What The VUCA Environment Means To A CEO

This is part 2 of a 6-Part Series: ‘Excelling in a VUCA Environment Requires a Learning Mindset’. Click here for part 1, part 3, part 4, part 5 and part 6.

This article illustrates what VUCA looks like from the CEO’s perspective across a variety of industries, highlighting specific disruptors—technology, competitors and market forces—that are impacting their companies. We found these environmental forces to be similar to what the Army experienced after the Cold War. Emerging global threats from new competitor nations, as well as non-state actors (terrorist groups) and dynamic market forces (e.g., changing geopolitical alliances and shifting national budget priorities), led the Army leadership to think differently about national security. Advances in digital technology played an important role in allowing the Army to respond to these new threats.

Remember the days of stopping by the local 7-Eleven on the way to work for a cup of coffee, a donut and a tank of gas? That is still the primary focus of the largest franchise business in the world with 63,000 convenience stores, but the business is changing dramatically, according to 7-Eleven CEO, Joe DePinto. Joe was named the Convenience Store Petroleum (CSP) Retailer of the Year among consumer and petroleum retailers and has led 7-Eleven for 12 years. “Disruption is as great as we have ever seen it. We are seeing all aspects of VUCA.” He described the disruption brought on by e-commerce competitors and the desire to transform the company before competitors change the industry:

“We are an immediate consumption business,” he says. “We sell products that are immediately consumable, and the e-commerce businesses are starting to encroach on our space. They are in fact beginning to redefine convenience as we have traditionally known it. The company that epitomizes this is Amazon. Once an e-commerce book company, they now disrupt businesses across many channels. For instance, Amazon’s Prime business will deliver anything you want within 2 hours. In time, it will be much faster. That’s why we have been so aggressive in ramping up our digital initiatives at 7-Eleven. We’re working to move our company toward being more of a technology company that works in coordination with our traditional convenience stores. Customers can now order products from 7-Eleven that are picked up by Post Mates or some of our other partners, and then delivered to the customer within 30 minutes.

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“Additionally, to offer increased convenience, we’re getting into the ‘click-and-pick’ business where customers will be able to order online or through our app, come to our stores, and the product will be available for them immediately to pick up, having already been paid for. We are also focused on utilizing our stores as distribution points for other businesses. Customers can have their boxes shipped to a local 7-Eleven, and can pick them up at their convenience. Finally, we are working on digital payment options that are multiple and varied. Today’s customer wants different payment options. We need to provide them solutions to pay the way they want. So, we have all of this going on. It’s really being driven by the customer and new e-commerce entrants. It’s forcing businesses like 7-Eleven to change the way we have done things in the past.”

Bob Weidner, President and CEO of the Metals Services Center Institute (MSCI), the trade group representing the industrial metals supply chain in North America, shared a story of how adaptive manufacturing and 3-D printing might disrupt the traditional industrial metals manufacturing process in the industry. This disruption illustrates dramatic changes in the way industrial metals manufacturing firms think about business going forward.

A relatively new CEO to this particular service center was attending one of his first MSCI conferences. And on that program, we actually had a speaker talking about additive manufacturing and 3-D printing. Again, that would not necessarily be the content at a typical trade association’s programming, but you know, I believe we have delegates in a ballroom for a finite period of time. Bringing new ideas is part of our value add – because we can see the world, by definition, through a very broad lens. We are looking at the world through a producer’s lens. Through a service center’s lens. We are looking at it through a lens of carbon steel, stainless steel and aluminum. And, again, our value is to identify on the horizon things that are going to be fundamentally changing their businesses.

The CEO went back to his company, pulled together his senior leaders and asked the question, “What do you guys know about 3-D printing and additive manufacturing?…I just came from an MSCI conference where I heard enough in the hour-long presentation that basically told me I don’t know what I don’t know, so I want you all to put together a little team and come back in 6 to 9 months (whatever the time frame was.) Come back with a plan for what our company should be doing in this space.” Flash forward – that company recently bought a 3-D printing company.

Bob Leduc, President of Pratt & Whitney, with 2016 sales of $15 billion and 38,000 employees, described how the rapid pace of technological advances in the jet engine industry is requiring his company to become nimble in the face of a historic growth rate in commercial aviation, advancements in technology, and increasingly stiff competition.

“There is no question that we are in a VUCA environment right now,” he says. “When you think about our business, we’ve got a very complicated landscape. We have established competitors, but also emerging competitors, particularly in China and Russia. We have technology that is constantly advancing, and we have commercial and military customers redefining what their business models are and [what] they value now vs. what they previously did. So basically, the whole landscape is moving on us in many different directions and, because of that, we needed to foster a culture that would allow the organization to move quickly.

Mike Fucci, Chairman of Deloitte, with 84,000 employees and $18 billion in revenue, spoke about how the changing nature of work and advanced technology is altering customer expectations in the professional services market.

“I’d say the same things that are affecting our clients are affecting us, which is artificial intelligence, robotics and cognitive technology. Our clients are struggling with the question of how they incorporate these innovative technologies into their day-to-day operation. Therefore, if we’re going to consult with them, we need to be ahead of the curve and help them decide how they use this technology. The days when you got by using just the experience you had are gone. We have to anticipate things that aren’t even fully baked yet, but it’s mostly around technology. I call it the—‘everything is a what-if scenario.’

“[I]t’s almost a 180-degree difference [from when I joined the firm] as to what people need to be learning and how they learn. We don’t work in offices anymore. We have people in London, on the phone with people in New York…people in South Carolina. The way we work is so different that training and learning (are different). It’s more like an extension of college, as opposed to a way to actually help you build skills that help clients solve problems. When people enter different levels of their career, like we do a lot of work with new senior managers and new partners, it’s helping them learn how to operate differently in those roles, and it’s not just that what got you to where you were doesn’t work at the next level. It used to be that that technical experience was kind of all you needed—you had a deep knowledge in something and you brought that knowledge to clients. We have to stay in front of disruption with our clients, and as the chairman, one of the things that actually concerns me a lot is how do we govern over disruption. It’s hard enough to manage over disruption. How do we govern over disruption? So, how do I build really nimble leaders to be able to address a little bit of the unknown? That’s why the VUCA analogy resonates with me, because it’s really more about building leadership than it is about building technical skills.

These examples illustrate how executives understand their dynamic business environments. They all talk about the accelerating rate of change caused by advances in technology, which have brought new competitors into their market and forced a rethinking about the nature of work in their companies. In the next three articles, we will share the ways these leaders are transforming their organizations to respond to these disruptions.

Click here for part 3 in the series.