What you really do with OODA loops

These are some selections and notes from a brilliant essay by Dr Chester W Richards about OODA loops and the general application of military know how to business. From “What you really do with OODA loops” :

The key to the military notion of time lies in how practitioners of the art of war view strategy. Great commanders down through the years have used time-based strategy to cloud their opponents’ understanding and destroy their morale so that the battle, if it must be fought at all, is relatively quick and painless. In the language of conflict, we say that they move their opponents where they want them to be. Leaders in business and industry can do the same thing and with similar results. This paper explores this notion, first by looking at what today’s most avant-garde business theorists claim for the concept of time, and then comparing that to what the most successful generals and strategists aim to achieve. Finally, we will the translate the military goals and objectives back into the commercial world and look for examples where it actually worked.

…Building one new business after another, faster than the competition, is the only way to stay ahead.

a real strategist doesn’t like words like “respond” and is dubious about “anticipate.” These are passive sorts of things…

Now it is true that fast reactions have their place – if your opponent catches you by surprise, for example. Competence in this tactic, such things as staying cool, using the other side’s momentum against them, and so on, form an essential part of any competitor’s tool kit. Problems arise when, as in the above paradigm, reaction becomes the goal of strategy. First, under such an arrangement, if we don’t see anything, we don’t do anything. So much for initiative.

If your mindset is to observe carefully and then respond, you will always incur a lag, and the focus of your efforts will be on finding ways to shrink it. But suppose there was a way to compete that didn’t generate a lag in the first place.

Sun Tzu also took aim at Maginot Line strategies: “Preparedness everywhere means lack everywhere.”

…”It is generally advisable to be the one to initiate the attack and thereby put the opponent in the defensive position.” (63) Also: “In the path to victory in Heiho (his school) taking the initiative at all costs is the most important thing.”

…What if opponents act first? Let’s not be arrogant – your opponents are thinking human beings and can also employ the basic strategic tools of surprise, deception, and ambiguity. Then, advised Musashi, you have to stifle their plans immediately. The focus, however, is never on defending, but on regaining and using the initiative so that you can lead your opponents where you want them to be.

Sun Tzu had proclaimed that the ability to think and act rapidly is the essence of war…Sun Tzu and his commentators also talked about sowing confusion by not giving opponents time to plan…In particular, one could manipulate time and rhythm to unhinge an opponent’s mental and moral composure: You use “an advantageous rhythm to arrest the powerful determination of the adversary’s motivation.”

This was, he insisted, an essential step before engaging in physical combat. It is a stunningly powerful observation, for demotivated opponents are defeated opponents, no matter what weapons remain in their hands. Warriors using Musashi’s techniques could create gaps, which the Japanese call “suki,” in their opponent’s attention, during which one could attack a fully armed samurai with a fencepost (as Musashi once did) and win. (Nihon 31)

In modern times, a corollary notion has been synthesized by the American strategist, the late Air Force Col. John R. Boyd. Like Musashi, Boyd got his initial ideas from one-on-one combat, in his case, jets over Korea. After pondering this experience, and studying the results of engagements from Sun Tzu to the present, Boyd derived the OODA loop, for Observe, Orient, Decide and Act. It has been described for business by Bower and Hout, Stalk and Hout, and Peters. Note 6 The ability to execute rapid OODA loops is called “agility,” and it now generally recognized that the more agile organization will build-up increasingly decisive advantages over its opponents.

It is worth repeating that this is not a theoretical construct, but a proven strategy for winning in armed conflict. It provides a framework much more powerful than merely reacting to opponents, but one might reasonably ask whether it applies to anybody but a soldier? More to the point, businesses don’t directly combat each other. Instead, they compete for the attention, and money, of customers. Can businesses employ OODA loops and the other tools of time-based competition to achieve anything like the effects of Sun Tzu, Musashi, and Boyd, and if so, how is this going to help them survive and grow?

