OODA as basis for business strategy

Long time and no posts. Shame on us.

I have been trying to write, but it seems that every succesful company could be used as an example of one or another management principle if you just spin it enough. I think that has raised my bar too high when looking for that true example of company utilizing maneuver conflict. Or I have just been too lazy.

Luckily there is atleast one company that has openly based their strategy on Boyd's principles. There is writeup about them on Chet Richards' blog by Jim Bowes, writer of Secrets of a Midnight Entrepreneur. OODA Loops in Contract Manufacturing tells interesting story on how they utilized low cost software solutions to support their strategy and not other way around.

Ofcourse, being the manufacturing guy that I am would've kept manufacturing inhouse, but outsourcing volume manufacturing to experienced partner rather and try to build up manufacturing capacity in addition to product development and spread resources too thin can be wise solution for startup.

Technorati revealed this blog to me. They have nice presentation on Lean principles and OODA in software startups. Ideas seemed sensible to me.

Implementing Boyd?

Can Boyd's principles be really implemented in business? Chet Richards talks about that in excellent article.

This part:

That is, if the employees didn’t commit to making the system work, it wouldn’t move at all. The Toyota Way is why they do it for Toyota and don’t for most other manufacturing companies. The other important point about the Toyota Way is that the system is always getting better at whatever it does. As one Toyota exec put it, whatever we do this year is baseline for next year. A lot of companies talk continuous improvement (kaizen), but few achieve it. Their organizational climate is why.

got me thinking about blog few blog posts in couple lean blogs.

Ron Pereira of Lean Six Sigma Academy is on study tour in Japan currently and he wrote about spark plug factory where people have perfected their flow to the point that they don't even need kanban cards or similar accessories to help them control the process. How could this be achieved without highly motivated and committed workforce?

On similar note in Evolving Excellence Dan Markovitz wrote a piece about respect for people. He attendet LEI summit and there one of the speakers claimed that:

Everyone at these conference focuses on tools like value stream mapping and 5S. But the tools are only 25% of the story. Lean is about peple, not about waste. Focus on the employees -- all other benefits are just by-products.

And that kinda rings a bell with motivated, committed workforce creating great results.

Toyota product development

Found interesting article from part two of Andy Wagners two part Boyd introduction at Lean Blog. Matthew May at Elegant Solutions provides two examples of Toyota creating creative tension to encourage innovation and to cut product development lead times.

He also asks important question about the burden faster cycles unleash to organization. Are they paying for faster product launches with decrease in quality and how they can overcome these problems?

Is decreased quality inevitable result of ever faster cycles? Are faster cycles worth the quality hit?

Wagners blog posts are both worth a read as he makes some comparisons with OODA and Demings PDCA and PDCA's applicability to decision making. He also makes comparison between development of F-16 and Toyotas product development. Part I, Part II.

More about 'being inside'

ReportonBusiness.com has nice article titled Got a competitor on your radar? where Senior partner from Boston Consulting Group of Canada describes how Canadian manufacturer of men's suits, Peerless, uses faster OODA loops as competitive advantage.

It would be interesting to hear comments from company representatives because in my opinion this article pretty much describes lean company, but company website doesn't mention neither, lean or OODA. What the company itself calls what it is doing? Is lean driving force behind their ability to cycle OODA loops faster?

Real advantage requires something uniquely active and not easily achieved. The speed of the OODA loop is rooted in systems thinking. Typically, less than 10 per cent of the total time devoted to any work in an organization is truly value-added. The rest is wasted.

This is measure that is often mentioned in lean articles as well, it is said that typical company has about 3-5% of value added work compared to Toyota who have around 14% of value added work.

This paragraph is sums 'being inside' to extent:

In business today, the difference in OODA loops among competitors is separating winners from losers. Organizations that consistently operate within the OODA loop of their competitors win. These organizations are faster than their competitors in developing and introducing new products or services, delivering their products and services, and resolving customer dissatisfactions. Organizations that pre-empt the moves of adversaries throw the loser into confusion and into a reactive cycle.

But still, I have yet to come clear definition of what being inside opponents OODA loop in business means and how one can spot it. Is being fast enough? I don't think so.

Did some searching at BCG website and found previous article, published in 1987 in New York Times, in which this one is based at. Almost word to word.

Schwerpunkt and how to have clear focus

Fast Company has article titled The Strategy of the Fighter Pilot which covers background of Boyd and his thoughts and also provides some nice examples of OODA in action. Even if Boyd is relatively know article is well worth a read.

I especially liked notion of schwerpunkt.

Systems like Toyota's worked so well, Boyd argued, because of schwerpunkt, a German term meaning organizational focus. Schwerpunkt, Boyd wrote, "represents a unifying medium that provides a directed way to tie initiative of many subordinate actions with superior intent as a basis to diminish friction and compress time." That is, employees decide and act locally, but they are guided by a keen understanding of the bigger picture.

I relate Boyds schwerpunkt to lean concept of 'High Agreement' and the need for organization to have High Agreement both on what they want to achieve and how they will achieve it. This allows whole organization to operate as cohesive unit towards common goal. Jamie Flinchbaugh and Andy Carlino describe High Agreement in page 16 of their book Hitchhikers Guide To Lean as follows:

"Valuing a common way or process with low ambiguity more than you value your own way." To be clear, this definition does not mean individuals need to like the common way, but they value having the agreement and accept decisions that they may not like.

