New leadership models for the VUCA world. Five leadership approaches to cope with uncertainty

Table of contents

Executive Summary

Table of contents

List of Abbreviations

List of Figures

List of Tables

1. Introduction
1.1. Problem Statement
1.2. Objectives of the Paper & Research Methodology
1.3. Structure of the Work

2. The VUCA World from an Economic Perspective

3. Leadership Concepts for the VUCA World
3.1. Leadership Agility
3.2. VUCA Prime
3.3. Resilient Leadership Theory
3.4. Light Footprint Approach
3.5. L.E.A.P. Leadership Approach

4. Analysis of Evaluated Leadership Models

5. Summary

6. Conclusion and Outlook

7. Reference list

List of Abbreviations

illustration not visible in this excerpt

List of Figures

Figure 1: Leadership Agility Compass

Figure 2: VUCA Prime Model Visualized

List of Tables

Table 1: Leadership Models for the VUCA World

Executive Summary

Over the last three decades, globalization and progressive digitalization drastically improved living and working conditions of many human beings around the world. People have gained permanent access to knowledge over the internet, customers can order products worldwide and former language barriers were dissolved by the introduction of software for instant language translations.

For many businesses, these achievements came with several side effects. For decades, organizations were able to create reliable mid- and long-term strategic corporate plans, as companies were aware of their (local) competition and upcoming product innovations.

Nowadays, companies have to deal with unknown competition from everywhere around the world. This has changed business worlds into worlds of volatility, uncertainty, complexity and ambiguity (VUCA).

In order to remain successful, leaders have to adapt their leadership skills and behaviors to the new conditions.

This paper begins by investigating and describing the aforementioned VUCA attributes within micro- and macro-economic business environments. Following, five models for leadership in the VUCA world (Leadership Agility Approach, VUCA Prime, Resilient Leadership Theory, Light Footprint Approach, L.E.A.P. Leadership Approach) are described. Part three focuses on finding similarities between the previously described models. As a result, five important areas are defined that leaders have to focus on in order to stay competitive in the VUCA world. These areas are: Communication, analysis, flexibility, team orientation and vision. The paper ends with a summary and a concluding outlook.

1. Introduction

For decades, business organizations were able to create reliable mid- and long-term strategic corporate plans, as companies knew their (local) competition and upcoming product innovations.

The achievements of the last decades, namely globalization and digitalization, brought new possibilities for companies and customers around the world.

Now customers have permanent access to knowledge over the internet, and they can order products and services worldwide, without even knowing foreign languages, thanks to the development of fully-automatic instant language translations^[1].

For businesses, globalization and digitalization brought a lot of new opportunities including access to additional suppliers and – even more important – the option to sell products and services worldwide to billions of potential customers.

1.1. Problem Statement

Unfortunately, the aforementioned changes did not come without any side effects. Nowadays, business organizations have to deal with competition from everywhere around the world. Hence, former foreseeable and reliable business environments have transformed into worlds of volatility, uncertainty, complexity and ambiguity (VUCA^[2] ).

In order to stay successful, leaders have to adapt their leadership skills and behaviors to the new conditions.

1.2. Objectives of the Paper & Research Methodology

The first objective of this paper is to perform a literature review in regards of leadership models and concepts that were created by theorists or practitioners to help leaders adapt their behaviors and skills to the requirements of the VUCA world.

A second objective is to find similarities between the evaluated leadership models as hints for very important areas of required leadership improvements in the VUCA world.

1.3. Structure of the Work

The work starts by applying the acronym VUCA, that was defined by the US military in the late 1990s^[3], to the situation of today’s business organizations (chapter 2). In chapter 3, various leadership models for the VUCA world are described, namely the Leadership Agility Approach (chapter 3.1), VUCA Prime (chapter 3.2), Resilient Leadership Theory (chapter 3.3), Light Footprint Approach (chapter 3.4) and L.E.A.P. Leadership Approach (chapter 3.5). Chapter 4 analysis the described leadership models and defines five important areas of leadership for the VUCA world. In chapter 5 the findings of this paper are summarized, before chapter 6 draws a conclusion and provides an outlook.

2. The VUCA World from an Economic Perspective

As stated before, the acronym VUCA stands for volatility, uncertainty, complexity and ambiguity.^[4] The following paragraph will investigate the aforementioned terms in a companies’ macro- and micro-economical context.

