Simplifying to meet the challenges of VUCA

Our world is becoming increasingly complex. There is even an acronym, 'VUCA' - short for 'Volatility, Uncertainty, Complexity, Ambiguity' - that encapsulates the key drivers of this trend. But what can be done about it?

The opposite of ‘complexity’ is ‘simplicity’. ERGO realised this early on and created a compass for all encounters with the ERGO brand with the brand essence ‘ERGO makes insurance simpler’. Our brand essence describes our business, our expertise and customer benefits in one sentence.

“Why is that so important? Because insurance is very important to people,” says Imke Jendrosch, Chief Marketing Officer at ERGO, for example. Insurance protects what matters most in life: your family, your home, your health, or even your dream holiday. It should be simple, with no complicated processes, unnecessary paperwork, or back-and-forth. Insurance is about protecting what matters most, so it needs to be simple.

In this article, we look beyond the insurance industry and try to work out the benefits of ‘simplification’ for companies in general. After all, the VUCA world is influencing business in general and calls for solutions that make increasing complexity manageable.

What are the challenges of the VUCA world?

VUCA describes the challenges that companies often face today. The rapid changes in markets, technologies and customer needs make it difficult to plan long-term strategies. Uncertainty regarding political developments and natural disasters makes risk forecasting more difficult. The complexity of global supply chains and multidimensional problems requires flexible solutions. The ambiguity of information and opinions makes it difficult to make well-founded decisions. One thing is for sure: in this fast-changing world, it’s important to be flexible, think in new ways and adapt quickly if you want to stay successful. But how?

Simplification is the answer to the VUCA problem.

There's too much going on in the world right now, and it's overwhelming. We feel like we're just chasing after the latest developments and making decisions at random. To regain a sense of solid ground for our actions, we need to simplify.

This could be the first misunderstanding: Simplification doesn't refer to the company's environment. It's complex and will remain so. We can't simplify the world, but we can simplify how we react to it.

The more confusing the complexity of the environment seems, the more important it is not to dwell on the unimportant and at the same time to abandon processing routines that make everything even more complicated.

What areas can companies simplify?

In theory, any area of a company's work can be simplified. Here are a few examples:

Processes and procedures

Are there workflows that are unnecessarily complicated? Can process steps be omitted? Is it possible to design processes flexibly so that they can be adapted to variable environmental conditions without further effort (agility)? 

Communication

Are tasks, goals and responsibilities clearly communicated? Communication problems often lead to extra work and additional coordination effort.

Technology

Using different technologies for similar tasks often leads to unnecessary frictional losses. In the long term, standardisation can make sense. But beware: technology changes can tie up a lot of resources in the short term and then tend to cause more complexity.

Product range

Sometimes it makes sense to simplify the product range in order to facilitate marketing and improve profitability.

Organisational structure

Complicated structures are often a cause of slow decision-making. Can we reduce the number of levels in the hierarchy and make responsibilities clearer?

Strategy

To stay agile, strategy developers shouldn't try to predict future developments as accurately as possible. This is a hopeless endeavour in a VUCA world. It's more important to understand your company well: who we are, what we want, and what we can do. If we know what we're doing, we can react more quickly to changes in the market.

Simplification isn't a new idea. For a long time, there have been management concepts that deal with managing complexity in the environment and reducing complexity in the company. Names like agility, lean management or Polynesian sailing represent this.

So it's all quite simple? Not quite.  

The challenge: How do you make things simpler without losing their purpose?

Structures within a company have a purpose. At least they did when they were set up. Over time, some structures become less useful. They may not keep pace with the development of the environment. As a result of organisational uncontrolled growth, functions are mapped twice and three times. Or the focus of structural development was on aspects other than economic ones. 

When companies want to simplify, they're always faced with the question: 'Can we get rid of it, or is it important?'

What can be simplified and what can't?

To answer this question, company managers and employees need to take a close look at structures. Self-analysis comes before simplification. This can get out of hand, but there's no way around it.

Know your goals and success factors

Which functions are essential for achieving the company's goals? This is the critical area where any simplification ends: Structures can only be simplified to the extent that the core functions are still fully guaranteed.

Analyse the impact

What would planned simplifications have for practical work? The interactions between structures are not always obvious at first glance. It can be helpful to play through specific scenarios.

Involve employees, customers and experts

Not only employees, but also customers sometimes know exactly what bothers them and what they would not want to do without under any circumstances. Ideally, simplification increases the satisfaction of all stakeholders. 

A simple approach to simplification

As has already been mentioned, the desire for simplification can actually make things more complicated. Months of navel-gazing, dogged structural discussions, paralysingly complex reorganisation of processes and hierarchies – these forms of simplification create more problems than they solve. Even setting up new teams with the goal of 'simplification' isn't the be-all and end-all. A bureaucracy that's been de-bureaucratised is still a bureaucracy.

One thing is clear: simplification also initially creates new points of friction. Routines are broken, new procedures have to be learned, responsibilities are reorganised and everyone involved is entering uncharted territory. So, how can such changes be introduced as simply as possible?

Doing without the big bang

It's a pipe dream to think that the company can be reorganised in one big, clever move and everything made simple. It's probably not worth the time and resources, because the environment doesn't wait until the big changes are made. It's the small steps that get us moving forward – agility is the key. 

Creating a starting point: Why do we want to simplify? What is bothering us?

It all starts with motivation. The people in the company, in the department, in the office can first see how much simpler things can be and how much better they can work: What do we want to achieve – and what do we no longer want?

Improve instead of create

It's easier to make changes to existing processes than to start from scratch. What's wrong with existing processes is already known and can be fixed in a targeted way. The problems with new structures will only become apparent over time.

Clear guidelines instead of spending ages coordinating individual cases

If you know in advance how a company or department is going to react in certain situations, you can save a lot of time.

Individual responsibility instead of integration of many co-decision-makers

If you give people more power to make decisions, you can get things done faster. But you need to make sure that everyone knows what they're doing.

The promise of AI

When people think about simplifying things these days, they often turn to artificial intelligence. AI can basically make life easier for companies in two ways. Firstly, it can automate routine tasks, freeing up people to concentrate on new challenges. The second strength of AI alongside automation is the analysis of large amounts of data. This can help companies to identify wasted resources in operational processes, tailor offers to customers or provide employees with exactly the information they need for a specific task in real time.  Jan Navel from the digitalisation agency Matchplan lists ten ways AI can make work simpler. The way to use AI for simplification usually involves using specialised tools that are tailored to the company. 

Using AI chatbots like ChatGPT as a brainstorming tool to come up with ideas is still pretty tedious. Unless you give them very specific information, the advice is often too general to be useful. For example, they might say, 'Sit down with your employees and find out what is holding you back in your work.' But the results are better if you describe the problem as concretely as possible using an example scenario. But the business of coaches and management consultancies isn't yet under threat from AI. 

Culture of simplicity - just do it

Perhaps this is the most important approach to simplification: just start somewhere. Perfectionism, which seeks to calculate all change measures down to the last detail, is not compatible with the goal of simplicity. Simplification is also a mindset. 

The uncertainties of the corporate environment cannot be countered by thinking in terms of hedging and meticulously planning for eventualities. In the VUCA world, pragmatic decision-making that is ready to correct course quickly when new circumstances arise proves its worth. This type of flexibility requires a culture of simplicity: just do it - and then take the next step.