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Managing Business in a VUCA Environment
A structured approach
www.pwc.nl
Piet van der Plas Milan, 0304.2012
An outlook into the future
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Slide 2
... There are many things we don’t know and but few things we can learn
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... There are many things we don’t know and but few things we can learn
Overlapping phenomena
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Structural changes in Business, Operations and Supply Chains
Welcome to the 21st Century…
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Japan, 11.03.01
Egypt, 28.01.11
Future Supply Chains: an easy prediction
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More pressure than ever!
Globalisation and Demand shift
Cost volatility
Lowering of Customer loyalty
Increased difficulties in accessing credit
Higher expected (and segmented) service levels (velocity, reliability, flexibility)
Rising rates of new product launches (combat commoditization, meet increasingly segmented Customer needs)
Increasing number of Joint Ventures, Mergers & Acquisitions (achieve geographical coverage, Market penetration, offering broadening)
COMPLEXITY EXPLOSION (everything depends on everything)
What is a Complex System?
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Edward Lorenz’s Water Wheel (Amsterdam, Nemo Museum)
A complex System is one whose properties are not fully explained by an understanding of its component parts
relationship effects relevance
non-linearity in relationships
unpredictability
history debatable relevance
The Extended Enterprise: a Complex System
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evolving interdependencies
velocity
uncertainty
social and relational complexity
Structural and continuous changes
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The Extended Enterprise: a Complex System
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evolving interdependencies
velocity
uncertainty
social and relational complexity
Structural and continuing changes
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Ecological impact
Geopolitical impact
Economic impact
Technological impact
Welcome to the 21st Century…
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Slide 9
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Japan, 11.03.01
Egypt, 28.01.11
Welcome to VUCA!
Slide 10
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V
U
C
A
Volatility
Uncertainty
Complexity
Ambiguity
What does VUCA mean…
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Volatility High rate of change (Clockspeed) The nature and dynamics of change, and the nature and speed of change forces and change catalysts
Uncertainty Unclear present situation and future outcomes The lack of predictability, the prospects for surprise, and the sense of
awareness and understanding of issues and events
Complexity Multiplicity of key decision factors The multiplex of forces, the confounding of issues and the chaos and
confusion that surround an organization
Ambiguity Lack of clarity about the meaning of an event The haziness of reality, the potential for misreads, and the mixed
meanings of conditions; cause-and-effect confusion
Risk defined…
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PROBABILITY IMPACT GOALS
The potential that a chosen activity will lead to an undesirable outcome
(Oxford English Dictionary)
The effect of uncertainty on objectives (ISO 31000 –Risk Management)
Senior director supply chain, for medical equipment company :
“Anything that holds me back from delivering to the customer
whether it be long term or short term is classified as a risk.”
The Risk Management Area
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KN
OW
LE
DG
E O
F B
US
INE
SS
IM
PA
CT
KNOWLEDGE OF EVENT LIKELIHOOD LO
HI
HI
REALM OF IGNORANCE
REALM OF AMBIGUITY
REALM OF UNCERTAINTY
REALM OF RISK MANAGEMENT
Which Risks are to be managed?
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BU
SIN
ES
S IM
PA
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EVENT LIKELYHOOD LO
HI
HI
IGNORE
1
STRATEGIC RISK
MANAGEMENT
3
IGNORE ? STRATEGIC
RISK MANAGEMENT ?
4
TACTICAL RISK
MANAGEMENT
2
Risk Management: the choices
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Avoidance
Acceptance
– Postponement – Supply-Side diversification – Demand-Side diversification – Risk sharing – Targeted redundancies – Anticipation – …
Mitigation
TIME COST
Risk Management: a structured approach
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Scope definition 1
Risks identification Endogenous – (partly) under supply chain players’ control, Exogenous – out of supply chain players’ control
2
Action areas identification What Risks are to be Managed ? – impact versus likelihood
3
Risk dynamics modeling Strategic Network Design, System Dynamics
4
Risk Management strategies selection Avoidance, Acceptance, Mitigation
5
Risk Management strategies tuning 6
Trade-offs evaluation and decisions 7
Are you prepared to manage the risk?
What is your framework for supply chain risk management?
Have you freed up capacity?
Are risks in the supply chain identified?
Which indicators determine the impact and risks?
What control mechanisms are defined and validated?
Have you installed a multifunctional team?
How often do you review your risks?
Do you have a budget to implement risk strategies?
Have you defined action plans to mitigate risks?
Have you assigned responsibilities to manage risks?
Have you defined your strategy for risk escalation?
What are the plans for business continuity in case of supply chain disruptions?
Do you audit your suppliers?
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Are you aware of your supply chain risks?
What is your ability to react?
Surviving in a VUCA environment
Slide 18
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Volatility
Uncertainty
Complexity
Ambiguity
Vision
Understanding
Clarity
Agility
What does VUCA mean…
Slide 19
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Vision Have a clear intent, create a future state
Understanding Look, listen, understand the system you’re in
Clarity Make sense out of the (apparent) chaos
Agility Privilege wirearchy (1), not hierarchy (1) "Wirearchy is a dynamic flow of power and authority based on: knowledge, trust,
credibility, focus on results enabled by interconnected people and technology" (Jon Husband, 1999)
The VUCA style
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Flexible, decentralized empowered networks with a structure of strategic intents
Learning through extensive experiences, scenarios and rapid P-D-C-A cycles
Strategic sense-making beyond operational problem-solving
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Add closing statement here...
© PwC. All rights reserved. Not for further distribution without the permission of PwC. "PwC"
refers to the network of member firms of PricewaterhouseCoopers International Limited
(PwCIL), or, as the context requires, individual member firms of the PwC network. Each
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acts or omissions of any other member firm nor can it control the exercise of another member
firm's professional judgment or bind another member firm or PwCIL in any way.
PwC | Consulting – Strategy & Operations Dott. Roberto Crippa CPIM ir. Piet van der Plas CPIM Tel: +31 (0)88 792 29 54 | Mobile: +39 348 85 95 060 Tel: +31 (0)88 792 29 32 | Mobile: +31 (0)6 43 57 13 61 Email [email protected] Email [email protected]
