Author Archive for earthquakesurfer

The OODA loop — A Strategy Tool for Turbulent Times

Published on September 18, 2009 in Uncategorized. 0 Comments

During the Korean War, American pilots won ten air battles for every one they lost. This was despite the fact that they were facing well-trained Russian pilots flying MiG-15s which were pretty evenly matched to the Americans’ F-86s.

An American pilot, John Boyd, became intrigued with how this could be. He began studying battles where armies won overwhelmingly, even when outnumbered by their enemies. Besides Korea, other examples include the American Revolutionary War and the Blitzkrieg which began World War II. During the Blitzkrieg, the German Army overran the combined French, British and allied forces in less than two weeks.

Boyd spent the rest of his colorful career developing his theories of war strategy and evangelizing for them. Eventually they evolved into the concept of the OODA loop, which has been applied in the development of the F-15, F-16, and F/A-18 aircraft, has been adopted as official doctrine by the U.S. Marines, and was employed with great effect in both Gulf Wars.

But this isn’t a military blog, and you may be wondering why I’m writing about this. It’s because, as Chet Richards points out in his excellent little book, Certain to Win, Boyd’s theories have interesting implications for business strategy. Consider, for example, one way in which Boyd summarized the goals of his strategy:1

What we want to have on our side

  • Sense of mission
  • Morale
  • Leadership
  • Harmony
  • Teamwork

Which allow us to:

  • Appear ambiguous
  • Be deceptive
  • Generate surprise and panic
  • Seize and keep the initiative
  • Create and exploit opportunities

Which cause these in the enemy:

  • Bickering
  • Scapegoating
  • Confusion
  • Panic
  • Rout
  • Mass defections and surrender

Some elements of this may be a bit strong for normal business competition — surrender is a rarity, after all — but we have all seen situations where one competitor’s strategy reduced its other competitors to bickering, scapegoating, confusion and panic. For example, this is what Toyota has been doing to its American competitors for over 30 years. Just as in warfare, any business strategy which enables you to do that to your competitors on a regular basis is very powerful.

So, what is the OODA loop, and how does it work? The concept is fairly simple. OODA stands for Observe, Orient, Decide, and Act. Executing an OODA loop involves observing what facts are available, orienting yourself accordingly, making decisions (explicitly or based on skill and intuition) and taking action. What makes this strategy so powerful is Boyd’s emphasis on speed and the use of speed to create surprise. As the Marine manual Warfighting puts it,

By our actions, we seek to impose menacing dilemmas in which events happen unexpectedly and faster than the enemy can keep up with them

This is a powerful notion, and very different from the largely static conception of strategy taught in most business schools and discussed in business publications. In today’s unstable and rapidly changing business environment, your ability to decide and act more quickly than everyone else may be the edge that helps you to succeed when all about you are failing.

Of course, there’s a lot more to this than I can lay out in one short blog post, particularly concerning how to create a business culture and organization capable of fast OODA loops. I may come back to that in future posts. In the meantime, I suggest reading Richards’ book.

I look forward to your comments.

  1. From Certain to Win, by Chet Richards, page 43 [↩]

The Great Restructuring

Published on March 10, 2009 in Uncategorized. 1 Comment Tags: , , , , , .

The New York Times ran a great article yesterday, entitled “Job Losses Hint at Vast Remaking of Economy.” Its central thesis:

As government data revealed that 651,000 more jobs disappeared in February, a sense took hold that growing joblessness may reflect a wrenching restructuring of the American economy. … layoffs have accelerated so quickly in recent months as to suggest that many companies are abandoning whole areas of business.

The article has attracted comment, including a great blog post by Jeff Jarvis over at Buzz Machine, where he calls this “The Great Restructuring.” I think that’s a great name for what’s going on. A lot of forces for fundamental change have been building up for some time. Their impact has been held off by rapid economic growth, abnormally low interest rates, and bubbles in commodity and credit markets. Now that markets have readjusted, change can’t be held off any longer.

There are a number of industries which are being fundamentally transformed:

  • Finance. The traditional investment banking industry is gone. Banks are folding or being nationalized.
  • Media. Newspapers are folding, radio stations are struggling, television networks are having a very difficult time, and the book industry is scrambling to find new business models.
  • Advertising. With media restructuring, digital content exploding, and marketers cutting budgets, the advertising industry is struggling to find new ways of reaching consumers.
  • Retail. More than 500,000 jobs have been lost in U.S. retailing over the past year.
  • Automobiles. We’ve all seen the headlines. Over 200,000 jobs have been lost in the past year. All of the major U.S. automobile manufacturers are in deep trouble. So is anyone that supplies them — I’ve personally talked to automotive suppliers who have laid off more than 3/4 of their staff.
  • Other manufacturers. It’s not just the automobile industry that’s hurting, although they are the highest profile. U.S. job losses in manufacturing total 1.2 million over the past year.
  • Logistics. Transportation and warehousing companies have been hit hard by the restructuring of their manufacturing and retail customers. Over 49,000 jobs were lost in February alone.
  • Travel. As businesses have cut back and consumers have tightened their belts, hotels, restaurants and travel companies are feeling a severe strain.
  • Real Estate. I think we all know about this one.

These are not temporary changes. Fundamental parts of these industries are now broken and don’t work any more. Over 4.4 million U.S. jobs have been eliminated since December 2007, and long-term unemployment is now at one of the highest levels since World War II. Companies and individuals are going through a painful period of readjustment. Eventually, new models will emerge that reflect the new economic realities. After things settle down, it’s likely that many of today’s major companies will be gone or restructured into barely recognizable form.

The repercussions of this restructuring will be widespread. If you’re in one of the industries being restructured or if you sell into those industries, your business is going to be severely affected. You need to reexamine the fundamentals of your business. Only those companies which make comprehensive adjustments to their strategy, their value proposition and their operations are going to survive.

