Strategy in a VUCA world

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by Mark Blackwell, Arkaro

The business press is seemingly clear – we are now living in volatile, uncertain, complex and ambiguous VUCA world (as if it was not before!) Even if this really were a new paradigm as some claim it to be, have we adapted our approach to business strategy to reflect this VUCA environment?

I was reading an article from Dave Snowden on “The Process of Strategy”[1] when one quote jumped out;

“I was always amazed that Western Capitalism adopted the planning cycle and approach of Soviet Russia!”

How painfully true and how far from the VUCA world we claim to live in! Sadly, it reminded me of hours spent filling in complicated spreadsheets sent from headquarters to the outermost reaches of the business empire demanding quarterly assumptions on price and volume by sku for 5 years. Something has gone terribly wrong in this approach to Business Strategy, and it needs to be fixed.  

A solution is coming. Dr Pete Compo’s “The Emergent Approach to Strategy[2] is to be published next year and I have had the enormous privilege of reviewing draft before publication and becoming an affiliated partner. The Emergent Approach is a new theory and practice of strategy that embraces an adaptive view of change and innovation as opposed to “planning” the future.

But what do we mean by the terms “adaptive” and “emergent”? Going back to Dave Snowden, with Mary Boone he developed the Cynefin (pronounced “ku-nev-in”) Framework[3] to provide context and insight. One version is shown suggesting that Emergent Solutions are associated with Complex situations.  

Cynefin framework
Diagram of the Cynefin framework. Credit: Snowden on Creative Commons

The Cynefin Framework

The Cynefin Framework has five domains Clear, Complicated, Complex, Chaotic and Confused recognising the different nature of cause-and-effect seen in each domain. As the cause and effect differs in each domain, then so should any problem-solving process differ by domain including strategy and planning.

Clear Domain – “The Domain of Best Practice”

In the clear domain the options are clear as the cause-and-effect known to all participants. The decision-making response is “Sense – Categorize – Respond”. The policy for handling business travel expenses is in the clear domain for example. However, the clear domain is next to the chaos domain for good reason. Best practices are based on past practices and may not be resilient to changes to the environment. Anyone who has been on a business trip to a cash-based country without printed receipts may start appreciating this adjacency!

I like to think of this as the perfect domain for DMAIC Six Sigma. The relationship between effect (Y) and cause (multiple x’s) may not be obvious, but with the right analytical tools and expertise the relationship is understood. Therefore, the “Sense – Analyse – Respond” reflects the decision-making process.

When the context is appropriate, this expert approach can be powerful in business, but it can be too tempting to use these processes in inappropriate contexts. The failure of Soviet Central planning techniques exemplifies this well. If a business really were no more than Y=f(x1,x2,x3…) then the future could be planned and predicted. Self-evidently this is not the case for most, if not all, cases!

Complex Domain – “The Domain of Emergence”

According to Snowdon and Boone many business situations fall into the Complex domain. The relationship between cause-and-effect is , regardless of the level of expertise. Therefore, regardless of expertise, decision-making is difficult. Feeling obliged to decide based on incomplete data is a good indicator of being in the Complex Domain.

“Like bramble bushes in a thicket”[4] everything appears to be connected to everything else. We see Complex Adaptive Systems in this domain. Complex Adaptive Systems consist of many individual agents that exhibit non-linear behaviour that cannot be predicted but can often be explained retrospectively. Emergence is the phenomenon of innovations following the interaction of the Complex Adaptive System components.

The best approach here is to “Probe – Sense – Respond”. Rather than trying to control with detailed planning and KPIs that likely only encourage gamification, look for emerging patterns and encourage a solution that survives the stressors faced. The organisation is best served by policies or rules that provide guardrails but do not over-specify exactly what people should do.

Solutions are unlikely to be obvious. Diverse teams should collaborate in the pursuit of creative solutions that may take time to emerge and validate.  

In the complex domain, managers should aspire to move to the complicated domain but be wary of the tendency to move back to the Complex Domain. Indeed, it might be is said that any system involving people has a tendency towards the complex domain! 

Chaotic Domain – “The Domain of Rapid Response”

In chaotic situations there is no relationship between cause and effect.  The decision-making approach is “Act – Sense – Respond” with the goal of moving the situation to the Complex domain.

Crisis situations are typical of this domain, best managed with a crisis plan that has identified risks together with a communications plan.

It should be noted that the Cynefin Framework is constantly evolving. Future articles may focus on other aspects, such as exaptation, and their connection to strategy design and execution.

What does the Emergent Approach to Strategy bring?

The Emergent Approach embraces an adaptive approach to design and execution that is needed for the complex domain. It presents a new theory that gives a rigorous definition of the strategy, and also tactics and execution, based on an influence diagram representation of complex adaptive systems. Then it fills an important gap by bringing new processes and tools for designing and implementing strategy frameworks based on this new theory, including:

The Emergent Approach to Strategy

embracing an adaptive approach to design and execution

A rigorous definition of rules-based strategy derived from complex adaptive systems science

Bring clarity to a concept that continues to confuse in the academic, corporate, and consulting world.

The five disqualifiers

New, more adaptive tests of strategy that enable efficient and early judgement of whether you have a strategy rather than goals, clichés, and truisms (or worse) lists of the same.

A new understanding of execution

An adaptive real-time definition that replaces a view of execution that often means little more than “get good results.” Results can only be known in hindsight.

An agile approach for developing strategy frameworks

A non-linear method guided by design principles as opposed to the sequential steps of familiar “chevron” processes.

  • Avoid unneeded data and analysis by focusing from the start on busting the bottleneck to aspirations
  • Problem definition and solution are evolved together

A matrix of strategy alternatives, fitness criteria, and assessments is stressed repeatedly until a compelling alternative emerges.

Insights on scenarios

There are always multiple scenarios, that is, multiple external conditions and events that cannot be controlled.

Each scenario does not get its own strategy; a strategy is at the mercy of all scenarios.

So, incorporating scenarios properly into the strategy matrix is needed for design of resilient and adaptive strategies.

Four-station dashboard

A design where execution is measured, not just results, and where there is much more specificity to leading indicators.

“Mark and I worked together in DuPont. We share the ambition to help businesses with strategy methods that quickly engage the minds of the people. He wants strategy that drives organisations with straightforward and down-to-earth guidance that brings harmony and efficiency to the organization in meeting its aspirations. This is why Mark is a natural partner to deliver the Emergent Approach™.”

 

 

Dr Pete Compo
Author of the Emergent
Approach to Strategy

Dr. Pete Compo, Emergent Approach to Strategy, Arkaro

[1] https://www.cognitive-edge.com/the-process-of-strategy-1-of-3/

[2] www.emergentapproach.com

[3] A Leader’s Framework for Decision Making (Snowden, Boone) Harvard Business Review 2007 A Leader’s Framework for Decision Making (hbr.org)

[4] Alice Juarrero

Mark Blackwell - independent consultant Arkaro

Mark Blackwell

Mark Blackwell founded Arkaro in 2016 following a career in organisations both large and small, covering a wide range of industries including animal health, specialty chemicals, advanced materials, food and feed ingredients.  13 years at DuPont included 8 years of consulting  roles across multiple businesses.  Expertise included Six Sigma, Integrated Business Planning, Product Line Management and Business Productivity. At this time Mark worked with Pete as the ideas forming Emergent Approach to Strategy™ were developed.  More recently Mark has provided feedback on the book prior to publication and is the first affiliated partner to deliver the Emergent Approach to  Strategy™

Mark is based in the Geneva, Switzerland area.