Like I mentioned in my previous blog on this subject, OODA presents some truly great techniques if you want to out-think and out-execute the competition. But to learn how to actually execute it, let’s look closely at the four components of the Loop: Observe, Orient, Decide and Act.
Observe – the first step
“If we don’t communicate with the outside world–to gain information for knowledge and understanding–we die out to become a non-discerning and uninteresting part of that world.” –John Boyd
Therefore, not surprisingly, the first step in the OODA Loop is to Observe. By observing and taking into account new information about our changing environment, our minds become an open system that is better positioned to overcome confusion-inducing mental arrest.
To effectively observe, you need to have good situational awareness. For instance, when you enter a building, notice where the exits are located. When you’re with people, be on the lookout for behavior that doesn’t seem “normal.” Keep them on your radar.
At the business level, observation will require you to keep track of not just your gross revenue, expenses, and profit, but also larger trends that concern the business. Reading trade journals or blogs related to your business should be part of your regular observations, as well as simply talking to other business owners in not only your own industry but also those that affect yours.
While doing this, we need to develop our judgment to see and discern patterns. Judgment is key. Without judgment, data means nothing.
How do we develop this judgment so that we can better understand our observations? By becoming deft practitioners of the next step in the OODA Loop: Orient.
This is the focal point of the OODA Loop. Orientation is how and when you interpret the observed information, analyze and convert it into knowledge by developing concepts. The way you interpret knowledge depends on culture, genetic heritage, ability to analyze and synthesize experience. Your success depends on your interpretation being better or more relevant than that of the competitors.
So how do you orient yourself in a rapidly changing environment? You constantly have to break old paradigms and put the resulting pieces back together to create a new one that better matches your current reality.
Boyd calls this process “destructive deduction.” When we do this, we analyze and pull apart our mental concepts into discrete parts. Once we have these constitutive elements, we can start the process of “creative induction” – using these old fragments to form new mental concepts that more closely align with what we have observed is really happening around us.
Orientation, in a nutshell, is the ability to make figurative mental scenarios on the fly and in the face of uncertainty. It is the key to successfully implementing the OODA Loop.
Decision is, quite simply, the process of weighing several options or alternatives available to you and picking the best one. For instance, a company having realized the need for a new product may choose to launch a new product or repackage an existing product. Decisions such as these are, at a basic level, guesses. They need to remain fluid or work-in-progress, ready to change as new information comes.
When we decide, we’re essentially moving forward with our best hypothesis — our best “educated guess” — about which mental model will work. To find out if our hypothesis is correct, we then have to test it, which takes us to our next step.
Once you’ve decided on a mental concept to implement, you must act. Action is how we find out if our mental models are correct. If they are, we win the battle; if they aren’t, then we start the OODA Loop again using our newly observed data.
Ideally, you’ll have multiple actions/tests/experiments going on at the same time so that you can quickly discover the best mental model for a particular situation. In business, you would want to try out different strategies at the same time to see which ones work. A/B testing is a good example of this. In A/B testing, marketers or online publications will come up with multiple headlines or copy (orientation!) and deploy them on different segments of their audience at the same time. They’ll then sit back and watch which headline, message, etc. performs the best. Whichever headline gets the most clicks will then become the default.
Practical applications of OODA
The OODA loop helps organizations exploit situations and respond to challenges better before customers lose interest, before competitors understand the organization’s business strategy and devise something better, and/or before the external environment changes for the worse.
One good example of the application of OODA loop in business competition is Honda trying to overcome the challenge posed by Yamaha. Honda countered Yamaha’s initiative to build a new grandiose factory and take the title of “World’s Largest Motorcycle Manufacturer” away from Honda not by building an even larger factory but by a smart maneuver of introducing 113 new models to Yamaha’s 37.
Honda neither waited to see what Yamaha was going to do, nor aped Yamaha’s strategy. Instead it processed a faster OODA cycle to seize the initiative of shaping the marketplace, with decisive effect. At the end of eighteen months, Yamaha publicly acknowledged defeat.
Similarly, Wal-Mart bases its success not on a reactionary approach of detecting market trends but by a fast OODA loop to create the trends. Wal-Mart succeeds by rapid conversion of ideas into reality such as reinventing the Five-and-Dime marketplace into rural markets to pull the rug out from under its competitors.
Are you inspired already? So go on and implement OODA in your team, organization, at home, and enjoy the difference!