Countering Business Competitors using OODA Loop Decision Making Model

Countering Business Competitors using OODA Loop Decision Making Model PPT Template

Countering business competitors amidst cutthroat competition is like going to war. No wonder various business concepts consist of so many military terms with words like war, menace, etc. Therefore, when looking to counter a price battle, a threat from a competitor to your business, or are facing issues; you can benefit from the OODA Loop decision making model to pack a pre-emptive strike via a strategy to observe, orient, decide and act.

What is OODA Loop?

OODA, which stands for observing, orient, deciding, and acting, is a part of a decision-making model developed by John Boyd, a U.S. Air Force Colonel, and a military strategist. While Boyd used this model for combat operations, the model is used for learning processes and commercial operations. OODA Loop is flexible enough to overcome raw power to defeat rivals.

When using the model of OODA Loop, there are several possible combinations of the diagram to be used, either using a literal loop or creating a flow model. This can be made in a live business presentation with your team or generated to support the decision process.  

OODA Loop PowerPoint Template
Source: OODA Loop PowerPoint Template by SlideModel.com

Applications of OODA Loop

OODA Loop has several applications outside its military use, cyberwarfare, and cybersecurity. These include business, litigation, and law enforcement. What makes the concept feasible in business is its quick action, which can help observe, orient, and decide to act in due time. This can disrupt the opponent’s decision cycle to help you gain the upper hand.  

Using OODA Loop for Countering Business Competitors

OODA Loop in business is all about revising business strategies by working in a loop of observing, orienting, deciding, and acting upon the decision taken in light of recent developments. Keeping business strategies relevant can help businesses adapt to competition and counter competitors. For example, Responsive websites now allow websites to be navigated with ease across mobile devices, targeting a large chunk of mobile users who have moved away from a desktop environment.

Businesses selling products and services online or using the Internet for advertising need to adapt to such an environment to stay relevant. Whereas, companies slow to understand such trends end up losing market share to competitors who are efficient in identifying and using these subtle changes in the business landscape.

What businesses need to understand under the concept offered by this decision-making model is that they need to have the ability to be flexible. The process itself is iterative and repetitive. New development can easily change the business’s needs to stay relevant in a matter of days once new technology or trends begin to pick up.

Observe

The first step in OODA Loop is to ‘observe.’ This includes gathering as much information as possible to acquire data that can be rationally interpreted to observe the current business environment. By analyzing the external and internal environment, businesses can look for changes that might affect them. Recording the findings from these observations might be a key process, perhaps creating a PowerPoint presentation where the decision makers can start collecting insights.  

Example: The exchange rate of a developing country might alter to depreciate the national currency value against the U.S. Dollar, making imports expensive with a need to raise prices. However, some competitors might find a workaround by reducing imports and relying on raw material from more affordable sources available within the country. This might be a signal to opt for the most cost-effective business strategy to counter competition before a business loses market share. Similarly, observing past and present market forecasts might help a company make better decisions. If the exchange rate is likely to stabilize, it might not be feasible to opt for local alternatives if they are low in quality. This might give the business a competitive edge in producing a better product in quality, with relatively inelastic market demand.

On the contrary, if the exchange rate is likely to remain volatile, a business might opt to make alternative arrangements. They can be, setting up operations to produce some spare parts locally to maintain quality standards and outsource some raw material to local firms that can ensure international standards. Another option would be to set up joint ventures or transfer technology to local businesses in meeting specific quality standards.

An excellent example of such an approach is Reebok and Adidas, which have influenced their supply chain and are highly ranked on the Fashion Transparency Index. The index ranks companies according to their transparency in the supply chain. Impacting the supply chain can help maintain quality, environmental and humane working conditions by businesses. This can help them remain relevant and stay out of trouble by focusing on a mechanism that provides them with customer goodwill. Reebok is already revolutionizing its products by using footwear through recycled material like plastic bottles. This can be a significant development in the industry. Businesses that fail to capitalize on the trend might lose customers due to recent awareness against global plastic pollution and the demand for sustainability in business models.

Orient

During the next phase, it is essential to orient the business strategy free of any biases. There are five primary influences to watch out for: cultural traditions, genetic heritage, previous experience, new information, and the ability to analyze and synthesize. These five influences can affect good judgment. Hence, it is essential to recognize these influences and to analyze the information to understand where your business currently stands and what should be the targets for the future.

