Formulating relevant strategies in a volatile world
Formulating relevant strategies in a volatile world
Increasingly, corporate leaders are facing a more and more volatile environment. The geopolitical, technological and business environments are changing so fast that strategies implemented today may be irrelevant tomorrow. Hence the biggest challenge for business leaders is about being able to not only lead the organisation through all these changes, but also have the necessary insights about the current and future trends that will have an impact on their business strategies.
Change is the only constant
There is no doubt that leading an organisation today is like constantly battling a guerilla warfare, where the environment is perpetually evolving and changing in ways that may be completely unexpected. On the one hand, new products/services from new competitors can suddenly appear out of nowhere and these entities can render obsolete business strategies of major incumbents overnight. On the other hand, especially in the technological space, steady digital disruption is bringing about new trends that are dramatically transforming whole industries.
It may seem paradoxical, but despite the fact that nowadays, leaders have all the necessary tools to provide them with all kind of structured and unstructured data, leaders seem to be unable to get the right information to respond rapidly and make the right decision fast. With new technological tools, the tsunami of data to process seems to lead to decision paralysis. The biggest danger is for leaders to stick with the familiar and continue on with business as usual, while consciously or unconsciously ignoring the disruptive trends in the market, till it is too late to take any proactive measures.
Hence the major challenge for organisations is to always remain agile and flexible; enabling it to constantly change and transform with the evolving environment. As for business leaders, they need to build up the essential leadership skills to be ambidextrous. That is being able to tap into all the resources available currently to map out today's best strategic plans as well as foresee and prepare for tomorrow's strategies to tackle new trends that will potentially make the organisation obsolete.
Leading in a VUCA world
Nowadays the world is so dynamic, unpredictable and unexpected that it is being described as VUCA - an acronym that originated from the military to describe a Volatile, Uncertain, Complex and Ambiguous (VUCA) environment. Hence, business leaders need to first acknowledge that they are leading in a VUCA world so that they can learn and acquire relevant skills to deal with dynamic situations:
Volatility - Leaders should come to terms with the fact that the world nowadays is much more volatile. That is things can change extremely fast and therefore, organisations should be resilient enough to be able to absorb those sudden shocks and overcome them. Hence, not only, leaders should expect the unexpected in their business plans, but they also prepare and accommodate for a certain amount of buffer in the event of drastic change, that will render their critical plans obsolete. For instance, they need to develop multi-pronged strategies rather than put all their eggs in one basket on a single strategic plan.
Uncertainty - While organisations keep moving forward under the assumption that their environment remains constant, leaders must deal with all kinds of uncertainties at all times. No longer should they assume or take for granted that the current information used for decision making is relevant or even precise. They need to accept the fact that they are constantly making decision based on asymmetric information and that mistakes will be made. However they need to be comfortable with all these uncertainties as well as be resilient and responsive in taking the necessary corrective measures fast.
Complexity - Especially for large organisations, the internal and external environments can become extremely complex to manage. As a consequence, leading and managing change are complex since they will bring about a chain of reaction, affecting the whole organisation. But leaders cannot take a hands-off approach, since increasing complexity will drag down the organisation's competitiveness. To be more agile and flexible, leaders need to develop and embed simplification in their strategies, procedures as well as overall organisational culture.
Ambiguity - Asymmetric information will not provide a full clear picture of the current environment. As a result, the lack of clarity will make everything ambiguous. Despite all these, leaders will have to make key decisions, even if they do not have a clear picture of what may or may not happen. Not only they will have to be comfortable in this ambiguous environment, but they also need to manage and mitigate the level of risks that they can take on. At the end of the day, taking into account the ambiguous business environment, they will have to take on calculated risks in formulating and executing their strategies forward.
The VUCA world is very challenging. Leaders will have to develop special leadership skills to be able to not only lead their organisation in a volatile environment, but also be comfortable with high levels of uncertainty and ambiguity, while constantly adapting and developing new sustainable strategies for their organisations. Moreover, they need to keep their employees highly motivated on their current action plans as well as maintain the whole organisation very nimble in the face of change.
Leaders will need to remain always curious about new trends and open to new solutions. They need to build high tolerance for risks and prepare contingencies in the event that they are making major mistakes. Ultimately, they need to maintain focus on their main objectives, remain agile and flexible in the face of change and finally be very responsive in tapping on new opportunities as well as changing the course of action whenever necessary.
Below is a series of analysis and commentaries about the fast changing world in 2018. Events over the previous years will continue on influencing how things will unfold. There are many potential macro events that will have an impact on any corporate strategies. These articles will provide an idea of the main risks to take into account while formulating current and future strategic as well as risk mitigation plans.
It took about a decade for the world economy to recover from the Global Financial Crisis (GFC) in 2008. And according to both the World Bank and International Monetary Fund, the global economic growth in 2017 was more broad-based with both developed and developing economies growing.
The United States (US) was a founding member of the General Agreement on Tariffs and Trade (GATT) that was enacted on January 1st 1948. Since then, the US has been advocating trade liberalisation.
Since the American President Donald Trump came in power last year, there has been a war of words between him and the North Korean leader Kim Jong-Un. Many words have been said and many statements made between both parties. Last August, Trump has even threatened to unleash 'fire and fury' over North Korea.