Certain To Win: Or, Any Position Other Than First Is A Tie For Last

Certain to Win
Boyds OODA Loop as a business weapon
Or, any position other than first is a tie for last.
Chet Richards J. Addams & Partners, Inc. March 2008

Chet Richards 2005-2006 crichards@jaddams.com (+1) 404.231.1132
Starting Point: Wars dont always turn out as expected
Russia Soviet Union United States
Chechnya Afghanistan Vietnam
Various Arab States
Israel
Chet Richards 2005-6 crichards@jaddams.com 404.231.1132
Business doesnt either

General Motors Market share fell from 52% to around 25% Dropped to #52 on Fortune 500 Lost billions in 2001, 2002, 2003, & 2004 In Chapter 11 Gone
Sears American Airlines Delta, Northwest, United Airlines, US Airways Digital Equipment, Compaq, Montgomery Ward, Eastern Airlines, TWA, Pan Am, McDonnell-Douglas
But its not inevitable
Automobiles Retailing Airlines Computers
Toyota, Nissan Wal-Mart, Target Southwest, JetBlue, Singapore, Emirates, Ryanair, AirTran IBM, Apple
In other words, there are many times when the side wed pick to win, based on:
size/financial resources
technology
market share
loses.
5
Why?
6
The militarys answer is something called maneuver warfare

And that is the business of decision cycles, or inside the decision loop, as people say if, in fact, you can deceive him with respect to what you are going to do, to cause him further confusion and make him keep his force in place one day too long, then, in fact, you find yourself all the way to Baghdad.
Gen Tommy Franks, Commander, USCENTCOM
in Peter Boyer, The New War Machine, The New Yorker, June 30, 2003
The primary advantage we want to achieve in all forms of maneuver is time.
Using time as a weapon: The H-Y War

1981 - 1983
Honda Motorcycles introduced or replaced 113 models, effectively turning over its entire product line twice. Yamaha, which also started with about 60 models, was only able to manage 37 changes in product line over the same 18 months. So, for one thing, Honda was able to incorporate (and test in the marketplace) a much wider variety of styling & technology.
H-Y War: The Results

But more fundamental: Honda succeeded in making motorcycle design a matter of fashion, where newness and freshness are important attributes to customers. Next to a Honda, Yamahas bikes looked old, unimaginative, unattractive. Yamaha was left with 12 months of unsold (and unsellable) inventory.
Stalk & Hout, Competing Against Time, 59
Comment: a classic example of shaping the marketplace.

10
A time-compressed company does the same thing as a pilot in an OODA loop Its the competitor who acts on information faster who is in the best position to win.
George Stalk, Jr. & Tom Hout, Competing Against Time, 180-181.
11
Business is a dogfight. Your job as a leader: Outmaneuver the competition, respond decisively to fast-changing conditions, and defeat your rivals. That's why the OODA loop, the brainchild of "40 Second" Boyd, an unconventional fighter pilot, is one of today's most important ideas in battle or in business.
Keith Hammonds, The Strategy of the Fighter Pilot, Fast Company, June 2002.
12
This is the OODA loop
Orient
Observe
Decide
Act
13
This is not the OODA loop
Orient
Observe
Decide
Act
14
An OODA loop with power
Observe
Unfolding Circumstances Implicit Guidance & Control Genetic Heritage
Orient
Cultural Traditions
Decide
Implicit Guidance & Control
Act
Observations
Feed Forward
Analyses & Synthesis
Feed Forward
Decision (Hypothesis)
Feed Forward
Action (Test)
Unfolding Interaction With Environment
New Information
Outside Information Unfolding Interaction With Environment

Feedback
Previous Experience
Feedback
J. R. Boyd, the Essence of Winning and Losing, 1995.
15
Observations on orientation for business

Orientation
Implicit Guidance & Control Implicit Guidance & Control
Cultural Traditions
Genetic Heritage
Observations
Feed Forward New Information
Analyses/ Synthesis
Feed Forward
Decision
Action
Previous Experiences
Observation is the only feed into Orientation

