Article by Georgiy Michailov
Or: How companies operate successfully even in a complex reality
From VUCA to TUNA? Around 30 years ago, the US military coined the acronym VUCA, which stands for the words Volatility, Uncertainty, Complexity and Ambiguity. It gradually crept its way into management literature and is still widely used today to describe the ever more complex, ever faster moving world. But I am starting to like another acronym developed in Oxford in the UK even more: TUNA.
TUNA stands for Turbulent, Uncertain, Novel and Ambiguous. It bears a certain similarity to VUCA, but describes the challenges facing many companies and managers in 2022 even better. “Turbulent” seems a more accurate description than “volatile” for a world beset as it has been recently by a whole series of dramatic events that have turned the world upside down, such as the various lockdowns around the world, the collapse of global supply chains, or the very sudden, very high inflation. And a pandemic or a war in Europe are certainly “complex”, but above all also “novel”, new, all-changing.
After several decades of economic growth, our leaders and managers now face huge challenges. Those who had hoped for an end to the pandemic in 2022 and thus a return to normality have had their expectations dashed by the war in Ukraine. Only a few of us have been through a situation like this before, and even for the dramatic inflation we are seeing, caused by the distortions on the energy and raw material markets, we would have to go back more than 30 or 40 years to find anything comparable. All this changes the brief and meaning of leadership. In the last few years, there has been much talk in the business world of “flat hierarchies” and “agility”, but now it is quick and sometimes radical decisions that are rapidly gaining in importance again.
So has leadership found a new sense of purpose in the TUNA world? And what does leadership that serves this purpose look like? Ten years ago, in his classic book Radical Leadership, the management guru Reinhard K. Sprenger summed the situation up clearly – and more topically than ever: “The purpose of leadership is: ensuring the survival of the company.”
The problem is, this task has become more difficult. Today’s world is so complex, so distorted, that extraordinary flexibility is required. Situations such as this, which almost no one saw coming, and hardly no one knows, require managers to find new solution models. These solution models are going to have to be developed under highly uncertain circumstances of enormous complexity, and not in a relaxed workshop, but during active operations, right here and now. Dietrich Dörner, Germany’s leading researcher in the area of cognitive psychology, describes challenges like this as follows: “Complex decision situations are like a chess game in which most of the figures are concealed by fog.”
Simple recipes do not help much here – the current situation is simply too complex and too serious. David J. Snowden, a leading researcher in the field of knowledge management and the application of complexity science, offers a helpful approach here. He calls it “Cynefin”, a Welsh word that stands for the many factors in our environment that influence us, without us necessarily being aware of them. Presented 15 years ago in the Harvard Business Manager, this approach provides leaders with a good basis for decision-making – depending on the context, horizon of experience, and the network of relationships of the respective leader. Put simply, this approach identifies three distinct basic systems, three situations.
Firstly: ordered systems, which can however vary from simple to complicated. These systems are characterised right from the start by clear, causal “If ..., then ...” relationships. The results of actions are clearly predictable. They require either “best practices” or – in the case of more complex challenges – the explicitly experience-based knowledge of experts. Even Franck Muller’s Aeternitas Mega watch, with its 36 complications and 1,483 individual parts, altogether costing more than 2.5 million US dollars, can thus be taken to bits and put back together again by an expert. The management challenge in these systems is to identify the scope for solutions, and to implement solutions effectively.
Secondly: complex systems, usually the focus today. In these, managers cannot fall back on best practices or tried and tested recipes of the past. Here the causal relationships can only be identified retrospectively, as the individual elements are mutually dependent and can provide for new development patterns. The Black Forest is thus for example a highly complex construct that is permanently in the making and that depends on variables as diverse as the weather, forestry, animals, etc., so that the whole is considerably more than the sum of its parts. In 2007, Snowden wrote of such systems:
“This is the realm of ‘unknown unknowns’, and it is the domain to which much of contemporary business has shifted.”
The “unknown unknowns” – an expression made famous years ago by a remark made by then US Secretary of State Donald Rumsfeld – are things we don’t know that we don’t know (as opposed to things we know and the things that we know we don’t know). In business, this second-order insecurity means that leadership has to switch to a sounding-out mode, and must continuously learn how the system is changing. Leadership then finds itself in an iterative learning process that involves the constant, consistent adjustment of its own actions. So-called “emergent practices” may arise from this – new patterns of action that turn out to be useful.
