805111

editorial2018
CMRXXX10.1177/0008125618805111CALIFORNIA MANAGEMENT REVIEW VOL. X NO. X MONTH XXXXManagement Innovation in a VUCA World: Challenges and Recommendations

Special Section on VUCA

Management
California Management Review
2018, Vol. 61(1) 5­–14
© The Regents of the
University of California 2018

Innovation in a Article reuse guidelines:

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DOI: 10.1177/0008125618805111
https://doi.org/10.1177/0008125618805111

VUCA World: journals.sagepub.com/home/cmr

Challenges and Recommendations

Carla C. J. M. Millar1,2, Olaf Groth3,4, and John F. Mahon5

Summary
Our Call for Papers focused on breaking established patterns and models and
showcasing management innovation in a world in which Volatility, Uncertainty,
Complexity, and Ambiguity (VUCA) reign. VUCA is both an outcome of disruptive
innovation and a driver of it; and frequently VUCA is used as an excuse to avoid
planning and action. While research has pursued the four elements independently,
interaction and integration have been lacking. This article introduces three papers
and offers 15 challenges as well as implicit and explicit recommendations to manage
in the unpredictable and challenging VUCA world.

Keywords: VUCA, innovation focused strategy, capabilities, customer satisfaction,

ecosystems, leadership development

S
ince we wrote the Call for Papers for California Management Review
(CMR) on “Management Innovation in an Uncertain World” we
have continued to see VUCA (volatility, uncertainty, complexity, and
ambiguity)1 in many forms. Donald Trump, perhaps the embodiment
of the VUCA world, entered the White House, breaking with rules and protocol,
and shaking the diplomatic and economic world order we had become accus-
tomed to. Newspaper headlines are warning of great trade wars and destabilizing
upsets in the economic balance. Even in less political contexts, the manageabil-
ity that was once associated with performance planning and forecasting and
the continuity of established actors can no longer be relied upon. In sports, the

1Ashridge (Berkhamsted, UK) at Hult International Business School, London, UK

2University of Twente, Enschede, The Netherlands
3Hult International Business School, San Francisco, USA
4Cambrian ai, San Francisco, USA
5The University of Maine, Orono, ME, USA

5
6 CALIFORNIA MANAGEMENT REVIEW 61(1)

tried and tested approach to predicting player performance and assigning “seed-
ing” by the Committee of the All England Lawn Tennis and Croquet Club at the
Wimbledon 2018 Championships produced a seeding result where in the first
five days over half the seeded women players had lost their matches and went
out, succumbing mostly to less experienced, younger, more creative players; and
only the top-seeded player reached the Men’s quarter finals. The 2018 FIFA soc-
cer World Championships in Russia also saw previous champions like Brazil and
Germany crash out before the quarter finals. Even negative predictions fail to
come true: when twelve boys and their football coach who were trapped 2.5
miles inside flooded caves in Thailand—with all odds stacked against them ever
getting out—were rescued after seventeen days. The global level of interest,
offers of help, and the participation of world experts in cave-diving demonstrated
how technology, international collaboration, and the power of the human spirit
of both rescuers and rescued could save the day in circumstances that previously
would have been seen as hopeless and a tragedy of mainly local interest.
In the Call for Papers,2 we suggested a focus on breaking established business
patterns and models and showcasing management innovation in a VUCA world.
VUCA is both an outcome of disruptive innovation and a driver of it. The concept of
a VUCA world was introduced by the U.S. military as the Cold War ended and as the
United States looked out over the emergence of a diverse, rather than monolithic,
global landscape. This meant being prepared to take on increasing challenges from
asymmetrical opponents such as nonstate militias and other loosely organized,
sometimes almost “virtual” adversaries; to adapt rapidly to highly improvised weap-
ons and tactics deployed by those opponents; to respond quickly, effectively, and
efficiently to the explosion of technology-enabled (but frequently contradictory)
battlefield intelligence; and to address the increasing ambiguity surrounding who
was an “enemy combatant” versus who was an “innocent civilian.”3
Frequently, VUCA is used to avoid planning and action as the world/envi-
ronment is “too disparate, too crazy” to determine, so instead we use piecemeal
approaches to deal with these challenges. The problem is that these piecemeal
approaches are simply not up to the task. For those readers unfamiliar with VUCA,
we recommend you read Bennet and Lemoine’s thoughtful and well-organized
guide for “identifying, getting ready for, and responding to events in the four cat-
egories of VUCA.”4
What makes VUCA so interesting at this particular time is the currently
simultaneous focus on each attribute and the interaction among the attributes. For
a long period, VUCA aspects were each pursued independently by academics in the
strategy arena. In 1982, for example, Boulton, Lindsay, Franklin, and Rue5 argued
that measures of uncertainty and the environment needed to be analyzed sepa-
rately. Research by Ettlie and Bridges6 and by Price7 looked at uncertainty as related
to the larger organizational environment, but took no account of the effects of com-
plexity and ambiguity; in essence, these aspects were either downplayed or ignored.
One reason for this lack of integration in the research is that there has often
been confusion over the practical meaning of uncertainty and ambiguity. Schrader,
Management Innovation in a VUCA World: Challenges and Recommendations 7