Warfighters, as we have seen, use mind-and-morale destroying techniques to create and exploit opportunities for collapsing the enemy. In business, things are fundamentally different. War has opponents; business does have its analog of opponents – competitors – but they are of secondary importance next to a new god-like entity, the customer.

…What about the mind-destroying effects described by Sun Tzu, Musashi and Boyd? There is little in the business press on this question, probably because writers have been focusing on the remarkable, if passive, attributes noted in Section II. But anecdotes and circumstantial evidence abound to support what military strategists and practitioners have found. Anybody who has ever been on a losing team, or worked for a failing organization, knows Boyd is right. Here is a classic description from one of the founders of the modern quality movement, Joseph Juran:

Lacking victories over their competitors, and unable to defend themselves from their bosses, they lash out at each other, making unity of purpose even harder to achieve. (74)

Or this, from the former chairman of General Electric, Jack Welch:

This internal focus has wasted our time, wasted our energy, frustrated us, made us so mad some nights over some bureaucratic jackass boss that we’d punch a hole in the wall. (Sherman 46)

An organization falling victim to the Boyd Treatment will enter a tightening spiral of internal conflict. As it falls further behind in the marketplace, and its successful moves (as determined, of course, by the customer) become rarer and rarer, all the wonderful chaos and bickering beloved of military strategists follows. Interviews with members of such organizations will reveal witch hunts, strict adherence to directives and procedures (with a total lack of risk-taking), and so on. Inevitably, people split into camps and start apportioning blame, and the company turns ever more deeply inward (Welch’s “internal focus”, Boyd calls it “folding your adversary in on himself”). Usually, Stalk and Hout observe, traditional managers never understand what hit them. When attacked by a time-based competitor, cost-based managers rarely figure out why, despite what their spreadsheets are telling them, they are suddenly losing market share and why more robust cost-cutting isn’t restoring profitability.(264)

The key point is that for business, these effects are icing on the cake. They do not, in and of themselves, produce products that customers will buy. The primary active effect of time-based strategy in business is the symbiotic shaping of the marketplace that agile companies participate in.

“The company that can identify what technologies are needed, introduce them quickly, and commercialize them will succeed.” – Hiroshi Okuda, President, Toyota Motor Corporation (Business Week, June 15, 1998)

…Ask any CEO, “Is your business philosophy reactive?” It’s like asking if his marketing plan is to wait by the phone. Even the French of 1940, that wonderful source of what-to-avoid examples, liked to brag about how their élan would sweep away the Teutonic invaders. Of course, as they were soon to learn, talking a good fight was not the same thing as actually doing it. And so it is with the world of business. Policies are one thing, but companies that have the power to shape the market are structurally, as well as philosophically, different.

Structure is so intimately bound up with strategy that it is difficult to imagine how one could make any lasting change in an organization’s behavior without first making equally profound changes in its systems.

meeting the needs of the customer should provide focus and direction to all activities of the company. Note 8 It is in this key area where we find perhaps the most visible differences between companies that claim to be proactive, and those that actually are. Reactive companies want to detect market opportunities. They engage in traditional market research, things like questionnaires, focus groups, and the like. Basic to their attitude is the idea that the customer is “out there” and we are “in here.” To bridge this gap, they will put a lot of effort into going out to Customer Land and “finding out what they want.”

One problem with this approach, of course, is that the customer often doesn’t know…the big question now is “What next?”  I don’t know – offer me something.

…whereas we all claim to put the customer first, the very structure of most companies limits how intimately involved with the customer they can become. One obvious example is a Marketing Department that jealously controls customer contact. Or a policy of basing sales and project people in a home office rather than with their customers. Or an accounting system that sees customer service as a cost, that is, an attractive candidate for cutbacks when times get tough.