I don't mean that schwerpunkt equals High Agreement, rather that in lean environment High Agreement is a way to maintain that organizational focus.

Comments? Thoughts?

Should companies try to out-Toyota Toyota?

At first I intented to post this as comment to this post, but then decided that this warrants whole post of its own.

"Striving simply to be "lean", or even "world class" is insufficient and, in fact, somewhat simplistic. At best, you end up only as good as (that is, no better than) your toughest competitors, and find yourself continually playing catch-up with them. ...long-term success still requires that a company differentiates itself from its competitors by offering something unique and valuable to customers - whether this be especially quick service, high reliability, low costs, or innovative products."

And

The whole point of Sun Tzu and Boyd was that the best way to win is avoid playing by your opponent's rules. If a competitor is really, really good at something, the odds are you're not going to be that good even if you tried. No one, not even fellow Japanese car manufacturers, has managed to copy Toyota Production System; trying to out-Toyota Toyota is foolishness.

I think that trying out-Toyota Toyota is the single biggest thing where people go wrong with lean. And that has to do with mistaking tools for thinking and trying to copy what Toyota does instead of concentrating on how Toyota does what they do. You can copy tool applications from Toyota all you want but you won't get better than Toyota that way, not even close, you might even worsen your own situation.

Toyota is good or even great at making cars, but that is only a result of a thing they are extremely good at - problem solving. And that is a thing every company willing to succeed should be great at. I don't believe that it really is do or don't or thing to differentiate yourself from competition, you should just do it. Being good at problem solving will enable you to launch features or products or conquer new markets that will really differentiate you from your competitors.

I don't understand how striving for perfection can get you only as good as your best competitor. For real lean thinkers there is no finish line, no written in stone goal that once you cross it you are 'lean' and can then focus on other things. Toyota is not lean, they don't claim to be, but they certainly are leaner today than they were yesterday and that is what matters. It is ongoing journey, not a trip with fixed start and end.

Ofcourse, you need to have goals but they don't need to be fixed. You might have set your ideal state as something that might've seem unattainable couple years ago, but can be feasible today. If that happens you need to figure out new ideal state to strive for. And then continue proceeding towards it one step at a time.

That being said I think lean is really an enabler for a company, thing that will allow fast transients from ch'i to cheng or other way around. Not necessarily manifestation of Boydian strategy but a model that will allow you execute it.

The Evolving Bases of Competition

from Hayes, R., Pisano, G., Upton, D. & Wheelwright, S. (2005) Operations, Strategy and Technology: Pursuing the Competitive Edge. John Wiley & Sons

p. 7-8:

...In the early 1970s, most competition in the U.S. was price-based. Within a given industry, defect levels, breath of product line, delivery times, and the rate of new product introductions tended to be roughly similar across companies, thus, rendering them "neutral" as far as competitive differentiation was concerned. ... "The American consumer will not pay for better quality", confidently stated one top auto industry executive to a class of Harvard MBA students back in the mid-1970s.

This, of course, was about the time many Japanese companies were beginning to mout attacks on U.S. markets based on their product's superior performance, fit, and finish, as well as defect rates that were one-hundredth or less of the levels that had been acceptable before. And European luxury cars began flooding U.S. markets in response to an exploding demand for clearly superior - and vastly more expensive - performance and appeareance. In the 1980s, quality became "Job #1" at Ford and many other companies...

...Clearly, a fundamental shift in consumer preferences had occurred: quality had moved from being a neutral basis of competition to being a powerful source of competitive differentiation.

The resulting, somewhat frantic, efforts by U.S. companies over the next decade to reduce costs and improve quality ... succeeded in narrowing the gap between U.S. and Japanese products in many industries - to the point where often those attributes no longer served as effective bases for competitive differentiation. This kind of competitive stalemate usually presages a new assault from a different direction (one must be careful not to prepare oneself to fight the previous war, as Marshall Foch vainly warned France in the 1930s). Indeed, even as companies belatedly recognized and grudgingly responded to the quality revolution, another competitive battleground began to emerge: flexibility and product variety.

The authors go on to point out that after flexibility and variety, the next "battleground" was the speed of new product introduction.

Are we straining the analogue here if we note that

a) there might be an OODA loop in action,
b) this illustrates the changing balance from ch'i to cheng (ch'i becomes cheng)?

OODA-loop or O followed with ODA-loop?

It can be argued that Toyota with it's Toyota Production System is using Boydian principles. Not necessarily after studying Boyd, but nevertheless they have come to similar conclusions.

There is atleast one thing that clearly separates Toyota from most of the other companies. And it is reflection (or hansei in japanese) and I relate it to Observe phase in OODA-loop.

To me it seems that not whole lot of companies actually look back into their successes in addition to their failures to determine their new current reality. So instead of OODA-loop they use one iteration of Observe and then endless loop of Orient-Decide-Act. Which will eventually lead to disaster. Not necessarily when market is good but almost certainly when things turn sour.

This post was partly inspired by post in Lean Blog about differences of approach between Merrill Lynch (8.4 billion USD write down) and Toyota (Exceeding sales goal three years early).