Volatility, Uncertainty, Complexity, & Ambiguity (VUCA)

A leader of a strategic initiative confided to me that she was frustrated with her strategic initiative program’s progress.  “How can we quickly execute our strategy in this fog of organizational change in our business environment?” she asked. I explained that the she could unpack the “fog of change” into the four VUCA components. By understanding each component, she could apply strategic thinking and gain traction.

Volatility – Volatility refers to the propensity for changing from one state to another.  We are all familiar with fog, which is simply water in gaseous form.  We use the term volatile for hydrocarbons like gasoline, which can quickly evaporate from liquid to gaseous phases at room temperature (basically, gasoline is boiling off, and we could easily reverse the process by lowering the temperature to condense it from gas back to liquid). Under certain conditions, volatile materials can dangerously explode; so this provides another implication that volatile conditions are dangerous conditions.

Another example of volatility is found in financial markets, and it the concept of volatility expresses the rate and amount of change from buying to selling and the changing interest (in terms of numbers of contracts/shares) in any given market.

The interesting thing about volatility is that even though it might represent danger, it can also represent opportunity. Let’s return to the financial market situation: many market traders make excellent money by trading on volatility (making an informed bet on the movement of a financial instrument) such as trading options on a company that is making a scheduled earnings announcement.  The point is this: volatility is a good if you are seeking opportunities and bad if you like predictability.

Uncertainty – Uncertainty refers to the lack of specific information, which can be found by answering specific questions.  Asking “What is the probability that it will rain today?” is a question that is an attempt to characterize uncertainty.

Complexity – Complexity refers to the number of components, the relationships between the components.  The normal layperson’s usage of the complexity tends to oversimplify the scope of practical problems facing leaders in organizations. I encourage you to examine Dave Snowden’s Cynefin framework (see nearby image copied from Wikipedia). In that framework, complexity is the relationship between cause and effect. It can only be perceived in retrospect, but not in advance. In this condition, the organization uses an agile approach of probe, sense, and respond.  Complexity differs from “complicated.” A complicated issue can be understood by analysis and investigation beforehand.

I wrote this article on pathfinding to provide tips for dealing with complexity in strategic initiatives.

Ambiguity – The Latin prefix “ambi-“refers to multiple or non-fixed, such as its use in the words ambiance and ambidextrous. Ambiguous language is language that can be interpreted differently. Ambiguity is a cause of stress for many people (especially those who work in well-structured organizations) as the disorder implied by ambiguity is not comfortable. People tend to avoid, ignore, or minimize ambiguity.

I wrote this article to provide more understanding on the specifics and contrast of ambiguity and uncertainty.

Coping With (Not Mastering) VUCA

My advice for leading in a high-VUCA environment is this:

  • First, detach. Step back from the program and get a sense of what is going on.  If you are feeling the stress of urgency for results, put that aside. Strive for a sense of lightness; this program is but one of many things that will define your legacy (and you may discover that what seems so significant now will be unmemorable and unremarkable in a year).  Ambiguity, in particular, can be a stressor; don’t let it get the better of you.
  • Second, get a sense of the performance gaps and relationships of all the elements. You don’t need to deep-dive into analysis. Keep the questions you ask high level: Why did the organization select this strategic initiative? Who are the beneficiaries of it?  Remember that you are looking at a fog, so keep with that metaphor: where is the fog dense and where is it light?
  • Third, work your way through each of the VUCA elements. As I implied earlier, identifying ambiguity is a good place to start.  The fog metaphor and volatility are naturally aligned as fog (water vapor) is simply a dynamic change of phase from liquid to gas (and back again).
  • Fourth, engage your team to help you with this. Lead with questions.

I have found that my stress goes down when I realize that VUCA is simply inherent in the situation. My job is to cope, help others, and make progress.  I try – as much as I can – to develop perspective that is characterized by maturity and wisdom. I try to see different points of views and be prepared to be surprised.

A Final Thought: is VUCA Prime: Helpful or Nonsense?

