In the turbulent times of globalization and digital transformation, VUCA has become a familiar and important term in business management and development. In the following article, let's learn more about VUCA with 1C Vietnam, along with the necessary skills to help businesses survive sustainably in the VUCA era!

1. What is VUCA?

VUCA is the name representing 4 basic characteristics, including: Volatility - Uncertainty - Complexity - Ambiguity. This term is used to refer to a chaotic and difficult-to-cope world, because too many changes have occurred in a short time. From another perspective, especially in the business field, VUCA is used to describe market fluctuations, requiring businesses to grasp and adjust to adapt.

2. What is VUCA Leadership?

VUCA Leadership is a leadership style and value system developed to cope with the challenges and risks in a volatile business environment. To do this, VUCA Leadership requires managers to have qualities such as: Broad vision, flexibility, creativity, readiness for change, along with the ability to assess and manage risks, problem-solving skills and the ability to adapt quickly to change.

3. Origin of the term VUCA

The VUCA definition was first used in 1987 in the leadership theory of Warren Bennis and Burt Nanus. VUCA was used to describe the developments during the Cold War and the conflict in Afghanistan at that time.

4. The meaning of each element in VUCA

To better understand VUCA , let's analyze the elements that make up this term with 1C Vietnam.

4.1 Volatility

Volatility describes the rapid and unstable changes in the world. Volatility includes events that disrupt people's lives and businesses (such as the Covid-19 pandemic that occurred in early 2020).

4.2 Uncertainty

Uncertainty reflects the results that businesses cannot predict accurately due to lack of information and complete data. In other words, history and past events are no longer capable of helping people predict the future.

4.3 Complexity

In VUCA, the term refers to situations that businesses face, which may include interactions between components in the system, uneven dependencies between unpredictable elements in the business environment.

Complexity can occur at many levels, from the organizational level to the global level. Complicating factors include: technological change, legal change, supply chain dependence, cultural and perspective diversity within the organization, and complex relationships between stakeholders.

4.4 Ambiguity

Ambiguity refers to a situation that is difficult to interpret if information is not completely accurate or complete. In VUCA, with ambiguous situations, information sources are limited, there is no single answer and no specific solution. This hinders the understanding and decision making of the business.

5. Benefits of VUCA in the business environment

It can be seen that understanding the term VUCA can help leaders effectively assess the business situation and the opportunities and challenges they face. However, leaders need to have the ability to adapt, control their mind and emotions to manage uncertain information and risks in the business.

In addition, VUCA also plays a role in providing transparent information about the issues faced, helping businesses focus on the notable issues in a difficult business context. To adapt to the VUCA era, individuals and businesses need to be ready to change, innovate and build the ability to navigate to find new approaches that bring high sustainable value.

6. How to cope and survive in the VUCA era

Nowadays, besides practical benefits, VUCA also brings many challenges and difficulties to individuals, organizations and businesses. Therefore, equipping yourself with the right skills and awareness is a prerequisite and urgent to survive and succeed in the current volatile period. Below are some typical ways to cope:

• Flexible

Individuals and businesses need flexible skills to adapt to the changes of the VUCA era, including: Skills to adjust plans and strategies when necessary, skills to adapt to new things, skills to look at problems from many perspectives, problem-solving skills and the ability to make quick and effective decisions.

• Complex thinking

Information is always changing and not always accurate and clear. So practice your skills in handling complex and ambiguous information by asking questions, investigating details and not being afraid to experiment to find the right solution.

• Collaboration and networking

Networking with like-minded people and goals is critical to creating an environment that encourages innovation and the sharing of new ideas. In the VUCA era, strong collaboration and networking ensure everyone is on the cutting edge, learning from each other to adapt, and creating a powerful force to deal with ambiguous and complex situations.

• Never stop learning

In the current digital transformation phase, old knowledge and skills are gradually becoming obsolete. Therefore, each person must have the skills to learn, update and adapt to new changes. By choosing learning goals and methods that suit their abilities and needs.

• Risk Management

Risk management helps leaders analyze and understand complex factors, thereby establishing flexible mechanisms to adapt to all possible situations. This skill not only helps minimize negative impacts, but also is the premise for businesses to turn around risk situations, surpass and gain an advantage over competitors.

• Leverage technology

To keep up with the digital transformation trend and improve performance, each individual, organization, and business needs to learn new technologies such as: Artificial Intelligence, automation, blockchain... to apply to daily operations.

Especially in the VUCA era, technology helps users access all information and knowledge from all over the world easily. Helps individuals and businesses grasp the latest information and apply it effectively to business operations.

• Select information

Faced with the “overwhelming” information on social networks, individuals and businesses need to have the skills to select, differentiate and carefully research information before trusting and spreading it. Priority should be given to official and verified sources in newspapers, specialized websites or from reliable experts.

• Think positive

To survive in a world immersed in VUCA, each person needs to apply positive thinking and stay calm to overcome difficulties and obstacles. There are some methods that can help practice positive thinking, such as: Listing things that you are grateful for before going to bed every night, always expressing gratitude and not complaining about difficulties... These things help each person change the way they perceive and approach the world around them in a positive way, helping to overcome difficulties and find ideals in life.

