Speech at CREDAI conference, London, August 12, 2017
We are living in a world of unprecedented technology disruption. The velocity of technology change that we are seeing is one of the highest in annals of human history. Just a few years back there was a lot of talk of Technology Megatrends like Mobile, Ecommerce, Social Media, Cloud and Big Data. All of these so called Megatrends have become mainstream and a part of our daily lives. The new Megatrends are Blockchain, Artificial Intelligence, Robotics and Internet of Things, and I am sure even this list will change in a few months!
This constant Technology Disruption is creating an environment I call the VUCA world. It is,
- Volatile – constantly changing,
- Uncertain – difficult to predict,
- Complex – cause and effect are difficult to decipher, and
- Ambiguous – reality is hazy
Technology disruption and the resultant VUCA world has many implications for business. The intensity of implications may vary across industries but they are present at some level for all:
- Customer behaviors changing. Customers are going digital, having greater pricing transparency and choice, and are thus becoming lot more demanding. Implication of this for many businesses is a squeeze on margins
- Industry structures getting disrupted. Many industries that have traditionally enjoyed fat margins and have been dominated by a few very successful companies are getting disrupted by new players, who often come from unexpected directions. In many cases it is leading to creation of totally new industries as the likes of Facebook, Uber and Airbnb have shown
- Shrinking business cycle. Product and business cycles are becoming shorter and shorter. You cannot rest on your laurels. It does not take much for the hunter to become the hunted. Indian IT industry is good example. Over the past 20 years, Indian IT companies have been a big disruptor, but now there is a threat of their business model getting disrupted
- Speed is king. Businesses are facing constant change and need to have fast response and that too in the face of uncertainty, complexity and ambiguity.
VUCA world can be very threatening but it is also a huge opportunity. Those who master it stand to win very big. If the environment is changing, you cannot win with the old rules, you need new rules. I want to share with you 7 new rules of management to win the VUCA world based on my experiences of leading transformation across Flipkart (which is a new age company) and Fidelity (which is a more traditional company).
Rule 1 – Innovate and Shape the future
Typically companies use historical performance to make their future plans. That counts for little in a VUCA world. Ecommerce industry is a good example. Historical trends will not help predict market evolution, instead you have to shape the markets. You have to Think Big and do constant innovation. In that process, do not be afraid to cannibalize yourself. If you do not do it, somebody else will!! The great Steve Job had famously said, “those who are crazy enough to believe that they can change the world are the ones who actually do so.”. That is the first management rule of the VUCA world!!
Rule 2 – Strategy is by Connecting the Dots
Strategy is the starting point for most businesses. However, well laid out plans do not survive contact with reality in a VUCA world. You do need to have clarity on your purpose and long term bets but Strategy for getting there cannot be cast in stone. It has to be light and agile. Rather it is Execution that is the most important thing – getting runs on the board and failing fast. Successful execution can help you discover your strategy by connecting the dots across what works and what does not. Therefore, the strategy-to-execution cycle changes from how it has been done traditionally. Strategy is now not looking forward to but looking back from execution.
Rule 3 – Co-create with Customers
Most companies talk about Customer First but very few live it. In our actions there is sometimes a conflict between what we think is right for the customer and what is right for the business (in the short term). These boundaries have to break in the VUCA world. You will not have time for long feedback loops. Therefore, you have to co-create with your customer. The relationship has to move from being a client to a partner. Working relationships will become iterative, with multiple checkpoints and points of interaction..
For those in the B2C industry, personalization will become more and more important. Until recently we were talking about customer segmentation, but technology allows you to understand and reach out to every individual customer. Ability to manage the huge quantum of customer data that you now generate and developing sharp insights from them will become a key differentiator.
Rule 4 – Every company has to become a Technology company
Traditionally companies have focused on the core functional capabilities of their industry and seen Technology as a support function. However, in an era of constant technology disruption, Technology has to be a core competence irrespective of the industry you are operating in. It has to move from being an enabler to being a core source of ideation for your business. Building a Technology DNA for your company is probably the most important step you can take to future-proof your business. I must warn you this is not an easy journey. It is not just about building new capabilities but also evolving your culture. This journey can take multiple years. However, it is a journey you have to start now. If there is one action point you take away from this talk, please see this as the most important one.
Rule 5 – Simplify Organization Structure and Processes
To handle the constant change and uncertainty of the VUCA world, you have to rethink your organization structure and processes. Traditionally the foundation of organisation structure and processes has been managing risk. This leads to controls and wanting to be comprehensive. This eventually leads to complexity and slow speed of execution. This runs contra to the key requirements of competing in a VUCA world. Three principles are important as you redesign your Organization Structure and Processes :
- Speed over Risk Management,
- Simplicity over Perfection, and
- Empowerment over Controls
Implications of these principles are that you need flatter organization structure and there will likely be a shift from vertical to more horizontal structures. In addition, you will almost certainly need to simplify your internal processes and reduce controls.
Rule 6 – Build a Web of Partnerships
Nobody can win it alone in the VUCA world – collaboration is key. There a host of new players emerging, see them as an opportunity. Continuously scan the value chain of your industry and look for partnership and/or acquisition opportunities. You have to be very dynamic in this because boundaries between a Partner becoming a Competitor and vice versa can change very quickly.
Rule 7 – Entrepreneurial talent and culture
With rules of management changing, expectations from talent will also change. Clearly, “what got them here will not get them there”. It is a cliche but very true, companies will need more Leaders not Managers. This will require them to unlearn and relearn. This is a big challenge for successful managers who are well set in their ways.
Companies will need to build a more entrepreneurial culture and one that is more aligned to a Tech DNA. There are at least 4 important changes that both the enterprise and individuals need to make:
- Need to build a higher tolerance of chaos and acceptance of failure
- Inculcate a Learning culture – encourage brutal honesty, humility over hubris
- Ability to manage Duality i.e., deal with seemingly conflicting objectives like short-term & long-term, speed & thoughtfulness at the same time
- Finally, build Resilience. Whatever you do, you will face knocks. So build the ability to bounce back. Personal anchors and Change Management become critical
We are living in very exciting times. Change is constant. It can be a huge challenge or an enormous opportunity, depends how you approach it. You will have to evolve and change your traditional approach to business. I hope the 7 new rules of management that I have shared will help your business and enable you to win in this exciting VUCA world.
All the best!!