Riggs, and Smith offer some distinctions to aid in our understanding of uncer-
tainty and ambiguity, they note the following:

•• Uncertainty: Characteristic of a situation in which the problem solver consid-

ers the structure of the problem (including the set of relevant variables) as
given but is dissatisfied with his or her knowledge of the value of these vari-
ables.
•• Ambiguity level 1: Characteristic of a situation in which the problem solver
considers the set of potentially relevant variables as given. The relationships
between the variables and the problem-solving algorithm are perceived as in
need of determination.
•• Ambiguity level 2: Characteristic of a situation in which the set of relevant
variables as well as their functional relationship and the problem-solving
algorithm are seen as in need of determination.8

The rationale for this Special Section in CMR sprang from the growing
interest in how decision makers across the breadth of institutions in society were
facing up to the disrupted and arguably unforecastable environment brought
about by a number of interrelated phenomena:

•• Disruptive technologically driven product and business model innovation in

industries;
•• The disruptive effect of new modes of applying and benefitting from technol-
ogy in business and society;
•• The disruptive effect of very rapid changes to the global business environ-
ment, driven both in the product market arena and as a result of governmen-
tal, regulatory, and social actions; and
•• The disruptive impacts of cyberterrorism and theft of proprietary information
on competitive success and sustainability.

The internet boom that started almost twenty years ago demonstrated the
promise of disruptive technology in a speculative bubble. Although it subse-
quently appeared to be unjustifiably hyped and has been put in its place by more
rational business fundamentals, the frenzy over innovations proved to lay the
digital foundations for much bigger structural change. Today, many of these tech-
nologies have become mainstream, interconnected, and foundational for the
economy, and hence mission-critical for business. Meanwhile they are being
overlaid, potentiated, and repurposed by even more disruptive technologies, as
seen in the emergence of quantum computing, artificial intelligence, the Internet
of Things, blockchain, cyber currencies, gamification, virtual and augmented real-
ity, cyber hacking, neurotechnology, gene-editing, multi-sided digital platforms,
and innovations such as robotics, drones, and driverless cars.
Meanwhile, global demographic shifts, migration, trade protectionism,
intergenerational hand-offs, and life pattern changes are adding fuel into the fire
8 CALIFORNIA MANAGEMENT REVIEW 61(1)