Volatility stands for a relatively unstable change in the micro- or macro-economic environment of a company. In the case of volatility, information about the current and the upcoming situations is available and understandable, but change is frequent and sometimes unpredictable.^[5] A study by the Boston Consulting Group that was conducted by Reeves, Love and Mathur^[6] in 2012 indicated, that the prescribed situation has become a part of the global economy as it found that one-half of the most turbulent financial quarters during the past thirty years have occurred since 2002. Among the drivers of this todays’ turbulence in businesses are digitization, connectivity, trade liberalization, global competition, and business model innovation.^[7]

Uncertainty stands for a lack of knowledge as to which extent an event will have meaningful ramifications. In this context causes and effects are understood, but it is unknown if and when an event will create significant change.^[8] Such times make it difficult (if not impossible) for leaders to use past events or their experiences as predictors of the future.^[9] Therefore, forecasting is extremely difficult and decision-making is challenging.^[10]

Complexity stands for situations where numerous difficult-to-understand causes and mitigating factors are involved in a problem.^[11] This layer of complexity, on top of the turbulence of change and the absence of past predictors, adds to the difficulty of decision making. This leads to confusion and may cause ambiguity.^[12]

Ambiguity stands for situations where there are several views to give meaning to things that happen around us.^[13] These situations are characterized by a lack of clarity about the meaning of an event.^[14] A symptom of organizational ambiguity is the frustration that results when compartmentalized accomplishments fail to add up to a comprehensive or enduring success.^[15]

3. Leadership Concepts for the VUCA World

Relying on experience is not sufficient in a VUCA world anymore as lessons learned from what worked well in the past may have limited or even negative application to challenges in the present.^[16] It even seems that many (strategic) leadership- and management-tools from the past are not functional anymore.^[17] Hence, theorists and practitioners have created numerous new concepts that shall help leaders and managers to successfully adapt corporate strategies and personal behaviors to the changed conditions. The following paragraph introduces some of these new concept, namely Leadership Agility (paragraph 3.1), VUCA Prime (paragraph 3.2), Resilient Leadership Theory (paragraph 3.3), Light Footprint Approach (paragraph 3.4), and L.E.A.P Leadership Approach (paragraph 3.5).

3.1. Leadership Agility

Leadership agility is the capability of a leader to dynamically sense and respond to changes in the business environment with actions that are focused, fast and flexible.^[18] It enables leaders to prepare all employees for a VUCA world and to shift their mindsets and supporting skills from “I know change is coming, but I can’t really see the potential changes that might impact our organization” to “I see change coming and am prepared and already doing something about it.”^[19]

The Leadership Agility Model classifies leaders into three levels of leadership agility with the catalyst level being the preferred level to face the VUCA world.^[20]

Experts (leadership level 1) have a tactical, problem solving orientation and believe that leaders are respected because of their expertise.^[21]

Achievers (leadership level 2) focus on the strategic outcome of their work and aim to motivate others by giving them challenging and satisfying tasks that contribute to larger objectives.^[22]

Catalysts (leadership level 3) have a visionary, facilitative orientation and believe that leaders should focus on articulating innovative and inspiring visions, and bringing together the right people that make the vision come true. Catalyst leaders empower others and actively facilitate their development.^[23]

Following the Leadership Agility approach, Catalyst leaders require four core competencies in order to being effective.

The context-setting^[24] agility empowers a leader to scan his environment, frame the available initiatives and clarify the outcomes that have to be achieved. To accomplish this skill, leaders have to take a bird's eye view, connect with the wider organization and use its insights to determine the most important steps to focus on.

Stakeholder agility^[25] enables a leader to engage with key stakeholders in ways that create support for the determined required initiatives. By doing this, a leader is able to understand the needs of key stakeholders and align them with his vision.

Creative agility^[26] supports a leader to transform encountered problems into required results. This skill can be achieved by taking a bird's eye view and identifying key issues and their inter-relation. It also requires the diagnosis of the underlying root causes, and the development of creative solutions to solve the detected issues.

Self-leadership agility^[27] is the ability of a leader for self-reflection. This skill can be strengthened by stepping back before, during and after initiatives that he leads. This behavior empowers the leader to determine strengths and weaknesses, which helps to find opportunities to grow as a leader.

The aforementioned core competencies are visualized in the Leadership Agility Compass (Figure 1) below that is part of the Leadership Agility model.