Even if you aren’t in one of the hardest-hit industries or serving them, you may well be affected. You may be relying upon them in some part of your business, for instance as suppliers: What will happen to your business if they go away? You may rely upon or compete with companies that are in a weakened state, due to their reliance on (or investment in) one of these industries. That could create problems or opportunities. Your investors and lenders could be having problems: What if they want to restructure your financing? Your people may be in trouble because of their investments or their family’s situations. That will create challenges.

Despite all these challenges, The Great Restructuring is not entirely bad news. Historically, crises like this have laid the groundwork for new booms as the old economic barriers were torn down and better business models emerged. I am optimistic that this time will be no different. There will be opportunities galore in the post-Restructuring world, if you position yourself to recognize them and take advantage of them.

The point is, you ignore The Great Restructuring at your peril. Permanent and far-reaching changes are happening. The “good old days” aren’t coming back. What are you doing to adjust?

Staying on the Board

Published on March 7, 2009 in Uncategorized. 0 Comments Tags: , , , , .

As you know if you’re running a business, it’s rough surf out there these days. I heard some good advice this week about how to keep your business healthy in this difficult environment:

  • It’s hard to plan very far ahead these days. Revenue in particular is hard to project. It’s prone to sudden drops and forward “visibility” is limited: sometimes as little as a week or two. It is critically important to keep an eye on your revenue pipeline.
  • The most critical challenge for businesses today is maintaining liquidity. Revenues are unpredictable, customers are slow to pay, and credit is limited or even unavailable.
  • You should be preparing contingency plans: Plan A, plan B, and the “break the glass” plan in case of extreme emergency. Why? Because when the time comes to use any of these plans, it will be too late to make them up.
  • You should communicate with your investors and your lenders. The good will in those relationships will help you in hard times.
  • If you believe you have issues, confront them directly and quickly.
  • Because of all the turmoil, it’s a great time to be building your brand and increasing your market share.

Many thanks to McKenna Long & Aldridge and Alvarez & Marsal for hosting the “Staying Alive” conference, where this was discussed.

What other things are you doing to manage your business in these uncertain times?

Earthquake Alert

Published on March 1, 2009 in Uncategorized. 0 Comments Tags: , , , , .

“Earthquake Surfer”? What does that mean?

The earthquake in question is evident enough. Look at today’s business headlines: economic distress, financial meltdown, political upheaval, uncertainty and anxiety. Recessions are like that, and this is looking the worst one since 1981/82, possibly longer. But recessions pass, right? So isn’t earthquake a bit of an overstatement?

I don’t think so. Look beyond the headlines and you’ll see that some more fundamental changes are going on:

  • Globalization. Formerly backward economies like China and India have become major competitors on the international scene. Their emergence has permanently changed the competitive landscape for many industries.
  • Shifting demographics. In the U.S. (where I live) and in most other Western nations, population demographics are in the middle of a historic shift. Birth rates have fallen, the population is aging, the Baby Boom generation is shifting toward retirement, and the ethnic composition of the population is transforming. Old assumptions about the nature of your consumers are becoming invalid. At the same time, new opportunities are opening up.
  • Environmental issues. Environmental concerns have stepped to the fore. Old ways of running our lives or doing business are being questioned and re-examined. Some products and behaviors that we’ve been taking for granted are becoming unfashionable or even illegal. Entire new industries are springing up to meet the new needs.
  • Technological change. Technology continues to accelerate. Entirely new industries are springing up, based on transformative technologies like cloud computing and biotechnology. At the same time, other industries, notably the mass media, are being torn down or rebuilt.
  • Political change. The political and regulatory environment is shifting. The regulatory assumptions under which businesses operate are changing in fundamental ways.

Most of these developments aren’t new. They have been building force for some time. They have now built to the point where they can’t be held back any longer, and the current economic crisis has forced their transformative power out into the open. The result: this isn’t just a recession; it’s an earthquake.

Remember, earthquakes are violent and unpredictable. They shake things up and cause damage, sometimes severe. People who’ve been in earthquakes1 report a sense of disorientation that resonates for most of us. Earthquakes leave you thinking, “If even the solid earth under my feet can move, then what can I rely on? Where can I go? Where will I be safe?” If you know the feeling, then you know what I’m talking about.

But the blog title is “Earthquake Surfer” — what’s this surfer stuff?

It’s a metaphor, of course.2 Specifically, it’s a metaphor for what I think it takes to succeed in business when the ground is shaking beneath your feet. Like surfing, succeeding in business today requires:

  • Balance. You can expect to be buffeted by strong forces from unpredicted directions.
  • Courage. It’s tough out there. You could get hurt.
  • Vision. You have to know where you’re trying to get to. You have to have an idea where the waves are.
  • Aggressiveness. The surest way to get hurt is to hold back or sit still.
  • Adaptability. Things will change. Your best plans are going to have be adjusted, sometimes abandoned.
  • Skill. There’s no substitute for skillful execution.

It’s not a perfect metaphor, of course. No metaphor is. But I think you get the idea.

So what I want us to explore in this blog is: what’s going on? What can we expect? How do you succeed in this environment?

I look forward to your comments.

  1. In the interests of full disclosure: I haven’t been in an earthquake. I live in Atlanta. We get tornados, but not earthquakes. [↩]
  2. Again, in the interests of full disclosure: I am not a surfer. Unless you count occasional bodysurfing, which hardly qualifies. I just like the metaphor. [↩]

Welcome to the Earthquake Surfer blog!

Published on January 25, 2009 in Uncategorized. 3 Comments

If you’re interested in succeeding in business in today’s turbulent world, you’ve come to the right place. I have a few thoughts on the subject — maybe you do, too.

Let’s share.