Living in a VUCA Project Environment?

What is a VUCA project environment? Are we currently living in a VUCA world and how might this affect your project?

One of the new topics introduced into the 7th Editions of the Association for Project Management Body of Knowledge was the concept of a VUCA project environment, but what is VUCA. VUCA was developed in the late 1980’s to describe the volatility, uncertainty, complexity and ambiguity of the world. It was initially used by the US army to describe the state of the world following the end of the cold war. The old certainties of the Soviet Union as an enemy had been replaced by a much more complex and dynamic range of threats. In early 2002 it was used more systematically in military education. Since then it has become more commonly used in strategic and business management, especially since the financial crises of 2008. This can be seen in the increasing number of Google searches for the term “vuca”

What does VUCA stand for?

VUCA stand for:

• Volatility: meaning rapid and unpredictable changes in the project environment. So, for example, future trends and indicators may not give an accurate indication of the future.
• Uncertainty: a lack of certainty about the existing state or future outcome or events. We are unable to describe the current conditions or the future outcome with any confidence. However, uncertainty implies that we can apply probabilities to potential future outcomes.
• Complexity: implies that the systems are made of a number of elements that interact in many ways which make it difficult to predict the outcome.
• Ambiguity: implies that the meaning can be interpreted in several ways. Ambi- refers to something with two meanings. Ambiguity implies that there are a number of different interpretations depending on perspective.

But what does VUCA mean in the context of projects?

But what does this mean for a project environment? What is a VUCA project environment? What are the volatile, uncertain, complex, and ambiguous elements of projects?

Volatility in the VUCA project environment?

In a VUCA project environment, volatility could exhibit itself in a number of ways. It could be rapid and unpredictable changes in the output requirements for the project. So for example rapid and unpredictable changes in the scope or the demand for the product or service. This volatility will make it difficult to plan for the future of the project because things are changing very quickly. Say for example you were developing some land for a property developer. Volatility might mean that the demand for rental property was changing very quickly in a random way, or the cost of input materials was changing significantly every week. So, for example, the cost of labour might be changing from £10 per hour to £25 per hour on a day-to-day basis, depending on how much work is available. This volatility makes it very difficult to plan.

Other areas of volatility might be:

• Rapid and major changes in scope due to volatile user requirements.
• Rapid and unpredictable changes in the availability of resources.
• Rapid and unexpected changes in the availability of technology. This could be due to new and emergent technology or the obsolescence of old technology.
• Significant and unpredictable changes in lead times for key components.

You can read more about the impact of volatility on projects in this paper on Thoughts on a Project-Volatility by Vince Kellen

Uncertainty in the VUCA project environment

In a VUCA project environment, uncertainty means that there is a range of possible outcomes but you are unsure which is likely to occur. For example, the range of rental income for property or the cost of material might have a with a range of uncertainty. They may not be volatile (i.e. changing is a rapid way) they might just have a wide range associated with them. The cost of labour in six months’ time maybe somewhere between £10 and £25 per hour, depending on some external factor. You cannot predict what the cost might be.

Project managers have for many years used risk management to try and understand the level of uncertainty in projects. The risk project face can be grouped into three categories.

1. Known unknowns. These are known uncertainties in the project often related to price. For example, we know that we need some labour resources to complete a project but we don’t know what the costs are going to be. In this case, we can make an educated guess based on historic data. Or we may know the system has the conduct some complex analysis of real-time data, we just don’t know at this stage how complex that analysis will be.
2. Unknown knowns. These are the classic risks we record on the risk register. We can identify these risks. We can even estimate the probability and impact based on past experience. What is uncertain is if the risk will occur or not.
3. Unknown unknowns. These are the blindside risks, those that we are unable to identify at the start of the project. People often call them Black Swan risks. There are risks that even a diligent risk assessment would miss. They are wholly unpredictable and unexpected.

For completeness, the known knowns are those part of the project over which we have certainty. For example those elements of the scope which are fixed.

You can read more about this in this paper on Characterizing unknown unknowns. Paper presented at PMI® Global Congress 2012—North America, Vancouver, British Columbia, Canada. Newtown Square, PA: Project Management Institute. ) by Kim, Seong Dae ( Kim, S. D. (2012)

Complexity in the VUCA project environment

Just to make things more difficult there is a lack of consensus on what project complexity is. A definition I like is

Complexity is the sum of the following components: differentiation of functions between project participants, dependencies between systems and subsystems, and the consequential impact of a decision field. 

