VUCA

Revision as of 12:54, 4 March 2022

Abstract

VUCA is an acronym for volatility, uncertainty, complexity and ambiguity, which are characteristics that can be used to describe projects environments. It is useful for project managers to know what characterizes the environment in which a project take place, as it will help choosing the correct strategy and leadership approach appropriate for the given environment. Volatile conditions should be dealt with by agility by being able to operate despite changing circumstances, while it is important that the project leader maintains vision for the long-term goal. Uncertain conditions are counteracted by obtaining new information and challenging current perceptions and a project leader should focus on understanding internal and external stakeholders and their beliefs about the situation. Complexity can be dealt with by restructuring the internal structures of a project to fit the environment, rather than the other way around, while a project leader needs to obtain clarity throughout the whole operation, to ensure transparency and not let the complexity ruin the overview. Ambiguity is best dealt with through experimentation and constant incremental learning of the conditions of the environment, while the project leader must show agility in responding to new information and change strategy accordingly. The VUCAlity of projects is a tool to help identify which of the VUCA characteristics that are present in each project environment. This can also be used during risk identification of a project, which enables to identify more risks a project might be subject to than what traditional and standard project management tools can.

Big idea

VUCA stands for the concepts of volatility, uncertainty, complexity and ambiguity. Each concept can be considered a characteristic which can be used to help describe and understand the environment in which projects take place. Understanding the context of project is crucial in an ever-changing world where it is impossible to separate a project from the social environment in which it takes place. These four parameters will be explained in depth along with how to manage the challenges, these different parameters pose in an environment in which they are present. VUCA Prime (vision, understanding, clarity and agility) will also be presented as a counterbalance to the concepts of VUCA, which is a leadership perspective to dealing with VUCA. The concepts of VUCA can help project managers understand the context of their project and the most appropriate approach to navigate in and manage the project risks, as an addition to the traditional way of assessing project risk by primarily using likelihood and impact. The VUCAlity of projects will be presented as a tool help identify how the different parameters score for a given project, which will help project managers understand the environment their project and its associated risks are taking place.

Volatility

An environment that is volatile is one that often experiences rapid change of circumstances, which be both be predictable and unpredictable circumstances. The given environment does not have to be particularity complex or lack critical information for the project, as volatility refers to environments that have clear information available and the context is clear, but the environment changes and the outcome might not always be predictable. (What difference a word makes)

Example in Project Management

Conducting a project dependent on a specific resource with rapid changes in its supply/availability can create a volatile environment for a project dependent on a steady supply of that specific resource. This could be the supply of physical resources, labour, services, etc.

Dealing with volatility

To deal with an environment that is volatile requires to prepare for the potential changes. This can be through hedging the volatile risk to multiple sources or stockpiling on the resources that could have volatile supply or price fluctuations. Ensuring that the project has agility and can continue despite an environment that might or might not suddenly change is key to operating in volatile environments. (Bennett & Lemoine, 2014)

Uncertainty

Uncertainty characterizes environments where the cause of an event is understood, but it is unknown when and which implications it will have for the project, if any at all. Therefor it makes it hard if not impossible to make valid plans or choices in response to events, with the current information available.

Example in Project Management

Conducting a project in a foreign country could pose uncertainties unfamiliar to a project manager. This could be related to different natural environment in the country, political unrest or culture differences. The situation here is known, but their implications for a potential project might not be.

Dealing with uncertainty

Gathering information is the core tasks in dealing with uncertainty. As uncertainty is due to lack of information it is necessary to reach beyond what the project manager and the company already know and expand on current knowledge and beliefs. This could be by seeking out information already existing in the world such as establishing new partners whom might be more experienced in the specific field/environment, or it could be generating new information by conducting research in the field. (Bennett & Lemoine, 2014)

Complexity

Complexity characterizes environments where information is well known or obtainable and their associated effect on the project can be determined, but the vast amount of data and information to consider makes the project complex and increases risks associated with not being able process all the information correctly.