There are a number of authors and bloggers who are now pushing a concept called VUCA Prime.  It is a simple and catchy idea, but I believe its simplification is ultimately counterproductive to the challenges of leading a strategic initiative.

Here is the VUCA Prime Model:

  • Volatility is replaced with vision
  • Uncertainty is replaced with understanding
  • Complexity is replaced by clarity
  • Ambiguity is replaced by agility.

I certainly believe that vision, understanding, clarity, and agility are admirable and useful ideas.  But making this clever substitution fails to address the core challenges of the fog of leading in an environment of volatility, uncertainty, complexity, and ambiguity. Here’s an example for volatility:

Let’s assume that a military commander (I’m picturing the trench warfare of WWI) peering into the fog, knowing that the enemy lines are out there.  This commander has a vision of being victorious, so he order’s his troops to attack.  His vision of victory doesn’t protect his troops, who are slaughtered by the entrenched enemy.

I can make a similar case for complexity and ambiguity.  We can pretend they don’t exist, but that doesn’t change reality. Uncertainty (because it deals with answers to explicit questions) can be replaced by understanding.  Ask questions and find the answers or estimates.

Thus, by my score card, VUCA Prime misses on 3 out of 4 factors.  A 25% percent validation is pretty weak!

How have you used VUCA concepts?

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Four Recommendations for Effective Program Governance

Governance quoteThe discussion of program governance is high on the list of learner expectations in my Leading Strategic Initiatives seminar. “What’s healthy governance practice?” I’m asked, “Where do I start?”

Since I’ve been writing this blog for several years, it might be wise to revisit the definition of strategic initiative and clarify the role of program management. Strategic initiatives are not the same things as goals or objectives; they are endeavors that close a performance gap. All strategic initiatives are programs, but not all programs are strategic initiatives.

Since a strategic initiative is (by definition) a particular kind of program, program management becomes a vital competency for the execution of strategic initiatives. Programs are often confused with large projects or with multiple projects. Rather, programs provide a kind of synergy (in the way of benefits) that separately-managed projects cannot provide.

Governance is a word that lacks a precise definition, and some people confuse it with government.  I believe that when you examine the bureaucratic actions recommended by some program management gurus and practitioners, you end up with a simple idea: program governance is about making decisions. From this, you can make a simple assertion that good design of governance leads to good decisions.

Three Common Mistakes in Design of Program Governance

I’d like to quickly mention three common mistakes that I have seen in program governance. They imply the need for thoughtfulness in design of program governance:

  • Overlooking the importance of strategic alignment.  To this, I add there is a bigger problem that organizations don’t have good strategy, and substitute goals for strategy.
  • Not distinguishing management from reporting. I say this because many program managers (or portfolio managers, for that matter) only collect and “roll up” project data for submission to higher management levels.
  • Drawing a program organizational chart and calling it the “program governance structure”

Four Recommendations

Here are four principles of program governance design, starting with the simpler ideas.

People respect what you inspect

This is a simple principle. As a strategic initiative leader, I need to convey what is important and do that by taking time to look at and discuss the “things” that I know are important.

Too often, program managers focus on metrics that are easy to collect or are familiar.  All of us know that when the CEO comes to our site for a visit, there is a lot of energy on cleaning up the physical environment. That’s nice, of course, as mess and clutter is can be a sign of laziness and sloth. A strategic initiative is a program to close a performance gap. What are the leading indicators and small wins that influence the closing? Are you looking for them or are you distracted by housekeeping chores?

Allow for mistakes

Smart people want some discretion and latitude in the program. They don’t want bureaucratic rules. They want to get things done.  Thus, governance needs keep decisions decentralized.

Yet, people are human and they make mistakes. So the important point of design for governance is to recognize that mistakes will occur and be ready to keep them from escalating into bigger ones.

Obviously, you want to avoid mistakes. For that you need to encourage people to stay aware for the presence of mistakes, and – this is crucial – make sure they avoid making the mistake worse. For example, covering up mistakes seldom works. Blaming others tends to make for a toxic culture.