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Figure 1: Leadership Agility Compass, Source: Joiner^[28]

3.2. VUCA Prime

VUCA Prime is a strategic reaction to the VUCA context that suggests a set of “flips”, in which volatility can be fought with vision, uncertainty with understanding, complexity with clarity and ambiguity with agility.^[29] The suggested flips are:

According to the model, volatility yields to vision, because clear ideas and goals for short and medium terms can guide managers’ decisions in volatile times.^[30] The vision lets them know where they want to get. It can also help to focus on the next step in order to achieve bigger goals.

Uncertainty yields to understanding, the ability to “stop, look, and listen.”^[31] This ability is important, because uncertain environments demand a high level of sensibility to observe beyond obvious evidences. In these situations, leaders need to make sure they get fresh perspectives and remain flexible with regard to solutions. These fresh perspectives can be gained by actively communicating and listening to various levels of the organization.

Complexity can be opposed by clarity, in a deliberative process to make sense of the chaos.^[32] Once a leader has clarity about which variables are influencing the scenario, which can be influenced and which not, he can make better, more informed business decisions. Clarity gained has to be communicated in a calmly and quietly way, that people find meaningful. Leaders also need to be clear about the commitments they are making and the commitments they seek.^[33]

Finally, ambiguity yields to agility, the ability to communicate across the organization and to move quickly to apply solutions.^[34]

Figure 2 below visualizes the VUCA Prime approach.

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Figure 2 : VUCA Prime Model Visualized, Source: Own illustration

3.3. Resilient Leadership Theory

Following the Resilient Leadership Theory, resilient leadership is the term used to describe leadership behaviors that help others withstand crisis and adapt to, or rebound from, adversity.^[35] The goal of the leader is to sustain an organization’s competitive advantage over time through empowering it to deliver excellent performance against current goals, and by effectively innovating and adapting to rapid, turbulent changes in markets and technologies.^[36] A mixture of eight groups of skills, traits and behaviors helps leaders to build these aforementioned resilient organizations^[37].

To help building resilient organizations, leaders have to continuously support the organization's clear mission to create a higher tolerance of uncertainty and to improve job satisfaction.^[38] Additionally, leaders have to serve as positive resilient role models for the company's strong moral principles and core values.

Integrity and a core set of moral and ethical principles are also described to help leaders to effect positive change into the direction of a resilient organization.^[39]

Realistic optimism is seen as a further important trait of resilient leaders. Resilient leaders are described to conduct risk appraisals, pay close attention to areas of potential threat and vulnerability, but also readily disengage from negative information.^[40]

The ability to manage change and fears is also said to be essential to build resilient organizations. Resilient leaders perceive resistance to change within organizations, which is often based on fears like fear of failure, perceived loss of self-mastery or a rigid or inflexible outlook.^[41] Leaders strive to understand the reasons for the resistance, encourage the development of strengths within the organization and work to convince staff to embrace upcoming changes.

The ability to build social support and team cohesion is also seen as important for resilient leaders. Interdependent teams are said to be one of the most effective social networks within organizations.^[42] These teams are also effective in solving problems and achieving coordinated actions. Empowering interdependent teams also helps to increase leadership capabilities in organizations and strengthens team cohesion.

Recruiting effective team members is another task that resilient leaders have to fulfill to create resilient organizations.^[43] By selecting individuals with various backgrounds and complementary expertise, robust teams with diverse perspectives can be created. It is recommended to look for applicants with character traits like industriousness, enthusiasm, loyalty, a sense of unity, and co-operation.

The Resilient Leadership Theory suggests, that leaders develop the strengths of their teams and individual team members.^[44] By assessing and understanding the strengths and weaknesses of each team member, work can be assigned accordingly. This helps to improve the team's motivation and effectiveness.

Last but not least, leading a team is seen as an important task of resilient leaders.^[45] Leading should be performed by possess a certain degree of humility and a willingness to delegate responsibility to others with detailed expertise.^[46] Effective leaders should also be good listeners and should encourage discussion between team members. As a behavioral compass, strong team norms like mutual respect should be implemented. These measures help to build effective interdependent teams.

