VUCA, BANI, Black Swans & Grey Rhinos...

While everybody else writes about #GenerativeAI and its impact on the world, I prefer to pick up a topic I have been thinking about for quite some time. This issue of the #DecisionModelInnovation newsletter focuses on a couple of concepts that many decision-makers and even more analysts and journalists love but which I find hardly applicable (with exceptions) to improve decision-making. These concepts are #VUCA vs. #BANI as well as #BlackSwans vs. #GreyRhinos.

So, it's time for some reflections.

VUCA vs. BANI

For years, academics and executives have used the acronym #VUCA to describe a somewhat challenging business environment. For those who are not sure what VUCA stands for: It's V for volatile, U for uncertain, C for complex and A for ambiguous. However, whenever I ask any of the executives I coach, none of them can tell me how they would use the concept to improve their decision-making.

Recently, some people got the 'brilliant' idea to push for another acronym called #BANI to describe their environment. It stands for Brittle (meaning being fragile, breakable, while seeming firm), Anxious, Non-linear and Incomprehensible. The proponents of this new acronym claim that the 'old' VUCA concept doesn't correctly describe the context of most organizations anymore - that might be a valid claim, but has it ever? ...and even if it had, what conclusions could we draw from classifying a (business) context as VUCA or nowadays as BANI?

Let me show you what #ChatGPT (GPT-4) provided as an answer (corrected by Grammarly):

"VUCA stands for Volatility, Uncertainty, Complexity, and Ambiguity. It's a concept that originated in the U.S. military to describe the chaotic and rapidly changing conditions in the post-Cold War world. In a business context, it has been adopted to explain today's business environment's unpredictable and dynamic nature.?On the other hand, BANI is a newer concept coined by Jamais Cascio and stands for Brittle, Anxious, Non-linear, and Incomprehensible. It focuses on the fragility of systems, the anxiety that pervades modern life, the non-linear relationships between cause and effect, and the difficulty in understanding current realities.

Both concepts can help decision-makers understand their business environment better and thus, make more informed decisions. Here's how (still ChatGPT):

**VUCA**

**Volatility:** The nature and dynamics of change, and the speed and volume at which it hits. Understanding this can help an organization develop flexible strategies and contingency plans. For example, a business operating in an industry with fluctuating market trends (e.g., fashion or technology) should maintain an agile approach to adjust to changes quickly.

**Uncertainty:** The lack of predictability and the prospects for surprise. Knowing this, a business could invest more in market research and intelligence to reduce uncertainty and make better forecasts. For instance, a company planning to expand to a new geographic market might face uncertainty due to a lack of familiarity with the local market conditions.

**Complexity:** The interconnectedness of several factors in an ecosystem. Recognizing this, a business could focus on enhancing cross-functional collaboration and using advanced analytic tools to handle this complexity. For instance, a company dealing with complex supply chains can use data analytics to understand better and manage its network of suppliers.

**Ambiguity:** The lack of clarity about the meaning of an event. Acknowledging this can drive a business to focus on clarifying its vision and communication. For example, during a company merger, clear and consistent communication from leadership can address the ambiguity around job roles and company culture.

**BANI**

**Brittle:** Systems and institutions that aren't resilient and break under stress. Recognizing this can help an organization focus on strengthening its processes, structures, and capabilities. For example, a business may need to invest in robust IT systems to prevent failure during high-demand periods.

**Anxious:** The high level of anxiety due to the rapid pace of change. Knowing this, a business can concentrate on promoting a culture of calmness, clarity, and resilience. For instance, during organizational changes, providing clear communication and support mechanisms can reduce employee anxiety.

**Non-linear:** Unpredictable cause-and-effect relationships. Understanding this can drive a business to consider a wider range of scenarios in its strategic planning. For example, a small delay in product delivery (cause) can lead to significant reputational damage due to negative social media coverage (effect), something not directly proportionate.

**Incomprehensible:** The difficulty in making sense of ongoing events. Acknowledging this can push an organization to continuously learn, adapt, and try to make sense of the world around it. For example, comprehending the effects of new regulations on a business might require expert analysis and consultation.

In summary, VUCA and BANI help decision-makers by enhancing their understanding of the business environment, thus improving their decision-making ability in complex and unpredictable situations.

--- Source: ChatGPT ---

Not really convincing arguments or recommendations, right? Well, I tried to ask ChatGPT in different rounds to be more specific about HOW EXACTLY the VUCA or BANI concept is helping decision-makers to improve any decision process, but the answers didn't really get much more specific/actionable.