of VUCA. All of this creates an acute challenge for management in designing

innovation, changing organizational structures, planning strategy, orchestrating
partnerships and ecosystems, and managing talent. So, we set out to examine
how disruption and innovation-related uncertainties in the business world affect
the way management work is done (e.g., leadership), how organizations are
restructured (e.g., organic vs. mechanistic designs), and how business processes
and strategies are adapted and with what effects?
While, for instance, a context-driven strategy takes the trends and uncer-
tainties of an organization’s environment as a strategic starting point,9 this is not
yet enough to guarantee management innovation. And although prior research
emphasizes the importance of pursuing management innovation, both as a com-
plement to technological innovation10 and as an independent phenomenon,11 a
better understanding of how VUCA environments lead to management innova-
tion in different organizational settings is needed.
We also found that Bennett and Lemoine’s article12 on understanding
threats to performance in a VUCA world puts the four words of the acronym into
a matrix, empirically and historically analyzing both the distinctiveness and inter-
action of the phenomena. Yet, this needs to be further researched and developed
into models that are actionable for practitioners that are constantly forced to “lean
forward” and look ahead as they seek to influence their evolving markets and
arenas. We require different tools and frameworks to deal with those future
situations.13
More attention also needs to be given to the effects of management inno-
vation at an organizational and functional level (e.g., financial and operational
firm performance, organizational commitment and employee involvement, and
capability ambidexterity) versus at an individual level (e.g., well-being, creativity,
purpose, and agility). Effective approaches to dealing with VUCA require a better
understanding of and coordination between those two levels.
Last but not least, leaders themselves, as individuals, are affected by the
VUCA environment, as volatility may have a detrimental effect on the well-being
and (mental) health of CEOs, managers, and entrepreneurs. Research in this area
is only just scratching the surface, mainly focusing on tangible or partial effects
such as in dealing with innovation or leading change. Perhaps significant to the
need for new thinking in the face of uncertainty is the development of “servant,”
“authentic,” “whole-person,” and recently “humble” leadership theories to sup-
plement or displace transactional and then transformational leadership theories,
as well as great inspirational leadership stories. A further possible connection may
be the “thriving at work” material of the “positive organizational scholarship”
community.14 We encouraged and sought interpretations and linking to shape
organizations and develop innovations as discussed by Mack, Khare, Kraemer,
and Burgartz.15
We formulated ten VUCA driven management innovation clusters to focus
research and implementation:
Management Innovation in a VUCA World: Challenges and Recommendations 9

•• strategy evolution/strategic foresight along with innovative approaches to

strategy,
•• strategic leadership/strategic management,
•• capacity building,
•• innovation and business models,
•• innovation processes/venturing under uncertainty,
•• organizational innovation,
•• organizational development/adaptiveness/agility,
•• data/markets and customer orientation,
•• contextual awareness and exploitation, and
•• ecosystems.

We also informed potential authors of CMR’s mission to not just present excel-
lent research, but make it accessible to leaders who practice management (often
without exactly knowing what theory the appropriate action might be based on) as
well as accessible to MBA students (who needed applications and papers articulating
the insights of ivory tower science). Both agile business leaders and students ought
to be focused on learning how to infuse new inputs and collaboration into work
processes, job roles, and measurement systems, as opposed to holding out for a more
static view of work and not taking account of VUCA requirements.16
We are delighted to now present three articles that more than measure up
to the criteria set. They integrate functions and elements of four of our clusters:

•• strategic leadership,
•• data/markets/customer orientation,
•• innovation processes, and
•• organizational development/adaptiveness/agility.

The Three Articles

The first article, “Innovation, Dynamic Capabilities, and Leadership” by
Paul Schoemaker, Sohvi Heaton, and David Teece, is at the heart of the spe-
cial section topic of management innovation. They warn of getting hooked on
the traditional approaches and develop the seminal Teece17 theory to a position
that shows how dynamic capabilities will result from novel approaches to both
product and process development as anchored in new business models. They
emphasize that innovation needs to be done throughout the business, not just
technically, or through clever modeling, but especially in the approach to leader-
ship throughout the company, from team leaders to the Board. Leadership needs
to reflect the heartbeat of the new dynamics and should combine entrepreneur-
ial flair and strategic vision, be ready to move at any moment, be proactive and
reactive, and create and implement 24/7.
10 CALIFORNIA MANAGEMENT REVIEW 61(1)

