Management is tough enough in normal times. But what are leaders to do when their companies are buffeted by global uncertainty? Bill George explains charting a course True North.
With the events of 2016—Brexit, the election of Donald Trump, threats from terrorists and cybercriminals, climate change—business leaders have entered a new era requiring new ways of leading. Traditional management methods seem no longer sufficient to address the volume of change we are seeing. I label this VUCA 2.0.
In a 1998 report designed to train officers for the twenty-first century, the United States War College presaged a world that is “volatile, uncertain, complex, and ambiguous” —VUCA, for short. VUCA describes perfectly what is happening in the global business world today.
Business is not running as usual. Leaders must deal with growing uncertainty, complexity, and ambiguity in their decision-making environments. CEOs have little idea what to expect in terms of health care policy, financial transactions, national security, and global trade—all of vital importance to themselves, their employees, and their stakeholders.
Managerial training in the classic techniques of control systems, financial forecasting, strategic planning, and statistical decision making have not prepared them for this amount of flux in the environment.
In short, these rapid-fire changes are putting extreme pressure on business leaders to lead in ways not heretofore seen.
The VUCA manager
Now is the time for authentic business leaders to step forward and lead in ways that business schools don’t teach. Let’s examine these different ways of leading comprising VUCA 2.0:
Vision – Today’s business leaders need the ability to see through the chaos to have a clear vision for their organizations. They must define the True North of their organization: its mission, values, and strategy. They should create clarity around this True North and refuse to let external events pull them off course or cause them to neglect or abandon their mission, which must be their guiding light. CEO Paul Polman has done this especially well by focusing Unilever’s True North on sustainability.
Understanding – With their vision in hand, leaders need in-depth understanding of their organization’s capabilities and strategies to take advantage of rapidly changing circumstances by playing to their strengths while minimizing their weaknesses. Listening only to information sources and opinions that reinforce their own views carries great risk of missing alternate points of view. Instead, leaders need to tap into myriad sources covering the full spectrum of viewpoints by engaging directly with their customers and employees to ensure they are attuned to changes in their markets. Spending time in the marketplace, retail stores, factories, innovation centers, and research labs, or just wandering around offices talking to people is essential.
Courage – Now more than ever, leaders need the courage to step up to these challenges and make audacious decisions that embody risks and often go against the grain. They cannot afford to keep their heads down, using traditional management techniques while avoiding criticism and risk-taking. In fact, their greatest risk lies in not having the courage to make bold moves. This era belongs to the bold, not the meek and timid.
Adaptability – If ever there were a need for leaders to be flexible in adapting to this rapidly changing environment, this is it. Long-range plans are often obsolete by the time they are approved. Instead, flexible tactics are required for rapid adaptation to changing external circumstances, without altering strategic course. This is not a time for continuing the financial engineering so prevalent in the past decade. Rather, leaders need multiple contingency plans while preserving strong balance sheets to cope with unforeseen events.
With external volatility the prevalent characteristic these days, business leaders who stay focused on their mission and values and have the courage to deploy bold strategies building on their strengths will be the winners. Those who abandon core values or lock themselves into fixed positions and fail to adapt will wind up the losers.
From HBS Working Knowledge on February 14, 2017
Written by: Bill George, senior fellow at Harvard Business School, former chair and CEO of Medtronic, and author of Discover Your True North.