How the OODA Loop applies to business
March 27, 2003
The war in Iraq is giving the world a firsthand look at modern warfare and its latest weapons. Embedded reporters and military experts give us blow-by-blow details and explain strategies, logistics, aircraft, weapons, and other tools of war. While war coverage and weapons have evolved since previous wars, the basic strategies remain the same, and these same strategies have found acceptance in business.
One strategy that has stood the test of time is the Observation, Orientation, Decision, and Action (OODA) Loop. In this process, rivals observe their positions, the environment, and their opponents; orient themselves to the situation; decide on a course of action; and act. The cycle begins again as each rival observes the changes brought about by the action, orients himself to the altered situation, decides on the appropriate course of action, and acts.
Because the OODA Loop is a basic strategy used by many combatants, the edge goes to the rival who consistently completes the cycle faster. By the time the slower rival reacts, the competition is on to a new course of action, rendering the slower rival's actions inappropriate to the shifting situation. The slower rival falls farther and farther behind and eventually self-destructs.
John R. Boyd, a U.S. Air Force colonel, jet fighter pilot, scholar, and military strategist, first documented the significance of the OODA Loop-sometimes referred to as the Boyd Cycle. Boyd wrote the first manual on jet aerial combat and was primarily responsible for designing the F-15 and F-16 jet fighters. He helped shape the U.S. military strategy in the Persian Gulf War.
As a young captain in the U.S. Air Force in the mid-'70s, Boyd was asked to study air-to-air combat during the Korean conflict. U.S. aviators were especially effective in Korea, and Boyd set out to find out why. He first considered that the U.S. simply had better planes, but soon found out that by most measures of quality, the U.S. F-86 was inferior to North Korea's MiG-15.
However, two characteristics of the F-86 were superior: The pilot had better visibility, and the F-86 could switch from one activity to another more quickly. U.S. pilots used these two factors to their advantage, forcing their opponents into a series of complicated maneuvers. With their clearer line of vision and their ability to switch activities faster, the American pilots were able to stay far ahead of their opponents in terms of strategy.
Boyd next examined ground combat and found similar patterns. The side with the slowest OODA was defeated, and often at relatively little cost to the winner.
In his article entitled, "The Boyd Cycle and Business Strategy," Dr. Fred Thompson, Grace and Elmer Goudy Professor of Public Management and Policy Analysis, Willamette University, Salem, Ore., made the point that "business competition is like war. It is a struggle for dominance and survival, and, like war, it takes place in time. . . success in business, as in any real-time competitive rivalry, depends upon the ability to perform a series of steps or a cycle faster than one's opponent."
Thompson cited case studies from the 1600s to the present of companies that used the OODA Loop strategy to best the competition. He also linked the strategy to competitive sports and applied a caveat to its effectiveness in both war and sports: "To say that the Boyd Cycle is important is not to say that it is everything. In some real-time competitions, material factors predominate. In sports, the ability to outhit, outrun, and outlast your opponent usually trumps observing and orienting skills. Advantages similar to strength, foot speed, and stamina are provided in wartime by a nations' personnel pool and its industrial, technological, and logistical base."
He added, "In many real-time competitions, frame of mind is extremely important. Winners have grit. In battle, grit means physical, moral, and intellectual courage. In sports, it means the will to win."
While Thompson viewed grit, along with various material considerations, as important to business, he concluded, "The ability to perform Boyd Cycles faster and more appropriately than your competitors is the crux of success in business competition." He defined success as "earning supranormal profits."
According to Thompson, businesses participate in two kinds of competitions: games against nature and games against rivals (games of strategy). He cited golf as an example of a game against nature and tennis as a game of strategy.
In games against nature, "material and morale factors predominate. In business, when there are many perfectly informed buyers, many perfectly informed sellers, a standard product, and competition simply is a matter of price, interfirm rivalry resolves to a game against nature." The key to success in this type of competition is improving operating processes as a way to reduce costs. In this relatively level playing field, outdistancing your competitors is very difficult. Improvements and cost reductions are necessary for survival.
In games of strategy, getting there first with the most is critical, according to Thompson. "In war, one of the most effective strategies combines offensive operations with defensive tactics. By this [Thompson means] taking a defensive position that threatens the base of your opponents, thereby forcing them to attack a prepared position or to withdraw ignominiously. If your opponents attack, they often expose themselves to destruction in the form of a well-timed counterattack. Getting to the market first with a superior product is the competitive analog of taking the high ground. It forces the competition either to withdraw or to attack the incumbent with similar or improved products. As in war, it is easier to defend a given position that to attack it successfully."
Careful, intelligent execution of the OODA Loop is important to business success, and volumes of material on how to do this exist. However, Thompson suggested that not enough has been said about the importance of OODA cycle time and how to speed it up.
According to Boyd, by reducing friction through simple, reliable administrative and managerial structures and by using flexible tools that can be adapted quickly in response to changing tactics, you can outpace your opponent more quickly.
Read the complete text of "The Boyd Cycle and Business Strategy" by Fred Thompson.
Also read: "Riding the Tiger: What You Really Do With OODA Loops" by Dr. Chester W. Richards.