The VUCA Company

Citation

Murali Aiyer (2015), "The VUCA Company", Journal of Family Business Management, Vol. 5 No. 2, pp. 317-318. https://doi.org/10.1108/JFBM-08-2015-0029

Agility and resilience are the buzz words today and on the lips of every CEO. The reason is not far to see. The global markets are more interconnected today but at the same time increasingly unpredictable, the so called VUCA environment. The acronym stands for Volatility, Uncertainty, Complexity and Ambiguity. Disruption is the norm in business. The chances of failure in such a business environment not only increases manifold but is also larger in scale as we saw in the recall of over eight million Toyota vehicles a few years back.

To survive and grow in this environment, leaders need to have a keen self-awareness and develop the skill for reflection on their actions and learn from them. They have to revisit assumptions, mind-sets, practices and tools on a regular basis to avoid complacency which is the first step of a fall.

Since 1991, when India launched its economic reforms, the growth rate of the economy nearly doubled for more than a decade. This was a time, after decades of socialist economy, when the positive sentiment in the business community was at an all time high and when the Indian entrepreneurship really took off. New, as well as existing companies announced ambitious growth targets both within India and abroad, in existing line of businesses as well as diversification. This was especially in sunrise sectors such as retail, aviation, public-private infrastructure and telecommunications.

Since large sums of funds were available globally, many Indian businesses, especially family owned business houses, which were born after the economic reforms, went on an uncontrolled, undisciplined business expansion in multiple areas where they had no prior experience. These were greenfield, brownfield, within India and abroad without being first fully conversant with the new line of businesses as well as the fast changing global environment.

The authors observed that many such companies were unable to manage their fast growth rate for long and either went bankrupt or shareholders’ wealth eroded substantially under a heavy debt burden. The global recession accelerated their poor health. The authors studied 12 companies which in spite of their early promise could not sustain their growth and suffered incalculable losses. These are not isolated examples as the increasing non-performing assets of Indian banks have shown and also the increasing number of companies which are under the Corporate Debt Relief (CDR) schemes of The Reserve Bank of India.

Some of the examples are Subhiksha which went on an uncontrolled expansion spree, Ranbaxy which suffered huge losses due to corporate governance issues, Shri Renuka Sugars and Wockhardt which acquired companies abroad in quick succession, Jain Irrigation which went on to diversify into several unrelated areas and Venkateshwara Hatcheries which acquired an English Football team to promote chicken products. Other failures such as Kingfisher have already been extensively discussed in the media.

Although it looks that these failures stem from unrelated causes, the authors have tried to reason that the basic cause of all these failures is the behaviour of the top management of these initially successful companies. Success breeds arrogance and hubris which has been the downfall of many successful leaders such as Napoleon and so was the cause of these companies. Under such Heads, companies become complacent and do not question their assumptions. Their mindsets become fixed, clogged like cholesterol in the heart arteries, slowly taking its toll on the heart and body.

The time where one strong leader such as Jack Welch, as he himself has rightly pronounced, can alone carry the organization is gone. The authors contend that leaders who will succeed are those with a keen sense of self-awareness. They are not overwhelmed by their past successes but humble people who are constantly aware of their inadequacies and blind spots and not only work towards overcoming these but also try to seed the same traits in the organization culture. They strive to create a learning organization where every member and not just the chosen star performers, are continuously broadening their knowledge horizon through curiosity and discovery, listening and comprehension, gather facts from diverse sources, separating opinions from facts, network across silos. Thus, they develop the skills of critical thinking and evolve to take their place in an empowered organization. Without excellence in thought process, there cannot be excellence in action. One cannot grow faster than the organization’s ability to learn and embed the learning in its future plans. Considering that worldwide, only 30 per cent of strategic initiatives succeed, there is all the more reason for developing a patient strategy as suggested in the book and highlighted by the cases. Such an organization not only becomes agile, fast to respond to changing circumstances but has the resilience to bounce back from adversity.