Euiyoung Kim, Sara L. Beckman, and Alice Agogino of UC Berkeley

authored the second article, “Design Roadmapping in an Uncertain World:
Implementing a Customer Experience-Focused Strategy.” This article illustrates
the essential role of an appropriate, creative approach to marketing and its man-
agement: gearing all elements of a company toward providing the customer with
the utmost levels of customer satisfaction in a constantly changing customer con-
text. Customers no longer meekly wait for and try out products and services,
customers want to experience, cocreate, and cotransform. This requires an inte-
grated approach, a multistakeholder understanding, and interaction like a war
room experience between the various departments and units—from strategic
planning, product design, NPD (new product development), and portfolio man-
agement to technology and operations management. And all this needs to be agile
to work within the VUCA environment. The design roadmapping approaches pio-
neered in this article are grounded in agile learning about the customer, and then
involve driving development, product choices, and technology. This way, the cus-
tomer can always be served, the customer can always be satisfied, while technol-
ogy changes and other variables can be accommodated.
The final article, “Management Innovation Made in China: Haier’s
Rendanheyi,” by George Frynas, Michael J. Mol, and Kamel Mellahi also high-
lights the role of learning as it takes us back to management innovation, but this
time focused on the processes and practices as operated by Haier in China.
Learning from overseas and emerging markets has long been a hard process for
many U.S. and European multinational companies (MNCs), but this article shows
that in this VUCA world much can be achieved when one is open to learning.
Haier transformed itself from a “standard” hierarchical manufacturing company
to an entrepreneurial, fast-market-responding firm through a platform of man-
agement practices named “Rendanheyi.” Context-dependent measures are shown
to create management innovations at the firm. The same VUCA context that
harasses and throws other companies off-balance inspires and allows Haier to
almost manage that context and turn it to its advantage. Dealing with VUCA this
way also allows Haier to create innovation and process models that can be readily
applied in practice.
The lessons from these three articles show that there are a number of fac-
tors in management innovation that are needed to win in a VUCA world:

•• Do not turn away from the VUCA environment but make it work for you by
understanding it and creating context-dependent management innovations.
•• Understand the customer and customer satisfaction needs and engineer all
functions and processes into management innovations to deliver on these
needs.
•• Approach entrepreneurial opportunity identification, pivoting, and strategic
vision in combination to build agility.
•• Integrate functions and processes within the company to create dynamic
capabilities.
Management Innovation in a VUCA World: Challenges and Recommendations 11

Challenges and Recommendations

We would like to offer managers, executives, academics, and leaders the fol-
lowing fifteen challenges as well as implicit and explicit recommendations to man-
age successfully in the current unpredictable and challenging business environment:

•• Executives should emphasize agility, dexterity, flexibility, and resilience to

navigate VUCA environments, updating capabilities and advantages fre-
quently and dynamically through organizational and resource fluidity as is
usually found in startups but not in mature enterprises.
•• Design, foresight, and systems thinking in organizations have to be supported
by new skills and tools in the VUCA environment.
•• Since staying close to the customer is important not just to ensure the right
value creation for them, but also to sense the VUCA environment and stay
ahead of surprises that impact customers, it is crucial to avoid the trap of
staying too close to what the customer already knows, but rather anticipate
where customer needs will be in the future. We also note the ongoing chal-
lenge of considering those that the organization does not now serve but who
are potential customers as a result of VUCA.
•• So as to keep experimenting and learning continuously about VUCA, we
need to treat innovation not as a one-off activity, but as a way of life in man-
agement today. This, in turn, requires change management to be a compe-
tency of all managers, not just of those in organizational development.
•• Organizations should take a different approach to the management of
change. Success in VUCA environments requires thoughtful reflection on
renewal from within an organization through transformational skills in each
employee. Merely scouting the latest technologies or resorting to acquisition
of the latest startups is not a substitute.
•• Likewise, realizing that strategy has been morphing from planning once a
year or every few years to an ongoing conversation about the raison d’être
of an organization and its functions, we need to build more regular weekly
and monthly foresight processes into strategy and budgeting. This will enable
flexible navigation of the intended path of the organization.
•• Business modeling needs to evolve from traditional static models for static
environments to radically new business models that are chosen and applied
at a unit level rather than the full company.
•• Learning needs to happen across borders and in places that have frequently
not been seen as centers of excellence for management, for example, China,
India, and Africa, as their local approaches have lots of best practices to teach
us, such as frugal innovation.18
•• Internationalization and innovation are ever more intertwined, thanks to
the information age in which knowledge-seeking motives drive international
networks and competence-creating subsidiary activities that connect local
innovation systems.19
12 CALIFORNIA MANAGEMENT REVIEW 61(1)

