BL&T No. 148: Exploring VUCA in E-commerce: What To Do When You Don't Know What To Do

This post originally appeared in my weekly newsletter, BL&T (Borrowed, Learned, & Thought). Subscribe

‍Borrowed

"Bad strategy fails to recognize or define the challenge. When you cannot define the challenge, you cannot evaluate a strategy or improve it."

From "Good Strategy Bad Strategy: The Difference and Why It Matters" by Richard Rumelt [Book]

Learned

When I first discovered the VUCA framework, it was just after the first layoffs in Barrel's history. It was difficult for several reasons, but we recognized the need to forge a new path and embrace experimentation. Researching VUCA was an enlightening and inspiring exercise for me.

So, what is VUCA?

VUCA, which stands for volatility, uncertainty, complexity, and ambiguity, provides a framework for navigating such circumstances. It was developed based on concepts described in the book "Leaders: The Strategies for Taking Charge" by Warren Bennis and Burt Nanus. The acronym gained popularity in its military application, starting with the U.S. Army War College following the Cold War.

Over time, VUCA has become a model used by leaders across various fields to enhance outcomes by better preparing for the unknown and adopting agile strategies in unpredictable and evolving conditions.

In my experience leading the Barrel team, I can't think of a time when VUCA would not have applied. Whether we're building new services, pivoting positioning, or evolving with changes in the market, there is always some unknown we're considering as we grow. Creating a culture of continuous improvement and resilience has had its challenges, but in the end, it has everything to do with why we still enjoy what we do after all these years.

VUCA does not illustrate one situation. Instead, it offers a guide for looking at the unique ways to approach volatile, uncertain, complex, and ambiguous conditions. In the Harvard Business Review article What VUCA Really Means for You, author Nate Bennett presents VUCA in a visual way to illustrate the difference between each. I found this helpful in applying the framework and created my own version below.

While VUCA resonates deeply with my experience at Barrel, it also offers valuable insights when applied to our clients' e-commerce businesses. When a client reaches out to us, it's usually due to a change or major event demanding attention, such as a new competitor entering the market, a decline in conversion rates, or another situation requiring strategic action. During these early conversations, we have an opportunity to understand their challenges and help them prioritize. Framing these situations through a VUCA lens can assist us in providing guidance and determining the best approach forward.

In this post, I'll break down each aspect of VUCA, including some examples we've seen among clients and what to consider when developing an approach.

Volatility

Volatility represents an unstable environment with numerous changes and options following an unexpected challenge. Resources are available to help understand the situation and predict the outcomes of actions.

Defined as:

High predictability of outcomes
High understanding of the situation

Examples:

A new competitor enters the market with a comparable product at a lower price point.
Changes in technology influence customer behavior and negatively impact KPIs (e.g. the rise of social shopping).
A global pandemic! We know the impact all too well.

Approach:

Focus on documenting current processes to ensure consistency in what's currently working (e.g. content creation for monthly marketing calendar).
Start building new systems to close current gaps and improve outcomes (e.g. monthly reporting and ideation sessions).
Allow for additional time in all initiatives, leaving room to pivot as new information becomes available.
Pursue more than one plan forward. Pouring all resources into one approach could be detrimental if it doesn't work out.

Uncertainty

Uncertainty arises when the path forward is unclear. While it's possible to understand what caused the situation, the outcomes of different scenarios are unknown. Change appears possible but it's impossible to know what's coming.

Defined as:

Low predictability of outcomes
High understanding of the situation

Examples:

Launching a new product in a new category.
Receiving conflicting feedback from customers on product efficacy, application, etc.
Seeing a fall in conversion rate after launching a new website.

Approach:

Spend more time talking with customers to understand them. Use tactics like post-purchase surveys to get more feedback on why customers bought.
Connect with stakeholders at other brands to share ideas and learn from their experiences.
Invest in research to close knowledge gaps and discover other unknown gaps.
Research what unknown factors might be impacting the business, like indirect competitors or industry changes.

Complexity

Complexity occurs when multiple moving parts contribute to the situation, making it challenging to comprehend the overall picture. There may be information available but it is overwhelming or daunting to understand.

Defined as:

High predictability of outcomes
Low understanding of the situation

Examples:

New stakeholders join the team after an internal restructuring and challenge current requirements.
Leadership wants to prioritize e-commerce and sets ambitious goals, requiring new tactics, website features, and tech integrations.
Launching a new website that caters to every potential customer use case.

Approach:

Document everything you know about the situation and identify what gaps exist.
Invest in subject matter experts to gain more insight into the situation and how to move forward (e.g. hiring an agency to conduct a website audit).
Break the challenge down into incremental steps (e.g. conducting one-on-one stakeholder interviews or implementing upsells and cross-sells vs. trying to improve sales with one giant initiative).
Avoid taking on the challenge alone. This is often inefficient and wastes time and money in the long run.

Ambiguity

Ambiguity refers to situations with many unknowns, no precedence, or access to crucial information.

Defined as:

Low predictability of outcomes
Low understanding of the situation

Examples:

Entering an untested market with limited or no access to customer insights.
Attempting to improve KPIs without accurate website analytics and customer data.
Launching a new sales channel (e.g. an Amazon business launching DTC).

Approach:

Invest in implementing systems to accurately gather the necessary data to make decisions (e.g. installing Microsoft Clarity to track user behavior).
Leverage user testing to learn about potential customers and what resonates with them.
Experiment and A/B test new features and tactics (e.g. introducing new email segments). Keep track of cause and effect to apply lessons learned across other areas of the business.