You want to selectively impose policy

A natural tendency for some program managers is toward consistency and control of all elements of the program. This can be stifling for the strategy, as understandably will not want to give up something or change something that they think is important to their success and to the enterprise’s success.

The key question for any program policies is, “Does this policy make sense with respect to the strategy? Alternatively, the question is, “Are the benefits worth the cost.”

To be able to answer that question well you need to have a sense of focus and leverage. You can’t ask for control and consistency everywhere; there’s little value to be added. You have to think and act strategically.

Design so that the organization is concentrating on the decisive aspects of the strategy

It might be best to use an example. Domino’s Pizza strategy of countering social media complaints, reinvigorating its brand, and upping revenues depended upon reinventing its core product (the pizza) through one simple goal: making a defensible claim that it had the best-tasting pizza in independently conducted taste tests. That claim was the decisive aspect, and would determine if Domino’s strategy would succeed.

The program governance structure for this strategic initiative was very informal.  There were not formal executive briefings with project updates. The program design reflected is strategic focus on careful design of experiments and rapid consumer feedback.

Conclusion: Strike a balance

Program governance usually comes down to striking a balance among conflicting needs and goals, which arise in various areas for many reasons.

The higher level needs are to balance business needs (How are we changing revenue or cost structures to create value?) and risk management (How can we preserve value?)

As a program manager, I have two highest-level responsibilities. One is to the sponsoring organization and is practiced through the disciplines of strategic alignment. The other is to the projects that make up my program. Good governance is an effective balance of those two responsibilities

Do you agree with the claim that good design of governance leads to good decisions? What else should be considered as essential to program governance?

Posted in Program & Portfolio Management, Success Principles for Strategic Initiatives, Useful Practices & Management Tools | Tagged , , , | Leave a comment

Six Strategic Thinking Skills: Developing the Proactiveness Habit

6rs tool for habitsFew argue that culture is a key factor in the execution of strategy. Culture has many definitions, and one way to understand it is that it is a set of thousands of individual habitual responses. They are also collective, and that’s what we see in culture. My commonsense approach is this: By changing individual habits and behaviors, we can nudge new collective behaviors; that is, culture.

One of the more popular tools in my workshops has been the “6Rs” tool (see the nearby graphic) for building better habits.

I’ll first illustrate them with an example (and I’ll touch on the theory behind it at the end of the article).

A manager came to me saying, “I’ve been told that I’m too tactical and often get lost in the weeds. How can I do better at seeing the big picture?”

Reflect (as is and to be) – We started by looking for one habit to work on.  I suggested that we look at her behaviors in meetings with her colleagues, which frequently included cross functional members and occasionally executives. The habit to break was one at the start of the meeting: She came to the meeting with a laptop or device and usually spent the time using the device prior to the start of the meeting, and often through the meeting as well.

Even though she was in a meeting, she (and the others) found themselves acting like “loners.” There was little sense of connection or community; the meeting was just a microcosm of the “silos” of specialization and complexity in the company. Information sharing was a perfunctory exchange of status and action items. I asked, “Do you feel like you miss opportunities to learn about the big picture in your meetings? If you knew the other people better, couldn’t you be more proactive?”  She agreed that both statements applied to her.

The habit we wanted to change her personal engagement in meetings. More specifically, it was to focus on the other individuals and not on the devices. She would have to start making more conversation before, during, and after in the meetings. To be a better strategic thinker, one needs to move beyond “small talk” and “chit-chat” into more substantive matters. I’m talking about really getting to know the people and the organizations they represent.

The habit to develop is one of asking more exploratory questions: “Jim, what do others in your department think about this project? Is it going to make their jobs easier or harder?”

Recognize (the need) - It takes work to change habits. This next R deals with the benefits of making a change. For this “R” you need to determine: Are the rewards worth it? How might your life be better?

