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Slay The VUCA Dragon

Teradata

By Susan Lawson-Dawson

Although the military coined the acronym VUCA, which represents the extremely volatile, uncertain, complex and ambiguous conditions that are often encountered in battle, the business world has adopted the relevant term to its own environment. For organizations, the challenges include growing pressure to meet stakeholder demands, increasingly stringent regulations and industry changes that occur in faster and shorter cycles. These conditions force executives to make critical decisions more quickly, exposing their businesses to greater risk.

The disruption caused by VUCA to traditional business and IT approaches means processes that worked well in the past may no longer be adequate or appropriate. At the same time, the “Global Leadership Forecast 2014 | 2015” by Development Dimensions International (DDI) found that fewer than two-thirds of business leaders said they were “highly confident” or “very confident” in their ability to meet the four VUCA challenges, and only 18% of HR professionals said their leaders were “very capable” of leading in a VUCA world.

To slay the VUCA dragon and emerge with a robust, more profitable business requires a combination of strategic decision making, readiness planning, risk management and situational problem solving. The sword? An integrated view of your business honed with big data analytics.

THE FOUR CHALLENGES OF VUCA

Last year, the Harvard Business Review suggested that some organizations find it “easy to use VUCA as a crutch, a way to throw off the hard work of strategy and planning” because it is impossible to plan for the unknown. But understanding what VUCA represents is an important step in providing the context needed to predict, plan and progress effectively.

Volatility

The economic depression in some parts of the world, financial instability in others and various compliance regulations are just some of the global events causing marketplace instability. Add in unforeseen events such as material shortages or natural disasters that impact supply, demand, pricing and other business areas, and it paints a picture of the volatility organizations are facing.

Uncertainty

When a product defect results in a recall or a competitor launches a product just before another company goes to market, it can catch a business by surprise. The constant and often unpredictable nature of change ensures that the traditional approach of relying on historic trends will only exacerbate uncertainty in today’s fast-paced, rapidly evolving environment.

Complexity

Companies can have dozens or even hundreds of suppliers, vendors and other partners, as well as numerous channels for selling. Meanwhile, increased regulations are especially problematic for global companies that must maintain compliance across borders. All of these interconnected components and variables add layers of complexity to conducting business effectively.

Ambiguity

A lack of up-to-date, reliable information about the business, trends, competitors and customers restricts the ability of leaders to make smart decisions and seize opportunities. Companies that fail to identify relationships between seemingly unrelated entities, like those who influence others on social media or how purchasing one particular product influences buying another, will lag behind more informed competitors.

CONFRONT THE OBSTACLES WITH BIG DATA SOLUTIONS

The best way to overcome VUCA challenges is to tackle them head on—with big data. By collecting, integrating and analyzing a variety of data, then sharing the results across the enterprise, businesses can implement agile, real-time decision making in the face of VUCA and other emerging challenges.

Holger Mueller, vice president and principal analyst for Constellation Research, points out that big data solutions are far ahead of optimal data usage, but “best practices are being developed as we speak.” Harnessing big data for simulation and prediction, whether in finance, HR or another department, offers compelling insights that address challenges such as uncertainty and ambiguity.

Analyzing integrated data also enables businesses to better understand markets and supply chains, and provides enhanced insights for improved decision making. Tony Cosentino, vice president and research director for Ventana Research, notes that the Internet of Things, which uses unique identifiers to represent objects or people combined with data transferred over a network without human involvement, has made critical real-time discovery a possibility. That capability can shed light on VUCA.

“The Internet of Things helps us see what’s happening in the process chain,” says Cosentino, adding that gaining that view helps reduce risk and creates opportunities in multiple areas.

SIMPLIFY WITH ANALYTICS

Businesses need a comprehensive view of their entire enterprise to overcome intricacies and barriers while meeting myriad demands. Big data is crucial, yet the overwhelming amount of information that’s available can sometimes add to complexity. The solution is effective analytics. John F. (Jeff) Tanner, dean of Old Dominion University’s Strome College of Business, notes that algorithmic modeling can help.

He offers an analogy using Homer Simpson. Not the person you’d expect—or even want—to see in charge of a nuclear reactor. Fortunately, all of the complex safety data for plant operations is processed to provide a simplified view of the truth that not even a doughnut-obsessed cartoon character can fail to understand. A green light is good; a red light is bad.

“While business is a bit more complicated than red light/green light, data analytics allows organizations to link together conceptual variables to gain insight,” says Tanner. This allows marketing, for example, to leverage data about micro-segments and marketing effectiveness to build predictive models that allow the company to allocate its marketing budget more efficiently to optimize sales.

THRIVE IN A VUCA WORLD

According to DDI, organizations that have “VUCA-capable” leaders are three times more likely to deliver high financial performance. When you equip your decision makers with a comprehensive view of the entire business through improved data and analytics, they have the critical information needed to anticipate, act decisively and defeat the VUCA dragon.

Susan Lawson-Dawson is a business writer who covers technology solutions, trends and strategies.