We live, especially in Russia today, in a VUCA world. Declining oil prices and increasing political rhetoric have aroused volatility (V) and created deep uncertainty (U) about what might happen next. Coupled with the growing complexity (C) of the modern, integrated global economy we're now in a place few have been before. There are no maps to navigate by and every decision is ambiguous (A), open to multiple, different interpretations. And this represents the greatest opportunity for Russian business.
Crises are inevitable - what goes up, must come down - but dips into crisis-generated chaos provide opportunities for radical change and renewal. Yet, till now, Russia has wasted every crisis, tightening belts and waiting the storm out until we emerge, finally, blinking into the sunshine of an economy awash with higher-priced oil money: while the desperate calls to 'diversify, innovate and modernise' heard on the downturn become mere echoes again.
But what if oil prices don't come back again?
If we assume the 'crazies' on the US far-right don't lead us to war this year the current crisis represents the biggest opportunity the Russian economy has to realise the potential its size, resources and human capabilities possesses. For in a system starved of resources incumbents will have to adapt or die - and those that don't will exit the game, leaving more for those who remain. But many will not heed this call, while others won't know how to.
Successful businesses will increasingly find their established operating models exposed by the realities of a VUCA world. Their past success blinds them to the big shift coming. For example, they look to exploit big data, as their governing paradigm remains economies of scale and scope, but the data deluge we face means there is already more data than we'll ever have the capacity to collect, store and analyse. If one can't calculate all inputs, one can't anticipate all outcomes rendering 'outcome-based' strategies sub-optimal. In the emerging paradigm success will not be enjoyed by those with the biggest data sets, but the ones who know how to use them better.
In a VUCA world 'action beats reaction', which requires operating tighter, quicker OODA loops: see the world the way it really is, rather than how you'd like it to be (observing); shape decisions according to context, not context according to theories (orienting); face failure head on, recover quickly and learn from it to reduce fear of taking risks (deciding); and rapidly amplify successes that push the boundaries of possibilities outwards (acting).
Optimal strategies will focus on effectiveness over efficiency for it isn't the best (e.g. most efficient) that prospers, but the ones best able to adapt to external changes (i.e. effective). As the economist John Kay memorably put it: the Giant Galapagos Tortoise hasn't prospered for millennia because it's a master race but because it adapted to an environment full of mud, lush vegetation and no mammalian predators better.
Russian business therefore should reject the myth of the one right answer. If every decision is the right one, you're not trying hard enough. 'Same old' risk-free strategies may provide the comfort of higher certainty (and massage the ego of the 'always-right' leader) but are exposed the moment a rival takes a calculated risk and makes the game-changing move. Organisations and economies thrive on risk-taking and failure is a necessary accelerator of the upwards learning curve - it therefore must be managed and budgeted for. In the words of Peter Drucker, 'those who take risks generally make about two big mistakes a year, while those who don't take risks generally make about two big mistakes a year' meaning victory will go to those who execute faster OODA loops to ride VUCA waves.
Mitigating business risks while reaping the rewards
Low cost, high impact tools and approaches exist - like SenseMaker® and the Cynefin Framework™ - that help organisations quickly construct and accelerate their own OODA loops. Tapping into knowledge flows in and around the organisation uncovers the critical weak signals of emerging opportunities and threats, as well as unique insights in how to exploit them. Organisations must learn to probe the environment to test coherent ideas and gather real-world examples of what works and what doesn't.
The advantage of a portfolio of probes over 'bet the house' fail-safe strategies is that they are quick to launch and cheap enough to abandon if they produce nothing of value: while those that show early signals of success can be quickly amplified. In an uncertain world picking winners is impossible. Launching multiple, parallel, safe-to-fail probes is your best chances of finding winners quicker.
Russian business must not seek alignment of its people around target outcomes; hard targets restrict the flexibility needed to adapt and alignment destroys the diversity of perspectives needed to truly innovate. Instead, Russian business must unleash a thousand probes to discover routes through the fog and become agile enough to quickly exploit them. We need to do this before the VUCA world shifts, obscuring the paths once again. Or, we can just wait for the oil prices to go back up, eventually. The choice is ours!
This represents a radical new approach to managing in a highly challenging environment. For more details on how this can benefit your company contact firstname.lastname@example.org or visit www.narrativeinsights.com.