Re-label (your reactions)Habits are a response to a stimulus. Let’s assume that you would call yourself a “chocaholic” – a lover of chocolate. I offer a beautiful piece of chocolate to you. Do you have an impulsive urge to take it? Do you give it thought, or just do it?

Back to my example: my client recognized that when the meeting room was “screens up,” meaning that people were focused on laptops and devices. Should we assume the behavior as a sign of that they were busy with urgent matters and didn’t want to be interrupted? More likely, it meant that they were just bored. She developed three guiding maxims that helped her re-label her philosophy:

  • Strategy is inherently ambiguous
  • Perfectionism leads to avoidance of opportunity
  • Engagement is empowering.

She decided that she would re-characterize her presence in meetings as an opportunity to capture new ideas and meet important stakeholders.

Refocus (on new behaviors) – Focusing your attention is vitally important. For this task, she decided that she would sit next to new people (especially executives), shake hands, and ask questions that reflected a sincere curiosity about the other person, their department, and the business situation.

Revalue (in real time) – This step is training your mind to adopt a new and different set of values that are more aligned with your goals.  People who hold the big picture and think strategically have an investment mindset that recognizes opportunities.

To do this step requires meta-cognition; the awareness of your own thinking.

RespondThis final R is the practice of consciously (and consistently) behaving differently. Through repetition, you are forming new habits.

~~

Here is another example of the 6Rs. The topic is introducing Agile Project Management principles and agile thinking. Each of the below bullets corresponds to the 6R model:

  • We need to make the customer the hero
  • We have to listen to the customer
  • The new situation is high customer involvement
  • More frequent meetings
  • Hold daily meetings
  • We value meetings

A Few Comments on Theory

Habits are reflexive memories; that is, a habit is learned and it is an automatic response to a stimulus. Recall the chocolate example above. Not everyone responds this way. Neurologically, habit is governed by a brain structure called the basal ganglia, which is located in the center of the brain.  Conscious thought is found in the prefrontal cortex. The pre-frontal cortex can over-ride the impulses of the basal ganglia; but, that requires mental energy, as you might guess.

Do you agree that changing individual habits can result in changed organizational culture?

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What’s the #Strategy? Let Me Tell You a #Story

Dominos Delivery VehicleMore #Storytelling Tips for Your #StrategicInitiative

A strategic initiative leader is a story teller. The story being told looks into the future; it is a prospective story about stakeholders receiving a stream of future benefits.

My audiences continue to tell me that they find the chief story teller role a new and compelling idea. I’ve provided a number of practical ideas in earlier articles (click on the “How to Improve Your Story Telling Chops” category on the right). In this article, I provide a tool for helping others to engage with the bigger picture.

Heroic Narratives and Romantic Narratives

There are two basic kinds of narrative*. In the heroic narrative, the central struggle is for discovery of a “new self.” The heroic narrative is most applicable for strategic situations where you are looking for growth: new business models, entrepreneurial opportunity.  In this narrative, the hero heads off on a quest, often accompanied by a team of fellow travelers. They travel into the unknown and experience personal changes through the journey. For more, see my earlier article on the heroic quest and the call for action.

In the romantic narrative, the central struggle is for a rediscovery of the “purer self.” The basic structure is for the romantic narrative structure is resembles a religious awakening: Our organization was once pure and filled with wisdom, grace, energies, and fruits of our founders. Over time, we became alienated from those values and it is necessary to atone for falling away. Even more importantly, our task is to return to our original (presumably true and natural) selves.

Let’s stop and put that in more concrete and less mythic terms.  Successful organizations, over time, necessarily get more complex as a result of growth. With complexity comes specialization, bureaucracy, entitlement, and impersonal relations. It’s not surprising, then, that “back to basics” is a frequent theme of strategic initiatives.

