How to Get an Advantage Through Faster Tempo – Time based Competition and the OODA Loop

John M. Boyd was an air force pilot who earned the nickname “40-second Boyd” due to his ability to defeat any enemy in combat air maneuvering in 40 seconds or less. He was very much interested in theory and later on, after he became a consultant he developed a brief called Patterns of Conflict summarizing military strategy from Sun Tzu, to Hannibal, to WWII Blitzkrieg, to guerrilla warfare.

Despite all this, the one concept he’s most known for is the OODA loop. It grew out of his theory of learning which he called Destruction and Creation and is the only paper he ever published. In it he discusses the processes of analysis and synthesis, which later would play a role in the Orientation phase of the OODA loop. 

Destruction and Creation

According to Boyd, through analysis you break down the whole into pieces so you can understand it better, and through synthesis you put various pieces together to create a new coherent whole. The key is to shatter the domains that hold the pieces together in your mind so that they are no longer connected to those domains. The relationship between those parts and the whole is to be destroyed before a new whole can be created.

Boyd’s example was the snowmobile. You take the treads from the tank, the engine of an outboard motorboat, the skis and the handlebar of a bicycle. When you take each of those parts individually and you shatter the links they have to the original concept (tank, boat, bike and ski) you are able to see how you can put them together in a whole new coherent way (the snowmobile). This according to Boyd was creative destruction. 

Fast Transients

After destruction and creation, Boyd set his sites on trying to understand warfare, especially how the US who was better equipped ended up losing the Vietnam War. He started his analysis by looking at why the F86 had more wins than the MiG despite the fact they were very similar in what he deemed energy-maneuverability (another concept he created earlier in his career as an air force pilot).

After working on it for a while he discovered that the F86 was able to go through changes in speed and direction much faster than the MiG due to it’s hydraulic controls vs the MiG’s mechanical controls. The F86 also had a much winder angle canopy which allowed the pilot a better view of the enemy. We’ll come back to that when we discuss the observation phase of the OODA loop.

The ability to quickly switch maneuvers in response to what your opponent was doing, was a key advantage that created a rapidly changing environment and caused confusion, disorientation and panic in your adversary rendering them unable to adapt quickly. This meant that in order to win, you had to operate a faster tempo than your adversary in fact you must operate inside their tempo.

This led him to create a brief called Patterns of Conflict which started out small but then ended up growing to be 8 full hours!. During the slides of the brief, as Boyd is explaining the key concepts of the blitzkrieg and guerilla warfare, he mentions the concept of the OODA Loop, or Observe, Orient, Decide, Act. According to Boyd, if you were able to go through the OODA loop faster than your opponent, you could essentially win without having to resort to attrition warfare.

The biggest misconception about the OODA loop is that it’s a simple step by step process comprised of four distinct steps which you then try to loop through as quickly as possible. Boyd’s concept was much more than that as we’ll see. 

OODA Loop

 Here is a diagram of the OODA “loop”

Image

During Observation you gather as much information as possible through your five senses and unfolding circumstances, unfolding interaction with the environment, feedback from any action or any decision you’ve taken and more importantly implicit guidance and control. Anything that hindered your ability to observe clearly and get accurate information about your environment will hinder your ability to orient yourself properly and cause mismatches between your “reality” and you opponent’s “reality” This was his key insight as to why the F86 was superior. The MiG’s canopy restricted the pilot’s view, creating blind spots that could easily be exploited by the enemy.

Because the key to the OODA Loop is how fast you switch maneuvers, you don’t want to be spending too much time Observing, you want to quickly move on to Orientation. 

Orientation is the key to the entire “loop” What Boyd meant by orientation is in a way the opposite of disorientation. Your goal is to bring about things like previous experience, new information, analysis/synthesis, genetic heritage and cultural traditions to create a complex integration, or as I like to call it a mental model of the situation. What Boyd means here, is that you should be able to read a situation in such a way that is as close to reality as possible and keep it that way so that you don’t get disoriented. When you do that, you’re able to dictate and shape the mind of your opponent in such a way as to bring about disorientation and confusion and inhibit their ability to make clear decisions.

