First published on BizCampBelfast 2010-07-16
Colonel John Boyd, USAF, left us with two interesting legacies. He was the most successful combat pilot in history and yet never shot anyone down. And he developed the OODA Loop theory for air-to-air combat which fundamentally describes how modern businesses must survive.
Known as “40 second Boyd” because he could shoot down any opponent in under 40 seconds when starting from a tactically disadvantaged position. He learned his skills by watching hundreds of hours of film from the gun-cameras mounted in Korean war era MiGs and F-86 Sabres. He created the OODA loop as a tactical approach to winning air battles based on the idea that the pilot that reacted fastest, indeed the pilot that continued to react the fastest, would always win.
The OODA loop, observe, orient, decide, and act, says that combat, and sport, and business requires that we are constantly trying to take advantage of the ever changing situation before the opponent does.
- Observe: use your senses and systems to collect data
- Orient: analyze the data and form an opinion
- Decide: what to do based on your opinion
- Act: and implement your plan
And then do it all again, and again. As you act you immediately change the situation so now you must observe, orient, decide and act on the new circumstances. What this means is that while your competitor is reacting to your changed tactics you are already planning and executing your next one, and the one after that. Maintaining this continual OODA cadence is very difficult but it is the key difference between companies that compete successfully and win markets and those that merely compete.
Following an OODA approach to competing demands that you have the senses and the systems to collect the data you need to make the right business decisions. You started your business because your gut told you that this would be a profitable, fun and worthwhile enterprise. Do not ignore your gut: it got you where you are and you need to keep checking in with it. However the speed of business demands that we have empirical data to support our instincts. Just as we know we are driving at 30 mph because our senses tell us we still check the speedometer when we see a police car to be sure. In the same way when we run our business we instinctively know what we need to do but when a competitive threat looms we need data to tell us what the effect the threat is having and what effect our response is making.
When we look at the computer systems we invest in for our business we, invariably, focus on systems to run the business. I want to encourage you to think about this: how many speeding tickets would you get if you didn’t have a speedometer and relied soley on your instinct for speed? Have you ever speeded up to 30 mph when you pass a police car? I didn’t think so.
A business priority must be to put in place mechanisms to report on Key Performance Indicators (KPI’s) that give you immediate feedback on how your business is faring. And we are not talking about feedback once a year from the auditor or once a month from the bookkeeper but feedback at least once a day that shows you exactly where you stand. For example you might have a DSO (Days Sales Outstanding – the average number of days before you are paid) of 30. If you could see that on a daily basis you could tell if it is drifting to 35, 45, 60 and do something about it rather than find yourself in a cash-flow crunch. And while you are stepping up your collection process, getting the money you need to advertise and invest, your competitors are still oblivious to the fact that their customers are becoming tardy payers.
So as you think about what you need for your business consider that real-time insight to how the business is performing may be just as important as a new fork-lift or a new lathe or new premises. And may be more so. Data is the essential ingredient to Empowering Change.