16
Orientation locked tight

The company (A&P), under pressure from Kroger, experimented with a new concept, The Golden Key. It sold no A&P branded products, it gave the store manager more freedom, it experimented with innovative new departments Customers really liked it.
What did A&P executives do with The Golden Key? They didnt like the answers it gave, so they closed it.
Jim Collins, Good to Great, 68.
17
Battle of Orientations: 1
James E. Press, president of Toyota Motor Sales, said any top American company must first have a lineup that meets its customers' needs. It also must produce vehicles in the United States that lead their category in quality, resale value, comfort and design, he said. A leading American player has to have a strong brand image, a dealer network that offers good service and most important, put buyers first, Mr. Press said. Asked if Toyota meets those criteria, he said, "Not yet. We can improve on everything."
18
Battle of Orientations: 2
Mark Fields, president of Ford's operations for the Americas, said: "Americans want to buy American cars.
Micheline Maynard, Toyota Shows Big Three How It's Done, New York Times, January 13, 2006
19
Improving orientation
Toyota calls this hansei
Set aside specific times (e.g., at each staff meeting) to review feedback on possible mismatches (Reflection must be institutionalized as a business process. Michael Hammer, co-author of Reengineering the Corporation, and Steven A. Stanton, Fortune OnLine, Nov 24, 1997) Abolish the Executive Dining Room. Abolish Management Clubs.
These are tubs for drinking your own bathwater

20
Improving orientation (II)

Post on internal web site (& invite discussion): Assessment of the current situation: customers, competitors, economy, government, our situation, etc. Post-mortems (proposals, projects, etc.) Specific competitor observations (esp. things they do better) Also include a competitive intelligence, what competitors do better, section in staff meetings.
21
What about action?

The idea is that the vast majority of the time, actions should flow smoothly from orientation via the implicit guidance and control link.
Thus, excellence in technique is vitally important study, train, rehearse, practice, critique constantly, from the factory floor to the executive suite.
I dont make decisions, the fireground commander announced to his startled listeners. I dont remember when Ive ever made a decision. Gary Klein, Sources of Power
22
Observation
(Orientation)
Unfolding Environment: Customers Competitors Economy Government Employees Financials Other Indicators Etc.
Observations
Feed Forward
(Orientation) What youre looking for are mismatches between a) what your orientation is telling you the world ought to be and b) what the world really is.
Feedback From Decision
Feedback From Action
23
In one of the first games he attended, [New Sacramento Kings Owner] Gavin [Maloof] missed an entire quarter waiting in a beer line. Knowing his father would have gone nuclear, Gavin arranged to have 20 minibars installed throughout the arena.
Nobody waits for a beer now.
Hugo Lindgren, The Flying Maloof Brothers, New York Times, February 15, 2004
24
Decision
Feed Back
(Orientation)
Feed Forward
Feed Forward
(Action)
Note: Decision is fed only from Orientation
(Observation)
Note: Decisions, in this sense, are needed when action does not flow from orientation. These types of decisions always slow down the OODA loop They can be considered as part of the learning process.
25
What OODA loop speed really means

Quickly understand whats going on Observe
Unfolding Circumstances Implicit Guidance & Control
Know what to do Orient Decide

And be able to do it Act
Observations
Feed Forward
Feed Forward
Feed Forward
Action (Test)
Unfolding Interaction With Environment
Outside Information Unfolding Interaction With Environment

Feedback Feedback
While learning from the experience

26
Key Points:
When youre doing OODA loops right, accuracy and speed improve together; they dont trade off. A primary function of management is to build an organization that gets better and better at these things.
27
According to Boyd, a fighter pilot didnt win by faster reflexes; he won because his reflexes were connected to a brain that thought faster than the opponent.
Bing West and MajGen Ray Smith, USMC, Ret. The March Up, p. 11
28
Question
How can your corporate brain think faster?