In the Decision phase, you create a hypothesis of what the orientation suggested and you test it by taking Action.

The most important thing to note here is that these stages do no need to occur in this order. Notice the arrows for implicit guidance and control between orientation and observation/decision/action. What this means is that there’s a point where a you can achieve an intuitive sense for how the events are unfolding. You get an insight and it happened to match reality perfectly. Once this happens, you no longer need to go though the stages one by one, they begin to occur simultaneously. You can now begin to dictate the tempo of decisions and shape the mind of your opponent. This allows you to win more easily. 

Fast Tempo Offense in Sports

I don’t like sports metaphors in general (since not everyone is a sports fan) but they illustrate the OODA loop perfectly. In the American NFL, NBA and in other sports, the idea of a fast tempo offense is starting to become more common. There will be a stage during the game where the coach will notice something in the defense, the game situation , the score, etc. and decide to speed up the tempo of the game in order to catch the defense off-guard or to dictate the tempo and score more easily.

The coach will observe for example the certain set up of the defense, how tired they look, their energy level, how much attention they’re paying in the game, take into account the score of the game, the clock, how well his team is advancing, game film that he’s seen previously of this particular defense in this situation, the type of defense he’s dealing with, plays they ran in practice, etc. and orient himself to the situation by creating a mental model of the reality. During orientation, he will get an idea that maybe by switching to a faster tempo, he can spark the offense, disorient the defense, advance faster and score easier.

He makes the decision and calls for quicker/higher percentage of success plays. Given how accurate the read of the situation was, how successful the play was, how the defense reacted, (this is feedback that will shape his orientation) he will go through the loop again and decide whether to continue the quick tempo while the defense tries hard to adjust. It’s very important that this fast decision making tempo be kept up in order to keep the defense guessing and delay/inhibit their ability to orient and adjust to the faster tempo. If the read of the situation was accurate, the coach will start to get an intuitive feel for the game and know exactly which plays to call in order to be successful.

Fast Tempo in Business

In business, if your orientation doesn’t match reality, for example when you’re clueless about what the customers really want, you will end up slowly declining and eventually go bankrupt. A good example of a company who operates at a fast tempo is Google. When Google first launched, AltaVista was the most popular search engine (in fact Google founders Larry Page and Sergei Brin, actually tried to license their search technology to AltaVista but they refused).

Internet search engines had a problem. They would display results without any sort of relevance, making it hard for you to find what you were actually looking for. One can say that their orientation to the marketplace was off. Google invented an algorithm called PageRank which assigned a rank to a website based on how many other sites linked to it. This was an insight that Brin got while he was working on a project to digitize papers. He noticed that the best papers had the most references from other papers.

People started to switch to Google as their main search engine and sites like AltaVista didn’t adjust so they headed for a decline. Not willing to adjust they slowly went out of business. But Google didn’t stop there. They monetized search by placing text based ads next to the search results. If you wanted your website to show up as a top search result in Google for certain search terms/keywords, given that most people didn’t go beyond the first 2-3 pages of search results, you needed to outbid your competition for those specific search terms/keywords.

However the natural search results were free! So people tried to figure out how Google’s PageRank algorithm worked by reverse engineering the search results (since this information is proprietary to Google) and then try to optimize sites or game Google’s algorithm so their site would appear on top for the desired search terms/keywords. The SEO (search engine optimization) game is still being played to this day. The problem isn’t that people try to figure out Google’s algorithm, the problem is that unscrupulous marketers were using unethical techniques (also known as “black hat SEO” from the popular term “black hat hacker”) to try and game the search results and have their sites show up on top undeservingly.

Operating at a fast tempo, Google began periodically updating the algorithm in order to stay one step ahead of these “black hat” SEO hackers. If Google didn’t operate at a fast tempo, they would soon start to lose credibility in their search results.