Example in Project Management

Conducting a project that spans its influence across several countries and local legislations pose substantial complexity to a project. There might be multiple different sets of regulations, documentations requitements, laws, procedures etc. all applying to the same project. All of them are well know and can easily be looked up, but the vast amount of information, rules, limitations etc. make sit hard to navigate in.

Dealing with complexity

The key to dealing with complex environments is restructuring the organization, project and internal operations to fit the external environment, rather than insisting on keeping the same internal structures and trying to make the complex environment fit the current structure of the project or organization. A project team might have to be restructured or different teams be assigned new and clear areas of responsibility in order to obtain a better suited project for the environment.

(Bennett & Lemoine, 2014)

Ambiguity

to the environment. This happens in situations that are unique in their form and/or context. This makes it hard to determine the outcome, since there is no past information to help predict it.

Example

Conducting mega projects that are unprecedented in history pose ambiguous environments as well as projects at the border of human knowledge and the future. The international space station is an ambiguous project that has taken incredibly long to develop to its current state exactly because it is in new environments with new technology requiring a lot of experimentation and testing before implementing new developments to the station.

Dealing with ambiguity

Experimentation is required to combat ambiguity. It should be experimented what cause and effect a given action might have in an ambiguous environment. It might be necessary to experiment in increments and split the project into multiple minor parts in order t find out what works best, before taking huge risks by going all in with a specific solution/decision. (Bennett & Lemoine, 2014)

VUCA Prime and leadership

VUCA Prime is suggestion of how to, from a leadership perspective, deal with the VUCA environments in the world. It is an acronym that stands for Vision, Understanding, Clarity and Agility where each of the leadership approaches is suggested to counteract the challenges the VUCA environments poses (Volatility, Uncertainty, Complexity and Ambiguity). Some of the aspects are quite like previous section in how to deal with the VUCA elements, but this is more oriented towards the role of the leader and has a slightly different angel. It is based on Bob Johansen description of VUCA Prime which he first articulated in 2007 (Get there early: Sensing the future to compete in the present) VUCA concept and leadership + bob johansen books as source

Vision

Keeping focus on the long-term goals is a way to maintain clear vision in times of unpredictable and volatile conditions. By maintaining a long-term vision for a business or project it makes it easier to ensure that no rash decisions in the present are made with only short-term gain in mind, which could misdirect the original goal and permanently steer the project or company in the wrong direction.

Understanding

Uncertainty happens because some data is unavailable to make proper decisions. This does not call for immediate action from a leader, but instead it is critical that a leader takes time to explore the situation and understand what is going on. This is achieved be leaders actively understanding and engaging in two-way communication with their surroundings.

Clarity

Complexity can both be internally or externally in an organization or both. Having a complex operational structure can create complexity. Clarity can be achieved by making ensuring there are clear procedures for the operations to be undertaking in an organization. It is also important to ensure that there is a common understanding of what the situation, problem, procedure, responsibility delegation etc. is throughout the organization.

Agility

Agility can work as an instrument to counteract the changing circumstances that comes with ambiguity. When it is impossible to predict the outcomes of certain actions, then it is important to be able to change strategy quickly while also learning from the outcomes of actions undertaken. Agility comes from shorter time interval between action, learning and based on that a change of strategy. In ‘Leaders Make the Future: Ten New Leadership Skills for an Uncertain World’ Bob Johansen goes into depth with more concrete skills that a leader should strive towards obtaining and developing in order efficiently lead in a VUCA world.

(Johansen, Leaders Make the Future: Ten New Leadership Skills for an Uncertain World , 2012)

(Johansen, Get There Early: Sensing the Future to Compete in the Present , 2007)

(Çiçeklioğlu, 2020)

The VUCAlity of projects’ – Practical application of VUCA in project risk management

Measuring the VUCAlity of projects has been proposed as an additional tool to the traditional way of risk assessment as defined by the Project Management Institutes standards. Especially it was developed to help identify risks that not normally might be identified using the standard tools. It seeks to combat the human biases that might be present when identifying risks, which can happen when only using the traditional tools. More specifically, it is helpful in identifying risks that aren’t only of a technical nature but more due to social or psychological aspects and risks that have a low likelihood to occur but that can pose a significant impact if it occurs.

