Why VUCA Is (Mostly) A Myth
“Imagine, if you will, a factory as clean, spacious and continuously operating as a hydroelectric plant. The production floor is barren of men,” Fortune magazine declared in its November 1946 issue. Soon the world entered a new world of mass production and mass retail. Then came a green revolution, a space race, genomics, computers, the Internet and now artificial intelligence.
Today it’s become an article of faith that everything moves faster. Business pundits tell us that we’re living in a VUCA world (Volatile, Uncertain, Complex and Ambiguous). These are taken as basic truths that are beyond questioning or reproach. Yet are things actually moving any faster than in earlier eras? The evidence is surprisingly scarce.
The inescapable truth is that some things move faster today and others move slower. We don’t have—nor should we want—more change today than before. We need to be more thoughtful about change, more deliberate about the ones we undertake and more tenacious in our pursuit of them. We should aim to have less disruption and more progress.
An Era Of Industrial Stability
Since Jack Welch took over GE in the 1980s, the management ethos has been taken over by a cult of disruption. Pundits say we must “innovate or die.” Managers feel pressure to launch new initiatives, to pivot and then pivot again, because the competition has become so rabid that “only the paranoid survive.”
The data, however, tell a very different story. A report from the OECD found that markets, especially in the United States, have become more concentrated and less competitive, with less churn among industry leaders. The number of young firms have decreased markedly as well, falling from roughly half of the total number of companies in 1982 to one third in 2013.
A comprehensive 2019 study from the National Bureau of Economic Research found two correlated, but countervailing trends: the rise of “superstar” firms and the fall of labor’s share of GDP. Essentially, the typical industry has fewer, but larger players. Their increased bargaining power leads to more profits, but lower wages.
With all of the hype around things like artificial intelligence, this may seem hard to believe. However, once you start to think about where you actually spend your money, food, shelter healthcare, travel and so on the reality sets in that most of the economy involves atoms and not bits and, if you do a bit more research, you’ll find that those industries are, for the most part, less competitive.
The truth is that we don’t really disrupt industries anymore. We disrupt people. Economic data shows that for most Americans, real wages have hardly budged since 1964. Income and wealth inequality remain at historic highs. Anxiety and depression, already at epidemic levels, worsened during the Covid-19 pandemic.
The Limits Of Digital Dominance
Over the past several decades, innovation has become largely synonymous with digital technology. When the topic of innovation comes up, somebody usually points to a company like Apple, Google or Facebook rather than, say, a car company, a hotel or a restaurant. Today, seven out of the ten most valuable companies in the world are digital firms.
This is largely because of two forces converging. The first is Moore’s Law, the exponential doubling of the number of transistors we have been able to cram onto a silicon wafer. Yet our ability to do that is coming up against the constraints of physics. Advancement in conventional chips has already slowed and, at some point, it will stop altogether.
The other force driving the digital economy has been increasing returns. As the economist W. Brian Arthur explained in a 1996 article in Harvard Business Review, certain conditions, such as high upfront investment, negligible marginal costs and network effects, lead to “winner take all markets where the fastest firm reaps incredible benefits.
Yet consider that information and communication technologies only make up about 6% of GDP value added in advanced economies and you begin to see the problem. The Silicon Valley model simply doesn’t work outside of software and consumer gadgets. In industries that have a low tolerance for failure, such as manufacturing and healthcare, you can’t simply move fast and break things because you’ll likely break something important.
Moving Slow To Go Fast
When Covid hit in the winter of 2020, it was a mysterious disease with no known cure. Yet in a mere matter of months vaccines were developed and being tested. By the end of the year two firms, Pfizer and Moderna received emergency authorization and people started getting their shots. Given that before Covid it took more than a decade to develop and test a vaccine, this was almost unheard of speed.
Yet look a little closer and it becomes clear that the real story is somewhat different. Katalin Karikó, published her first paper on the mRNA technology used to make the vaccines in 1990. She wasn’t able to win grants to fund her work and, in 1995, was told that she could either direct her energies in a different way, or be demoted. She took the demotion, worked through it and, a decade later, began to see some success.
Today, of course, mRNA technology is moving very quickly. Funding is flooding into labs to potentially cure or prevent a wide range of diseases, from cancer to malaria, vastly more efficiently than anything we’ve ever seen before. There are similar slow moving revolutions underway in quantum computing, drug and materials discovery and other things.
There’s nothing usual about any of this. It’s long been known that technology follows an s-curve pattern, starting slowly, then hitting an exponential phase in which it moves very quickly before leveling off again. For example, after penicillin became commercially available in 1945, we entered a golden age of antibiotics and scientists quickly uncovered dozens of compounds that could fight infection, before things slowed to a crawl.
At any given time, there are many s-curves going on at once. Some are just beginning to crawl, others speeding up and still others slowing down. Pointing out the ones that are speeding up and ignoring everything else that’s going on may be exciting, but it’s not the way to get the best results.
Rethinking The Change Gospel
It’s no accident that VUCA is a military term. The ever-present mantra that we are living in a time of volatility, uncertainty, complexity and ambiguity makes corporate executives feel like swashbuckling heroes. The truth is that there is very little evidence that is the case and a veritable mountain to the contrary.
There is also evidence that all the hype around change is doing real damage. Leaders conjure up dramatic images of “burning platforms” to justify launching ambitious initiatives, which rarely succeed. These failures then are given as confirmation for how dire the need for change really is and more initiatives are launched with similar results.
That is the change gospel. Transformation has, all too often, become an end in itself rather than a means to an end. We end up pivoting so much that we end up right where we started. The problem with cheerleading change is that it puts the cart before the horse. People don’t embrace change because you came up with a fancy slogan, they adopt what they find meaningful, that creates genuine value to their lives and their work.
We need to have more reverence for the mundane and ordinary. When you look at previous eras in which more genuine transformation took place and far more economic value was produced, there was much less talk about disruption and much more focus on improving the human condition.
The truth is that we’re not really disrupting industries anymore as much as we are disrupting ourselves and fairy tales and living in a VUCA era will not change those basic facts. We need to think less about disruption and more about tackling grand challenges that will impact the world in significant ways. Innovation should serve people, not the other way around.
Greg Satell is Co-Founder of ChangeOS, a transformation & change advisory, an international keynote speaker, and bestselling author of Cascades: How to Create a Movement that Drives Transformational Change. His previous effort, Mapping Innovation, was selected as one of the best business books of 2017. You can learn more about Greg on his website, GregSatell.com and follow him on Twitter @DigitalTonto and on LinkedIn.
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Photo by krakenimages on Unsplash
thank You for writing what I´ve been thinking of , years ago (after the inicial wave of the Internet)
A must read for my pupils!
Glad to hear that Fran!
Howdy Mr. Satell!
We have exchanged “hello’s” over the years.
This article, plus the four most recent posts, is par excellence.
I read “Cascades.” Ordering “Mapping Innovation” to match Blue Ocean Strategy and its predecessors, unless you have an update coming?
Unraveling a new era is your forte. Please correct me if I am wrong, but the original concept, “The Great Reset,” was reshaped into something else. I have my concept and call it “The Global Transformation Age.” Preach the Peace!
Thanks so much for your support, Miguel!
Greg