3.4. Light Footprint Approach

The Light Footprint Strategy^[47], which is inspired by military tactics and Chinese management strategies^[48], describes seven principles for companies to deal with the VUCA world. It also describes five important instructions for leaders that want to succeed under the new conditions. These instructions are:

Be a Strategus^[49], not a strategist: A leader has to be armed with the bigger picture in order to provide the guiding vision for the entire organization. A leader has to be a commander with tactics and consistency that works towards achieving the vision.^[50]

Unleash Gemba^[51] power: Tasks of a leader are to monitor his organization's structure, observe the areas of skill, knowledge and wisdom and mobilize the staff around a common objective.^[52]

Keep the equilibrium between yin and yang: Maintain a constant balance between conflicting ideas.^[53]

Be in synch: Leaders operate on the dividing line between stability and agility. By optimizing the organization to the edge of instability, it will be able to respond faster to changes in its environment.^[54]

Be enlightened: LFP leaders act in the interest of their various constituents, they embrace the responsibility and reduce collateral damage. Enlightened leaders are pragmatic, rather than idealistic and want to make things better insofar as it is in their power to do so.^[55]

3.5. L.E.A.P. Leadership Approach

The L.E.A.P approach defines four key capabilities that leaders need to leap through the VUCA world.^[56] The specified leadership traits are:

Liberal: Being open to new behavior or opinions and be willing to adapt or discard existing values if and when it is necessary to adapt to the new world.^[57]

Exuberant: Being filled with lively energy with a sense of passion and with optimism in engaging the team and other stakeholders.^[58]

Agility: Proficiently change and evolve the learning organization^[59] with nextgen leadership competencies including cognitive readiness, critical thinking and emotional and social intelligence amongst others.^[60]

Partnership: Build a trust-based partnership with inter- and intra-teams as well as externally with other stakeholders including customers and suppliers.^[61]

4. Analysis of Evaluated Leadership Models

In order to find similarities between the previously described leadership models for the VUCA world, the author analyzed the postulated traits, skills and behaviors. As a result, five areas could be located, that are valued as important categories by all five leadership models. These areas, that require strong leadership skills, are:

Communication: This category holds all skills that deal with communication in a broader range. This includes both, active communication from a leader into the direction of others^[62] and active listening to others^[63].

Analysis: This category contains all behaviors that require analytical skills from a leader. Possible examples are scanning an organization’s environment^[64], understanding the needs of stakeholders^[65], detecting potential threats within companies’ internal or external environment^[66], and finding creative ways to solve problems^[67].

Flexibility: This category contains skills that deal with flexible thinking or behaviors in order to being able to quickly adapt to changed conditions.

Team orientation: This category consists of leadership behaviors that focus on developing teams or individual team members.^[68] Also contained are behaviors like the transfer of responsibilities from a leader level to team members.^[69]

Vision: Having a vision is the last trait valued important for leaders to succeed in the VUCA world. Visions of a leader or an organization can replace detailed long-term corporate strategies as volatility, uncertainty, complexity and ambiguity make those former detailed strategies invalid. Skills and behaviors like the creation of visons^[70] and their communication to an organization’s staff^[71] are contained in this category.

The evaluated leadership models, their claimed leadership skills, and the categories that are affected by the respective skills are visualized in Table 1 below. Within the table, green colored icons indicate, that the corresponding leadership category is affected by the described skill or trait. Grey colored icons signal, that the correspondent category is not affected.

Table 1: Leadership Models for the VUCA World

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Source: Own illustration

Table 1 shows, that the evaluated leadership models address the five previously defined important areas for leadership in a VUCA world. Despite all similarities, the table does also visualize special focuses of the various concepts.

For example, the Leadership Agility model, VUCA Prime, the Light Footprint Approach and the L.E.A.P. Leadership approach seem to focus on the development of communication and analytical leadership skills. The models postulate close bi-directional communication between the leader, his team(s) and other internal and external stakeholders. Furthermore, leaders are asked to continuously scan their environments for upcoming changes and / or possible threats. In the view of these models, a leader in the VUCA environment has to be a good communicator and an agile problem solver.

In contrast, the main focus of the Resilient Leadership Theory is on training a leader’s skills to constantly develop his team(s) and individual team members. For this model, teams and individual team members are the main advantages of organizations in order to stay competitive in the VUCA world. Hence, building resilient organizations^[72] is seen as one of the most important tasks of leaders.

To sum the analyzed leadership models up, the perfect leader in a VUCA world seems to be an open-minded visionary with great communication skills, the ability to continuously scan his environments for potential opportunities and threats, and an empathic developer of teams and its individual team members.

[...]

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^[1] Cf. Paul et al. (1999) for general information on machine language translation.

^[2] Cf. Mack and Khare (2016, p. 3).

