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How VUCA is Reshaping the Pharma Industry Today

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Posted by Darleen DeRosa April 11, 2019

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The days of stable, predictable economic growth have long since given way to a much more tumultuous business environment defined by disruption. Many organizations use the term VUCA as a convenient shorthand for describing the unprecedented challenges confronting them today.

First introduced by the U.S. Army War College in 1987, the acronym VUCA was gradually adopted by the business world to refer to the inherent instability and unpredictability of the modern, multilateral world. Each letter represents a different kind of challenge today’s organizations face: Volatility. Uncertainty. Complexity. Ambiguity.

VUCA Defined

Volatility

In a volatile situation, challenges are unexpected or situations are unstable. The causes of that instability, however, are easily identified and ample information is available to understand why things are happening and how to respond to them. A company dealing with disruption in its supply chain due to a natural disaster is in a volatile situation.

Uncertainty

When the cause of an event is known, but there isn’t enough information to determine how to best proceed, the situation is uncertain. Without good data, it can be difficult to determine how to react to changes because the outcomes of actions are difficult to predict. A company trying to understand how a competitor’s new product is shifting the marketplace is grappling with uncertainty.

Complexity

In complex situations, problems have many interrelated parts and multiple variables. The sheer volume of information needed to determine a course of action is difficult to manage, even though individual solutions may be easier to implement. An organization with operations in several countries, all with different political, economic, and cultural contexts, is trying to manage complexity.

Ambiguity

Organizations sometimes face situations where they have little information available to inform strategy and can’t predict the outcome of their decisions. This is an ambiguous environment in which they must try to learn quickly in order to identify the best ways to proceed. A company entering an immature marketplace or introducing new products outside their existing competencies is confronting ambiguity.

VUCA and the Pharma Industry

No other sector has experienced the challenges of VUCA in strategic management quite like the pharma industry. The twenty-first century has been largely defined by the impact of a rapidly globalized market, which has led in turn to a series of disruptive mergers and acquisitions that show little sign of slowing. Technological developments continue to reshape the way research is conducted and products are delivered to market, while the pressure of rapidly approaching patent cliffs has caused pharma companies to rethink their existing business models.

While the pharma industry has long relied upon product innovation to deliver success and market growth, increased customer power has led many companies to turn to consumer-facing innovations to gain a competitive edge. From information tools like analytics and mobile apps to integrated devices like internet of things (IoT) wearable and augmented reality (AR), pharma companies are investing in new areas far outside their traditional comfort zone.

Agile Leaders to the Rescue

Pharma companies operating in VUCA environments continually face difficult trade-offs when it comes to balancing competing demands. They must find ways to effectively service customers while still investing in new ways to improve efficiencies and drive innovation. Focusing on any one of these three areas necessarily has an impact on the others, forcing companies to make hard choices about priorities.

With their ability to connect, adapt, and deliver, agile leaders are well-equipped to balance competing demands with minimal trade-offs. They understand how to take action to address immediate needs while also positioning their organizations strategically to succeed in the long term. Agile leaders are willing to challenge the status quo and make the tough decisions that many pharma companies will need in an increasingly competitive business environment.

Given the tumultuous nature of VUCA environments, agile leaders are essential for setting a tone of calm and purpose while still keeping people focused on key initiatives. Their ability to connect and empathize helps them better support team members as they grapple with unexpected challenges. When situations change or setbacks occur, agile leaders have the flexibility to reimagine strategic direction quickly in ways that balance the competing priorities of people, efficiency, and innovation. Their commitment to results and integrity makes it easier for them to secure buy-in during difficult change initiatives, which puts them and their teams in a better position to achieve their targeted goals.

Finding people who have the potential to become agile leaders is critically important for pharma companies looking to navigate the challenges of today’s dynamic economy. These high-potential employees set themselves apart by a desire to learn and are enthusiastic for the organization’s mission. By identifying these candidates early with an effective assessment process, they can receive the development they need to become a valuable part of a company’s succession plan.

With the pharma industry going through an unprecedented period of disruption, companies must find ways to overcome the four elements of the VUCA world: volatility, uncertainty, complexity, and ambiguity. The companies that manage to implement the principles of agile leadership will have a significant advantage as they attempt to reshuffle their priorities and build a sustainable business model for the future.

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Topics: pharma

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