OODA is the acronym for Observe Orient Decide Act. The OODA loop bases itself on the premise that parties to a conflict or competitors are systems that operate through a rational decision-making process that follows a cycle of Observation, Orientation or situational awareness, Decision Making, and Action.
(O)=Observe: The system scans the environment and gathers information regarding changes in the environment that affects the system directly or indirectly, and how the environment reacts to the strength, weakness, maneuvers, and intentions of the system. Such observations aim to spot mismatches before customers and competitors do.
(O)=Orient: Orientation is interpretation of the observed information, or converting information into knowledge by developing concepts through analysis of information. The way the system interprets knowledge depends on culture, genetic heritage, ability to analyze and synthesize, experience, and latest changes to information, and success depends on such interpretation being better or more relevant than that of the competitors.
(D)=Decide: Decide is weighing the several options or alternatives available from the concepts knowledge body generated during the orientation phase, 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, based on what they perceive the customer would do with the same knowledge. Decisions are at basic level guesses, and as such, need to remain fluid or work-in-progress, ready to change as new information comes.
(A)=Act: Act is carrying out or implementing the selected decision. This completes the OODA loop and the feedback of the implementation is the basis for the next round of observation.
The OODA loop bears resemblance to the Plan Do Check Act cycle. Both highlight the importance of analyzing situations accurately, checking for actions to have intended results, and making the required changes.
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Colonel John Boyd (1927-1997) first developed the OODA loop theory based on his experience as a fighter pilot to explain victory in air-to-air combat. He later extended this concept into a grand strategy to defeat the enemy by psychological paralysis. Later, John Boyd's OODA loop found its way from the military battlefield to corporate boardrooms as a management strategy.
Organizations use the OODA loop to orient their strategy to disorient or disrupt their competitors. The "observe" phase of the OODA loop probes and tests competitors to reveal their strengths, weaknesses, maneuvers, and intentions. Instead of the conventional approach of using raw power to overwhelm competition, or reacting to competitors actions, John Boyle's OODA loop recommends implementing the OODA cycle at a faster pace than competitors do. Such a blitz, while making explicit the competitors intentions to the organization, obscures the organization’s intentions from the competitors, and thereby makes the organization unpredictable and ambiguous to competition, and inhibits the competition from adapting or reacting to the onslaught.
To illustrate, when the competitors schedule a planning review to react to changes in the external environment or a new competitor initiative, the organization can work to execute an initiative at lightning speed and give wide publicity, thereby making their planning review redundant.
Continue o Page 2 for the application of the OODA loop theory with examples.
The OODA loop helps organizations exploit situations and respond to challenges better, and change existing states or conditions 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.
Organizations apply the OODA loop theory by undertaking their OODA cycle in a blitz and by working toward lengthening the competitor's loop.
Sun Tzu’s celebrated work “The Art of War,” dating to 400 B.C has guidelines that sheds light on how to lengthen the competitor's OODA loop. Countering competition requires being extremely mysterious to the point of soundlessness to the point of formlessness. The strategy is not to wait for the competitor to make a mistake and hope to capitalize on such mistakes, but rather to adopt deception, make fast transient maneuvers, and show unexpected reactions to competitor initiatives. Such postures sow uncertainty, mistrust, and ambiguity in the competitor's mind, enticing them to make wrong perception of threats, and thereby, make wrong decisions. Attacking the competitors thought process through such means also shatters their morale values, generates panic, and induces decision-making paralysis, leading to their collapse.
The exact means adopted depends on the perception of threats.
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One good example of the application of OODA loop in business competition is shown by Honda trying to overcome the challenge poised 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. It rather processed a faster OODA cycle to seize the initiative of shaping the marketplace, with decisive effect. At the end of eighteen month, 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 such trends in the first place. Wal-Mart succeeded in 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.