The concept of VUCA—Volatility, Uncertainty, Complexity and Ambiguity—was first introduced by the U.S. Army War College in 1987 to describe the state of the world following the Cold War. The term can also be applied to the business environment, where the VUCA of today’s increasingly digital world is having a tremendous impact on supply chains and commerce.
In my latest webinar, The Beyond Belief Impacts of VUCA on Supply Chains and Commerce, I discuss how to harness VUCA to achieve profitable growth, which I have outlined in the steps below.
Volatility is all about change – the nature of change and frequency of change. The nature of change is best illustrated by bugs. Take, for example, the ant: when a baby ant grows into an adult, it gets bigger, but there is no change, which is represented as continuous improvement. Then there are grasshoppers, which experience transformation through changes in wings and reproductive organs. Lastly, the caterpillar undergoes total metamorphosis—or reinvention—as it becomes a butterfly. The circle of life for companies requires completion of all three steps—continuous improvement, transformation and reinvention—in order to be successful in today’s digital world.
In addition to the nature of change, we also have to look at the frequency of change, also known as the “disruption cycle.” The disruption cycle is turning nonstop, beginning with an innovation, which sometimes leads to entrepreneurship or—if it’s too risky—winds up dead. Businesses that move on from entrepreneurship will become disruptors, but some of those will wind up dead too. However, those that harness innovation and boldness will disrupt the status quo. They then move through the incubation and validation phases before becoming the new status quo and, with the addition of professional management, they then become an established firm. It is at this phase where those that are too risk averse or resistant to change will end in death. Businesses that live through this stage and on to new innovation, courageous leadership and new boldness will achieve profitable growth and value creation, and become the new leader(s).
We are living in the most uncertain times in the history of the world. The high level of uncertainty today makes it impossible for us to make accurate predictions or define standard operating requirements. Instead of developing optimal solutions, we need to focus on developing flexible supply chain solutions that are capable of adapting and constantly evolving to offer a series of options. When Popeyes failed to accurately predict the popularity of its chicken sandwich, the fast food chain blew through its entire inventory of the new menu item more than a month earlier than projected.
Optionality is the new optimality. Since you cannot predict what the future holds, make sure you have the greatest number of options available so when uncertainty hits, you can move to the option that will meet the requirements of that day—or moment.
The rise of digitalization and increased complexity of commerce today is requiring companies to “sell anywhere” and embrace a unified performance. While there used to be a clear distinction between retailers, distributors, manufacturers and wholesalers, those lines are now blurred, from grocery stores developing their own private label brands to consumer packaged goods (CPG) companies creating their own e-commerce sites and selling direct-to-consumer (D2C).
To achieve success, companies must “fish where the fish are” by selling anywhere their customers are. This includes diversifying your sales strategy to incorporate all the channels and methods used by each of your customer demographics. When developing a strategy, companies must think beyond traditional digital and physical channels and evaluate all options, including mobile, desktop, social media, retail e-commerce, marketplaces, brick-and-mortar and more.
When broadening your sales strategy, it is important to maintain a single, unified supply chain, which is where complexity comes into play. This complexity drives the need to unify our channels, logistics, marketing and technology to act like a single company—or supply chain—and provide customers with a seamless shopping experience.
As we enter a new era of business, there is a haziness of reality, or inability to understand what is really going to happen, that is taking place across all companies and industries. Digital technology is affecting all businesses by paving the way for new products, services and business models. In this digital era, it is imperative for all organizations to vigorously pursue digital commerce and prevail among the lack of certainty today.
In addition to the digital imperative, we are also battling the speed imperative. The speed at which the marketplace is changing its mind is much faster than the speed at which companies are able to respond. With the speed imperative, it is not about how fast you work today, it is about the rate of acceleration. If it is taking your organization weeks to make a decision that should only take days to make, your company will fall behind and become a victim of the speed imperative. Likewise, the half-life of a great idea is much shorter than it used to be due to the speed of disruption. As the pace of life is accelerating, you need to act faster than ever before.
To learn more about the impacts of VUCA on supply chains and commerce, access the full webinar here or join us at this year’s Supply Chain Leadership Forum (SCLF), May 4-6, 2020 at the Pinehurst Resort in Pinehurst, North Carolina.