Don’t be that Frog — Business Volatility and my issue with the VUCA model

Most of us rally against change. We say we’re not wired for it. That it’s not built into our DNA. We quote our cavemen ancestors. As Nassim Nicholas Taleb put it eloquently in his book, Antifragile, “Procrastination is our natural defense”.  Which is true — up to a point.

The irony of the status quo

The problem with this is that, as long we adhere to the status quo, to the current model and market system of the modern world as we’ve created it, we will incur greater change, not less. Stability is nothing more than an illusion.  It breeds stagnancy.  As business leaders, we will incur greater instability, greater price volatility and greater inherent risk to our overall business models if we don’t change.  We will become increasingly redundant and left behind. 

Enter stage left: Our global Covid-19 response

When we look at our global response to Covid-19, as long we continue to direct our money, time and priority to addressing the symptoms of climate change (health support systems, trace and track, vaccines et al) vs the causes (deforestation, wild life trade et al), we will face more and more of this volatility. This is incredibly relevant for business at a deep structural level. For so long as we remain beholden to an economic system that has us produce and consume in a linear ‘Take-Make-Waste’ way, we’ll incur greater price volatility as the market prices in the world’s finite resources. And as businesses, we’ll continue to incur increased prices and disrupted supply chains.  We need to set ourselves up for the future market, where these impacts will be priced in.  We need to prepare for this future world.  Our business livelihoods depend on it. 

It’s like the frog in the pot of water, slowly getting hotter as the fire burns beneath. We take on the burden a little more every day, without really noticing it. In fact, the VUCA leadership model of Warren Bennis and Burt Nanus recommends resolving volatility by building in slack, banking up resources. To go on the defensive.   Don’t be that frog.

Netflix started out as a mail-order DVD service, competing hard out with Blockbuster and staring down the barrel of nothingness at the advent of dig downloads.  So it rapidly evolved to downloadable films, then to streaming films, then as it identified the risk of the film studios licensing their content to other streaming services, it started to develop its own films, TV shows and documentaries. Whilst Blockbuster rested on its video rental service, Netflix continuously pivoted, changed and iterated. It continuously jumped out of the pot.

You can jump out of the pot. Rewrite the script. Change the system.

Jump out of the Pot

As much as instinct, bureaucracy and ‘risk mitigating’ decision-making protocols might stop us, the easier path is actually to change the system. As Sun Tzu in his Art of War 2500 years ago, the best form of defense is to go on the offensive.

So often we stress in the night that it’s too hard, too radical, too bloody scary. But the reality is we do it all the time. How quickly did we, as consumers, embrace the i of iPods, iPhones and iPads? The barista coffee? The Uber ride? The Airbnb booking? Netflix? TikTok? When it’s cool, when it’s fun, when it makes our lives easy, or is as bright and shiny as the latest iPhone, we change rapidly and willingly. We flock to the novel in spades.

When we acknowledge that it’s not only possible but that we do it every day; when we acknowledge that those who are disrupting systems are winning strategically, we can more easily see that the risk of doing nothing is far greater than the cost of doing nothing.

We are in that time now.   When it comes to investment, invested in the status quo is a losing game.  Instead, invest in redesigning your business. In jumping out of the pot.

Jumping is in our nature.

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If you’re a business leader grappling with this right now, it can be helpful to think about these four things

1. It’s simply a choice

Many business leaders I talk to don’t feel like they have the courage to jump. They’re scared of the unknown. Of not having the answers. Of not being able to guide their teams with clarity. And that is perfectly normal and human. And yet it’s simply a choice we choose to make. Something we have full control over.

2. It requires a risk reframe

As I walk alongside my clients going through the process of jumping out of the pot, it always starts with a risk reframe. I start by looking at what sits beneath their business model. And time and again the pattern I see is that market risk, and risks outside of organisational control are underscored, and those risks within it (Health and Safety et al) are over scored. Which makes it very tidy in a risk register, but not worth much more than the paper it’s written on when it comes to building a strong sustainable business model. Reframe your risks.

3. Give yourself permission

As we go through the process now of resetting our businesses, of putting effort into adjusting to new normals, give yourself permission to think about whether you’re investing in staying in the pot or jumping out. Hold the space for you and your leadership team to do this.

4. Answer these four things

To share briefly some of what I learnt working alongside UK insurance actuaries doing strategic system risk assessments some twenty years ago, answer yourself these four questions:

1.       What risks and assumptions underpin the health of your business model?

2.       How do these risks hold up under stress testing when you look at them against market, consumer, political and environmental trends?

3.       How much are you investing in shoring up your current model?

4.       Of the things you’re investing in, do they entrench you in your current model, or are they enabling you to be more open, responsive, agile and adaptive to market movements?

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Thank you for taking the time to read. If you want more on business model transformation, feel free to use my free tools page for useful models, tips and examples.  If you want to chat about your business model, or how Design Thinking 3.0 can help you face into 2021 stronger connect with me

* The photo above is of the 12-metre-high concrete sea walls built in Fukushima after the nuclear plant melt down. When in doubt, build it higher, when arguably mangrove forests would have provided a cheaper buffer — and a view of the sea.