Transformation In A VUCA World
How do businesses transform in an environment that is dynamic and uncertain? What do they transform into, when everything appears to be in a state of flux? Business is inherently risky; there is good as well as bad risk everywhere. Additionally, there are massive repercussions because we live in an interconnected world. “We often don’t know what processes we need to improve or automate,” said Fredric Ducros, Chief Transformation Officer of AirAsia, who presented a session on transformation in an increasingly complex, chaotic, VUCA world. The current situation is made riskier by Covid-19. The implications of this go way beyond the virus itself and the people who are affected.
“We have legacy systems; people make guesses that don’t work,” he continued. “They look at things independently of other events instead of holistically.”
There is a constant risk of poor judgement and thinking errors. Our thinking tends to limit the things we can remember, and our biases lead us to make mistakes. “We create patterns where there are none, and we start to make wrong decisions,” he remarked. But what can we do about the things we cannot see? Risk management is often misunderstood because people do not see everything all the time. This is where risk managers come in. They have to help others see and “get” it.
Systems are constantly evolving in the way they are structured; transformation inevitably compounds the challenges that stem from this. But sometimes the problem is not with the system. Rather, it may lie with the people who are dealing with it, who may be using it in the wrong way. People-based risks are often the most difficult to deal with because they involve human traits, biases, and individual or personal preferences. How should risk professionals work with businesses and people that are constantly changing? While controls and structures are imperative in any complicated environment, the risk may not lie with the system but with the people who can’t, don’t or won’t use it in the way it was intended. The challenge then will be to help them see this, and the consequences of their actions.
All activities carry different risks and thus need to be handled in different ways. “People who are “driving” have to be helped to “see” the end results better,” Ducros said. “They often work in silos and don’t see the repercussions of what they do. They don’t see the big picture, but must see the details that make a difference.” He quoted an example of wanting to upgrade systems but not having the Internet structure to support it. What works in an increasingly Volatile, Uncertain, Complex and Ambiguous world? The situation today is compounded by the presence of VUCA but it helps tremendously for people to decide where they want to go and what they want to do.
There are no clear answers to the questions of tomorrow; organisations need to respond to the increasing number of incidents or events. But effectiveness tends to decrease with the frequency of the incidents, he cautioned. Risk managers should help organisations identify and understand what they may be doing wrong, or help them find the direction they need. “Agree on where you want to go,” he advised. “Know where you are and what you should be looking at, even the unfamiliar.” He said risk managers could join the core team as enablers to support the people who were tasked with doing the actual work.
They could be instrumental in creating “safe spaces” for employees to discuss risks, and what requires attention. “Good judgement comes from experience, and experience develops partly from having made bad judgements,” he said, pointing out that having strong capabilities and working as a team was critical. Also, the pace of transformation was quickening. “The faster it goes, the less controllable it becomes,” he stressed, advising risk managers to work on their capabilities in order to be able to remove barriers which may stand in the way of achieving objectives. Working on capabilities also means becoming self-aware of the role that they play individually in the organisation, and how this relates to the work of those they collaborate with.
Further defining the role of the risk manager, Ducros stressed that they were not agents of change but agents of awareness. As such, they needed to be in control of themselves and be cognizant of the fact that VUCA is a risk, and although it came with opportunities, these may not be suitable for everyone. It was imperative to find a balance that would work for their respective organisations, particularly as the environment was in a state of flux and disruption and was likely to be so for some time to come.
“We don’t have all the answers,” he acknowledged. “Every day is a challenge.” But the fact of the matter is that transformation would have happened with or without the virus.
In reality, a lot of projects start out quite well-defined but they become complicated as they progress. Organisations therefore need in-depth understanding of the path they are on, its processes, operations and methods. They need to standardise and simplify processes; document comprehensively as they progress; improve their value chains; and digitise and automate where they can. He said that the ground on which transformation has to take place is often not fertile enough, and may even be unhospitable to growth. “We create biases that lead us to make bad decisions,” he said. “We should be following the plan but we rarely do.”
We inevitably start in a confused state, he opined, and further compound the mistake by believing that we are not confused. This is also where we end up when things go wrong. “Things go right when we constrain, understand, standardise and make things repeatable,” he said. “Things go wrong when we feel too comfortable or when we lose control or allow too many exceptions. People need to see the big picture, but they must first want to look. They need to go and see what is out there, and find the risk themselves.”