Uncertain about Uncertainty

"The only certainty is that nothing is certain."

The entire world is talking about Uncertainty today. Countries are locked down, economies are limping, businesses face multiple challenges, and human beings are dying, and the international bodies are somewhat clueless! The society at large is finding itself in the middle of nowhere where everyone wants to contribute to rescue humankind but still muddling through, anticipating what could happen. In short we are facing multiple problems, at multiple levels and in multiple areas.

Businesses always do “scanning” to gauge the external environment. Organizations also conduct industry analysis and competitive analysis to mark their place in the competitive landscape or to find points of entry into the market or industry. Strategic management scholars have used various ways of operationalizing the external environment. Dess and Beard’s dimensions of defining the external environment (1984) remains one of the standards in the academic world.

In their seminal work, Dess and Beard used industrial classifications as a basis for operational definitions of both industrial and organizational task environments. A codification of six environmental dimensions was reduced to three: munificence (capacity), complexity (homogeneity-heterogeneity, concentration-dispersion), and dynamism (stability-instability, turbulence). They used Inter-item and factor analytic techniques to explore the viability of these environmental dimensions. This advanced the research for building both descriptive and normative theory about organization-environment relationships.

The central assumptions in all these studies is grounded in the resource-dependence theory and population-ecology paradigm, is that the resources required for organizational survival are the most relevant focus in defining the organizational environments. These two views when married together are able to explain both the immediate and a long-term perspective on the firm’s existence.

Today we talk about the VUCA world. How do we conceptualize a VUCA world? VUCA stands for Volatility, Uncertainty, Complexity and Ambiguity. I get baffled with usage and intermingling of these words by managers. Being a flag-bearer of didacticism, let me define them below to bring more clarity and comprehensiveness and get rid of all confusion around their definitions

Environment Parameter

• Volatility - The frequency or rate of change is unknown

• Uncertainty - The degree of change is unknown

• Complexity - The number of variables or dependencies are unknown

• Ambiguity - The number of interpretations are unknown

What does the above entail in terms of analyzing an external trigger or shock? How does this help us structure our analysis better? Now this is what I write in my subsequent post. I hope you enjoy and learn in this series of articles on “Uncertainty” in the environment.

Being an optimist, I think this should not be seen as a limitation or constraint in the thought process. Instead, it should be considered as a window that enhances the inquiry of knowledge and opens up herculean possibilities in front of us. I admire how well Margaret Drabble puts it - "When nothing is sure, everything is possible" !

Ref: Dess, G.G. and Beard, D.W., 1984. Dimensions of organizational task environments. Administrative science quarterly, pp.52-73.