…Most of today’s management systems and practices preclude the intensity of customer involvement that companies will need in order to survive.

companies with rapid decision cycles are often good innovators. Partly this is because most innovations are actually incremental improvements on an original idea, what Hamel and Prahalad call “expeditionary marketing.” (“Imagination” 86-92) The more rapidly that a company can sense how the customer reacted to its last offering and make changes accordingly, the better job of innovation it will do.

…Companies take the initiative in the marketplace by offering a stream of new products and services. Where do new products and services come from? The only answer possible, discounting elves and gamma rays, is through the initiative of the people who work for and with the organization. A market creator uses the almost symbiotic relationship all of its people have with its customers to generate ideas for new features or capabilities or whatever. Stalk and Hout were dead on, when in the middle of describing how agile companies become entwined with their customers, they observed that “Sometimes it’s difficult to know who’s leading whom.”…Incidentally, this is the same principle underlying maneuver warfare, where an army puts out tens or hundreds of small “feelers,” then uses its fast OODA loop speed to identify and reinforce those that begin to penetrate.

…”lean production,” which is based on these same principles (and can therefore be considered as an implementation of the principles of maneuver warfare), has displaced mass production, which relies on synchronization and control, in every marketplace where the two compete.

Toyota, whose system is generally considered the foundation of lean production, expects initiative at all levels and in all processes…”The paperwork is minimal,” reads the official Toyota description of the system, “the efficiency is maximal.  And the employees themselves are completely in charge.”

…Far too many companies demonstrate the fatal flaw noted by Sybase co-founder Robert Epstein: An established company’s true major goal is to defend what it did last year….These are business versions of the Maginot Line.

The Maginot Line mentality is deadly and yet it is so appealing that it may not be recognized until it has sapped the company’s competitive strengths.

But while it is certainly true that at any given point in time a company has to do the best with what it has, this is the definition of “tactics,” not strategy.  Basing a company’s future on any particular resource is a business version of a stance, and so a false and fatal strategy.

Perhaps the most obvious objection to a core competencies strategy is that the market might not happen to be buying what you’re good at.

…It is worth keeping in mind that Wal-Mart is a market shaper and creator, not merely a market responder, and thus agility – rather than the specific products of it – is its “core competence.”

a belief that you have any type of unique capability is the siren song of complacency. In fact, a belief that you have some kind of difficult-to-emulate ability to know the customer is simply arrogance, which is even a faster-acting poison than mere complacency, and this tends to be true of all high-level business (as opposed to technical or physical) functions. You must assume that your competitors are just as good at the business basics as you are, and you would be better served to assume they are already ahead.

Former Intel CEO Andy Grove was right: Only the paranoid do survive. It is so tempting to believe that “we have these facilities” or “we have these great capabilities”, and therefore we are safe.  You are never safe, and the first hint of a belief that you are safe marks the start of your decline. Only a management that can constantly challenge comforting beliefs, even if they are unstated, will lead its company to survive and grow year after year.  Remember when Enron used to proclaim itself “The World’s Best Company”?

According to the ancient warriors of the Sun Tzu school, the real situation is even worse than complacency-invites-decline.  That, at least, is well within our own tradition.  Musashi proclaimed that any manifestation of the stance mentality, even if assumed with vigilance and paranoia, will always generate a defensive spirit and so will open vulnerabilities. One might do better to emulate the Zen warriors who knew that the only resource that will ensure victory is resourcefulness itself. (Cleary, Japanese Art of War, 77)

So the bottom line is yes, you can prosper by restructuring your operations to become a fast reactor to market trends. You may have to prune things some, which it’s probably time for anyway, but you won’t need to do great violence to your underlying systems and culture. And everything will probably work out OK, unless, of course, you meet up with a competitor who is determined to shape the market and who is structurally able to do so. Then 2,500 years of experience say that you are going to have a problem. And word is getting out. “Boldness,” writes Fortune‘s Rahul Jacob, “may very well be the preeminent competitive advantage in this slow growth decade.” (74) After all, whom would you bet on, a fast sheep or a fast tiger?

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