The OODA Loop in Business Strategy
The OODA Loop was developed by the military as a method to adjust strategies quickly. It was adopted by business to solve a specific problem – how to remain competitive. Usually it looks at what is happening externally, and issues that are arising – for example a rival releasing a new product or service.
This can be called sub-problems of the overarching problem of competitiveness. The OODA Loop is designed for speedy decision making, for organisations to be as active and flexible as possible. As soon as an external problem is on the horizon, a solution can be found before market competitiveness is lost.
A real world example is how:
Windows Phone lost competitiveness because it failed to generate as many apps as Android or IPhone. This in turn (along with other factors) is leading to the demise of Windows Phone, because people want an app rich environment.
The OODA Loop is also about updating and revising business strategies to keep pace with an evolving environment. For example, the sub problem is ‘keeping marketing strategies relevant’. Information comes in that competitors have quickly adopted responsive websites, which work better on mobile technology. In response, the business needs to develop a new marketing strategy that will include how to keep its online content innovative and forward thinking in the future.
Understanding the Tool
This approach has a four-step decision loop that enables quick, effective and proactive decision-making around a problem. The four stages are:
- Observe – gather as much recent information from as wide a range of sources as realistically possible.
- Orient – analyse the information, to give you an update of where you are at, and where you need to be.
- Decide – develop the plan for action.
- Act – implement the changes.
Like other problem solving models, it is an interactive, iterative process. You repeat the cycle through the OODA Loop, observing the results, measuring results, reviewing and revising your initial decision, and progressing to the next action.
However, each stage never stops. Because the problem of maintaining competitiveness is so broad, it will continually evolve, and so solutions need to evolve.
Within the overall problem, will be a series of sub-problems
Observing and orienting are the key steps. If these steps are imperfect, they’ll lead you to an imperfect solution. The more the tool is used the more it improves analytical skills and builds the big picture. This can then lead to skills in forecasting what is coming up next, and being more innovative, becoming a market leader, rather than a market follower.
Clear comparisons can be seen with Plan Do Check Act (PDCA). The easiest way to differentiate is that PDCA was designed for internal problems,
OODA is about maintaining market competitiveness – external issues.
Additionally, it can be argued that PDCA focuses on planning and implementation of a predefined, specific problem, whereas OODA Loop is about discovering and addressing needs in a broad context.
Stage 1. Observe
Sub-problems emerge from ‘observing’ the external environment, in relation to the competitiveness problem. Initially, Observe will be used as a reactive process for gathering high-level information.
As skills develop it will include a low level stage, where external, potential innovations and ideas are spotted before they hit the market.
This could be new technology from start-ups, requests for innovations from customers on Social Media etc. – although monitoring the competition remains central to the process – so a business can react to new developments.
It is vital to acquire as much relevant market place information as possible. The more information that is taken in, the more accurate the understanding of the problem will be. Additionally, in this stage the results of previous solutions will be monitored. Questions to ask:
- What’s happening externally that directly affects the organization?
- What’s happening externally that indirectly affects the organization?
- What’s happening internally and externally that could have residual effects in the longer term?
- Were the previous predictions accurate?
- Where and why have previous predictions and reality differed?
Stage 2. Orient
Perceptions of events are filtered and viewed in different ways by different people. There are five main influences:
- Cultural traditions
- Genetic heritage
- The ability to analyse and synthesize
- Previous experience
- New information coming in
Orientation is about the people involved in solving the problem becoming aware of these influences both on themselves, their competitors and the market.
If the PS group or individual can shift their own perceptions, they can respond more quickly. One important point here is that the OODA Loop was developed for military decision-making. This means that you need to:
Understand your opponent’s perspective – using the five influences and the impact on competitiveness.
If you are looking at selling to a diverse market, a strategy needs to address how to access these different markets, with their differing needs. For example, the Japanese have a high rate of lactose intolerance – this is genetic heritage. If you were looking to compete with a new Japanese heart drug, you would need to be aware that lactose is rarely used as a filler in pills.
In turn, in a diverse market, this means the drug could be used by anyone in the market place who is lactose intolerant. If you use lactose in your pill, you would be excluding a potential market.
Stage 3. Decide
Decide seems straight forward, but is more complex than simply choosing an approach based on the information available alongside the perspectives generated. It is not the final solution, more of a suggestion. As more information comes in and is orientated, more suggestions will be generated, and decisions on a way forward made.
OODA is about being able to react quickly to an ever-changing environment. During ‘Decide’ stage predictions about the impact of the decision must be made. This can then be used in stage one – Observe.
Stage 4. Act
The Act stage is the implementation phase – acting on the decision. Results from this stage feed into the observation stage, and the prediction of impact is re-assessed.
Using the Model
Unlike other iterative problem solving models,
OODA is not a cyclical process; instead it is a series of on-going, overlapping spaces.
Observe and Orientate will continue alongside Decide and Act, and influence these.
Returning to the Japanese example, the sub-problem would not be specific to the Japanese heart medication. It would be broader – “How do we keep our heart drugs competitive”. This would be continually evolving – new issues, new information about competing firms, their competitiveness, markets, products and services would be frequently coming in.
For example, after the new Japanese heart drug, the next challenge could be a competitor improving their support services to medics, then a different competitor launching a new marketing campaign.
By continually observing and orientating strategies, products and services can adapt quickly and flexibly.
However, be careful of the emphasis on a quick pace of problem solving. Speed is relative to the scale of the solution needed. A change to social media marketing policy can be made quickly, and adapted more rapidly if the solution fails. A significant change to a product or service needs to be considered in more depth, as failure is likely to have a significant cost, both monetarily and in terms of competitiveness.
OODA is about addressing the problem of staying competitiveness. As this is such a big area, there will be sub-problems below it, to help analyse a range of issues and challenges. It allows an organization to react quickly to issues, and to be proactive in addressing them.
- The OODA Loop has been adopted by business to assist in speedy decision making so that as soon as an external problem is on the horizon, a solution can be found before market competitiveness is lost.
- This model is very simple, consisting of four stages: Observe, Orient, Decide, and Act.
- These actions constitute a loop that continue for the life of the organization in question.
- Stage 1 Observe: You should always be observing what is going on around you, looking for information that can help you to make smart decisions.
- Stage 2 Orient: You have to be able to set your biases aside in order to make a choice that is based solely on the evidence in front of you.
- Stage 3 Decide: The best decision makers are those who are confident in their choice today while remaining open to new ideas that may come along at any time.
- Stage 4 Act: The success or failure of a given decision will depend not only on the quality of the decision itself, but also on the commitment of the individuals responsible for bringing that decision to life.
- You will always bein all of the different phases of this loop at all times because you will have some decisions that are in the observe or orient stages, while others are residing in the decide and act stage.