The tool has been made by identifying a set of criterions for each parameter in VUCA, which translates into how much the project and its environment it characterised by these parameters and thereby obtaining the ‘VUCAlity of a project’. Each criterion is then answered with a score of 1-5 ‘Strongly agree (1), Agree (2), Neither agree nor disagree (3), Disagree (4), and Strongly disagree (5)’. The criterions are directly quoted from the paper and are as follows:

(Fridgeirsson, Ingason, Björnsdottir, & Gunnarsdottir, 2021) (Fridgeirsson, Ingason, Jonasson, & Kristjansdottir, 2021)

_______________________________________________________________________________________

Volatility

Simple in planning (straightforward/sequential execution) Resource needs are known and accessible Adequate timeframe with good slack in schedule Solid contracts throughout project duration Known, well defined objectives

Uncertainty

Uses few and proven technology components Stakeholders are few, with few time zones/cultural differences Information is easy to obtain Scope is well defined and approved Risk management is well defined

Complexity

Few and simple regulatory or political environments Few subcontractors, organizational departments, and cultural differences Few interfaces with other technologies, projects or operations Has been done many times before Clear governance, straightforward decision-making

Ambiguity

Deliverables are well defined, no “unkowns unkowns” Connections between tasks are clear Risk factors are well known and documented No “hidden agenda” All stakeholders and their relationships are recognized _______________________________________________________________________________________

The same authors creating this questionnaire has also published a paper on how to better answer these questions. In (xxx) it is suggested that in order to identify risks, each criterion could be formulated as a question to be answered, e.g. criterion 3 for complexity: ‘What complexity factors could lead to the need for many interfaces with other technologies, projects, or operations?’ Each criterion acts then as a question a project team and manager can ask themselves in order to identify risks associated with the specific concept (volatility, uncertainty, complexity and ambiguity). The study conducted in the paper suggests that this way of identifying can produce more identified risks, as it puts the question aiding the risk identification into specific contexts, which are easier to relate to and promotes ideation of the more unlikely but impactful event, which the traditional methods might not be as efficient at.

Limitations

The use of the VUCAlity of proejects does not ensure that The two articles are both published in 2021 and both are based on limited study data. This method is thus yet to be fully developed, tested and standardized, as it as of now might not be a recognized efficient tool. Still, it has showed positive results in the studies and experimentation with using the concept of VUCA to identify risks might prove useful and worthwhile to adapt. More literature will might be published on this in the future along with further studies of its effectiveness.

Bibliography

Bennett, N., & Lemoine, G. J. (2014). What a difference a word makes: Understanding threats to performance in a VUCA world. Business Horizons, 311-317.

Çiçeklioğlu, H. (2020). VUCA Concept and leadership. In G. Mert, Management & Strategy (pp. 229-244). Istanbul: Artikel Yayincilik.

Fridgeirsson, T. V., Ingason, H. T., Björnsdottir, S. H., & Gunnarsdottir, A. Y. (2021). Can the “VUCA Meter” Augment the Traditional Project Risk. Sustainability, 1-13.

Fridgeirsson, T. V., Ingason, H. T., Jonasson, H. I., & Kristjansdottir, B. H. (2021). The VUCAlity of Projects: A New Approach to Assess a Project Risk in a Complex World. Sustainability, 1-13.

Johansen, B. (2007). Get There Early: Sensing the Future to Compete in the Present . San Francisco: Berrett-Koehler.

Johansen, B. (2012). Leaders Make the Future: Ten New Leadership Skills for an Uncertain World . San Francisco: Berrett-Koehler.

Szpitter, A., & Sadkowska, J. (2016). Using VUCA matrix for he assessment of project environment risk. Zarzadzanie i Finanse, 401-413.