Unit2:

Globalization, addressing a VUCA

environment with a bottoms – up
approach (Volatile, Uncertain, Complex
and Ambiguous time)
• Globalization is the word used to describe the growing
interdependence of the world’s economies, cultures, and populations,
brought about by cross-border trade in goods and services, technology,
and flows of investment, people, and information
• The term gained popularity after the cold war in the early 1990s, as
these cooperative arrangements shaped modern everyday life
• The wide-ranging effects of globalization are complex and politically
charged
 What is Globalization?
• Globalization - the process by which businesses or other organizations develop international
influence or start operating on an international scale
• Globalization is the opening of local and nationalistic perspectives to a broader outlook of an
interconnected and inter-dependent world with free transfer of capital, goods, and services
across national frontiers.
• Globalization is the spread of products, technology, information, and jobs across national
borders and cultures
• In economic terms, it describes an interdependence of nations around the globe fostered
through free trade
• Globalization has created new jobs and economic growth through the cross-border flow of
goods, capital, and labour
• Globalization motives are idealistic, as well as opportunistic, but the development of a global
free market has benefited large corporations based in the Western world
 Globalization Explained

• Corporations gain a competitive advantage on multiple fronts through

globalization
• They can reduce operating costs by manufacturing abroad
• They can buy raw materials more cheaply because of the reduction or
removal of tariffs
• Most of all, they gain access to millions of new consumers
• Globalization is a social, cultural, political, and legal phenomenon
• Socially, it leads to greater interaction among various populations.
• Culturally, globalization represents the exchange of ideas, values, and artistic
expression among cultures.
• Globalization also represents a trend toward the development of single world
culture. 
• Politically, globalization has shifted attention to intergovernmental
organizations like the United Nations (UN) and the World Trade
Organization (WTO).
• Legally, globalization has altered how international law is created and enforced
• On a business level, globalization affects an organization's product life cycle
and an organization's balance sheet
• Globalization also affects how governments throughout the world create
policies affecting areas such as monetary regulation and trade
• On an individual level, globalization has affected the standard of life and
quality of life of individuals and families throughout the world.
• Standard of living is the level wealth, comfort, material goods and necessities
available to a certain socioeconomic class in a certain geographic area.
• Quality of life is the degree to which a person enjoys the important
possibilities of his or her life.
• On a corporate level, globalization has had an effect on organizations
product or service life cycle.
• Product life cycle is the period of time over which an item is
developed, brought to market and eventually removed from the world
market.
• Most economists agree that globalization provides a net benefit to
individual economies around the world, by making markets more
efficient, increasing competition, limiting military conflicts, and
spreading wealth more equally around the world. 
 Globalization Advantages

• Proponents of globalization believe it allows developing countries to catch

up to industrialized nations through increased manufacturing, diversification,
economic expansion, and improvements in standards of living
• Outsourcing by companies brings jobs and technology to developing
countries
• Trade initiatives increase cross-border trading by removing supply-side and
trade-related constraints
• Globalization has advanced social justice on an international scale,
and advocates report that it has focused attention on human rights worldwide
 Disadvantages of Globalization
• One clear result of globalization is that an economic downturn in one country can
create a domino effect through its trade partners
• E.g. : The 2008 financial crisis had a severe impact on Portugal, Ireland, Greece,
and Spain. All these countries were members of the European union, which had to
step in to bail out debt-laden nations, which were thereafter known by the acronym
PIGS
• Globalization detractors argue that it has created a concentration of wealth and
power in the hands of a small corporate elite which can gobble up smaller
competitors around the globe
• Globalization has also increased homogenization. Starbucks, Nike, and Gap Inc.
dominate commercial space in many nations. The sheer size and reach of the U.S.
have made the cultural exchange among nations largely a one-sided affair
 Examples of Globalization
• A car manufacturer based in Japan can manufacture auto parts in
several developing countries, ship the parts to another country for
assembly, then sell the finished cars to any nation
• China and India are among the foremost examples of nations that have
benefited from globalization, but there are many smaller players and
newer entrants
• Indonesia, Cambodia, and Vietnam are among fast-growing global
players in Asia
Simple definition of  Globalization
• Globalization means the speedup of movements and exchanges (of
human beings, goods, and services, capital, technologies or cultural
practices) all over the planet
• One of the effects of globalization is that it promotes and increases
interactions between different regions and populations around the
globe
 Official Definition of Globalization by the
World Health Organization (WHO)
• Globalization can be defined as ” the increased interconnectedness and
interdependence of peoples and countries. It is generally understood to
include two inter-related elements: the opening of international
borders to increasingly fast flows of goods, services, finance, people
and ideas; and the changes in institutions and policies at national and
international levels that facilitate or promote such flows.”
VUCA (volatility, uncertainty, complexity and ambiguity)