7. Effective management strategy in the VUCA era

In addition to the benefits, VUCA has also posed many challenges, requiring leaders to build a suitable and effective strategy to ensure the survival of the business. Below are 4 management strategies for businesses in the VUCA era:

7.1 Deal with volatility by maintaining a long-term vision

The first step in this strategy is to accept changes and events in business. Then, businesses need to build a long-term vision based on these events. Specifically as follows:

• Building a business continuity strategy (BCP - Business Continuity Planning)

This is an important tool to help businesses maintain operations in the event of disruption. Thereby minimizing damage and quickly recovering. To build a BCP, businesses need to follow the following 5 steps:

Step 1: Identify the core elements that need to be prioritized to maintain business operations in the event of fluctuations.

Step 2: Identify potential risk factors that may affect business operations. For example: Risks of natural disasters, accidents, cyber security, supply chain disruptions, etc.

Step 3: Assess the potential impact of each risk on business operations and develop response plans. Including: Eliminating high-risk activities, minimizing disruption to activities that cannot be eliminated, transferring risk management to relevant parties, accepting low-risk activities and budgeting for payment...

Step 4: Ensure the business continuity strategy is implemented effectively and meets the set objectives. Including: Aligning with current business direction and potential risks, ensuring that personnel and stakeholders strictly follow the process, assessing the success of the strategy in reducing risks and resilience.

Step 5: Regularly evaluate and improve the BCP strategy. In particular, the BCP needs to be adjusted promptly when: Incidents occur and the BCP is no longer effective, employees do not comply with the regulations in the BCP and there are changes in the business operations of the enterprise.

• Diversify supply sources and maintain inventory

These are two important activities that help businesses minimize risks due to supply chain disruptions. At the same time, they reduce dependence on a single supplier, ensuring that production and business activities run smoothly.

• Set flexible goals that can be adjusted as needed

Flexible goals are goals that can be changed or adjusted as needed to suit the actual situation. Setting flexible goals helps motivate employees, improve productivity, and build good relationships between businesses and employees.

7.2 Dealing with uncertainty by increasing understanding

Increasing understanding of the market, business aspects and customer needs helps businesses reduce the impact of uncertainty. Specifically, this approach emphasizes the importance of knowledge in making decisions and adapting to volatility in the VUCA era.

• Business news updates

Leaders need to constantly monitor and update business news. At the same time, businesses need to know how to encourage asking questions, looking up information and proposing new perspectives to solve complex problems.

• Make data-driven decisions

Business decisions should be based on data analysis rather than on intuition or personal experience. This helps create more objective and effective solutions.

• Construction and risk management

This method helps managers predict potential risks, assess the likelihood and severity based on reviewing historical data and consulting with industry experts. Some common tools that help managers analyze risk factors inside and outside the business:

- 5 competitive forces model: Includes supplier power, customer power, industry competition, threat from new competitors and threat from substitute products/services.

- SWOT model: Analyze strengths, weaknesses, opportunities and challenges.

- PESTEL model: Helps managers collect information about politics, economics, society, technology, environment, and law.

7.3 Respond to complexity with clarity and transparency

In VUCA, clarity and transparency come from breaking down complex situations into smaller parts. This makes it easier for managers to track progress and for stakeholders to understand the situation better.

• Information management capabilities

Breaking down complex situations makes it easier for managers to track progress and find bottlenecks, which means identifying potential risks and making better decisions.

• Professional training for staff

Sharing information transparently helps employees in the business understand their roles and responsibilities, while also creating opportunities for them to learn and improve their professional skills.

• Technology application

Taking advantage of technological developments helps businesses be transparent in their work, minimize errors due to manual operations, provide accurate data for decision making and ensure information security for the entire business.

7.4 Deal with ambiguity with flexible and adaptive thinking

To adapt and survive in a volatile business environment, managers should not avoid unclear information. Instead, they should flexibly adjust their strategies based on new changes. Specifically, as follows:

• Enhance business engagement

Interaction in a business can only be optimal when it comes from both managers and employees. In which, managers are the key players, if they explain detailed information and listen, employees will have more trust and long-term commitment to the business.

• Building a positive corporate culture

In order to overcome barriers and seize opportunities in the VUCA era, building a positive, creative and flexible corporate culture is important and urgent. In addition to constantly updating professional knowledge, members need to improve critical thinking, question old assumptions and experiment with many new solutions.

• Pursuing an emotional leadership style

Adapting to the changing situation is not enough, managers need to pursue the appropriate emotional leadership style. In other words, instead of imposing and giving orders 100%, managers should lead, connect, direct, command and be democratic with the staff in the business. This helps create a friendly working environment and bring high work efficiency.

From the information provided by 1C Vietnam above, surely your business has clearly understood what VUCA is and the importance of VUCA in business. In the current digital age, the term VUCA is becoming more and more popular. To adapt to market fluctuations, businesses should apply modern software to their business operations, typically the comprehensive business management solution 1C:ERP. The solution is developed on an advanced low code platform, with the ability to deploy 2 times faster than other management software. For more detailed advice on 1C:ERP, please contact 1C Vietnam via hotline (+84)247 108 8887.