What a difference a word makes: Understanding threats to performance in a VUCA world

VUCA is an acronym that has recently found its way into the business lexicon. The components it refers to-volatility, uncertainty, complexity, and ambiguity-are words that have been variously used to describe an environment which defies confident diagnosis and befuddles executives. In a 'VUCA world,' both pundits and executives have said, core activities essential to driving organizational performance-like strategic planning-are viewed as mere exercises in futility. VUCA conditions render useless any efforts to understand the future and to plan responses. When leaders are left with little to do other than wring their hands, organizational performance quickly falls at risk. In this installment of Organizational Performance, we demonstrate that by overlooking important differences in the conditions that volatility, uncertainty, complexity, and ambiguity describe, we have disempowered leaders. We show how leaders can appreciate the differences among each of these challenging situations in order to properly allocate scarce resources to preserve and enhance organizational performance. (C) 2014 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.