Understanding the Decision Cycle
Has it ever struck you just how many military terms are used in business?
In fact, war and business are often compared and contrasted. As well as "fighting off threats" or "engaging in a price war," we talk about "gathering intelligence," "making a pre-emptive strike," and even trying to "out-maneuver" the competition.
One of the most noteworthy military strategies to be applied in business is the OODA Loop model (also known as the "decision cycle"), which was developed by US Air Force Colonel John Boyd to help pilots make quick decisions when engaging in air combat.
Boyd developed his model after analyzing the success of the American F-86 fighter plane compared to that of the Soviet MIG-15. Although the MIG was faster and could turn better, the US plane won more battles because, according to Boyd, the pilot's field of vision was far superior to that of the Russian pilots.
This improved field of vision gave the pilot a clear competitive advantage, as it meant that he could assess the situation better and faster than his opponent. As a result, he could surprise his enemy, who would be put off-balance, and would start making mistakes.
Similarly, success in business relies on being one step ahead of the competition and, at the same time, being prepared to react to what they do. It is now more important than ever that we stay up to date and revise our strategies to keep pace with our ever-changing, turbulent environment.
Understanding the Tool
The OODA Loop model is a four-point decision loop that supports quick, effective and proactive decision-making. The four stages of the Loop are:
- Observe – collect current information from as many sources as practically possible.
- Orient – analyze this information, and use it to update your current reality.
- Decide – determine a course of action.
- Act – follow through on your decision.
You continue to cycle through the OODA Loop (see Figure 1, below) by observing the results of your actions, assessing whether you've achieved the results that you intended, reviewing and revising your initial decision, and moving to your next action.
Figure 1: The OODA Loop sequence
Observing and orienting correctly are key to making a successful decision. If these steps are flawed, they'll lead you to make a flawed decision, and, subsequently, a flawed action. So while speed is important, so is improving your analytical skills and being able to see what's really happening, too.
The OODA Loop model is closely related to Plan-Do-Check-Act. Both decision-making models highlight the importance of analyzing a situation accurately, checking that your actions are having the results you intend, and making changes as needed.
Let's look more closely at each stage of the OODA Loop:
Stage 1. Observe
At this initial point in the loop, you should be gathering new information, and will need to be aware of any important, unfolding events. The more information you can gather here, the more accurate your perception of the situation will be. Like a pilot with a wide field of vision, you want to capture as much incoming data as possible. So, when you're at this stage, ask yourself the following questions:
- What's happening in the environment that directly affects me?
- What's happening that indirectly affects me?
- What's happening that may have an impact later on?
- Were my predictions accurate?
- Are there any areas where my predictions and reality differ significantly?
Stage 2. Orient
Orientation is about how you interpret a situation. This is important because your intepretation will significantly impact your decision.
However, one of the main problems that we encounter in the decision-making process emerges at the Orient stage – that is, we all view events in a way that's filtered through our past experiences and our history. According to Boyd, five main factors can influence how we orient ourselves. These are:
- Cultural traditions.
- Genetic heritage.
- The ability to analyze and synthesize.
- Previous experience.
- New information coming in.
By becoming more aware of your perceptions, and by speeding up your ability to orient to reality, you can move through the decision loop more quickly and more effectively. The quicker you understand what's going on, the better. And, if you can make sense of the situation and the environment around you faster than your competition, you'll likely have the advantage.
It's also important to remember that you're constantly re-orienting. As new information comes in at the Observe stage, you need to process it quickly and revise your orientation accordingly.
Stage 3. Decide
Decisions are really only your best guesses. They are based on the observations that you've made and your orientation. As such, they can be considered fluid "works-in-progress."
As you keep cycling through the OODA Loop, and new observations keep arriving, your decisions and subsequent actions will change accordingly. Essentially, you're learning more and more about your situation, and the decisions that you make are a response to what you learn.
Stage 4. Act
The Act stage is where you implement your decision. Once you have done this, you can then cycle back to the Observe stage, to judge the effects of your action. Actions can influence the rest of the cycle, and it's important that you keep learning from what you, and your opponents, are doing to stay one step ahead of your competition.
Using the Model
The OODA Loop isn't meant to be a linear "do this, then this, then that" type model. Instead, it aims to make decision-making a smoother, more continual process. The faster you can move through each stage of the Loop the better. In fact, if you were to sit down and map out each step, your decisions will likely slow down instead of speed up.
The goal of the model is to increase the speed with which you orient and re-orient based on the new information that you receive. You want to be able to make a smooth and direct transition between what you observe, how you interpret it, and what you do about it.
When you make these transitions rapidly, you're in a position to be proactive, and take advantage of opportunities that your competition isn't aware of yet. Boyd calls this "operating within your opponent's OODA Loop." When you do this, your competitor is likely moving too slowly and only reacting to environmental changes. By contrast, you're working on the offensive, making strikes and forcing them to react to you.
Be careful with this emphasis on speedy decision making. In some situations, a fast decision is genuinely needed, but, in others, a more cautious, deliberate approach is appropriate.
The approach you take will likely be affected by things like the length of product cycle times, the pace of change in your industry, and the consequences of a poor decision.
Whether it's looking out for the next big opportunity, making a move before your competitors do, or reacting to the current state of affairs, you often need to be sharp-sighted and decisive.
This is where the OODA Loop decision-making model can help. There are four stages to the Loop. These are:
You continue to cycle through the OODA Loop as you receive new information or if you need to assess the consequences of your actions, until you reach your desired result.
The model is particularly helpful if you need to make quick, nimble decisions. Doing this will help you to stay one step ahead of your competitors and take advantage of opportunities that they might have missed.