Complexity and Project Management: A General Overview
José R. San Cristóbal ,1 Luis Carral ,2 Emma Diaz,3 José A. Fraguela,2 and Gregorio Iglesias4

In this definition, complexity comes from the interactions of the different parts of the system. Sometimes in unexpected or unpredictable ways. Projects today often have more stakeholders, more parts within the system, more constraints and regulations that must be complied with. All these factors lead to an increase in complexity. For example, Steve Wozniak, the co-founder of Apple, has said that when he started work it was possible for one person to understand everything within the early computers, today no one person can understand all the different elements and components. This implies that even in the narrow field of IT we need difference specialists within the team to manage this increased technical complexity and makes decision making more difficult.

This complexity not only comes from technology but also the more complex interaction of stakeholders. For example, many project have joint ventures with several organisations coming together to deliver the project. This reduced the risk for each member of the consortium and means that the team can draw on the specialist skills of different members but it does increase the complexity. Likewise with funding often this is provided from multiple sources, with a consortium of investors coming together to fund a project. Again this increases the complexity of the project.

Ambiguity in the VUCA project environment?

Ambiguity in a VUCA project environment comes from a wide range of different interpretations of the information. The information on which decisions are taken could lead to different interpretations, each of this is equally valid. Ambi is a Latin word that means

The Ambi Root Word has Latin origin which refers to the equivalence between two opposing ideas or forces. For example ambidextrous, is somebody who is able to use the right and left hands equally well, and can be split as follows,

https://wordpandit.com/ambi-root-word/

In a project environment, this ambiguity has it’s roots in the volatility, uncertainty and complexity of projects. It means that the information available could be interpreted in different ways and led to different decisions. For example, in a land development project, we may be unclear if the future demand will be for residential units, shops or offices. The natural tendency is to put off the decision and hope with time that more information becomes available.

In another example, different users may have a very different interpretation of the user requirements. Based on facts available different stakeholders interpret the problem in different ways. Which would make it extremely difficult to agree on a proposed project approach and solution?

This is not a new problem, for many years leaders have had to make decisions based on intuition. In the lack of hard information, they have to back a hunch or gut feel. What may be new is that project managers are not used to this level of ambiguity.

Read more about Ambiguity management: the new frontier. Paper presented at PMI® Global Congress 2011—North America, Dallas, TX. Newtown Square, PA: Project Management Institute.

Do we live in a VUCA Project Environment?

As I write this today we are mid-way through the Covid-19 pandemic and to me it feels like we live in times of high volatility, uncertainty, complexity and ambiguity. The situation seems to be changing every day, with rapid and turbulent changes in the situation. This makes projects ever more challenging. It is hard to estimate future demand and forecast costs.

How to manage a project in a VUCA World? The Theory of Change

How can we manage the project in such a dynamic and ever-changing world? The APM defines a project as:

A project is a unique, transient endeavour, undertaken to achieve planned objectives, which could be defined in terms of outputs, outcomes or benefits. A project is usually deemed to be a success if it achieves the objectives according to their acceptance criteria, within an agreed timescale and budget

What is project management
https://www.apm.org.uk/resources/what-is-project-management/

How can we deliver defined outputs within agreed timescales and budgets with so much uncertainty? My view is we need creat islands of stability. Within the overall vision for the project, we need to set intermediate outcomes that move the project towards an ultimate vision. This is often described is the Theory of Change. This presents a way of working in a collaborative way with stakeholders to identify what can the realistically achieved in the current environment. Then focusing the team on delivering these intermediate level outcomes.

Theory of Change

At a workshop with the key stakeholders.

1. Identifying long-term goals
2. Backwards mapping and connecting the preconditions or requirements necessary to achieve that goal.
3. Identifying your basic assumptions about the context.
4. Identifying the interventions that your initiative will perform to create your desired change.
5. Developing indicators to measure your outcomes to assess the performance of your initiative.
6. Writing a narrative to explain the logic of your initiative.

Learn about managing in a VUCA world with our APM PMQ course.

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