Understanding the Decision Cycle
Has it ever struck you just how many military terms have become everyday terms in business-speak?
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.
It can be fun to read books like The Art of War, written in 6th Century China by Sun Tzu, and to think about how these can be applied to business strategy. So when former US Air Force Colonel John Boyd developed his model for decision-making in air combat, its potential applications in business soon became apparent.
Boyd developed his model after analyzing the success of the American F-86 fighter plane compared with that of the Soviet MIG-15. Although the MIG was faster and could turn better, the American plane won more battles because, according to Boyd, the pilot's field of vision was far superior.
This improved field of vision gave the pilot a clear competitive advantage, as it meant he could assess the situation better and faster than his opponent. As a result, he could out-maneuver the enemy pilot, who would be put off-balance, wouldn't know what to expect, and would start making mistakes.
Success in business often comes from being one step ahead of the competition and, at the same time, being prepared to react to what they do. With global, real-time communication, ongoing rapid improvements in information technology, and economic turbulence, we all need to keep updating and revising our strategies to keep pace with a changing environment.
See the similarities with Boyd's observations? Brought together in his model, they can hold a useful lesson for modern business.
Understanding the Tool
Called the OODA Loop, the model outlines a four-point decision loop that supports quick, effective and proactive decision-making. The four stages 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 by observing the results of your actions, seeing whether you've achieved the results you intended, reviewing and revising your initial decision, and moving to your next action.
Figure 1 below shows the OODA Loop sequence:
Observing and orienting correctly are key to a successful decision. If these steps are flawed, they'll lead you to a flawed decision, and a flawed subsequent action. So while speed is important, so too is improving your analytical skills and being able to see what's really happening.
The OODA Loop model is closely related to Plan Do Check Act . Both highlight the importance of analyzing a situation accurately, checking that your actions are having the intended results, and making changes as needed.
Let's look more closely at what each stage involves:
Stage 1. Observe
At this initial point in the loop, you should be on the look-out for new information, and need to be aware of unfolding circumstances. The more information you can take in here, the more accurate your perception will be. Like an F-86 pilot with a wide field of vision, you want to capture as much incoming data as possible. The kind of questions you need to be asking are:
- What's happening in the environment that directly affects me?
- What's happening that indirectly affects me?
- What's happening that may have residual affects later on?
- Were my predictions accurate?
- Are there any areas where prediction and reality differ significantly?
Stage 2. Orient
One of the main problems with decision-making comes at the Orient stage: we all view events in a way that's filtered through our own experiences and perceptions. Boyd identified five main influences:
- Cultural traditions.
- Genetic heritage.
- The ability to analyze and synthesize.
- Previous experience.
- New information coming in.
Orientation is essentially how you interpret a situation. This then leads directly to your decision.
The argument here is that by becoming more aware of your perceptions, and by speeding up your ability to orient to reality, you can move through the decision loop quickly and 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 have an advantage.
And it's 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 your best guesses, based on the observations you've made and the orientation you're using. As such, they should be considered to be fluid works-in-progress. As you keep on cycling through the OODA Loop, and new suggestions keep arriving, these can trigger changes to your decisions and subsequent actions – essentially, you're learning as you continue to cycle through the steps. The results of your learning are brought in during the Orient phase, which in turn influences the rest of the decision making process.
Stage 4. Act
The Act stage is where you implement your decision. You then cycle back to the Observe stage, as you judge the effects of your action. This is where actions influence the rest of the cycle, and it's important to keep learning from what you, and your opponents, are doing.
Using the Model
The OODA Loop isn't meant to be a static, linear "do this, then this, then this" type model: it needs to be a smoother, more continual process. With this approach, the faster you can move through each stage the better. In fact, if you were to sit down and map out each step, your decisions would likely slow down instead of speed up.
The goal of the model is to increase the speed with which you orient and reorient based on new information coming in. 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 you can take advantage of opportunities your competition isn't even aware of yet. Boyd calls this "operating within your opponent's OODA Loop". Here, your competitor is moving too slowly and simply 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 speed. In some situations, you genuinely need it. In others, a more cautious, deliberate approach is appropriate. This is likely to be affected by things like the length of product cycle times, the rate 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 assessing the current state of affairs, you often need to be sharp-sighted and decisive. The OODA Loop gives you a great way to maintain this vigilance, and be proactive in a rapidly changing world. By using the OODA Loop, you can be nimble in your decision-making, and make changes to your decisions and strategy quickly and decisively.
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