The romantic narrative is most appropriate for a situation involving a turnaround or reconfiguration of the existing organization. Here you invoke the legacy of the organization. Here are two examples:

  • Domino’s has its first delivery vehicle (a Volkswagen Beetle) in the lobby of its HQ. It was an important icon of tradition in its Pizza Turnaround video. (For more discussion of this as a case study, see this article.)
  • Louis Gerstner Jr wrote of his efforts in turning around IBM, “Our strategic moves had much to do with returning IBM to its roots as a research-driven builder of large systems and infrastructure.” (See his book, Even Elephants Can Learn to Dance, page 257)

As I explained in this article, it is useful to constructing a timeline that displays the major events in the organization. The strategic initiative is a turning point.

Anticipating Your Audience’s Three Needs

As you think about the narrative, you need to consider the audience’s response.  Is there a need to clarify the vision and direction of the company, and the role of audience? I had a project with IBM during the 1990s where our work product was a training course to explain the process and new responsibilities of its new product development process. In this situation, we strove to use clear language and to show the expected transitions from the old process to the new process. This communication style is called a “plain narrative.

The Domino’s Pizza Turnaround video was intended to stimulate interest in its new product. This is an example of a “tempered narrative,” although it also had telling elements of the grand narrative

Finally, a “grand narrative” is intended as more emotional and motivational message. Again, I’ll use IBM’s turnaround, which included an initiative to centralize all advertising and marketing. The first commercial in 1994 had the theme of “Solutions for a Small World” that featured an international cast that included Czech nuns and old Parisians speaking in their native language. Louis Gerstner explained that it served to signal that

“we were staying together as a world-class integrator” and it “signaled that we were a very different company – able to change and make bold decisions, just as we had done with the decision to consolidate; able to move quickly; able to take risks and do innovative things; and we were more accessible.” (See Even Giants Can Learn to Dance, page 92).

How have you used narrative ideas in your leadership?

* Acknowledgement: The ideas here originated in an academic paper by David Barry and Michael Elmes, Strategy Retold: Towards a Narrative View of Strategic Discourse.

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Benefits of Being a Visible Expert

In earlier articles, I’ve explained that the strategic initiatives are a kind of program. All strategic initiatives are programs, and are amenable to the tools of program management. (However, not all programs are strategic initiatives.) One of the most important functions of programs is to create and deliver a stream of benefits to stakeholders. Benefits can be of two types: economic benefits and emotive benefits.

In this article, I want to briefly list (in prioritized order) benefits that flow to stakeholders through exposure to “visible experts.” A *visible expert is an individual with pronounced visibility in their subject matter as evidenced by writing books, articles, keynote speaking, and etc. They have an earned reputation as an expert. Here is the list:

    • We learn just from working with them
    • They introduce new solutions we had not considered
    • They solve problems more quickly
    • The solve the most complicated problems
    • They help increase our credibility
    • They reduce our risk

Leaders of strategic initiatives have big jobs in closing organizational performance gaps. They have a big challenge in the benefits realization piece, especially articulating and delivering emotive benefits. You can use the above list as a way to probe for and deliver things that will enhance your credibility.

How have you become a visible expert or used one? Are you working toward becoming a visible expert? How do you provide benefits realization?

* The source of this list was research done by Hinge Research Institute and published in their eBook: The Visible Expert: How to Create Industry Stars. And why every professional firm should care.

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Strategy is Not Long-Range Planning, Vision, Mission, or Values

This is NOT StrategyA while back, a seminar participant, who was a senior administrator in local government, showed me a nice 1-page statement that was his organization’s “strategy,” his term for a statement of mission, vision, and values describing the borough’s desire to be a preferred place to live and work. I asked him some questions:

 

Me: Let’s assume that you showed this statement to the top administrator at a neighboring borough. What would she say?
Him: That’s a nice statement. Our strategy document expresses similar ideas.
Me: Are you in competition for attracting industry and jobs to your borough, and would not the neighboring locale want to have the same industry and jobs?
Him: Yes they would.
Me: So, you are in rivalry with the adjoining borough?
Him: Yes.
Me: But, does this document give guidance to you and your employees on how use your resources?
Him: No it doesn’t. We really don’t have a strategy.

