The Innovation Show

“There are scientific ways to address a new idea or project. If you take the conservative scientific route, you study the problem in your head or on paper until you are sure there is no chance of failure. However, you have taken so long that the competition has already beaten you to market. The entrepreneurial way is to immediately take a forward step, and if that feels good, take another; if not, step back. Learn by doing; it is a faster process.” — Yvon Chouinard, founder of Patagonia

In a rapidly changing and unpredictable business environment, organisations (and individuals) must adapt and make decisions quickly to remain competitive and resilient. However, many organisations will admit that slow decision-making processes and layers of bureaucracy hamper their agility. This is where the OODA Loop, a concept developed by military strategist John Boyd, can help. By applying the principles of the OODA Loop in a world characterised by brittleness, anxiety, non-linearity, and incomprehensibility (BANI), organisations can better navigate challenging circumstances and make more informed decisions.

A BANI World: Even Our Acronyms Are Being Disrupted!

The acronym “VUCA” was introduced in 1985 to describe the general conditions of volatility, uncertainty, complexity, and ambiguity facing decision-makers. The US Army War College initially used the concept to describe the socio-political landscape at the end of the Cold War. It encapsulates situations facing many strategists today.

• Volatility: The tendency of the business environment to change quickly in unexpected ways.
• Uncertainty: The lack of predictability and conviction about future events. Imperfect and often unknown information about the future.
• Complexity: The attribute of a system with many components that interact in multiple complex, non-linear, random, and time-dependent ways.
• Ambiguity: When the meaning of an event or statement is open to multiple interpretations.

However, in late 2018, Jamais Cascio presented a new framework called “BANI” to the Institute for the Future. Cascio’s BANI parallels VUCA but better encapsulates today’s characteristics of a highly complex and rapidly changing environment in the context of business and organisational challenges.

BANI means:

• Brittle: The stability and predictability of traditional business models have become fragile, and disruptions can occur without warning.
• Anxious: Organisations and individuals alike are in a constant state of unease due to the unpredictable nature of the environment.
• Non-Linear: Cause-and-effect relationships are not always clear-cut, making it challenging to predict the outcomes of decisions.
• Incomprehensible: The complexity of the business landscape often leads to confusion and a lack of clarity in understanding what’s happening.

OODA Loops in BANI Worlds

“Time is the dominant parameter. The pilot who goes through the OODA cycle in the shortest time prevails because his opponent is caught responding to situations that have already changed.” — Harry Hillaker (chief designer of the F-16)

If we agree, the business world has changed, and decisions lead to more than simple cause-and-effect outcomes. In that case, we must be aware of unintended consequences and update our decision-making models and time cycles. We must think more like a master chess player against the clock or a military strategist in the heat of battle. A valuable tool in a BANI (or VUCA) world is the OODA loop.

In the 1950s, aviator and military strategist John Boyd created the OODA loop: observe, orient, decide, act to explain how expert fighter pilots continually processed information in the heat of battle.

When Boyd studied how highly successful air tacticians outmanoeuvre their opponents, he found that they pass through a four-step decision cycle:

1. Observe the environment.
2. Orient themselves to what is happening around them.
3. Decide the best course of action.
4. Act quickly to execute this decision.

When decision-makers cycle through these four steps, they increase their lead over their adversaries. With each loop, they widen the gap in their adversary’s mind between what they observe and what is happening. The loops compound with each cycle until the opponent’s observations and actions are based so profoundly on the past, no longer relevant, that the opponent collapses. Jack Welch once remarked, “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.” This is why small attackers can topple once-dominant incumbents. Because incumbents are heavily wed to the old way of doing things to embrace the new, even when the new was what enabled them in the first place! Incumbents sometimes lament that they do not have the right people for the job, but when they experience a crisis, they realise they have (some of) the people but lack (all of) the urgency.

Consider how Sony looped away from industry stalwarts RCA and GE. In 1947, when Bell Laboratories unveiled the transistor, the future of electronics was poised for a monumental shift. RCA and GE, two industry titans, along with most experts, recognised the disruptive potential of transistors, anticipating that they would one day supplant vacuum tubes. However, the giants proceeded with caution. Both RCA and GE were heavily invested in vacuum tube technology and perceived little immediate competitive pressure to switch gears. Consequently, they embarked on long-term plans, intending to study and gradually develop transistor technology over two decades.

Meanwhile, Akio Morita, then-CEO of Sony, acted akin to using an OODA loop. He swiftly observed the competitive landscape, realising the inertia of RCA and GE and the opportunity this presented. Morita oriented himself and his company toward decisive action. He secured a licensing agreement from Bell Labs for transistor technology, a decision he made rapidly, marking the “Decide” phase of his OODA-like cycle.

With the license in hand, Morita challenged his engineering team to outpace industry expectations, thereby initiating the “Act” phase. In just two years, significantly shorter than the twenty years projected by RCA and GE, Sony introduced a groundbreaking product — a portable transistor radio. Morita’s decision to act urgently and bring a product to market epitomised the essence of an OODA loop.

The transistor radio not only cost one-third of traditional radios but was also remarkably smaller and lighter. Sony’s swift, well-informed actions in creating and launching this product enabled Sony to dominate global consumer radio markets. Akio Morita had effectively employed an OODA loop-like approach, reacting rapidly to changing circumstances, seizing opportunities, and thus gaining a competitive edge. This meant the incumbents now had a wide gap to close if they wished to take on the attacker.

Of course, like RCA, Nokia and a list of other poster children of disrupted organisations, Sony too fell prey to the same psychological stasis that had given them their “OODA-loop” headstart in the first place. The loop is not an event but a mindset, even more so in a BANI world.

THANKS FOR READING

This week, we began a 4-art series with Theodore Modis on his substantial work on S-Curves.

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OODA in BANI (VUCA) was originally published in The Thursday Thought on Medium, where people are continuing the conversation by highlighting and responding to this story.