Leadership Skills to handle today’s VUCA world

How to lead in the Digital Transformation age

Today’s world is characterized by disruption, constant pressure to change, and complexity. The digital transformation is changing entire value chains. Industry boundaries are increasingly blurring and throwing up new business models. The changed framework conditions that business leaders have to face today are described by the VUCA model. The term “VUCA” originated in the 1990s and was used by the U.S. Army to describe the major changes in the military after the end of the Cold War. Nowadays, it is primarily used in a corporate context. The acronym stands for four differentiating characteristics of the new digitalized world of work, which increasingly pose challenges for corporate leaders, but also for employees:

• Volatility: Markets are characterized by a high degree of changeability. Today’s world is changing at a high pace and is subject to constant fluctuations.
• Uncertainty: The development of markets is becoming increasingly unpredictable.
• Complexity: Today’s markets consist of many different elements that interact with each other. The multi-layered nature of these influencing factors makes the environment in which we operate increasingly complex.
• Ambiguity: Information is often ambiguous and therefore difficult to evaluate precisely. This makes orientation more difficult.

Not least the Corona pandemic has shown how fragile the existing is and to what extent there is a need to be able to react quickly to unforeseen events. The four VUCA factors have become tangible not only for companies, but also for each individual to a particular degree. Management and leadership approaches based on detailed analysis and long-term planning must be reconsidered against this background.

A paradigm shift in leadership

The effects of this changed starting situation make it more difficult for established players across industries to successfully withstand the shifting times and remain at the top of the industry for many decades to come. To remain successful, companies must adapt and business leaders must act differently. Previous business and organizational models are up for grabs. A crucial prerequisite is that outdated, outmoded leadership methods are abolished and new approaches are developed and tested. The concept of digital leadership addresses the question of which competencies enable managers to successfully lead their employees through the digital transformation. Managers need resilience to deal with the challenges of digital transformation and to successfully shape the change for themselves and their employees. Furthermore, in addition to their traditional leadership role, they are required to take on the role of innovator, networker and change coach.

Orientation is provided by the VUCA Prime Model, which was developed by Bob Johansen and has in the meantime become widely accepted in theory and practice as a way of thinking. Johansen argues that the successful handling of the four constituent characteristics of the VUCA world is made possible by four core competencies:

• Vision: In a volatile, constantly changing environment, a common target image is needed. A shared vision in the format of a “why” provides employees with orientation as an anchor, which can be recalled again and again despite all the change and volatility of external circumstances. In the best case, this long-term strategic orientation is broken down at the operational level to make it more tangible in day-to-day doing. Agile working methods and shorter-term goals, such as those realized by the OKR method or SCRUM, can help here.
• Understanding: Dealing with uncertain situations is difficult for most people. Empathy and emotional intelligence to put themselves in the shoes of employees and understand their situation are therefore key competencies for managers. In addition, security in the team can be achieved through the transparent handling of information. Here, too, elements of agile working methods such as regular stand-ups and retrospectives help to generate mutual understanding. In order to master unclear, complex situations, there is also a need for cross-departmental exchange throughout the company, which can be achieved through collaboration platforms such as MS Teams, communities of practice, reviews and good knowledge management. Managers must learn to think outside the box beyond their functional areas of expertise in order to lead with vision. This requires leaders to communicate with all levels of employees in their organization and to develop and demonstrate collaboration skills.
• Clarity: Complexity can be countered with clarity in order to make sense of the supposed chaos. Looking inward, clear, comprehensive communication and an understandable delineation of roles help to reduce complexity for employees. Looking outward, it is important to develop a clear understanding of the market and customers. An integrative customer-centric approach helps companies to continuously adapt their value proposition to changing circumstances. In product development, design thinking or design sprints provide particularly good starting points for customer-centric development and iterative testing.
• Agility: The short planning horizons of the VUCA world can also be addressed by a flexible approach in the form of agile methods. In this way, costly risks, e.g., in the form of costly product development failures, can be reduced to a particular extent. Waterfall-like classic project management approaches should be replaced by a short, interactive interval approach. This makes it easier to assess general conditions and risks.

In summary, the VUCA model can be seen as a kind of continuum of skills that senior managers can learn and should therefore be considered in leadership development plans.

Do you want to learn more or exchange thoughts about how to drive digital innovation with a human-centric perspective? Let’s connect!

Bennett, N., & Lemoine, G. L. (2014). What VUCA really means for you. Harvard Business Review, 92(1), 2.

Crummenerl, C, & Seebode, RO (2016). Das Geheimnis erfolgreicher digitaler Transformationen — Warum Führung, Befähigung und Kultur den Unterschied machen. In Petry T (Hrsg). Digital Leadership: Erfolgreiches Führen in Zeiten der Digital Economy. Haufe, Freiburg, S.151–186.