This is only scratching the surface of what the OODA Loop can do. Some of the more interesting applications of it can achieve the ability to shape the marketplace, shape the mind of the customer and the mind of the competitors to keep them at bay. For more on John Boyd, check out Robert Coram’s excellent biography “Boyd: The Fighter Pilot Who Changed the Art of War”

 

Patterns of Strategic Thinking – The Secrets of Exploiting Leverage

Introduction

I’ve recently been obsessed with strategy and have been reading a variety of strategy books in a variety of fields such as psychology, economics, business, military, etc.  I noticed that while few people really understand strategy (even though they think they do) there were certain patterns of strategic thinking that show up over and over again in these works. These patterns can easily be abstracted out of their respective fields and used in their everyday life.

Game theory is one of the fields that studies some of these patterns from the perspective of games where you and an opponent take turns making moves. According to Wikipedia game theory is: “the study of mathematical models of conflict and cooperation between intelligent rational decision-makers.”

Your objective in these games is to be able to predict what moves your opponent will make for every one of your moves and choose the most optimal one for you to win the game (however winning is defined)

Personally I’m not a big fan of game theory for two core reasons. First it limits your thinking to a frame of move-countermove when in real life things are a lot more dynamic and complex. In fact, in many cases you can build quite an advantage without worrying about what your opponents or competitors are doing. Second it utilizes a model of the “intelligent rational decision makers” which according to many studies in behavioral economics is incorrect.

I first started to notice these patterns while I was studying psychology and influence, however I saw them as specific techniques within those fields. It wasn’t until I started reading books on strategy that I was able to generalize them and abstract them out of those fields and I started to see them everywhere. The techniques were different of course but the patterns were eerily similar

For example you can leverage certain skills you have to get a higher position in one company than you’d be able to get in another company. In another setting, say in business, you might be able to leverage big cash reserves to invest in R&D to move your company beyond the current trends in technology and be able to actually shape the future rather than be shaped by the future.

In both cases you’re leveraging/exploiting certain assets, that are only available to you, to put yourself in a better position to succeed. What else can your leverage that puts you in a position of advantage against your competition? More on that in a bit.

This is the first in a series of posts on the patterns of strategic thinking. My goal with this is to create a collection of these patterns that can be used as a toolkit for making smarter decisions both in business and in personal life and who doesn’t want to make smarter decisions?

In this post we will explore the vast and unending ways you can exploit and make use of leverage.

Using Leverage

“Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.” – Archimedes

Leverage is simply a way to multiply the force used to a greater effect or to achieve a specific objective. It’s a type of advantage that is context free and not rooted in any particular field.

You can get or use leverage in one of two ways:

  1. by exploiting certain patterns that exist in a system either innate to it or by design
  2. by creating and accumulating assets which can be used at a later time

Let’s explore these two in depth.

There are three categories of patterns you can notice and exploit in systems:

  1. Predictive Patterns
  2. Pivotal Points
  3. Focused Effort

Part 1 – Exploiting Patterns

1. Predictive Patterns are patterns that allow you to predict what might happen in the future through the use of trends in the industry, momentum, routines, habits, biases, social dynamics in a given context, psychological models of behavior, inertias, etc.

In game theory a lot of your leverage and advantage comes from your ability to predict other people’s responses to your moves and figure out the countermoves to that anticipated behavior so you can win the game in the end. The farther you’re able to predict, the more likely you are to win the game.

As I mentioned above, one of the issues I have with it is that it assumes that you’re dealing with intelligent and fully rational human beings. However, as Daniel Kahneman and Amos Tversky (and later Dan Ariely in Predictably Irrational, Richard Thaler and Cass Sunnstein in Nudge and many others) have repeatedly pointed out, humans deviate from the so-called “rational behavior” but do so in relatively predictable ways.

So you can either use the “rational model” of behavior, or you can use the biases model that behavioral economics has put forth. In fact a lot of the techniques that are discussed in books about persuasion and influence focus specifically in telling you the various patterns of behavior that humans tend to follow which can be used for leverage.

