“Disruption is as great as we have ever seen it,” says Joe DePinto, CEO of 7-Eleven. “We are seeing all aspects of VUCA.”
The U.S. Army coined the acronym VUCA in the 1990s to describe the post-Cold War operational environment: Volatile, Uncertain, Complex and Ambiguous. Facing a VUCA environment, the Army developed doctrines and procedures that allowed leaders at all levels to respond effectively.
The idea of VUCA has since been embraced by leaders in all sectors of society, in particular the current business world, to describe the nature of the world in which they operate:
The accelerating rate of change (volatility)
The lack of predictability (uncertainty)
The interconnectedness of cause-and-effect forces (complexity)
And the strong potential for misreads (ambiguity).
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Certainly, 7-Eleven is not alone. Thomas Friedman, in his recent book, “Thank You for Being Late,” argues that most organizations face significant environmental complexity in “the age of accelerations” and identifies three main drivers of our contemporary VUCA environment: the exponential growth of technology, globalization and the environment (climate change, population growth and migration), which all are accelerating simultaneously. This “Supernova”—as Friedman calls the convergence of these drivers—has created a VUCA environment for nearly every business and every industry.
How do CEOs and their companies understand the challenges of a VUCA environment? How do they adapt and innovate quickly to respond appropriately? To answer these questions, we interviewed 6 CEOs/Chairman/Presidents from a variety of industries:
Joe DePinto – CEO, 7-Eleven
Mike Fucci – Chairman, Deloitte
Tony Guzzi – CEO, EMCOR
Margaret Keane – President and CEO, Synchrony Financial
Bob Leduc – President, Pratt & Whitney, and
Bob Weidner – President and CEO, MSCI
We asked each to describe their business environment and discuss how they are leading their companies to thrive in the face of massive disruptions.
This is the first of a series of six articles focusing on what the CEOs did to adjust to their VUCA environment, how it worked and what they learned from their efforts that might be helpful to other CEOs. We hope our readers will find this series, drawn from personal stories, to be of benefit as they lead their companies and teams in today’s VUCA environment.
We begin with a case study drawn from the U.S. Army’s creation of and experience with VUCA to introduce several key concepts that will provide a framework for subsequent articles. In addition to the CEO interviews, we also interviewed General (retired) Dennis Reimer, a former Chief of Staff of the U.S. Army. General Reimer led the Army of over 1 million soldiers in the latter half of the 1990s and presided over the service’s transformation following the end of the Cold War. Under General Reimer’s command, the concept of “VUCA” was created and the Army’s doctrine and procedures to deal with a VUCA environment were formulated.
General Reimer said the Army’s VUCA environment began in December 1989 with the fall of the Berlin Wall and subsequent end of the Cold War. The Army had spent decades building what he called “a threat-based force,” with a single focus on deterring and, if necessary, defeating, a military threat from the Soviet Union. The demise of the Soviet Union ushered in a New World Order, which President George H. W. Bush at the time said was “long on New and short on Order.” Uncertainty about potential threats meant the Army had to be ready for a full spectrum of conflict, from low-intensity conflicts to nuclear war. To respond to this new VUCA environment, the Army moved from a threat-based force to a capability-based force, prepared to “go anywhere in the world, with the right force.” And so, the Army had to be able to mix and match forces to adapt to a more complex and uncertain operational environment. “When you go from something like a threat-based force to a capabilities-based force and all that entails, you end up really doing a transformation,” said General Reimer.
How did the Army transform? According to Reimer, the answer is by using 5 key strategies to position the Army for future success. These strategies have much in common with what business leaders are doing to make their organizations more adaptive.
1. Shaping the Culture around Mission and Values. Executive leaders shape the organizational culture. Particularly during times of rapid change, it is critical for the chief executive to pay attention to culture. General Reimer noted one cannot change everything at once—the CEO must keep the organization focused. As the Army’s chief of staff, he chose to focus on mission and values and encouraged leaders at all levels to live by, and reinforce, the organization’s values. He cautioned that without a strong emphasis on mission and values, periods of rapid change might create negative leadership conditions within the organization. The Army experienced such challenges in the 1990s when the Army was simultaneously downsizing its end-strength and reorganizing the force, which led General Reimer to redouble his efforts to promote the Army’s core values.
