Developed to explain a fast-paced, increasingly unstable and rapidly changing world, the concept has since migrated into business schools and corporate boardrooms to frame strategy and leadership development in the 21st century.
Because VUCA is a leadership model, we can look to the leaders of companies for insights in how to thrive in today’s rapidly changing world. There are several characteristics common to those who are best able to navigate a VUCA world: Individuals should be lifelong learners with the ability to flip problems into advantages. They see connections where others don’t and learn from nature, striving for balance. They understand rapid prototyping and smart mob organising, making it fun and easy for teams to achieve success. They are motivated by significant emotional events, whether personal or global. And they have a sense for nurturing shared assets and knowing how to bring resources together.
With hindsight we will look back at the technologic, economic and demographic factors that fostered some of the most profound media disruptions in the last decade and see whether VUCA principles could or should have helped leaders anticipate them.
Netflix, Blockbuster and pay-TV
Reed Hastings and a partner founded Netflix in 1997 in response to late fees he was charged by Blockbuster. In 2000 he offered Netflix to Blockbuster for $50m, but Blockbuster declined the opportunity. In 2011 Dish Network acquired what was left of Blockbuster and ultimately shut the service down.
In 2007 after achieving 1bn DVD rentals by mail, Netflix expanded their distribution model and began offering streaming video to its 7.5m customers. Despite the short-lived Qwikster phase in 2011, which resulted in some subscriber losses, Netflix now has almost 70m streaming customers. It is the internet TV leader, with a long runway ahead for growth.
According to Jonathan Salem Baskin, former CMO of Blockbuster and currently a contributor to Forbes on innovation, ‘Digital content distribution didn’t kill the video store, we did it to ourselves’. With 20/20 hindsight, he concluded Blockbuster should have ‘turned its store associates into de facto recommenders. It could have implemented true social networks to rate and catalog movies, and used its customer data to develop a predictive engine that members could use to locate new titles. It could have owned the position of movie experts and migrated that brand to any new distribution platform’.
Meanwhile, in spite of the fact that growth has declined from almost 3 per cent quarterly in 2007 to an almost 1 per cent quarterly subscriber loss in 2015, Pay TV remains tone deaf to the need for à la carte programming. Repeating the mistakes of Blockbuster, there has been no acknowledgement that viewers want to be the masters of what they watch and have greater ownership over their content purchase decisions. From 2011 to 2015 there has been a 20 per cent drop amongst 18-24 year olds tuning in to their TV sets. In the past 5 years, the availability of smart TVs and other media hubs (think Xbox 360 or Blu-ray devices), with increased bandwidths for distribution, have enabled cord cutters to signal the possible end of the pay TV era.
Some industry insiders were advocating for changes before the millennium due to evident changes in viewership and technology. Netflix rapidly adjusted by moving to VOD while Blockbuster ignored the external market factors pointing toward digital distribution. Maybe it’s not too late for pay TV to respond to the confluence of FCC rulings, changes in the environment and consumer desires. Through the lens of VUCA, adapting will require seeing the changes coming and preparing for them, pivoting when the disruptions occur and flipping the challenges into advantages.
Advertising, Craigslist and ‘I Googled it’
Up until 1995, advertising dollars were the domain of traditional publishers and then came Craigslist. Founder Craig New mark didn’t set out to kill the classified industry. Even today, Craigslist resists paid advertising and generates revenue by charging for ad placement for some jobs in some cities. Mostly it is a free site for users, buyers and sellers, but it has impacted newspaper publishing profoundly. Revenues generated from newspaper classifieds dropped from $19.6bn to $6bn between 2000 and 2010, a 70 per cent decrease. How did traditional print media miss the cues?
Scott Anthony, managing Partner of Innosight and a frequent contributor for Harvard Business Review, recently noted, ‘It has been a great 20 years for US media innovators, with hundreds of billions of dollars created by companies that are helping democratise content production and distribution while developing new ways to connect advertisers and customers’. With Google leading the way, it, along with Facebook, LinkedIn, Twitter, Trip Advisor and Yelp now have a combined market capitalisation of over $650bn, principally by generating revenue from selling advertising.
Traditional media companies were slow to embrace new business models that are based on larger numbers of smaller transactions. While many could predict digitisation was going to transform the industry, too many leaders clung to the inertia of legacy systems and historic revenue streams. Anticipating change and embracing it are two significant VUCA traits that successful companies have to master.
So what can we learn from VUCA?
Embracing the VUCA model requires leadership to deal directly with questions of how to hire, how to listen and how to spot your gurus and champions. The job is to know who to listen to. Is it the disgruntled employee who continuously brings you the contrary opinion? Is it the day dreaming millennial who is more in touch with your next generation of customers? Or is it your ability to display humility in sharing, networking and co-developing solutions to the next round of disruptive events? Leaders, companies and industries need to focus on agile employees, agile processes and training to solve unanticipated problems. As technology focuses on automating minute, transactional details, our employees need to be trained on how to respond in volatile and complex situations and how to predict changes that will disrupt known and proven business models.
And the leaders? Following a VUCA model of constant learning, inclusive engagement and identifying the unpredictable may be the path to becoming tomorrow’s industry winners.
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