Here are a few examples.

-In investing/business, if you notice a trend towards cloud computing and anticipate growth, you can invest in a company that owns and operates a lot of data centers.

-In your career, if you notice that everyone is talking about data science and big data and anticipate a big demand for people who know data analysis, you can start to learn statistics, if you already know programming or programming if you already know math/statistics.

-In your personal or social life, if you notice that when you call yourself a statistician people stop wanting to talk to you, next time you can call yourself a data scientist and get them more interested.

2. Pivotal Points are things like imbalances, inefficiencies, weaknesses, and so on that magnify the effects of effort. They are either innate to the system or are put there “by design” and once noticed can be used over and over again until the system is either corrected or corrects itself.

I put “by design” in quotes to highlight the fact that in many cases the weakness that are exploited in certain systems, (for example networks or websites that are hacked) are usually not there on purpose but through design they were introduced in the system as bugs probably through oversight or just faulty construction.

Imbalances exists when a small shift in the system results in relatively large effects. This can be for example pent-up demand for an item that nobody thought would be there. In war/conflict an imbalance would be a perceptual difference between say the number of soldiers that the enemy says they have and their actual numbers.

Inefficiencies are usually extra steps that one has to take to accomplish something in the system and are the most easily noticed form of leverage. Google for example noticed that the big search engines operating in the late 90’s all had the same inefficiency. They would provide irrelevant search results and as an advertiser you might be able to buy yourself into the top of the results list and stay there as long as you were paying.

Google exploited this inefficiency by introducing their PageRank algorithm and later their bid-style PPC ad buying platform. This not only had the effect of millions of users switching over to Google as their default search ending but also leveling the field for everyone so the little guy could compete with the big advertisers on an even footing.

Notice that this was both an imbalance (search engine users wanted to see relevant results so there was pent-up demand) and an inefficiency (users had to scroll through many irrelevant search results to get to what they were looking for sometimes never finding it)

Weaknesses are areas of lack of competency by an opponent/competitor that can be exploited and used by someone who has that competency. Of course the actual competency needs to be in demand in order for it to be worth exploiting. Again this is another common way that leverage is used in business or even personal life.

A good example of this is choosing a career. We’re all good at some things but not others, so for example if you find yourself in an organization that has really poor processes that are hindering growth and you are good at project management, this is a weakness you might be able to exploit long enough to either become an expert in project management or get promoted within the organization.

The examples above should be plenty to stir your imagination so let’s move on to the third pattern.

3. Focused Effort is a pattern where you limit your application of effort into a concentrated area of the system and you get larger payoffs from it. This pattern relies on constraints and threshold effects within the system.

A threshold effect is like a tipping point. There’s some point in the system that you need to reach before you see any payoff. This is something that happens for example when you launch a new product. It can take a lot of effort to get to the threshold/tipping point of awareness about that product but once you’re there things start to become easier and you just need enough effort to maintain the effect.

The threshold effect can be understood through the concept of inertia from mechanics where it takes a lot of initial effort to get an object moving, but once it has momentum, you just need enough force to counteract friction.

Another application of constraints and threshold effects is when you go after a small market and seek to dominate it before trying to take on a bigger market. From a strategic point it is a lot easier to dominate a smaller market fully than to claim an equal slice from a bigger market.

A perfect example of the threshold and focused effort patterns is the strategy that Tesla Motors has used to take on the giants of the automotive industry. In a recent article in FastCompany.com, Tesla Motors founder Elon Musk stated that his plan for introducing the electric car was really simple:

1. Build sports car
2. Use that money to build an affordable car
3. Use that money to build an even more affordable car
4. While doing above, also provide zero-emission electric-power generation options

One of the investors in Tesla explained in an answer on Quora why they chose to first build the very expensive Roadster (the sports car) then the Model S (the affordable car) and the plans for what they’re calling the Bluestar (the more affordable version). The reason for this is that you can’t penetrate the automobile market from the bottom up, it has to be top-down.

