Beat your competitors in business with the OODA Loop.

In 2020 there was a massively popular mobile-phone application called Clubhouse. This app let users listen to live conversation by global thought leaders. There were a wide variety of topics organized by ‘virtual rooms.’ New user registrations were by invitation only. Clubhouse became wildly popular with many celebrities signed on to share their stories through the app. This led to the tidal wave of social audio platform. In February 2021 there were 10 million people who downloaded Clubhouse. Investment funds bought stakes in the developer of the app, valuing the business more than $1 billion. But within a few months the new user download count nosedived. The following April the number of monthly downloads dropped to 900,000. And within two years the management team of Clubhouse laid off more than half of the staff. It was a clear verdict that the existing business model was broken and could not continue.

The story of Clubhouse demonstrates that in today's world everything turns over ever so quickly – from consumer demand to competitor’s movement. Business owners have to face a myriad of volatility, uncertainty, complexity beyond comprehension and ambiguity. We can neatly call this condition as VUCA. Even the environment can change incredibly quickly. For example, the laws and regulations over or the government support for digital assets; the change had been driven by the cryptocurrency assets which experienced a meteoric and borderless growth, with massive market capitalization and transaction value. The flux of change is not limited to only external factors. Within organizations the team must also face turnovers of key staff with increasing frequency and oftentimes without adequate preparations. The latest case study was the former prime minister of New Zealand, Jacinda Ardern, who unexpectedly quitted after 6 years in power. She left politics at the tender age of 43 while her political position was secure; she was popular and admired widely by international leaders for her principled and shrewd administration. Her political party was not able to adjust and began the downward spiral until they lost the last general election.

But there is a group of professionals who have to constantly face uncertainty and ambiguity. And, they have been consistently successful in handling VUCA. We are talking about the military organization. This is because in battle nothing is certain and the battlefield can change very quickly. In this article we will learn about the tools that the U.S. Armed Forces, which rank highly on the world stage, use to deal with VUCA situations. This tool is called the OODA Loop; it stands for Observed, Orient, Decide and Act.

The inventor of the OODA framework is Colonel John Boyd of the U.S. Air Force. In his younger days, Boyd was recognized as a top fighter pilot. He dug into his experience to develop the Energy-Maneuverability theory which was then taught to fighter pilots how to conduct air-to-air combat. The theory also proved influential to the design of later fighter jets, which stresses the importance of maneuverability. John Boyd is a highly regarded thought leader within the military. He had proposed OODA loop to be used in dynamic situations with high uncertainty, such as during aerial dogfights. The U.S. military utilized the OODA framework widely. Leaders of the Armed Forces had credited OODA for the success of the U.S. in the Gulf War (1991). Later on, technology startups recognized the usefulness of this framework and started to implement it in their business practice. Because of the success of these companies, OODA became widely popular within the business circle. Here is the loop diagram to illustrate the concept:

Imagine driving into the city during rush hour to an unfamiliar destination. The process of getting there reflects the OODA loop quite well. First, as a driver one must observe the traffic conditions all around. Next, one must orient oneself by considering applicable factors such as traffic rules (permanent and temporary), weather conditions and viable options (alternate routes). After one is familiar with all the factors involved, one can then select the route and the lane to take – which leads to the final step of taking action.

There are many relevant factors that would influence the decision-making. Oftentimes, they cannot be foreseen or are fluctuating. These may include behavior of other drivers (using the emergency stopping lane as an extra traffic lane), weather (flooding or heavy rain), unannounced road closure (giving way to fire engine), new information (the radio host saying that there is an accident ahead) and prior experience (the parking garage at the destination is probably full upon arrival). All these factors would be evaluated in the next iterations of the OODA Loop.

The essence of the OODA loop is the repetition. That is, cycling over and over, taking stock of how the decision taken pans out – if the desired outcome has been attained – and re-iterating if the target or objective is not met. The faster we can cycle, the sooner we can reach the end-goal. And if we are facing uncertainties and fast-changing situation, the cycle would have to be turned faster to be able to catch the change.

In the case of Clubhouse, the management team should have observed that the app that offered “listen only”, “live only” and “long-format only” was attractive during the Covid pandemic (2020). This is because most people were stuck at home and were working from home; their choices of activity were limited. They were bored and their eyes fatigued by virtual meetings on Zoom or Teams. However, times changed and as Covid eased up (2021), people returned to their previous lifestyles which afforded little time. So content consumption habit swung back to the short-form. Moreover, people did not always have time to listen to a live event. And some people found voice-only content not accessible enough: they needed accompanying pictures in order to overcome voice-related issues like foreign accents.

Another critical observation is that after Clubhouse became popular, several copycat apps came on the market. Critically, Facebook and Twitter (now X) added functionalities on their platforms that offered similar features to Clubhouse. While these two social media giants had far larger user base, Clubhouse insisted on user addition by invitation-only mechanism. Thus, from the point of view of OODA framework, the management team of Clubhouse cycled too slowly, not taking in enough changes in environment and competitive landscape and not adjusting the decision-making and strategy quickly enough.

At Agile Assets we use OODA loop as an important management tool because our clients are small business owners who aspire to grow very quickly. During the ramp-up phase of the business they often encounter factors/situations that are unpredictable and unforeseen. Consequently, we carry out a swift evaluation of client business quite often – so that we can respond with a financial solution to support client’s businesses growth quickly enough. This way, client business can expand smoothly, uninterrupted, and the Agile team can proactively monitor and manage risks. For example, a beverage manufacturing company secured a lease financing for production equipment from Agile to expand capacity and increase revenue. Then their major client, a retail chain group, unexpectedly changed the credit terms from 15 to 45 days, leading to liquidity pressure. Agile caught on to this change shortly after and was able to propose a solution: a factoring facility that enables the business owner to cash the invoice (once it had been signed off by the client).

In conclusion, as the world moves faster and becomes more volatile, new generation of business owners can apply to the OODA framework to respond to these uncertainties – by developing stronger capability in data acquisition and pushing for a more rigorous situation evaluation and decision-making. When these processes are efficient, OODA loop can cycle faster and lead to the achievement of end-goal and successful mission.

Punsa Roengpithya , Director and co-founder of Agile Assets Company Limited

---

Ref :

• https://taylorpearson.me/ooda-loop/
• https://www.forbes.com/sites/falonfatemi/2022/02/10/the-rise-and-fall-of-social-audio-will-continue-to-impact-the-entertainment-industry-for-the-next-generation/?sh=5633792c5c9f
• https://medium.com/@oliveramansner/the-rise-and-fall-of-clubhouse-ee84617e9eb
• https://hbr.org/2013/09/decision-making-top-gun-style
• https://www.cnbc.com/2023/04/27/clubhouse-layoffs-app-reached-4-billion-valuation-during-pandemic.html
• https://www.toolshero.com/decision-making/ooda-loop/