• VUCA refers to an operating environment that is constantly changing in

conflicting, dramatic, and relentless ways to produce leadership and
organizational challenges
• Each letter of the acronym VUCA represents a type of change that leaders should
identify to contend fully with the environmental flux without wasting resources
due to incorrect issue identification
• Volatile changes are frequent and cause instability;
• Uncertain changes are those of which leaders lack full knowledge;
• Complex changes are confounding due to the interconnectedness of processes and
information; while
• Ambiguous changes are those that lack precedence
• Globalization and technology fuel VUCA dynamics through increased
innovation, interconnectivity, and digital revolutions, which, in turn, create
new and nimble competitors, who operate globally to transform customer
expectations radically and thus produce organizational turmoil
• The landscape that confronts the business leaders of today is characterized
by what is known as the VUCA principle or the Volatility, Uncertainty,
Complexity, and Ambiguity characteristics
• VUCA term has been coined by the noted futurist and member of the
Institute for the Future, Robert Johansen, who points to the increasingly
unstable and unpredictable world that the business leaders have to
navigate
• VUCA is dynamic and situational — sometimes things can be fairly
clear but then suddenly shift due to outliers, adjacencies, and
disruptions
• Arguably, leaders today face an extended period of rising VUCA
• The elements of VUCA are not new and they exist since long, but the
modern world has amplified them
• Amid globalization, instantaneous communications, and innovative
ecosystems, leaders are more challenged by continuous change
• VUCA concept aims to create a framework which can identify and act on emerging
strategies
• It is an incremental approach to strategy formulation which involves the development
of strategy from the bottom up
• It helps to maximize the value created and influences the next formal strategic planning
• This concept involves:
• A staged, adaptive approach to planning
• Need to be agile
• Need to be adaptive and flexible
• Expect the unexpected
• Use of unexpected opportunities to one's advantage
 Volatility

• Consumer preferences and trends are ever changing and the rapid turnover in
brands, products, and companies is proof that business leaders cannot take their
leadership position for granted anymore
• For example, the Finnish Mobile maker, Nokia that used to be the market leader a
few years ago is now nowhere in the reckoning because astute and agile players
like Samsung and Apple saw the emerging trend of Smartphone and quickly
launched their products
• The business landscape that is characterized by extreme volatility means that
business leaders have to focus on getting there early and staying there for the future
• In other words, business leaders have to channelize their energies so that they know
the future to compete in the present
EXAMPLE – VOLATILE
• A recent example of volatility was seen in how the slowdown in
China’s growth impacted financial markets this year and how those
same global markets behaved following the UK’s ‘Brexit’ vote.
• Terrorist attacks are another source of volatility that can destabilize
economies and global relationships.
• For business this financial volatility can affects things like supply
chain of products and components bought from overseas priced in
local currencies and the selling of products in internationally.
• As these changes impact the global markets, leaders need be agile and
responsive, having strategies in place to manage risk
 Three ways to lead more effectively in such
volatile environment
• Train team to provide meaningful information rather than general
data:
• In a volatile environment, quick decisions are the most important tool to
give immediate response to any change
• In this digital and AI enabled world, all companies are working online and
considerable amounts of big data are available for any events and outcomes
• However, such data is of no use until it is processed into meaningful and
usable information
• Such information will help leaders to make quick decisions with probable
outcomes.
• Clear Communication: 
• We all are aware that communication within the team and with outsiders is very
important
• The great orator Winston Churchill always focuses on the small words as those are
clear
• It’s a complex and volatile world and indirect communication generates various
meanings as per understanding of listeners
• It affects decisions.
• Hence, clear and focused communication is a great help in between teams
• Keep your communication small, clear and to-the point, not be jumbled with
jargons and corporate makeover
• Ensure your intent is properly communicated and understood: 
• In any communication, sending a message is one part but it is not complete if
the audience is not well received and understands the intent for the
communication
• Every action, objective or being of person, team or organization is on its own
“Purpose” of “Intent”
• The challenges inherent to a volatile environment require agile leadership and
flexible organizations
• If your subordinate leaders fully understand your intent, they’ll be better
equipped to appropriately handle violent and unpredicted shifts in the
environment
 Uncertainty