Answer:
Ultimately, a culture or climate that encourages people to use their initiatives to further the goals of the organization.
Under such a culture, people will solve the technical & operational problems.
29
The Principles of the Blitzkrieg Fingerspitzengefhl - Zen-like quality of intuitive understanding. Ability to sense when the time is ripe for action. Built through years of progressively more challenging experience. Einheit - Has the connotation of "mutual trust" and implies a common outlook towards business problems. Built through common experience. Fingerspitzengefhl at the organizational level.
30
Blitzkrieg, continued
Schwerpunkt - Any concept that gives focus and direction to our efforts. In ambiguous situations, answers the question, "What do I do next? Requires leadership.
Auftragstaktik Convey to team members what needs to be accomplished, get their agreement to accomplish it, then hold them strictly accountable for doing it - but don't prescribe how. Requires very high levels of mutual trust.
31
Fingerspitzengefhl: excellence at the level of tactics

Every day the sales team met at 7am for two hours of training that involved role playing, sales strategies, and videotaping of mock sales calls. Don Sumner, 38, an account executive, says Winkler has handed him a three-page performance analysis more than once, after overhearing one of Sumner's phone pitches. "Dealing with someone who can be such an S.O.B. has made me more thick-skinned," says Sumner.
Since his arrival the number of clients at SecureWorks has grown from 100 to 800 New orders at the now profitable company are growing at 200% to 300% a year
~ Fortune Small Business, The Best Bosses, October 2004.
32
Fingerspitzengefhl as strategy
There is a surface version of genchi genbutsu (go and see for yourself) and a much deeper version that takes many years for employees to master. What the Toyota Way requires is that employees and managers must deeply understand the process of flow, standardized work, etc.
Jeffrey K. Liker, The Toyota Way, p. 224 emphasis added
33
The Operating System is GE's learning culture in action. It is a year-round series of intense learning sessions where Business CEOs, role models and initiative champions from GE as well as outside companies, meet and share intellectual capital.
http://www.ge.com/en/company/companyinfo/at_a_glance/operating_ system.htm - 2/25/2003

34
Einheit hits the beach
It is not more command and control that we are after. Instead, we seek to decrease the amount of command and control that we need.
We do this by replacing coercive command and control methods with spontaneous, self-disciplined cooperation based on low-level initiative, a commonly understood commanders intent, mutual trust, and implicit understanding and communications.
MCDP 6, Command and Control, p. 6
35
Flowdown: Schwerpunkt for manufacturing
The Toyota Production System, quite simply, is about shortening the time it takes to convert customer orders into vehicle deliveries.
This tells everybody in Toyota manufacturing: When in doubt, take the action that has the biggest impact on order-to-delivery time.
36
Augtragstaktikmissions and contracts instead of tasks
The concept of mission can be thought of as a contract, hence an agreement, between superior and subordinate. The subordinate agrees to make his or her actions serve superior's intent in terms of what is to be accomplished. The superior agrees to give the subordinate wide freedom to exercise his or her imagination and initiative in terms of how intent is to be realized.
J. R. Boyd, Patterns of Conflict, 76
37
Augtragstaktikwhat commitment means

As part of this concept, the subordinate is given the right to challenge or question the feasibility of the mission if:
he feels his superior's ideas on what can be achieved are not in accord with the existing situation or
he feels his superior has not given him adequate resources to carry it out.
Likewise, the superior has every right to expect his subordinate to carry out the mission contract when agreement is reached on what can be achieved consistent with the existing situation and resources provided.
38
Auftragstaktikfocused initiative
Abbott recruited entrepreneurial leaders and gave them the freedom to determine the best path to achieving their objectives.
On the other hand, individuals had to commit fully to the Abbott system and were held rigorously accountable for their objectives.
They had freedom, but freedom within a framework.
Jim Collins, Good to Great, 123.

