September 17, 2008

The OODA Loop

Filed under: Strategy — Nicola Rowe @ 8:40 pm
Tags: ,

It sounds like a hip Japanese accessory, and in truth it is a way to accessorise your mind. OODA, or the OODA Loop, is a concept developed by USAF Colonel John Boyd to describe a set of states fighter pilots cycle through during combat. OODA stands for Observe, Orient, Decide and Act: the pilot must observe the situation around him (and, back when the theory was devised, it was invariably him, not her), orient to it, decide what to do and act on that decision. 

So far, so good: a nitty-gritty description of what most of us do unconsciously all day. So why is it worthwhile breaking an action down into its OODA components, and why should we schlep yet another military construct into the C-suite?

A company can gain competitive advantage through OODA in three ways: by speed of execution, by excellence in execution and by interfering with competitors’ own OODA cycles.

First, sheer speed of execution will create competitive advantage, as, for example, this decade’s literature on innovation to cash makes clear. Secondly, excellence in execution – perceiving the competitive landscape accurately, assimmilating and processing that information and  implementing decisions well – will serve the company: this is the stuff of the well-run firm. But it is the third form of advantage, advantage by interference with a competitor’s OODA loop, that offers the strategist most room to manoeuvre.

No company operates in isolation. As a firm goes through its OODA loops, its competitors are executing theirs. It is difficult to influence another firm’s execution directly, but there are two other ways to interfere with competitors’ OODA loops: by influencing speed of execution and by shaping the perceptions which govern a competitor’s own OODA process. 

First, a company can try to slow down others’ OODA cycling. Taking high (but calculated) risks will require competitors to hem and haw before they decide what to do, for example, and engaging in markets with high barriers to entry will slow the speed at which can competitor act. 

Secondly, a company can interfere with a competitor’s perception of its options at any of the OODA nodes. Most firms focus on influencing competitor action, which is the final OODA step. But the first three phases, which allow a much more differentiated approach to the manipulation of competitor behaviour, bear closer examination. 

Considering the first criterion, observation, we might think of Apple’s legendary secrecy, which makes it impossible for outsiders to observe anything at all. Or a company might dissimulate, luring its competitors into believing action – or a lack of action – is imminent. We need only look to any company’s internal decision-making for examples of interference with the orientation phase: it’s common for executives to snow their board with information, preventing directors from developing a reasoned stance on active issues and holding them hostage to the opinions executives provide. A company can lever the third OODA node by forcing its competitors to take decisions – bellwether pricing in commoditised industries is a cardinal example – and to re-visit those decisions, thus absorbing time and resources.


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