He was holding a list of aspirations and guiding values.  His locale was in a competitive situation. It was substituting a nicely-worded poster for the hard assessment of its situation. His borough had many resources, but it wasn’t using those resources strategically.

Here’s a practical test: You have a strategy if your competitors saw your strategy, would they be worried? If you truly have a strategy, the rival will be worried. They won’t fear your aspirations.

An equally-matched rival should fear your strategy, but won’t fear your aspirations!

Aspirations, for most people and most organizations, are cheery statements that provide a sense of energy and closure. They’re comfortable.

Strategy is Not Long-Range Planning

People often fail to distinguish strategy from long-range planning. The result is “bad strategy;” the appearance that a strategy is present when there is none.

Long-range planning is an effort that is focused far into the future, often years. Long-range planners tend to focus mostly on internally-focused plans to accomplish agreed-on goals. Long-term planning is used to project budgets and so forth into the future. Long-range planners assume that the external environment is relatively stable; therefore, the future is predictable. Waves of change are ignored.

Strategy is different in that strategists believe that the organization must be responsive to a dynamic, changing environment. Strategists are skeptics of someone who assumptions that the environment is stable or the future is predictable. Strategy involves ambiguity. That ambiguity starts with picking signals out of the context, and defining a clear core challenge.

As I have written previously, a strategic initiative is a response to performance gap. It’s purpose is to close it.  A leader of a strategic initiative needs to watch out for the “fluff” of attractive artifacts and documents.

Strategy is “hard work” in the sense that tolerating ambiguity is uncomfortable. Maybe it’s more fun to create multicolored poster or a polished brochure?

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Five Ways to Involve Smart New Voices in the Strategy & Agile Innovation Conversation

Next Gen Leaders Smart New VoicesStrategic initiatives – by definition – intend to achieve organizational transformation. The transformed organization will be owned by the next generation of leaders. It makes sense include their energy and ideas in a strategic initiative.
I recently was involved with an exceptional strategic initiative team. One of the things that stood out was how the initiative allowed for – and encouraged the contributions of next-generation leaders. How are you doing at mentoring, coaching and developing them?
Here are five suggestions for including and leveraging the talents of new, smart voices.

  • Engage – Look for ways to make the team experience one of action. Strategic thinkers have a playful mindset. If you don’t know what the word ‘gamification’ means, look it up!
  • Listen – This is a part of engagement, but is so important that it needs to be called out separately. As a generational cohort, we have a group that has been told their whole life that they are exceptional individuals. Ask for their advice.
  • Tweet! – Twitter and other social media can give you a better perspective on the strategic environment. I can open you up to some of the latest and best thinking.Also, check out and participate in Tweetchats, a fast-moving discussion on a special interest topic.

I confess that I was a little slow to establish a presence on Twitter. Now I am active (follow me @GregGithens, and search for #strategicthinking, #strategyexecution, and #strategicinitiatives as some examples). I am learning new and valuable ways of seeing the world of strategy and of work. The 140 character format has caused me be to a more concise communicator.

  • Encourage Disruptive Thinking – Change is prevalent in every organization, industry, and situation. Next generation leaders like to talk about disruptive technologies. Let them!
  • Learn – I stand in front or audiences all the time and see the contrasts of the next generation of leaders with Baby Boomers. Next generation leaders must become competent at 1) thinking strategically, 2) understanding the parts of the business and how they fit together, and 3) driving change.

I teach two seminars that provide for a nice mix of thinking for Boomers and for next generation leader (shameless plug). The first is Leading Strategic Initiatives (Program Management) which is full of practical tools and insights for the topic. My newest seminar is How to Think Strategically and Apply Business Acumen, which I designed to provide tools for the top-three needs of next generation leaders.

Do you agree that organization need to include new, smart voices in their strategy development and in their strategic initiatives? What other ideas do you have for including and leveraging their talents?

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