39
Its really pretty simple

I. (Individual) Fingerspitzengefhl
II. Einheit
III. Schwerpunkt
IV. Auftrag
40
A case study in cheng / chi
In October 2001, Apple introduced the iPod. It did what youd expect play music - but also what you didnt expect - be intuitively easy to operate (in 2002, this was unexpected in MP3 players).
41
A case study in cheng / chi

iPod
1 Gen 2 Gen 3 Gen 4 Gen 5 Gen 6 Gen
Exploit!
Mini
1 Gen 2 Gen
Nano
1 Gen 2 Gen It turns out that the real iPod killer is Apple 3 Gen itself. Last week, the company eliminated its top-selling model, the iPod mini, and topped Shuffle 1 Gen itself with the iPod nano, an even smaller device 2 Gen that becomes the new target dangled in front of the competition
Penetrate: Learn the marketplace; build Fingerspitzengefhl & Einheit
Touch
Seattle Times, Sept 17, 2005
2002
2003
2004
2005
2006
2007
42
iPod
1 Gen 2 Gen 3 Gen 4 Gen 5 Gen 6 Gen
And how well did Apples strategy work?

100 million
Mini
1 Gen 2 Gen
Nano
1 Gen 2 Gen 3 Gen
Shuffle
1 Gen 2 Gen
Touch
2002 2003 2004 2005 2006 2007
43
How well did Apples strategy work?
44
Cheng
After 8 hours sitting on a ramp in Austin, American Flight was out of water and food and all the toilets were overflowing. This wasn't a story about the "perfect storm," but about corporate cultures that don't put customer service first. American's Mr. Hotard says the airline is truly sorry for the mess. He says one reason the airline may not have contacted customers to apologize is that its Fort Worth headquarters, where customer-service specialists work, was closed for four days over New Year's. -Scott McCartney, Wall St. J.
45
Chi
Bob Hamel: "I had a similar experience with Southwest last summer. Sat in Chicago for five hours to go to Detroit. The difference was Southwest sent me two $50 vouchers and a letter of apology. In this case, it wasn't even their fault, it was the weather. Southwest staff took care of me and made sure I was as comfortable as possible despite the long lines and what I was sure had been long hours for them. Yeah, there were a couple of glitches, but these were taken care of in a manner that definitely put the customer's needs first. Finally, Southwest staff never seemed to lose what I consider to be one of the best things about flying Southwest -- a great sense of humor. Even when they may have been laughing just to keep from crying." 46
Military analysts say we [US Navy SEALs] are becoming skilled disciples of John Boyd. That is, we execute the Boyd Loopobservation, orientation, decision, action (OODA)far better and far quicker than our enemies.
Dick Couch, The Finishing School, p. 258
47
You dont wait for the future. You create it.

Hwang Chang Gyu, President, Samsung Semiconductor
48

Certain To Win: Or, Any Position Other Than First Is A Tie For Last

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Certain to Win

Boyds OODA Loop as a business weapon

Or, any position other than first is a tie for last.

Chet Richards J. Addams & Partners, Inc. March 2008

Starting Point: Wars dont always turn out as expected

Russia Soviet Union United States

Chechnya Afghanistan Vietnam

Various Arab States

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

Business doesnt either

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

But its not inevitable

Automobiles Retailing Airlines Computers

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

The militarys answer is something called maneuver warfare

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

The primary advantage we want to achieve in all forms of maneuver is time.

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

Using time as a weapon: The H-Y War

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

H-Y War: The Results

Comment: a classic example of shaping the marketplace.

This is the OODA loop

This is not the OODA loop

An OODA loop with power

Analyses & Synthesis

Outside Information Unfolding Interaction With Environment

J. R. Boyd, the Essence of Winning and Losing, 1995.

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

Observations on orientation for business

Feed Forward New Information

Observation is the only feed into Orientation

Orientation locked tight

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

Toyota calls this hansei

These are tubs for drinking your own bathwater

Improving orientation (II)

What about action?

Feedback From Decision

Feedback From Action

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

Note: Decision is fed only from Orientation

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

What OODA loop speed really means

Know what to do Orient Decide

And be able to do it Act

Outside Information Unfolding Interaction With Environment

While learning from the experience

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

How can your corporate brain think faster?

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

Fingerspitzengefhl: excellence at the level of tactics

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

http://www.ge.com/en/company/companyinfo/at_a_glance/operating_ system.htm - 2/25/2003

Einheit hits the beach

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132

Flowdown: Schwerpunkt for manufacturing

Augtragstaktikmissions and contracts instead of tasks

Chet Richards 2005-6 crichards@jaddams.com 404.231.1132