In most companies, developing new products is a critical component of strategy. Many companies are finding this to be more and more difficult as their environment increases in VUCA. The acronym VUCA stands for Volatility, Uncertainty, Complexity, and Ambiguity. This acronym was created and gained recognition in the strategic planning circles of the US military during the past 15 years. A body of knowledge is being developed around leadership in the VUCA world, with numerous articles and books published in the past few years.
Bob Johansen has proposed a leadership response to the VUCA environment which he titles VUCA Prime. According to Johansen, volatility is countered by vision, uncertainty is countered by understanding, complexity is countered by clarity, and ambiguity is countered by agility. Let’s take a look at each of the elements of VUCA and VUCA Prime as they apply to product development.
Volatile is defined as changeable – and often with an explosive or fleeting connotation. Volatile situations are full of surprises. Vision is the recommended leadership response. Developing and articulating a clear vision will assist an organization through the volatility be reducing the disorientation that occurs when a volatile situation unfolds. Even though there is rapid changes happening all around, the vision and direction stay constant; providing a basis for decision-making and action.
Product development involving innovative new technology, or a marketplace that is fast developing with new customers and competitors, can often be volatile. The vision that is needed for the product development team is a clear product line strategy. The strategy that has identified target markets and the characteristics of new products will guide the product development team through the technology, design, and business trade-offs that must be made when volatility strikes. Without a clear product line strategy, the product development team often stalls as they start chasing options and waiting for decisions from stakeholders.
Uncertain is defined as the state of being unpredictable and indeterminate. There are numerous significant unknowns in the business situation. The environment is novel to the point that past experience cannot be used as the measure for what should be done now. However, in an uncertain environment, there are facts that could be discovered. The recommended response to uncertainty is understanding. This requires investigation, fact-finding, and analysis. Rather than responding in a dogmatic manner using outdated principles, the response is to slow down and learn what is actually happening.
Within the product development environment for innovative new products; there is normally uncertainty with respect to customer needs, product performance, and market response. There are two approaches being used to create understanding within product development methodologies. One approach is to do extensive upfront analysis using tools such as the Quality Function Deployment. The other approach is to create a series of rapid prototypes of a minimally viable product to get “real-world” experience and feedback. I have used both approaches and there are pros and cons for each. The key takeaway for this discussion is that there is work that must be done to gain understanding. And that work needs to be built into the development project plan.
Complex is defined as intricate, often complicated, interconnected parts, processes, or organizations. With complexity comes options and opportunities. Some of these options and opportunities are very favourable and some are disastrous. Navigating through the complexity requires numerous decisions. The recommended response to complexity is clarity. Clarity exposes the decision points and the options. Clarity will also often provide a framework for understanding the implications of decisions. Clarity exposes pathways through the complexity.
Product development of new innovative products will often involve complexity on several levels. If the product is a system, there will be multiple components, possibly hardware and software, that must all work together. And research shows that system integration and test is one of the most likely areas of a product development project to overrun both time and money. In addition, there is often organizational complexity. Marketing is developing requirements, engineering is creating designs, quality is establishing test and inspection methodologies, operations is setting up manufacturing and logistics processes and facilities, IT is bringing new databases online and possibly new systems for support. All of these functions must work together and a change in one cascades through all the rest. Establishing a stage-gate product development methodology with defined practices and decisions points will go a long way to creating clarity in product development.
Ambiguous is defined as obscure, indistinct, and with numerous possible interpretations. Unlike our definition for uncertain where facts are available but are not yet known; in an ambiguous environment there is normally no “right” or “wrong” answer. Instead the answer is always, “it depends.” The recommended response to ambiguity is agility. This means that as the fluid situation continues to change, the decisions are revised and updated frequently. Nothing is ever final; it is just the “current state,” with the expectation that change will soon be required.
In the global marketplace, industries are separating into those that are ambiguous and those that are rigid. The highly regulated industries have a tendency to be very rigid and those that are not regulated are often ambiguous. But regardless of the industry, the product development environment is ambiguous. It follows that an ambiguous end market will create an ambiguous product development process. As the target for product definition and performance is constantly changing, whatever product is developed will immediately need an upgrade or replacement product. But even in rigid end markets, development is ambiguous. The regulatory environment is often different in different countries or areas, and these regulations are frequently changing. In addition, the regulatory agencies interpretations of regulations are often inconsistent. Regardless of the industry, a rapid pulsing process is needed to determine the current state of the market and industry environment. This must be coupled with a robust change management process for product development. Finally, the product development metrics must be focused on business success or failure of the product, not on time and budget targets for the project.
If you are involved in product development today, you are probably experiencing VUCA. You may reminisce about the “good old days” when things were calm and simple. But don’t expect those days to return. Instead embrace an approach to have vision, understanding, clarity and agility.