•• As a result, a big part of leadership in the VUCA world is the ability to provide
ecosystem and network entrepreneurship, that is, leading from the front, by
orchestrating new markets and new domains to shape the future, rather than
just reacting to change.
•• There is nowhere to turn to get away from the VUCA environment, so man-
agers should make it work for them by making sure they understand what it
means and then create context-dependent management innovations.
•• All of us will do well to focus on learning to understand rapidly evolving cus-
tomer needs in terms of pain points and aspirations in the VUCA world by
engineering all functions and processes into management innovations that
deliver those needs.
•• To that end, organizations and managers need to integrate functions and pro-
cesses within the company to create dynamic capabilities with faster cycles.
•• Leaders need to ensure that all data, insight, and intelligence on changing
market environments feed innovation processes continuously.
•• And finally, realizing that strategy, leadership, and management need new,
much more integrated interdependent models for the VUCA world that are
scientifically anchored, we need to show that these new models then cre-
ate disproportionately large impact for managers. In other words, we need to
show that the whole (of our effort) is so much more than the sum of its parts.

McKinsey’s Gregg, Heller, Perrey, and Tsai, in their 2018 article, “The
Most Perfect Union: Unlocking the Next Wave of Growth by Unifying Creativity
and Analytics,”20 confirmed the importance of a fusion and integration of func-
tions, and of people and data, indicating that companies that harness creativity
and data in tandem have growth rates twice as high as companies that do not.
They recall that ideas and numbers have always had an uneasy alliance in mar-
keting since for creative directors, designers, and copywriters, creativity is an
instinctual process of building emotional bonds with consumers; bring in too
much quantitative analysis and the magic dies. Our four articles emphasize the
importance of this fusion of functions and processes across the board in a VUCA
environment.
Finally, we would like to express our heartfelt gratitude to our near fifty
reviewers for their critical analyses and judgments and the support they have
given to authors. Both they and authors who submitted papers are due recogni-
tion for their effort, their patience, and their resilience. We hope that they will
make similar contributions in the future, as the VUCA world calls for ever more
insight and understanding.

Author Biographies
Carla C. J. M. Millar is a professor at Ashridge at Hult International Business
School and University of Twente (email: c.millar@utwente.nl).
Management Innovation in a VUCA World: Challenges and Recommendations 13

Olaf Groth is Global Professor of Management, Strategy, Innovation & Economics

and the Discipline Lead for Strategy, Innovation & Economics at Hult interna-
tional Business School (email: olaf.groth@faculty.hult.edu).
John F. Mahon is the John M. Murphy Chair of International Business Policy
and Strategy and Professor of Management at the Maine Business School,
University of Maine (email: mahon@maine.edu).

