In a study that was conducted by Shell Group in the early 1980s, called 'Corporate Change: a look at how long-established companies change', it was found that the average life expectancy for the big multinational companies, such as the ones that are listed in Fortune 500, is only 40 years and this number is decreasing with time. The challenges that are surrounding the business environment are not new and have been affecting companies in many ways, yet the impact of these challenges, along with their speed, frequency and intensity are ascending in nature.
The collective challenges, with their dynamic nature and frequent changes in today's business environment, are usually represented by the ‘VUCA’ acronym which was first used by the 'US Army War College' in 1998. VUCA stands for the 'Volatility', 'Uncertainty', 'Complexity', and 'Ambiguity' of the business environment.
Despite the new terminology, it is believed that the world always used to be surrounded by VUCA circumstances, and operating in such conditions can create positive and negative impacts. On the first hand, it can bring a positive change in a stagnant environment where volatile prices for example can result in a higher profit, and uncertainty in the business environment means that there is a possibility of having new technologies. On the other hand, high VUCA conditions can result in business disruption, failure to meet stakeholders' expectations, and many financial consequences such as bankruptcy and liquidation.
Companies are continuously challenged to manage under such a rapidly changing environment. When the industrial revolution changed the manufacturing process from individual craftsmen into today’s fully machine-operated one, the order wining criteria changed from purely a cost perspective into one that included a strong focus on the quality of the product. This has influenced gradually the development of the quality management knowledge area.
In a relatively stable business environment, the traditional quality tools and techniques, that were used to achieve business excellence, were enough to succeed. However, nowadays, the winning criteria is not just product quality; it is by providing the product and service in a FAST and FLEXIBLE manner. This even becomes crucial when dealing with digital disruption and the technology that transform every aspect of our business environment.
The Elements of VUCA Acronym
Before going over what companies need to do to achieve excellence under high VUCA conditions, let us have a look at the definition of each element of the VUCA concept.
Volatility means the pace of the change in the business environment, the volume of the change, its magnitude, hence the degree of turbulence it creates. A volatile change implies that the causes of the change are known, e.g. the reasons for changing commodity prices are known, yet the high frequency of that change is unpredictable. An example of a volatile condition is the changes to customers' behaviors and requirements.
Uncertainty means the lack of knowledge about a situation or an event, especially about its cause and effect relationship, hence the future cannot be predicted confidently and the development of long term- strategic decisions is difficult. Examples of uncertain conditions are terrorism acts and changes to regulations and legislations.
Complexity represents the interconnected parts, networks, and procedures within the organization and with the external business environment which might even be competing and contradicted with each other. Examples to complexity are outsourcing/offshoring part of the business and adding a new product range that necessitates a new supply chain.
Ambiguity means the haziness of a situation or event and the unclear results in which the outcome cannot be clearly understood. It can be viewed as the combined impact of the three previously discussed conditions; volatility, uncertainty, and complexity. An example of ambiguity is adopting a new technology such as digital media where customer's expectations and behaviors are not clear.
Business Excellence in a High VUCA Environment
The American Author Zig Ziglar once said "there is no elevator to success, you have to take the stairs". The problem with today's business environment is that the stair is surrounded by highly volatile, uncertain, complex, and ambiguous conditions that make climbing challenging. As a result, companies need to:
Managing the ‘Volatility’ by ‘Agility’
When the business environment is changing rapidly, companies should think and react quickly and flexibly, i.e. it must be agile. Agility may include many factors such as leadership agility, developing Agile Key Performance Indicator (KPIs), embracing change management, embracing innovation and creativity, and ensuring team resilience.
Managing the ‘Uncertainty’ by ‘Understanding’
When companies manage under uncertain conditions, ‘understanding’ can help in bringing sense to a situation and can compensate for the lack of knowledge about the cause and effect relationship of an event. Elements such as stakeholders' management and dynamic planning can be very helpful in this area.
Managing the ‘Complexity’ by ‘Clarity’
When the business environment is surrounded by the complexity which blurs, confuses, and hides potential connectivity, then establishing improved ‘clarity’ will provide an effective way to reduce the complexity to a more manageable level. Clarity can be achieved by having an effective knowledge management system and a data-driven organization.
Managing the ‘Ambiguity’ by ‘Vision’
The fundamental base for interpreting ambiguous situations for a company is by examining these situations with respect to ‘vision’ development. ‘Vision’ here also includes the organization culture and the importance of practicing an ethical leadership.
Business Excellence in STS Company
Believing that business excellence is a journey, not a destination, STS Company took different steps to tackle this target.
Firstly, we launched an internal initiative called ‘Processes and Tools Improvement Initiative’ as a part of our Digital Transformation program. The initiative aims at improving, automating, and optimizing the internal business processes to better serve the internal stakeholders; in a nutshell, to be more agile and operate better in a high VUCA Environment. This initiative implies reviewing all the internal business processes to make them:
Secondly, we use technology not only to reduce the human errors in our operation but also to move into a Data-Driven organization by collecting and analyzing performance data from the internal business processes. Establishing performance dashboards, facilitating the online performance monitoring, and using data for decision- making are examples for that. As a result, technology helps us to better understand our operations and our market needs.
Finally, we believe that operating in a high VUCA and a turbulent environment is another reason to fuel our mission as a technology provider in the MENA. Accordingly, the commitment to excellence is one of our seven principles that we identified in our Digital Culture Program.
Process Improvement Manager