^[3] Cf. Mack and Khare (2016, p. 5).

^[4] Cf. Mack et al. (2016, p. 3).

^[5] Cf. Bennett and Lemoine (2014, pp. 312–313).

^[6] Cf. Reeves et al. (2012).

^[7] Cf. Reeves et al. (2012).

^[8] Cf. Kail (2010b).

^[9] Cf. Livingston (2014, p. 661).

^[10] Cf. Sullivan (2013).

^[11] Cf. Sullivan (2013).

^[12] Cf. Bennett and Lemoine (2014, pp. 315–316).

^[13] Cf. Nandram and Bindlish (2017, p. 3).

^[14] Cf. Livingston (2014, p. 661).

^[15] Cf. Kail (2010a).

^[16] Cf. Bunker, Gechman and Rush (2012, p. 288).

^[17] Cf. Hofert (2016, p. 22).

^[18] Cf. Seidel (2017, p. 36).

^[19] Cf. Horney, Pasmore and O’Shea (2010, p. 38).

^[20] Cf. Küster (2014, p. 10).

^[21] Cf. Joiner and Josephs (2007, p. 8).

^[22] Cf. Peters (2017, p. 43).

^[23] Cf. Seidel (2017, p. 46).

^[24] Cf. Joiner (2017).

^[25] Cf. Joiner and Josephs (2007, pp. 34–35).

^[26] Cf. Joiner and Josephs (2007, pp. 35–36).

^[27] Cf. Joiner and Josephs (2007, pp. 37–38).

^[28] Cf. Joiner (2017).

^[29] Cf. Rühle and Wagner (2017, p. 506).

^[30] Cf. Livingston (2014, pp. 665–667).

^[31] Cf. Johansen (2007, pp. 162–163).

^[32] Cf. Kinsinger and Walch (2012, p. 2).

^[33] Cf. Johansen (2007, p. 163).

^[34] Cf. Lawrence (2013, p. 6).

^[35] Cf. Everly, Strouse and Everly (2011, p. 27).

^[36] Cf. Dartey-Baah (2015, p. 101).

^[37] Cf. Serrat (2017, pp. 245–250).

^[38] Cf. Southwick et al. (2017, p. 320).

^[39] Cf. Southwick et al. (2017, pp. 320–322).

^[40] Cf. Southwick et al. (2017, p. 322).

^[41] Cf. Southwick et al. (2017, p. 323).

^[42] Cf. Southwick et al. (2017, p. 324).

^[43] Cf. Southwick et al. (2017, pp. 324–325).

^[44] Cf. Southwick et al. (2017, pp. 325–326).

^[45] Cf. Southwick et al. (2017, pp. 326–327).

^[46] Cf. Weick and Sutcliffe (2007, p. 90).

^[47] Cf. Deelmann (2016, 201-202) for an overview of the seven principles.

^[48] Cf. Bouée (2014b, p. 3).

^[49] Cf. Bouée (2014b, p. 1).

^[50] Cf. Bouée (2014b, p. 159).

^[51] Cf. Alves, Lichtig and Rybkowski (2017, p. 26).

^[52] Cf. Bouée (2014b, p. 162).

^[53] Cf. Bouée (2014a, p. 33).

^[54] Cf. Bouée (2014b, p. 150).

^[55] Cf. Bouée (2014a, p. 33).

^[56] Cf. Bawany (2016b, p. 43).

^[57] Cf. Bawany (2016a, p. 40).

^[58] Cf. Bawany (2016b, p. 43).

^[59] Cf. Serrat (2017, p. 58).

^[60] Cf. Bawany (2016b, p. 43).

^[61] Cf. Bawany (2016a, p. 40).

^[62] Cf. Lawrence (2013, p. 6).

^[63] Cf. Weick and Sutcliffe (2007, p. 90).

^[64] Cf. Joiner (2017).

^[65] Cf. Joiner and Josephs (2007, pp. 34–35).

^[66] Cf. Southwick et al. (2017, p. 322).

^[67] Cf. Joiner and Josephs (2007, pp. 35–36).

^[68] Cf. Southwick et al. (2017, pp. 325–326).

^[69] Cf. Weick and Sutcliffe (2007, p. 90).

^[70] Cf. Bouée (2014b, p. 159).

^[71] Cf. Joiner and Josephs (2007, pp. 34–35).

^[72] Cf. Serrat (2017, pp. 245–250).