Notes
  1. P. Kinsinger and K. Walch, “Living and Leading in a VUCA World,” 2012, accessed September
21, 2018, http://www.forevueinternational.com/Content/sites/forevue/pages/1482/4_1__
Living_and_Leading_in_a_VUCA_World_Thunderbird_School.PDF.
 2. C. C. J. M. Millar, O. Groth, and J. F. Mahon, “Management Innovation in an Uncertain
World, Call for Papers,” California Management Review, 2016.
  3. Kinsinger and Walch (2012), op. cit.
 4. N. Bennett and J. Lemoine, “What VUCA Really Means for You,” Harvard Business Review,
92/1-2 (January/February 2014): 27.
 5. W. R. Boulton, W. M. Lindsay, S. G. Franklin, and L. W. Rue, “Strategic Planning:
Determining the Impact of Environmental Characteristics and Uncertainty,” Academy of
Management Journal, 25/3 (September 1982): 500-509.
 6. J. E. Ettlie and W. P. Bridges, “Environmental Uncertainty and Organizational Technology
Policy,” IEEE Transactions on Engineering Management, 29/1 (February 1982): 2-10.
 7. R. M. Price, “Uncertainty and Strategic Opportunity,” The Journal of Business Strategy, 2/3
(Winter 1982): 378-387.
 8. S. Schrader, W. M. Riggs, and R. P. Smith, “Choice over Uncertainty and Ambiguity in
Technical Problem Solving,” Journal of Engineering and Technology Management, 10/1-2 (June
1993): 73-99.
 9. J. Kraaijenbrink, The Strategy Handbook: A Practical and Refreshing Guide for Making Strategy
Work/Part 1, Strategy Generation (Doetinchem, The Netherlands: Effectual Strategy Press,
2015).
10. F. Damanpour, R. M. Walker, and C. N. Avellaneda, “Combinative Effects of Innovation
Types and Organizational Performance: A Longitudinal Study of Service Organizations,”
Journal of Management Studies, 46/4 (June 2009): 650-675.
11. M. J. Mol and J. Birkinshaw, “The Sources of Management Innovation: When Firms
Introduce New Management Practices,” Journal of Business Research, 62/12 (December 2009):
1269-1280.
12. Bennett and Lemoine (2014), op. cit.
13. O. Mack, A. Khare, A. Kraemer, and T. Burgartz, eds., Managing in a VUCA World (Heidelberg,
Germany: Springer, 2016).
14. J. E. Dutton, L. M. Roberts, and J. Bednar, “Pathways for Positive Identity Construction
at Work: Four Types of Positive Identity and the Building of Social Resources,” Academy of
Management Review, 35/2 (April 2010): 265-293; S. Sonenshein, J. H. Jones, J. E. Dutton, A.
M. Grant, G. M. Spreitzer, and K. M. Sutcliffe, “Growing at Work: Employees’ Interpretations
of Progressive Self-Change in Organizations,” Organization Science, 24/2 (March/April 2013):
552-570.
15. Mack et al. (2016), op. cit.
16. N. Horney, B. Passmore, and T. O’Shea, “Leadership Agility: A Business Imperative for a
VUCA World,” People & Strategy, 33/4 (2010): 32-38.
17. D. J. Teece, G. Pisano, and A. Shuen, “Dynamic Capabilities and Strategic Management,”
Strategic Management Journal, 18/7 (August 1997): 509-533; D. J. Teece, “Explicating Dynamic
Capabilities: The Nature and Micro-Foundations of (Sustainable) Enterprise Performance,”
Strategic Management Journal, 28/13 (December 2007): 1319-1350.
18. N. Radjou, J. Prabhu, and S. Ahuja, Jugaad Innovation: Think Frugal, Be Flexible, Generate
Breakthrough Growth (San Francisco, CA: Jossey-Bass, 2012).
19. J. Cantwell, “Innovation and International Business,” Industry and Innovation, 24/1 (2017):
41-60, doi:10.1080/13662716.2016.1257422.
14 CALIFORNIA MANAGEMENT REVIEW 61(1)

20. B. Gregg, J. Heller, J. Perrey, and J. Tsai, “The Most Perfect Union: Unlocking the Next
Wave of Growth by Unifying Creativity and Analytics,” 2018, accessed September 21,
2018, http://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/
the-most-perfect-union?cid=eml-web.