2. Leveraging Technology. For General Reimer, technology was a key driver in both the acceleration of change and the success of the Army’s adaptation. “We decided we wanted to change the way we operate. If we didn’t change, we were going to lose the advantage we had over the other armies. And so, we set about digitizing the Army.” The Army planned to use digital technology to create a complete picture of the battlefield and, thus, gain an advantage over potential adversaries. “We figured if we could answer three questions: Where am I? Where are my buddies? And where is the enemy? Then we could really change the way the army fights.”
3. Aligning Organizational Structures. The need for flexibility and rapid response led to an examination of how the Army was structured to be able to respond to a wide range of possible threats. The Army has six major levels of command from largest to smallest:
Army > Corps > Division > Brigade > Battalion > Company
The Army division (10,000-18,000 soldiers) had been the force that was deployed to face known Soviet threats, but after the Cold War ended, smaller brigade-sized forces (3,000-5,000 soldiers) afforded greater flexibility, and they could be mixed and matched to meet specific threats. This was no small change. This transformation required changes in training, leader development, supply chain management, and, inevitably, how we fight and win our wars. There is no doubt that a brigade-based structure is more agile than the “Cold War” paradigm of the division-based force. But to make that move would require time and effort and possibly distract from current missions. The problem was the personnel and leader-development systems were all geared to support a division-based structure. So, General Reimer asked his senior commanders to read about, and reflect on, the idea of change. In the end, they decided on a hybrid approach that aligned structure to current mission requirements.
There was some merit to going to a brigade-based force. The problem we had—and the problem I particularly had, was I couldn’t quite figure out how to make the leader development work for that size or that type of an Army. We had certain leader development programs we wanted our leaders to go through. And when you remove a level of command, then you ask yourself, “How do you go from the brigade-level to the Corps-level,” for example. And it didn’t work. So, we backed off of that. But what we did was to leave the division structure in place and to mix and match a lot more. And that’s the way most of the wars, or most of stability operations in Afghanistan, Iraq—well, the second war and then also, the stability force, have been fought. You use that mix and match methodology and it seems to be working out all right.
4. Establishing a Learning Organization. In the 1990s, the Army experimented with these new ideas—creating the digital battlefield and operating with nimble tactical formations. The Army established a test bed at Fort Hood, Texas to try out these concepts which involved lots of people trying new ideas, gathering data, and reporting back to the Army the results of the tests. Despite some naysayers, the results of the tests were positive enough for the Army to move forward. As General Reimer said, “we just made the decision that we’re close enough. We’re at the 90% solution. Let’s just take it forward. And I’m glad we did.”
Next, the Army ran a series of war game simulations to test the concepts against a variety of current and future threat scenarios. After every exercise, large or small, all leaders used after-action reviews to learn and implement lessons learned in future operations. The objective was to learn how the new ideas stacked up against alternative threats, to ensure the transformed Army would embody the characteristics that would meet the challenges of this VUCA world. Additionally, Army units incorporated the new concepts into tactical training in force-on-force simulated combat at the combat maneuver training centers to prepare leaders and units for the new operational environment. Throughout the transformation process, General Reimer clearly communicated the need for change and encouraged experimentation and information sharing within the Army.
5. Leader Development. General Reimer reflected on the importance of leader development within the Army, emphasizing the necessity for a continuous and progressive system of professional education, training and job experiences to prepare leaders throughout the chain of command for the management of change. As the CEO, he also emphasized the importance of succession planning for the most senior executive positions. He told the story of how four successive Army chiefs of staff progressed through critical assignments—deputy chief of staff for operations, vice chief of staff, and chief of staff—and that continuity in top leadership allowed the Army to maintain the transformation’s momentum and continuity from the end of the Cold War well into the post 9-11 era.
The 5 strategies presented above provide a framework for examining what works today in the business world. In subsequent articles, we will look at how corporate CEOs understand their VUCA environments and are positioning their companies to respond effectively. What does VUCA look like today, and how are business leaders adapting to ensure success? Do the strategies used by the Army after the Cold War make sense in today’s business world? We’ll answer these questions in follow-on articles.