• The next aspect of uncertainty is closely tied with the points made in
the previous paragraph
• Therefore, the next feature that is discussed here is complexity, which
means that business leaders have to adopt a non-linear approach to
solving problems and must think out of the box
• Further, they would have to ensure that they not only solve the
problems but the business dilemmas brought on due to too much
complexity which means that they would have to choose between
several competing alternatives that are all attractive but cannot be
actualized together
EXAMPLE –UNCERTAINITY
• An example of uncertainty in the business world would be a
competitor launching a new product and not understanding how the
markets and your customer base will respond, which could impact
your own product sales.
• This is nothing new but the impact of technology which has been a
huge disrupter in many industries has meant that competitors are much
harder to spot. 
 Three ways to lead more effectively in an
uncertain environment:
• Get a fresh and innovative perspective:
• Leader has to always try new innovative ways to solve any challenge and check the possibility of all
negative outcomes and its solutions before trying these new ways
• To always get a fresh perspective, one has to challenge the appropriateness of conventional ways of doing
the particular work or solving any problem
• In this process, the concept of Red-teaming is very helpful within the team
• Red-teaming is the use of a devil’s advocate (one who is always challenging the solutions where the entire
team consensus is there) within the leadership team in order to counter the influence of group-think
• Red-teamers don’t simply argue in the plan; they think and act as the competition requiring leaders to
move beyond “that won’t happen” to “what if this occurs.”
• The red-team members have no personal investment in the plan, so they don’t have problems exposing
weaknesses or single points of failure
• Red-team membership should be rotated and leaders must be careful to value and protect red-team
members from any perceived resistance from other organizational members
• Flexible Planning: 
• To achieve any objective or goal, a well-thought plan is required
• Sometimes organizations suffer the loss as when there might be change in
plan required, leaders believe that they have made a well-thought plan
which needs to be followed
• Such a plan has no capability to address dynamic situations and it leads to
failure
• In any organization, plan or system is important but it shall be flexible
enough that at the time of requirement, it shall be flexible
• A plan should incorporate flexibility and options at its inception
• Glance back, look ahead. 
• It is prudent to assess the outcomes of our plans and decisions; it’s
how we get better individually and collectively
• Every review must be conducted at the right level of detail, with the
purpose of making the organization better as it moves forward
• They should focus on what could realistically be done better in the
future, rather than what could have been done in the past
• A leader shall keep an eye on the past to learn things and on the future
to implement those learnings
 Complexity

