Welcome to a VUCA World

It's a mess.

The economy. Everything. The times are changing - they have been changing. It's not new, but 2020 probably puts the last nail on the coffin of arrogant certainty. Plans are wrong. Our capacity to predict the future did not seem as good as what we believed it once was. Well established principles and theories don’t apply anymore. Laws of thermodynamics are failing us...

Leading indicators don’t lead us anywhere. Lagging indicators prove after the fact that we were wrong . Welcome to VUCA land.

 This acronym has become more pervasive in business world in the last couple of years, but it seems like it was first used in 1987 to describe the post-cold war world. WW2 aftermaths had established a global geopolitical equilibrium between 2 forces, 2 school of thoughts. Easy Yin and Yang. A "western block" of free economy - mostly democratic states, gearing towards liberalization and globalization. JFK was the self proclaimed "president of the free world", an "eastern block" of socialist state-regulated economies, mostly autocratic in spite of their popular stance. Led by USA and Russia, each side would combat in proxy wars - some militaro-scientific (atomic bombs, space race), some awfully tangible (Afghanistan). The collapse of the East-Block in the 80's did not designate a winner - it left a mess. 

 And there's a name for it. VUCA acronym is used to label volatility, uncertainty, complexity and ambiguity of situations. It was introduced by the U.S. Army War College, who had to think about how to understand new threats, and how to deal with them. It's not 2 camps anymore - it's an intricacy of fluctuating interests, influence and political support.

So what is VUCA in ecomomic terms, how do we sense that the world has changed? To make it more tangible, I'll anchor it in our present. The Covid-19 recession. 

 Complex. Well, that one is obvious. No? I sometimes believe that part of the complexity to sense reality is aggravated by the overwhelming access to information. But we have to recognize that there are many many more parameters than before to account for in the 2020 economy. Lots of companies - even local - are influenced by much more factors than they used too... access to goods, access to resources, freedom of movement in Covid 19 has been a very complex set of circumstances. From large multinational to local restaurants, the number of parameters that influence your activity has simply grown by couple of orders of magnitude in complexity.

Volatility. There are more factors to consider... and they change must faster than they used to. There are too many examples... let's pick one. Epidemics explode, the states are proliferating movement-restrictive measures that get a whole part of the economy to grind to a halt. Effects of such policies have never ever been stronger in history. Previous records of weekly claims for unemployment in the US for instance are dwarfing previous records, by many many miles. Ronald Reagan came on TV in 1983 to talk about 800k claims in the week, there have been many consecutive weeks about 3 millions in the last couple of months. situation is changing day to day. 24/7 connectivity is reinforcing the appearance of speed. Information, reactions, anything you can measure goes faster - economy is the same, it's more volatile.

Ambiguity. More data, moving faster. Moreover, relationship between causes and consequences are less known than we thought (or hoped) than before. Take interest rates ratios for instance... they've been up and down (long term vs short term) for a long while now. They were supposedly announcing a recession that was never coming. Covid19 has been a detonator, and initiates a crisis through an unprecedented demand drop. If one thing is certain, is that the future is unsure and the best we can do is to think about couple of scenarios. But which of the previous laws of economy still apply is unknown as we're in uncharted territories.

Uncertain. That's the cherry on the cake. No one knows where this is all going. Think about planning your company sales volumes for the second half of the year... how do you do that? How will the pandemic evolve? Will it die out? Will it rebound? Will it follow same course regardless of the economy? Will some countries re-open with a degree of social distanciation that enables economic recovery, or will it continue to be severely constrained until 2021 or beyond? It's pretty much impossible to predict.

So now you know what the disease is. And you can even call it VUCA. But how to deal with it? We can't give up, but planning and leading in this world will be different. I'll share some ideas and techniques in next articles.

Stay tuned, and stay healthy my friends.

Maxime Katgely, Singapore, June 28th , 2020. 

Passionate in making global businesses grow and teams thrive. Part of the mobility generation - automotive, transport, energy fan in a cosmopolitan and fair society.

Thrilled in building relationships, creating markets and opportunities to share sustainable value. Strong professional with a Engineer's degree in Polymers and Operational Research. Loving husband, 11 times Ironman finisher, proud father of 2 French-Texans.