VUCA world which is an acronym used to describe the volatility, uncertainty, complexity and ambiguity. We all are living in such a world. It is necessary for any manager, policy maker and even individual to understand this.

1. VUCA World
The term VUCA, which was introduced by the U.S. Army War College in the late 1990s to
describe the situation of the world after the collapse of the Soviet Union, has gone too far
and has become more relevant. Today we live in a world where any event that happens at
any part of the world affects directly or indirectly our country and company. The event does
not need to be always related to economy, but politics, technology and socio-economical.
More interestingly, we can never predict such event and that is why such events are called as
black swan (defined by the Lebanese American scholar Nicholas Taleb). Thus I would call this
as Turbulence which is rapid rate of change. In this situation everyone just try to navigate a
safe passage.
One of the major reason for such a VUCA world is globalization. Diversity and globalreach has
introduced a lot ambiguity to the whole environment. Globalization along with technology
has made the whole world more cohesive. In other words, this has made the world more
complex and competitive. We have seen such problems with economic theories as well.
Economic theories which were made before 19th century are not so valid now a days. One of
the major reason for the same is they never considered international trade. They took few
assumptions and called them as ceteris paribus (with other things the same). But now things
are less constant but more dynamic. Earlier things, much or less, used to remain constant for
a long period as there were geographical boundaries which were not frequently crossed by
people from other nations. Now moving to other location is as easy as never before. More
importantly, earlier it was people and product (mostly tangible things) who used to move
within countries. Before 19th century it used to take 1 month to transport from one extreme
of the world to another, now it takes less than 24 hours. Moreover tangible things need
human intervention to transport. However intangible things do not need much human
involvement to transport. These can be transported from one place to another place (does
not matter how far other place is) within seconds over internet. Technologist call it
advancement and development in human civilization, but believe it or not, it has made this
world more complex as well uncertain. Why uncertain? Because we never know what any
individual (company/country/person) is doing somewhere. And as soon as somebody comes
up with some change, it takes seconds to transport the same to anywhere.
We have seen many examples of failing a company who were once leaders and later they
(even) filed bankruptcy such as Kodak, HMV and Borders. We have seen countries at the verge
of failing such as PIIGS. And there are enormous examples of humans who were once leader
and successful, but later they were none. We saw economic theories becoming irrelevant as
well. It started with Physiocrat (agriculture is all source of wealth). Then it was supply side
(classical economics), then it became supply and demand both (neo-classical economics),
then American Institutionalist, Keynesian Economics, New classicaleconomics and finallynew
Keynesian economics. And we are sure that New Keynesian Economics can never saveus from
crisis that we will face in future. However we are uncertain about any event that will shake
the whole world.

2. Companies always know about this VUCA but many times they failed to anticipate the same.
We have seen this situation in 2008 financial crisis, when companies took excessive risk as
they were anticipating good times in future. They were uncertain about the same, but they
were too optimistic and forgot about VUCA world which has become more VUCA.
There are certain megatrends that will shape our world and these trend are:
 Digitalization
 Rise of developing world which are not just producer for developed world but
consumers as well
 Sustainability
If we talk about volatility, then we are never sure about next thing and it leaves us alone,
overwhelmed and utterly unprepared. There can be three ways for any company/individual
to lead more effectively in such an environment:
 Communication clearly
 Getting data all time and translating that into information (in god we trust all
others bring data)
 Being flexible enough to accept any change
When we look at uncertainty, which has become more dangerous as we rush to understand
it with our past experience and over rely on it. And this behaviour is natural, we as a human
always seeevery challengeas something similarto what we have seenor encountered before.
The same is true with companies as they try to solve new problems based on historical data.
Many times it is a faulty assumption that yesterday’s solution to a seemingly similarchallenge
today is appropriate. Here can be two ways to deal in highly uncertain environment:
 Get a fresh perspective: Many individual follows red-teaming concept to get a
fresh perspective. It is useof adevil’s advocate within the leadership team in order
to counter influence of group/stereotype thinking.
 Be flexible:There is a saying in US military as “plan never survives first contact with
the enemy”
 Glance back, look ahead
In a complex environment, we see opportunity and threats as collective, but they are
interactive rather. We need to think non-linearly to lead through complexity. In such a
complex environment, below are some of things that will help organizations/individuals:
 Develop collaborative leaders:It is abilityto seethe bigger picture and to lead their
peers/members to achieve more together than they could achieve individually.
 Stop seeking permanent solutions: In such a VUCA world, there is no permanent
solution as things are dynamic than how solution be static/permanent.
 Train yourself for tomorrow: Being updated and ready is one of the best way to
deal with current VUCA world.
In ambiguous world, which is result of diversity and globalization, we need to appreciate
opportunities as well challenges from multiple aspects, not just from one (individuals)

3. perspective. Ambiguity generally leads to inefficiency and missed opportunities. If we define
characteristics of ambiguous world, then we can list it as given below:
 Ambiguity is a leading cause of conflict.
 It is impossible to diagnose from singular angle.
 Second and third degree effects are capable enough to ruin a whole
organization.
There are below three ways through which an ambiguous environment can be handled
effectively:
 Listenwell: One should try to understand other’s point of view. This willresolve
conflict as well improve communication.
 Think divergently: Looking any problem from various angle can lead to more
appropriate solution in a VUCA world.
 Setup incremental dividend: This can assure stakeholders that organization is
working hard to achieve sustainable gain.
Let me present current economic scenario, which perfectly describe VUCA world. Global
market from NYSE to Shanghai stock exchange has lost thousands of million dollar in recent
days, just after China devalued its currency. WTI and brent oil has lost more than 60% in a
year. Commodity price has decreased which has affected Brazil, Mexico and many other
developing countries. Dollar which is considered the Pappu, has started dancing in front of
Yuan. If this continues for some more time than a self-fulfilling vicious circle of default, forced
asset sales, further price declines and ultimately recession could result. Now whole world is
looking at China to take impressive steps so that others can recover from slowdown. Policy
makers are struggling in such a risk scenario to respond.
China which is second largesteconomy in the world, has power to pull other major economies
of the world like U.S. down with it. We know that currently China hold around USD 4 trillion
reserves. But it also hold a huge debt. If economy slows down than there are concerns about
toxic loans, which will in turn lead to financial crisis.
We never know which will be next disruption because of VUCA world which is getting more
VUCAoed. Some experts are predicting that next big economic crisis is yet to come and we
can feel the same currently when whole world is always in uncertain mode. First major
economic crisis was in 1930s, then it took 40 years for another major crisis (1970’s oil crisis),
then it took 25 years for another major crisis (Asian currency crisis 1997), then it took another
10 years for another major crisis (2008 financial crisis). And after that some part of the world
is going through some major crisis such as European debt crisis. If this continues then there
will be scenario where world is having multiple crises at the same time. And we can feel the
same, where Greek has not yet able to stand on its own and China stock market is crashing.
This is impacting not just China, but all developed as well developing countries.