Today, "strategy" is a major focus for every organization everywhere, as they have come to realize that without a strategy, surviving in the business world becomes more challenging. Past strategies, even if successful, do not necessarily apply to the future. In the era of globalization, changes occur constantly and faster than before. This includes changes in market conditions, consumer demands, industry regulations, and technological advancements. Every industry has the potential to be disrupted by smaller players like startups that leverage the internet and technology to introduce new offerings to customers. Traditional business models and limitations are being bypassed. For example, hotels are not just competing with each other but are also contending with platforms like Airbnb. Even banks need to keep an eye on new fintech developments, and the insurance industry is witnessing a surge in insurtech both internationally and, even though less familiar, in Thailand.

Crafting strategies in a VUCA (Volatile, Uncertain, Complex, and Ambiguous) environment:

Developing strategies in a VUCA environment (characterized by volatility, uncertainty, complexity, and ambiguity) is not an easy task. It particularly challenges mindset and internal alignment within an organization. Shaping the mindset of employees is essential to make them believe in and actively participate in the direction the organization is taking. Achieving alignment within the organization is also crucial.

How an organization's capabilities should be in a VUCA environment:

1. Strategy and capabilities should align.

The first question an organization must ask itself is what capabilities are necessary to drive the strategy that the organization currently lacks. To do this, it's important to first identify the existing capabilities and the required capabilities to identify the gaps and figure out how to fill those gaps.

Example of misalignment between strategy and capabilities:

The online grocery business was growing rapidly and seemed promising for the future. Even consulting giant Accenture invested hundreds of millions of dollars in creating an online grocery business named Webvan. Customers could order groceries online and have them delivered to their doorstep. However, Accenture's venture failed within 18 months because the company's capabilities did not align with the chosen strategy. Apart from having no prior experience or knowledge in the supermarket business, their online capabilities required significant development, such as website design, online customer acquisition, and suitable transportation for groceries.

Example of alignment between strategy and capabilities:

At the same time, a giant company like Amazon has similar intentions. However, it is evident that Amazon has a clear advantage when it comes to online capabilities and already possesses a database of online users. Furthermore, Amazon has the capability to handle its own deliveries in multiple cities, with faster delivery times and cost-effective management.

Another example of an organization that aligned its capabilities with its strategy is Tesla Motors. The trend in electric cars is the future of the automotive industry, which uses batteries as a power source. Tesla Motors joined hands with partners to build gigafactories for the production of batteries specifically for Tesla cars.

2. Strategy and capabilities must be agile.

In a VUCA environment, strategies should not remain static because the VUCA environment has become the new normal. Holding onto a single long-term strategy without adapting to the evolving environment is difficult and often leads to failure. Capabilities built to execute past strategies may not be beneficial in the future and may eventually become a heavy cost burden for the organization. 

Consumer behavior in the past:

For example, in the banking industry, there was a time when banks everywhere were rapidly expanding their branches to accommodate growth. They were leasing or purchasing spaces to establish branches, hiring more branch employees, and providing training to enhance the knowledge and skills of branch staff, such as sales skills and knowledge of banking products.

Consumer behavior changes today:

However, as people became more accustomed to using the internet and with the growth of smartphones, consumers started shifting towards conducting transactions online rather than visiting branches, as it was more convenient. Consequently, fewer people visited physical branches. This shift led to a surplus of branch employees.

Impact of the VUCA environment:

Many banks had to close certain branches due to them becoming cost burdens on the banks. Additionally, the skills and capabilities of branch staff needed to be developed as traditional sales and product knowledge were no longer as effective. Differentiating and retaining customers within the bank became a matter of managing the relationships with customers that branch employees should possess. In the case of the banking business, the organization's capabilities had to be highly adaptable to respond to these changes, both in terms of personnel and other assets.

Examples of agile strategies and capabilities:

Today, many businesses are shifting towards "renting" resources rather than "buying." This approach provides greater flexibility to organizations, as seen in the growing trend of contracting services rather than hiring full-time employees. For instance, many organizations are now opting to purchase IT management systems as a service instead of owning and maintaining them. Retail businesses, like convenience stores or restaurants, are increasingly focusing on franchise operations rather than growing independently. Numerous startups exhibit high agility and flexibility, making them capable of adapting, changing, or developing their abilities and resources quickly and easily.