The OODA loop was developed by military strategist and United States Air Force Colonel John Boyd. Boyd applied the concept to the combat operations process, often at the operational level during military campaigns. (Source: https://en.wikipedia.org/wiki/OODA_loop)
It’s highly likely you need to make hundreds of decisions daily, some of which have significant impacts on the future of your business. Decision making is a natural process to all of us and one we rarely put much thought into.
However, there are different ways we reach a decision and the OODA loop is a great way to describe the process.
So, what’s an OODA loop.
O – Observe
O – Orient
D – Decide
A – Act
It simply describes the process your brain goes through when you see something and then come up with a decision about how you will act.
What does this have to do with business?
The OODA loop is not just applicable to high-intensity combat situations. It comes into play in long term situations too.
Every decision you make day to day involves the OODA loop in some way. Our actions today impacts tomorrow and beyond in some way or another.
In a business sense, observations of certain situations require you to orientate, decide on an action, and act fast.
Observation is the act of being aware of the environment around you and assessing whether anything has changed that would challenge your expectations. For example, the RBA left rates on hold again, but what would have happened had they dropped them. Would this be a situation that required you to act? If so, how?
Observation can occur at a macro or micro level.
- The monthly Profit and loss report is
- Social media is minute by minute
Make sure you align your business with your observations. Are the Observations meeting your expectations or not. In which case the observation has provided new information that has challenged your outlook.
Where your expectations are met, you may decide to hold the course. Where your observations did not meet your expectations, you examine the possible actions you could take based on this new information and decide on the most appropriate.
Carry out your action, the one you have decided will achieve the best outcome.
In business, decision-makers subconsciously use the OODA loop all the time. The observed part is more commonly the biggest bottleneck to making sure that the act of the D is made in a timely fashion.
Thinking about a dashboard, the speed at which you are provided observations is pivotal to the speed at which you can decide and act. If you are receiving updates to your industry or market data on a monthly bases then the decisions you make are lagged by 1 month behind the action that others took and which led you to act.
If you have real-time data (minute or daily) then your decisions you make are only lagged by one day…
The more informed you are, the shorter the OODA loop and the stronger your decision making.