The VUCA Framework

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Last week at the Human Ventures annual retreat, our very own Peter Shallard walked our team through the VUCA framework and why it’s important for us as builders and investors. The framework was developed in the 1980s by Warren Bennis and Burt Nanus and has been used in military education and executive management.

As Peter explained the framework, I realized I spent the early part of my career in  quadrant #1 (ex. corporates, traditional asset management), but quickly moved my way to quadrants 2, 3 & 4 (ex. the world of startups and VC) and have greatly enjoyed the challenge of increased risk that goes along with potential for increased reward. Below, I briefly go into more detail about each quadrant:

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1) Volatility

By leveraging a high level of understanding in the area where on operates, one can narrow down decisions to a science where the unpredictable variables are well-known and can be effectively mitigated against

2) Complexity

Faced with a plethora of information but no structure, the challenge becomes how to sort through it efficiently to develop causal relationships and disregard noise

3) Ambiguity

The land of unknown unknowns. This is typically an area so new that no one has really mastered how to navigate it or causal relationships are unknown.

4) Uncertainty

The land of the known unknowns. One has greater knowledge from which to make decisions and can isolate the unknown variables.

Startups typically start in #2 (ex. navigating the healthcare industry) or #3 (ex. leveraging frontier tech). Founders operating in the Complexity quadrant need to develop systems and frameworks that will allow them to focus their efforts on the things that truly matter and avoid noise. Founders in the Ambiguity quadrant are typically attempting to leverage a new technology such as AI or blockchain and determining which use cases are the most attractive.

VCs will spend most of their time in the #2 and #4. Investors constantly have to digest and navigate a seemingly endless amount of information in order to develop theses that guide their focus on the most attractive market opportunities over a long time frame. The best investors are very good at channeling out noise and focusing on key insights that will impact the future. On the other end, Uncertainty is another natural home for VCs – the better understanding an investor has around key unknown variables and assigning a risk level to each, the better equipped one will be to make an informed investment decision.

Human Ventures is an environment that demands one to not only be comfortable with Complexity, Ambiguity, and Uncertainty, but to thrive in it. This requires an endless appetite for learning, proactiveness, and a high appetite for risk. As we continue to navigate various levels of unknown and try to make sense of the world and where it’s going, we hope to help our portfolio companies mature to eventually reach quadrant #1.

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