Example: Many businesses that failed to orient themselves according to changing market needs could not stay relevant. Both Windows Phone OS and its hardware partner Nokia lost the plot due to their inability to orient their business models according to market needs. In the former, there weren’t enough Windows Phone apps to make it relevant, unlike Android, which had a wide range of apps, mods, and third-party development for alternative UIs, making it famous among all kinds of smartphone users. Similarly, Nokia’s move to not introduce Android models sooner resulted in losing its top spot as a smartphone manufacturer and virtually made the company irrelevant in the smartphone industry. On the contrary, this was the time, nearly a decade back, when Samsung rose as one of the top companies in the mobile phone industry. 

Decide

This is the time when a action plan should be developed based on the previous two stages. It doesn’t help to be indecisive amidst intense competition in the market, because hasty decisions too can be costly. OODA Loop provides a constant circuit to help businesses make informed decisions.

Example: It doesn’t help to decide when a business has a treasure trove of information. Many companies have failed to become data-driven due to their inability to use data or turn it into actionable information. 2019 Big Data and AI Executive Survey, which consisted of 64 technology and business executives of large corporations, concluded that 72% of survey participants claim that they currently do not have a data culture, whereas 69% have failed to create a data-driven organization. Moreover, 53% didn’t even consider data as a business asset. The survey included many top businesses, including American Express, General Motors, Johnson & Johnson, Ford, and General Electric.

Many large corporations face a decline amidst new competitors, making better use of market conditions, competing on lower product prices, and engaging customers more efficiently using data and market analysis. On the contrary, large corporations are being competed out of the fold due to their lack of foresight. Many big automobile manufacturers like Suzuki and Honda have suffered losses and declining sales across their global assets, while companies like Tesla and FAW are gaining ground. As electric cars become the new gold rush due to changing consumer demands and government policies to cut emissions, many smaller companies might likely edge out large automobile competitors who fail to adapt to changing market conditions. 

Act

This is the final stage of OODA, which is meant to enable businesses to act upon the decision made in the previous step. One of the hassles of big data is that companies can gather more information than they can process. Merely gathering information isn’t enough, as interpreting the data into actionable information is all that counts.

Example: Many tech companies have been outstanding in taking actionable decisions based on available user information. A few examples include Google, Facebook, and Amazon, all of which are top tech companies that constantly chop and change their algorithms to help drive revenue.

One of the primary reasons Google still ranks No 1 in providing online searches is its algorithm which frequently weeds out scrapper and spam websites to give relevant results. Similarly, Facebook has introduced new features to drive user engagement and drive its advertisement platform to provide cost-effective outcomes for social media marketing. Amazon’s famous A9 algorithm is a product ranking algorithm to help sell products online through relevant queries, making Amazon account for almost 50% of online transactions in the United States.

OODA Loop Google Slides Template
Source: OODA Loop PowerPoint Template by SlideModel.com

Advantages of OODA Loop

Based on its utility as a decision-making model for quick decision making, the advantages of OODA Loop are as follows:

  • OODA Loop can be an excellent tool for chaotic market conditions, where swift, actionable information followed by short-term decisions is needed.
  • It can disrupt the competitor’s decision cycle and help acquire a competitive advantage.
  • The model can enable businesses to become data-driven by focusing on updated information gathered in a loop to assess market conditions and cater to changing consumer needs.
  • OODA Loop can be great for short-term decision making, where there are swift changes in market conditions, such as new markets where different organizations are trying to enter and gain a foothold.

Disadvantages of OODA LOOP

There can be several instances when OODA Loop might not be relevant. There is also some criticism regarding the model. Some disadvantages of OODA Loop are as follows:

  • The model does not account for in-depth factors such as human behavior, employee motivation, negotiation with stakeholders, etc. Arguably, OODA Loop might not be suitable for long-term business strategies.
  • The model considers the opponent to be quick and decisive; this can miscalculate the need to act, wasting resources.
  • OODA Loop is not scientifically verified, and therefore, some critics question its effectiveness as a relevant decision-making model.
  • The model has been derived from war-like conditions, not always how business environments tend to be or what they are evolving into. This can lead to decision-making, which might be too aggressive and may even result in a backlash from stakeholders such as regulatory bodies due to pricing violations and consumers’ frequent changes in products or services.

Final Words

OODA Loop is a constant cycle to help businesses fine-tune their strategies to gain a competitive advantage in a constantly shifting environment. OODA Loop might be more relevant for competitive markets than those dominated by fewer companies or a monopoly, oligopoly or cartel affecting market conditions. OODA Loop is also effective for quick decision making, where the business might lack time to gather and process extensive information.

1. OODA Loop Model PowerPoint Template

OODA Loop is a flexible model that supports decision makers, with a unique format that includes, observation, orientation, decision, and action, allowing a process that provides in-depth thought and capabilities to teams and individuals. 

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