My extensive criticism with these kinds of concepts is that they are fantastic to quickly express that somebody perceives a (business) context as 'challenging' or 'dynamic' but, honestly, not much more.

Is there any research that provides some indications about how optimal decision processes look like for different levels of volatility, uncertainty, complexity, ambiguity, brittleness, anxiety, non-linearity or incomprehensiveness?

Again, my academic database research and ChatGPT indicate nothing publicly available. That's why I don't understand how people still use these concepts except for describing that a (business) context is 'challenging' or 'dynamic'.

Please let me know if you have any more specific insights or some actionable research results.

Obviously, it's also unfair to criticize these concepts without providing some better ideas/concepts. I will do that in one of the following newsletters.

Black Swans vs. Grey Rhinos

Another type of concept that executives, analysts or journalists often use to describe their (business) context or, instead, a specific event is based on using metaphors of animals and their characteristics.

The Black Swan concept

The "Black Swan" is a metaphor that encapsulates the idea of a significant event that comes as a surprise and has a major impact. It was popularized by the statistician and risk analyst Nassim Nicholas Taleb in his book, "The Black Swan: The Impact of the Highly Improbable".

According to Taleb, a Black Swan event has three key characteristics:

• Rarity: It is an outlier, as it lies outside the realm of regular expectations because nothing in the past can convincingly point to its possibility.
• Extreme Impact: It carries an extreme impact.
• Retrospective Predictability: Despite its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.

In the context of decision-making, the Black Swan concept offers (at least) two actionable insights:

• Improving Predictions: It shows the weakness of relying solely on past data to predict future events. The Black Swan concept highlights the need for decision-makers to question assumptions, scrutinize the validity of their models, and not over-rely on data-driven predictions.
• Decision Model (Innovation): It invites decision-makers to consider extremely unlikely events that could have a significant impact on their organizations in their decision models. Instead of simply focusing on the most likely outcomes, decision-makers are encouraged to consider a broader range of possibilities, which could help mitigate potential damages from unforeseen events.

In practice, the Black Swan concept is primarily actionable to decision-makers if they realize that anything they are NOT integrating into their decision models is actually a Black Swan to them and their organizations - independent of the likelihood!

The Grey Rhino Concept

The term "Grey Rhino" is a metaphor coined by policy analyst Michele Wucker in her 2016 book "The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore". A Grey Rhino is a highly probable, high-impact event that is obvious and visible, yet often ignored for various reasons until it's too late. It's different from a Black Swan event, which is much more unpredictable or highly unlikely.

The concept of the Grey Rhino has four distinct stages:

1. A looming danger is identified: It’s clear, present, and visible to everyone.
2. Denial: Despite the danger being evident, there's a collective decision to ignore it.
3. Muddling: Partial efforts are made to address the problem, but they are insufficient.
4. Panic or action: Finally, decision-makers can panic or act decisively when the Grey Rhino charges (when the crisis happens).

In the context of decision-making, the Grey Rhino concept has (at least) two actionable insights:

• Risk Prioritization: The concept encourages decision-makers to identify and prioritize obvious but ignored threats. This often helps develop solutions and proactively prevent crises before they occur.
• Overcoming Complacency: The metaphor is a powerful tool to overcome complacency and inertia in an organization's decision-making. It nudges decision-makers not to ignore the big, visible and ignored problems just because they are uncomfortable or difficult.

In practice, the Grey Rhino concept supports decision-makers in fighting cognitive biases and sometimes hidden dissent so that they can confront their organizations with obvious risks that they have ignored so far.

In a nutshell, I hope you agree that the VUCA & BANI concepts are not useful for decision-makers to improve their decision processes except for being able to describe that the DECISION CONTEXT is at least challenging. The Black Swan & Grey Rhino concepts are much more actionable for decision-makers. The Black Swan concept, however, is only usable if decision-makers become aware that they have to include many more unlikely events into their decision models than they have done so far and that this selection of unlikely events needs to be more broadly agreed with their stakeholders. The Grey Rhino concept is probably the most directly applicable idea to improving decision-making. As a metaphor, it can help decision-makers to make others aware of dangerous situations that have been ignored so far and need to be tackled - this often requires overcoming multiple cognitive biases and managing disagreements among decision stakeholders more proactively.

I want to thank?SatSure?for its continued support of this newsletter.?SatSure?is an excellent example of how?Decision Model Innovation?can lead to competitive advantages for organizations and their clients!