• The world has become so complex even for the layperson that the
complexity in the business world is of much higher magnitude and is
multilayered meaning that the landscape is now no longer a simple
equation where profits mean success
• The business leaders would have to ensure that they take into account
the laws, regulations, and policies as well as social and environmental
costs of doing business in an increasingly interconnected world where
conditions in one region are markedly different from conditions in
other regions
EXAMPLE – COMPLEX
• If your business operates internationally, you will be working within
many different cultures and unique environments with differing
regulations, this is a complex situation as there are many different and
connected parts
• Working internationally may mean that you need to adapt how your
business operates.
• For example, a business may sell an unregulated product in one
region, but in another region that product could be heavily regulated
and taxed differently. 
 Following measures can help you to leading
in complex environment
• Collaborative Leadership: 
• Leadership doesn’t mean that leading peers but it is encouraging peers
to achieve defined goals, improve their capabilities, learning from
each other and make them leaders for next generations. It is called
collaborative and inclusive leadership
• In such a collaborative team, each team member understands his/her
importance and performs his/her role in the team
• This approach can multiply the skills and efforts of the entire team
which makes complex goals achievable
• Avoid searching permanent solutions: 
• In a complex environment, a team or organization has to work on many fronts at a
time and all problems or situations are interrelated
• organization has limited resources to deal with the situation, it is not necessary to seek
permanent solutions for every problem and focus on each problem in too many details
• There are chances of ignoring other important issues while dealing with one to
eradicate completely
• The permanent solution is also not permanent forever as the situation and environment
is changing fast in the VUCA world
• Hence, focusing on important issues and resolving them to a significant extent can
help in a complex environment
• Train peers to fit in your Shoe:
• In a journey of rewarding career, each team member is running his or her own race
in his or her own track
• In a complex and highly demanding environment, you cannot do everything on
your own as a leader
• Nowadays, a leader’s most important role is to train future leaders; every
experienced fellow has his or her own success story to tell others
• A leader’s job is to impart training, build up confidence and challenge the team
members to conquer the challenge and define their own success story to tell others
• Put the right resources into their development now, and don’t be surprised when
they amaze you. That’s potential worth investing in
 Ambiguity
• The fourth and the final aspect that business leaders must confront is ambiguity,
which means that the business landscape presents problems and dilemmas that
cannot be reduced to simple yes and no type of solutions and black and white
approach to problem solving
• Most of the problems that business leaders face now are of the type where the
complete information is lacking, where there are no clear solutions in sight, and
where the reality of the marketplace is multilayered and multidimensional
meaning that leaders would have to resort to unconventional ways of solving
problems and confronting situations
• Ambiguity also manifests in conjunction with the other features like uncertainty
and complexity and as discussed next, each of these features feed into each other
creating a mélange that is tough to handle for many firms
EXAMPLE – AMBIGUOUS
• There are many contributing factors to ambiguity in the modern world,
but one which stands out is the pace of change.
• An example of this is globalization which has seen organizations enter
new markets quicker than ever before, often expanding in regions or
markets unexplored in relation to their products
• Dealing with ambiguity in this instance requires leaders to have a clear
understanding of hypothetical outcomes, test them, ask questions of
stakeholders with different perspectives and not jump to conclusions
too quickly
 Leading in Ambiguous environment
• Active Listening: 
• To counter ambiguity, active listening by a leader is most important to
understand and analyze the situation
• Every subordinate wants to be part of a meaningful work effort and
contribute to the team in achieving goals
• To maintain and improve this spirit amongst employees, leaders shall draw
strength from diversity and listen to every team member
• Subordinate leaders will listen to others only as well as we listen to them
• Don’t create your own friction by hearing just what you want to hear from
diverse voices representing valuable perspectives
• Think divergently and remain open for new ideas: 
• Openness to new ideas is a leadership characteristic highly correlated
with effectiveness
• Diversity of race and gender are most certainly important in order to
provide role models for emerging leaders
• The days of one best solution are gone for good; see the second- and
third-order opportunities inherent in equally attractive solutions.
• Set up incremental dividends: 
• Celebrating success is important, especially in an ambiguous
environment
• When the way ahead is not clear, it is always good to be reassured to
have tangible proof that we are moving ahead in the right direction
• Our stakeholders need to know that we can achieve small gains over
the long term; setting and achieving incremental dividends is a great
way to build and maintain momentum, confidence and trust, in both
the leader and the organization
VUCA Prime Model:
• Volatility is replaced with vision
• Uncertainty is replaced with understanding
• Complexity is replaced by clarity
• Ambiguity is replaced by agility.