VUCA analysis has become a trendy term in some management circles, especially in the finance sector. VUCA is an acronym standing for Volatility, Uncertainty, Complexity, and Ambiguity, and is used to describe key characteristics of the external environment. It is another analytical tool that can be used in issue management.
Some knowledge of VUCA factors is valuable to communicators. Apart from considering these factors in your own communication plans, you will impress senior management by being knowledgeable about the terms during planning sessions.
Confronted by this buzzword/buzzphrase, some managers can be overwhelmed and use it as an excuse not to engage in rigorous development of strategy because such factors apparently make it intimidating to look ahead.
However, VUCA types of factors are not new. They have always been integral to scenario planning and in PESTLE analysis (Political, Economic, Social, Technological, Legal and Environmental) of the external environment in issue management.
(Personally, I would add a ‘C’ to PESTLE analysis – Communication Climate – so it becomes PESTLEC. A crucial part of issue management is analysis of factors affecting communication and stakeholder relations. You can read in more depth about SWOT and PESTLE analysis in my Kindle book, Annual Communication Plans: How to get the result you want!.)
Anyhow, planners and managers have always had to cope with ambiguity and uncertainty in decision-making, and they have always been obliged to try to predict the outcomes of their actions. Therefore, VUCA is not a dramatic step forward. Nevertheless, it can be a useful reminder in PESTLE analysis and scenario planning.
Two key questions that VUCA analysis can help to address are:
- How much do you know about the situation?
- How well can you predict the results of your actions?
Professor Nathan Bennett from Georgia State University explained the VUCA concept in a recent Harvard Business blog. He said each factor needed to be analyzed separately from the others; the 4 factors don’t just add up to one big variable.
Prof. Bennett discussed the characteristics, as well as a business example and business approach relating to each VUCA factor. These are shown below in my own words. In addition I have outlined in italics an example of a communication role relating to each factor to show how the analytical elements of the corporate communication planning model is vital to issue management. It should be noted that fully comprehensive information is seldom available in any situation, and therefore managers are invariably obliged to make decisions based on the best information they can assemble.
Relatively unstable change. The challenge is unexpected and may be of unknown duration, but it is not necessarily hard to understand; knowledge about it is often available.
Prices fluctuate after a natural disaster, such as when a fire takes out a supplier.
Conduct risk analysis, build in spare capacity and devote resources to preparedness – for instance, stockpile inventory or overbuy talent. These steps are typically costly and therefore management should only commit where the cost is justified by the downside.
Prepare a crisis management strategy. The communication function should be integrally involved.
Lack of knowledge. Nevertheless, the situation’s basic cause and effect are known.
A competitor’s expected product launch can change the future of the business and the market.
Increase business intelligence activities. Collect, interpret, and share relevant information. Engage in serious boundary-spanning collaboration.
The organization’s communication function is the logical area in which to build these resources, especially as the role incorporates boundary-spanning.
Complexity variables are the easiest of the 4 factors to understand, but managers can’t know what they don’t know, which compounds the complexity of the situation. Managers may know the likely outcomes but not the unintended consequences of complexity factors. For instance, writing new computer code may open up the further complexity of unforeseen security risks. Some information is available or can be predicted, but the volume or nature of it can be overwhelming.
The company operates in many countries, each of which has its own regulatory environment, tariffs and cultural values.
Restructure, bring in or develop specialists, and increase resources adequate to address the complexity.
Identify the key stakeholders in each country and initiate a systematic stakeholder relations management program. Tailor messages for each country and its unique culture. Government relations is crucial.
Causal relationships are completely unclear. No precedents exist; management faces “unknown unknowns.”
The company decides to move into developing markets or to launch new types of products that are outside its previous experience.
Companies need to be prepared to take on risk, perhaps initially in trial markets, to evaluate outcomes. Lessons learnt can be applied progressively over time to other markets.
Communicators can support with gathering intelligence about the operating environment including regulatory parameters, and in preparing broad issue management and crisis communication strategies in advance.
This article was updated in February 2020.