The Roadster provided Tesla with many benefits they wouldn’t otherwise have if they started with an affordable car. They got money from sales to be able to sustain themselves, they created a brand image, they showed the world they could build a high-performance electric vehicle, and they learned a lot from the engineering challenges, lessons they can now apply towards making more affordable electric cars for everyone.

Part 2 – Building Assets

Now that we covered the patterns you can exploit in a system to gain leverage, let’s cover the other side of the coin which covers the assets, competencies and advantages that allow you to exploit those patterns.

There are three types of assets you may innately have or can build:

  1. Positions
  2. Resources
  3. Competencies.

1. Positions are a type of asset that has to do with either a physical location in space or a more abstract perceptual position in the mind. The first one is obvious. In real estate for example you know that the key is location, location, location. Where you are located with respect to people’s movement patterns can make you or break you. In war/conflict certain positions are more advantageous than others and thus become mission critical to get and to hold. Good examples are bridges, hills, trenches, etc.

The second one is more abstract in that it represents a position in your mind (or as Al Ries and Jack Trout in their seminal work Positioning – The battle for your mind call it cherchez le creneau). The central idea is that a product, a service or a company should occupy a very well-defined and simple concept in the consumer’s mind. For example when you’re thinking about a refreshing drink, Coca Cola wants you to think of Coke.

One of the key insights in the book is that you should not try to compete with a position that’s already been taken by a competitor but rather try and create a new position and place yourself, your company or your product there as the sole owner. You do this by inventing a category and becoming the only provider of products/services in that category.

Tim Ferriss (of the 4-Hour Work Week fame) didn’t want another book on “career advice” so he created a new category called “lifestyle design” and put his book as the first one there.

This doesn’t just work for brands and companies, it’s the same for people too. In a company for example you might be the “go-to guy” whom everyone calls in a crisis, or you may be the “recluse but brilliant scientist” whom nobody has met but everyone knows about. This position can make or break a career and should be chosen very carefully otherwise people will just slap some disadvantageous label onl you that will hinder your career.

There’s a lot that can be written when it comes to perceptual positions. I may do a full post on this in the future. Suffice it to say that how you position yourself will greatly affect your success in life.

2. Resources are a type of asset that represents concepts like money, connections, physical things like real estate, factories, farms, machinery, weapons, personal things like looks, height, weight, age, etc. They can be created, acquired or innate.

This is the most common type of leverage you have or can build because it’s really obvious when used. If you’re astute you will notice that resources can be used directly on one of the three patterns mentioned above (anticipation, pivotal points and focused effort) If you’re not using some kind of advantage to get ahead in life or in your career, you’re really being left behind and missing out. All those successful people you see have some kind of secret advantage they’re using, connections, physical features (height, weight, looks), competencies, etc.

3. Competencies are assets that reflect things you or your company are good at or have expertise in. They represent strengths but they’re slightly different than resources, although they can be called resources and just like resources they can be built (like skills), acquired (like experts) or innate (like talent)

A really good example of the use of competencies to exploit an advantage is the case of IBM getting out of the PC market and focusing on providing their customers tailored information processing solutions to their problems under the IBM brand name. They sold the PC business to Lenovo and moved their entire business into IT consulting knowing that they had the necessary competencies in place both software and hardware. That allowed IBM to keep growing while the PC business commoditized.

Putting it all together.

Competencies, resources and positions are at the mercy of the market forces of supply and demand as well as the three patterns we discussed above in part 1. They dictate whether or not the assets you have can be used as leverage.

The patterns of leverage are vast as you can see. I hope with the above I’ve been able to make a dent in this subject. Please note that this post doesn’t discuss the morality of how you use leverage. As with any power tool it can be used for both good and bad. My goal here is to simply make you aware of the various patterns of strategic thinking that we humans use to reach our goals or solve problems and hopefully help you by structuring it into something more usable.

Note: A lot of the ideas in this post came from Richard Rumelt’s book Good Strategy, Bad Strategy