How does a board govern in today’s volatile, uncertain, complex and ambiguous environment? By Cathy Parker.
VUCA – Volatile, Uncertain, Complex and Ambiguous – was a term coined by the American military to describe battle fields in Iran and Afghanistan but is now spreading into the management lexicon as it aptly describes the conditions many industries and businesses face.
Previously I looked at the meaning of VUCA. Having owned and run a magazine publishing business for the last 25 years I am something of an expert at operating in a VUCA environment, as media is certainly an industry that has had to face extensive disruption.
When I started in the industry the internet was a fledgling, mainly used by universities and geeks, a magazine publisher did just that – publish a magazine and that was only just starting to become computerised versus the old hand makeup systems.
Fast forward to today and a business like mine has to have a multitude of platforms and touch points with our audiences including, but not limited to, websites, newsletters, video channels, various social media platforms and digital issues with many more options such as podcasts, AR and VR.
If that was not bad enough the technology within each of those platforms is advancing and morphing at a frightening pace requiring constant re-imaging, upgrading and rebuilding.
So a director or manager looking to set strategy is faced with a bewildering array of options around where they could invest and usually has limited resources to apply. Choosing which opportunities and priorities to pursue is challenging and getting it wrong can have significant downside risks – ranging from that idea failing to effectively destroying the future prospects of the business.
React too slowly and your competitors will eat your lunch – and they probably are not today’s competitors but a group of millennials you have never heard of – funded by venture capital, without the weight of your legacy infrastructure, and without the short-term need to keep satisfying shareholders with profit projections.
Should you take a punt and be bleeding edge and aim for first mover advantage but with risks of much higher costs (you will essentially be developing the technology as you go along) not to mention ending up down a blind alley.
Or should you look to be a fast follower (but make sure you are actually fast). Let someone else take the risk and make the initial investments and then step in. But someone else may have cornered the market.
Or do you play it even safer and wait till the technology and business case is proven and then utilise it.
A lot will depend on the risk appetite of your business, the imminence of any threat you are facing and the availability of resources and especially resources that you can put at risk – in particular capital.
I have certainly seen a number of businesses in my area decide to be bleeding edge or even a very fast follower. They invest huge amounts in a technology idea for it either to not work out technically or, if it does, it costs more and takes longer than planned. Or even if the technology side works the business case doesn’t – a build it and they don’t come problem.
Sometimes, as well, we can be blinded by the latest great idea and end up following the frenzy without necessarily looking at what other opportunities we may have to develop existing products.
In the publishing industry many are going ‘digital first’ and only investing in digital products, which is great, but the revenue streams from digital are smaller than from traditional media.
Whilst my company has invested in digital and with around 10 percent of our revenue there (and some titles being 20-30 percent digital) we have also recently invested in two brand extensions in our traditional print media space that generated around five percent extra revenue – without the investment and risk that would be required to achieve that in digital. A digital-first or digital-only mantra would not have let us consider those gains.
I believe the job of a board in a VUCA environment is to challenge new ideas and especially to make sure that downside, as well as upside, risk has been considered.
That is not to say a board should be obstructive, but investments must meet the strategy objectives, have a well thought-out risk plan (for instance at what point should you bail or pivot if they are not working) and understand the downsides.
Given the propensity for costs to blow out there also needs to be a high level of project oversight from a governance perspective.
Cathy Parker is a director and business owner and the publisher of Adrenalin Publishing, which owns Management magazine. She has spent 25 years managing and governing businesses in a VUCA environment.
