Business Strategy - Explode Performance With The OODA Loop

The basic OODA loop is broken down into four stages: Observe, Orient, Decide, and Act.

The Observe stage is all about taking in information, like sight, sound, touch, etc.

The Orient stage is where information is processed, and we make sense out of what is happening in the world around us.

The Decide stage is where we figure out all of the possible moves and counter-moves of what might happen going forward, and we determine which path is the one we are going to take.

The Act stage is where the decision gets carried out. Here is where we interact directly with the world around us.

John Boyd is one of the foremost strategists of the 20th century. His development of the OODA loop model has been critical in many domains in the modern world including warfare, sports, and business.

John Boyd was an Air Force pilot who became a career military strategist that worked at the Pentagon. He was well known for many larger than life stories. One example is that they use to call him "40 second Boyd", because he had an ongoing bet with other top pilots that he could out maneuver them in a fighter dog fight in under 40 seconds, even though they could start behind him with all of the advantage.

It is obvious that Boyd had a keen insight into fighter tactics, and he created many presentations and other works that became the new standard in aerial combat.

Boyd was able to boil down the same elements in dog fighting and was able to apply them to warfare. Years later, as his theories got more exposure, people started applying the same theory to sports, and then business with amazing results.

Let's look at several examples to help strengthen our understanding of the OODA loop.

One example that is obvious is when fighter pilots engage in a dog fight. They have to take in information through their senses, as well as information from their aircraft. Then they have to make sense of the information and figure out what is going on at that point in time. Next, they must plot out the possible moves and counter-moves of what could happen next, and decide what to do. Finally, they must take action on that decision. This process happens over and over again until one pilot outmaneuvers the other pilot, and then its game over.

We could talk about endless examples like a Chess game, street mugging, or SWAT team assault. The premise of the examples comes back to the OODA loop theory.

A natural extension of the OODA loop theory is business. The same principles apply when two companies compete with each other in the same market. Which company will win? The one with the best understanding of what is going on around them and therefore making the best decisions. It's the one that understands the OODA loop the most and is well in tune with it.

John Boyd always drew and explained the OODA loop as a much more complex process.

Now that we have covered the basics of the OODA loop, let's get into a more in depth understanding.

The OODA loop doesn't necessarily always flow smoothly through the 4 stages. Typically, a stage can get interrupted by a competitor, which causes the loser in that loop to start back over at the beginning. Or, new information could interrupt a naturally flowing cycle, which causes the cycle to reset.

Now that we have a good grasp of the basic theory, let's go in for a deep dive to learn more.

The Observe stage is where information is taken in through the senses as individuals, or by means of information in businesses.

This is an important stage of the OODA loop because we are limited in business by the types of information we have access to. We should question what types of technology are we using or that is available that could give us better quality information and at better speeds. Are we watching the right types of information that become relevant at the next stage. Are we capturing information and sharing it freely in our teams, so that the people that need the information have access to it freely without much labor and time involved?

The Orient stage is where we take the information gathered and figure out what is going on in the world around us.

Here is where we must make sense of the world around us in business by looking at the information and processing it to find meaning. Do we have the right expertise and experience levels in the positions that are responsible for this particular stage? Is there technology that we could get that might be better equiped to analyze the information for us faster and at better accuracy?

The Decide stage is where we figure out all of the possible moves and counter-moves for the situation and choose which path is most favorable to us.

Here is where we decide what to do next. In the business arena, teams usually partition out decision authority to different layers of management, which we typically call bosses. How much time do we lose by blindly allowing bosses to micromanage even the smallest of decisions? Does this drastically slow down our ability to continually adapt to the market? Is there training or technology that we can get that will help enable front line workers to make valuable informed decisions on the fly? Can we track these decisions over time and implement ways to improve our decision making capability in the organization? Are we even tracking where decision authority exists in our management structure?

Great questions, and great things to explore in our business so that we take our OODA loop game to the next level.

The Act stage is where we carry out the decision in the real world.

This stage is where the rubber meets the road. We interact physically with the world around us here, but how well do we do it? Do the people that are taking action here have all of the tools and technology that they need to do a good job? Have we cut corners in cost but greatly handicapped some capabilities here? What kind of advantages could we get by really focusing on this stage to figure out how to get better at carrying out actions? Is there special training or experiences that we can use to our advantage?

We use structure in our businesses to partition the workforce into different functions based on work and decision authority.

Over time, original structures no longer fit the current market situation, but how often do we go back and prune the structure? Most companies never do, and simply keep adding positions and side structures over time to deal with new problems or opportunities. We call this the Frankenstein effect over time, because the structure starts to resemble this character after a while. This is a good way to kill the business.

Your company is most likely doing this very thing, but then again so are your competitors. What sort of gains could your company see if it were to really analyze recent times and streamline your company structure to re-adapt? Why not make your company lean and mean again?

Here we look at some different structure examples seen in business.

How complicated is your company structure? Where does the decision authority live, and at what management level? How many people have to pass on information up and down the chain to make a single decision? How long does this take? These are the types of questions you must ask to get to the heart of your command chain.

Now that we are familiar with the theory, let's transition into some exercises.

We have some great course documents that will help you analyze your situation and help define a path forward for improvement.

Business Component Analysis - this will help you discover and diagnose the key components of each of the 4 OODA loop stages, and help identify a path forward on how to improve them

Business Competitor Analysis - this will help you compare your company's key components to your competitors, and then understand what you should do to win

Business Structure Analysis - this will help you diagnose your company's decision making ability, and help you determine how best to reorder your structure for max effect

Business Component Analysis Worksheet - this worksheet allows you to self diagnose the strengths and weaknesses of your business, and identify actions that will lead to a superior OODA loop execution.

Here we work through a business component analysis exercise example by focusing on a well known business example, McDonald's food order fulfillment process.

Let's see how McDonald's does according to the OODA loop theory so that we get a good grasp of how to use the worksheet for our own business.

We're going to go through each of the components of the 4 OODA loop stages one by one and score each component. At the end, we'll be able to identify our strongest ones and our weakest ones, so that we are aware of our current business performance.

Here we continue to work through a business component analysis exercise example by focusing on a well known business example, McDonald's food order fulfillment process.

Now let's answer some questions about how we rated each of the components of the 4 stages of the OODA loop for better clarity about the current performance.

Business Competitor Analysis Worksheet - this worksheet shows a side by side comparison of your business and one of its competitors. The exercise will allow you to compare your business's strengths and weaknesses to your competitors, so that you have a clear strategy on what OODA components need to change.

Here we work through a business competitor analysis exercise example by continuing to focus on a well known business example, McDonald's food order fulfillment process.

How does McDonald's do compared to their competitors. Let's take a look. Then we can apply the same thinking to our business and competitors.