The problem is that under complex and uncertain conditions, managers often fail. Dietrich Dörner, who has studied human thought and action intensively, attributes this to two main causes. One reason for it is the low self-esteem of many managers. These are usually not even able to reflect on their own thinking, never mind question it. Self-criticism scratches away at a person’s self-confidence and is thus not practised.
“As such persons cannot cope with failures, they will exhibit a strong tendency to avoid self-criticism.”
The second reason is a lack of imagination that might show what new paths could look like, and a lack of courage to leave the tried and tested paths that have brought success in the past. Both are not going to help in complex and unknown circumstances.
The third type of system Snowden sees are chaotic systems – systems, in which any semblance of order is missing. Chaos usually causes a temporary situation without causal pattern or limits, and tends to be based on coincidence. The task of leadership in such systems is to act quickly and consistently in a new situation, in order to stabilise the situation as quickly as possible by introducing limits. A major fire in California is a typical state of chaos. Initially uncontrollable, it can be converted little by little into a (more) controllable state through rapid, decisive action taken by the firefighting forces.
If we consider Snowden’s three categories from the manager’s control room, it quickly becomes clear that it takes great courage to take a decision under complex or even chaotic conditions. In such situations, it is difficult to make reliable forecasts, and they require the ability and willingness to think in terms of very many options, and to recognise nuances. But Germany in particular is an either-or country. Clear statements are very much appreciated, shades of grey less so. Nevertheless: Only those who are open and flexible, those who think courageously and in novel ways, will survive under these circumstances – as they characterise today’s TUNA world. Radical times often require radical leadership.
In times of stability, when no “critical” course must be set, companies do not really need any leadership. Only when they are no longer running “on autopilot” and the usual patterns of action have to be interrupted is an individual required – a manager or CEO who has the courage and is prepared despite a lack of predictability and reliable experience of the situation to accept responsibility, to make decisions and also to accept the consequences.
In the last few years, Reinhard K. Sprenger emphasises, consistent or even “radical” leadership (meaning leadership tackling the roots) was only really necessary in a tiny minority of cases. This led among other things to a certain aversion to hierarchies. “Purpose” alone was to determine the necessary decisions.
One consequence of this is that far too many companies today have managers who are too agile, too concerned with consensus, and who are thus too weak to take decisions. That may work in times of constant growth. In times of crisis, however, too much deliberation and the inability to take “lonely” decisions when necessary can become very costly for a company.
What leadership will look like in the mid- and long-term is currently difficult to predict. Sprenger nevertheless offers the following sometimes provocative theses:
// The only legitimate goal of leadership is self-leadership. Leadership is only effective when it encourages other people and organisations to lead themselves.
// Most managers are self-optimisers. The idea of being a third-party optimiser is a very strange concept to them. And they do not recognise that the very presence of a manager is often enough to take away people’s self-responsibility.
// Many structures in companies virtually invite infantilisation. These structures need to be reconsidered.
Radical leadership today does not signify the return of the “great man” at the top. The primary goal of all managers must be for their employees not to trust them alone, but to trust first and foremost themselves. The aim must be to “design” the team in such a way that, thanks to the complementary strengths of its members and a sufficient level of self-confidence, it barely needs leadership at all. In other words, a leader who is a strong decision-maker will also want to put others in a position to take decisions, because in tumultuous times like these, anyone who keeps having to climb up and down the hierarchy until a decision is taken is going to be too slow. Sprenger’s clear message:
“We don’t need managers taking up space in a room. We need managers that open up spaces.”
And: Leaders should ensure that their organisations think from the outside to the inside. Only then can they remain successful. What are customers willing to pay for – and what are the core strengths with which we can give them special added value? What might people need the day after tomorrow? For this, many things that have been very successful up to now “internally” need to be questioned “from the outside”. And in an emergency, we must be prepared to make painful changes in the short term in order to avoid greater pain in the end. The problems is that (too) many companies are primarily concerned with an internally defined reality. The more intensively they proclaim that they take customer needs very seriously, the more probable it is that the customer will notice very little of this.
Leadership and leaders have come under intense scrutiny in recent years. To some they already appeared to be a phenomenon of days long gone. But the past two years have again shown us clearly that ultimately, you do always need one person prepared to take decisions quickly, clearly and courageously.
Author: Georgiy Michailov
Increasing Value with Appreciation I Value-based Business Model Redesign I Managing Partner @ "Consulting of the Year" I Advisory Board in Family Businesses I Podcast "SMP LeaderTalks".