The OODA loop (Observe, Orient, Decide, Act) was developed by US Army Colonel John Boyd and originally applied to combat operations. Boyd’s insight was that decision-making involves a repeating cycle of observation orientation, decision, and action. He argued that an individual or organization could gain advantage in combat by processing this sequence faster than its opponent. This would allow you to get “inside” their decision loop.
The OODA loop has subsequently been applied in non-military circumstances, and, with its focus on decision-making, it has much to offer an organization that is developing Digital Decisioning. The OODA loop helps organizations manage the ongoing decision analysis process in the context of Digital Decisioning. It also helps clarify the relationship between strategic and (particularly) tactical decisions and the operational decisions at the heart of most Digital Decisioning.
The need to measure and understand the performance of Digital Decisioning has been noted repeatedly. Unless the decisions made by Digital Decisioning and their outcomes can be observed effectively, it will be impossible to systematically improve results over time. The Observe part of the OODA loop can and should, therefore, be applied to the decisions in Digital Decisioning.
But the OODA loop also links strategic and tactical thinking with operational decision-making. Observing the results of large numbers of operational decisions in the context of strategic and tactical imperatives is more useful than simply observing the results themselves. Operational decision-making approaches are designed to ensure that those day-to-day decisions are made in alignment with the strategy and tactics the organization has chosen to adopt. Observing both the detailed results and the overall behavior of the organization is essential.
Any observations must be interpreted before they can be used.
The second O, orientation – as the repository of our genetic heritage, cultural tradition, and previous experiences – is the most important part of the O-O-D-A loop since it shapes the way we observe, the way we decide, the way we act.Colonel John Boyd
As noted above, the cultural norms and expectations of the individuals and organizations evaluating data observed in the first part of the loop will play a crucial role in the use of that information.
Besides these more unconscious elements, the Orient part of the loop allows the context of the ongoing strategy and tactics of the organization to be applied. In addition, the links between decisions and performance management objectives and key performance indicators also shape what happens next. Performance is observed not only in terms of measures but also in terms of the decision-making that resulted in the actions that drove those results.
It can be helpful to think of the Observe-Orient parts of the loop resulting in new strategic and tactical objectives. They represent the control part of the loop.
When applying the OODA loop to Digital Decisioning, the Decide part can be mapped to the determination of appropriate decision-making approaches. As a result of the first three parts of a cycle, we may decide to change the way we are making decisions in one or more of our Digital Decisioning systems.
Actually running a Digital Decisioning system and determining which action to take in each situation, is the Act part of the OODA loop. These actions are what will impact customers, partners, and suppliers. The Digital Decisioning system and its users perform this element of the OODA loop. Digital Decisioning is instrumented and produces data about the decisions made, the actions, taken, the results of those actions, and the choices that drove the decision. All this information feeds back into the Observe step, and the loop continues.
Different types of decisions interact
Operational decisions are made every time a business process or transaction executes and tactical decisions are made periodically to change operational decision criteria or to attend to exceptional business situations and take corrective actions. Over a longer horizon, this is not sufficient to improve business outcomes. Business strategy guides tactical and operational decisions and may need to change to respond to the dynamic marketplace and the external world. For example, competitors may introduce new products and services influencing customer choice and putting competitive pressure on revenue and profitability. This may mean changing business strategy around providing targeted discounts and customizing products. This, in turn, creates change in processes and associated operational decisions. These strategic, tactical and operational decisions must be aligned.
The OODA loop can be used to map these different decision types. Business outcomes are “observed” to detect changing situations that may lead to new tactical decisions, represented by “decide” or strategy “reorientation” with changes in business processes and additional decisions. “Act” represents operational decisions following the decision criteria set by the “decide” stage.