Observe, Orient, Decide, Act

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.

July 16, 2010 at 10:49 am | Business and Technology | No comment

Working in the margin

For more than six decades now we have been using technology, specifically computer-based technology, to drive costs out of the business. Quaint hardly describes those now sepia pictures of serried hoards of clerks, stamping, signing and sorting multi-part documents in vast open-plan offices. Typewriters on every desk but phones only on the manager’s. And over the last 60 years we have slowly replaced those jobs with technology solutions and those people have moved their skills into different fields. Maybe you are one of them.

Today there is not much automation that is left to be done. Indeed most people in the computer business spend their time trying to replace the systems they put in 10 or 20 years ago  and we are even replacing systems we put in only one or two years ago. And we are doing this now because we are desperately trying to drive cost out of IT.

With the way the economy has been for the past 10 years everyone is completely focused on cost containment.

But that is not the only way to keep increasing the margins in your business. Mr. Micawber once reflected; “Annual income £20, annual expenditure £19 19s 6d, result happiness. Annual income £20, annual expenditure £20 0s 6d, result misery.” Profit is the difference between income and expenditure. We have already driven out all the significant and unnecessary expenditure we can: the pips are squeaking, there is no more juice in the lemon!

Businesses that can turn technology to their commercial advantage will be the Glaxo’s, the BP’s, the British Airways, the Sainsbury’s of the future. It used to be, in 1935, that if you made it to the Fortune list of top companies you’d be on that list for 90 years. Today companies on the list last only 15 years there on average.

Look at FaceBook, Microsoft bought by a 1.5% stake for $250mn, or Amazon, worth over $50bn, these are companies that could not exist without technology to create markets,  create products and deliver revenues.

So what does this mean for your business? Look to turn technology into a way of creating new revenue.

Maybe you can deliver your product and services to your customers through technology that gets it there faster, cheaper, safer. Do kids want to go shopping in the High Street? No, they want to surf the web, from their iPhone and get a package on their doorstep the next day. And kids have a lot of money these days.

Can technology help you understand your customers better? Help you with detecting trends, buying behavior? Can technology help you discover why customers don’t buy from you? Or why they start to buy and then stop.

Is the customer experience with your company better because of technology or worse? What can you do to make your customers become your best sales team because your technology makes them love doing business with you? What can you do to make your competitors look un-cool, out of date, not in tune with the customer?

If you have an idea for changing your business model does your technology allow you make those changes? Or does it hold back and force you to do things the old way? Can you model what effect your ideas might have if you implement them? Or do you have jump and hope?

How do you know that you are being successful? Does your technology tell you, give you feedback on how you are running your business? Does your technology monitor your competitors?

There are as many ways of turning technology into a competitive advantage as there are business people with ideas.

In this series of postings I want to explore ideas on how we start to use technology to drive sales, how we enable business owners to run their businesses proactively and how we Empower Change that increases the margins in your business.

Tell me how you turn technology into a competitive advantage.

July 9, 2010 at 11:47 pm | Business and Technology | 5 comments

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