It is probably fair to say that the amount of change we are going through, as individuals or as part of a society, has been constantly increasing. The war in the Ukraine, the exploding cost of living, large scale working from home instead of commuting to the office, the rising effects and importance of climate change – all topics that as individual point might be challenging but to make matters worse, there are interdependencies and factors that accelerate each other.
For an organisation the considerations of frequent change and instability are the same and are commonly attributed to the concept of VUCA. So, what are those?
The concept of VUCA
1.Volatility
VUCA means Volatility. The V of VUCA implies the pace of change in a business environment — be it an industry, a specific market or even the whole world in general. The more volatile an environment, the more frequently and rapidly are things likely to change within it. As challenging as volatility might be for an organisation, it also has the potential to boost creativity and innovation as a strategic response.
2. Uncertainty
VUCA means Uncertainty. The U of VUCA, reflects on the lack of predictability of the future. Let’s take the global pandemic COVID-19 as an example. Business leaders across the world struggled and are still struggling to interpret the market conditions and implement necessary measures.
3. Complexity
VUCA means Complexity. The C of VUCA, refers to the different factors at work in a business environment, the relationship among them and their impact on one another. An increase in the complexity of an environment, makes it more difficult to interpret, analyse and control.
4. Ambiguity
VUCA means Ambiguity. The A of VUCA, denotes the absence of clarity while interpreting a situation. An incomplete picture, contradictory information or lack of relevant details can give rise to an ambiguous situation. It becomes harder for organisations and business leaders make important decisions.
The four elements of a VUCA model are interrelated. For instance, a dynamic, volatile, and complex market is susceptible to changing frequently, which might give way to uncertainty and ambiguity, making things difficult to discern. To successfully operate in a complex VUCA world, business leaders not only need to trace a pattern between the interacting factors in the market but also adapt their business to the evolving conditions.
So, how can business leaders adapt their business to reflect VUCA?
Enterprise Agility
Sometimes it is easier to start with explaining what a concept is NOT. Enterprise Agility is not Agile (what is Agile anyway? A question for a different day!).
Enterprise Agility is the organisational flexibility and strategic responsiveness in the given organisational context (VUCA) to react to any changes. Those changes could be inflicted by the market directly or indirectly through a change in the organisation’s strategy.
For an organisation to be able to operate with agility, several different factors have to be addressed. And it fair to say, not only the strategy or the operating model has to be amended, but governance and culture must fall in line. Most of those factors follow a change in mindset which typically the leaders display and encourage first.
and the outcome?
The organisation or the business can “change on a dime” – but how is that possible?
Please note “change on a dime” or “turn on a sixpence” are old-fashioned idioms, we know it is now to be called “pivot”.
Strategic Portfolio Management
How can you change your business on a dime? Imagine, the organisation needs to create a new product or service within a very short time frame, the existing product needs a radical overhaul to comply with new regulations…
The starting point for change: Visibility and Transparency. Only if you know what you are doing, can you change it. End-to-end visibility of all your major initiatives, their contribution to the organisation’s strategy, the value achieved to date and forecasted, and last but not least, any high-level interdependencies.
Only a high degree of transparency and trustworthiness in the data will enable accelerated decision-making confidence by senior leadership during evaluation, prioritisation, and re-evaluation of initially business cases and later on in the lifecyle, initiatives during delivery.
And it is the senior leadership that is in charge here – any resource allocation across the organisation has to be arbitrated by the board or investment committee ultimately, some decisions by their very nature cannot and should not be delegated.
How can the board or investment committee trust the data that is presented to them and any associated recommendations? There should be a strategic investment analysis function that is a fully integrated component of the organisation’s strategy and transformation or, in other words, the PMO or Portfolio Management Office.
The evolving role of the PMO
One word about the “PMO” upfront… over the last few years, not only has the number of PMOs increased but the number of PMO variants has exploded! We started off with having a Project Management Office, a Programme Management Office, an EPMO (Enterprise Programme Management Office before adding a Value Management Office, a Value Enablement Office, a Value Realisation Office, a Transformation Office, a Strategic Portfolio Management Office, an Agile Portfolio Management Office. I am sure there are many more out there. Those organisations that had already a PMO might have to add portfolio management capabilities and services to their scope.
In the industry, it is a “PMO” – in my eyes, not the best term that could have been chosen but for those operating in it, the common term used for all variants.
What is certainly true, is the move towards having
- An enterprise wide operating PMO and
- A PMO that is directly engaged and involved, operating somewhere between strategy definition and strategy execution.
Or in other words, operating Strategic Portfolio Management on behalf of the CEO or COO of an organisation. The PMO will build a coherent Portfolio Management System of processes, procedures, governance, metrics, and tooling that collectively provide assurance to the sponsor/board that the promised outcomes and value will be delivered with a certain degree of predictability, while at the same time the costs are controlled.
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