As we Reboot and enter a world with a new normal, we need to know that Uncertainty and Unpredictability would be part of that normal.
A great tool to use in under Uncertainty and Unpredictability is the OODA Loop, first articulated by US Colonel John Boyd in the context of air combats. In its simplest form it consists of the four stages of OBSERVE, ORIENT, DECIDE and ACT, looped as under.
OODA Premises :
- When circumstances change, we often fail to shift our perspective and instead continue to try to see the world as we feel it should be. We need to shift our “mind models” to make sense of the changing world – in order to deal with the new reality.
- As we make specific observations about something, we would experience more uncertainty about another; this is the limitation of our ability to observe reality with precision.( Heisenberg’s Uncertainty Principle).
- Closed Systems viz. individuals or organizations that are cut off from the outside and new information would experience increasing mental entropy or disorder ( Second Law of Thermodynamics)
I propose to use an Airline, it could be Indigo, Air India or even Emirates, to showcase the OODA tool.
A more detailed model of the OODA Loop is shown below.
Stage -1 Observe :
We must focus on external parameters and quickly filter out what is important. In this data collection stage we seek and absorb and evaluate all manner and forms of data to gain a more accurate insight.
- What shifts in demography, buyer behaviour, traveller behaviour, Regulations and Technology are taking place that might directly affect our airline?
- What changes in the environment are taking place that might impact our airline and its business? Now or later on?
- What information do we have in terms of : (1) Routing options (2) Capacity deployment (3) Alliance opportunities (4) Marketing strategy (5) Gross revenue, costs and profits.
Mechanics of Observe: As we consider new information based on above questions, our minds move from being closed to becoming an open system. We thus start forming new mind models and gain the ability to “see” the emerging situation differently. We overcome confusion inducing mental entropy of closed systems.
Stage- 2 Orient :
Orient is the heart of the OODA Loop because that’s where our mental models exist, our mental models shape how everything in the OODA Loop works.
So how does one orient oneself in a rapidly changing environment?
We constantly have to do “destructive deduction” i.e. break apart our old paradigms and then do “Creative Induction” by using these old fragments to form new mental concepts that more closely align with what is really happening around us.
- In the context of shifting customer profile, buying and travelling behaviours, how do we :
(a) Evaluate and finalise ticket pricing?
(b) Manage seat inventory?
(c) Refunds and Exchange?
(d) Fare filings with Civil aviation?
(e) Supplier payments?
2. In view of new safety protocols, how do we :
(a) Optimise Check-in process?
(b) Improve efficiency of airport operations, ground handling, aircraft turn-around time?
(c) Make fight operations cost effective?
3. In view of shifting customer mindset relating to travel, how do we :
(a) Optimise route network?
(b) Deploy Capacity on routes?
(c) Enter into alliances with other airlines and associated service providers?
(d) Marketing partnerships with hotels, ground transportation, destination services?
4. In view of emergence of new regulatory frameworks,how do we:
(a) Engage with and support Governments and Regulatory authorities for creating worldwide / regional standards for hygiene and operations?
(b) Ensure an overall smooth and consistent customer experience?
Mechanics of Orient: We formulate new approaches using refreshed mental models and paradigms. As we analyze the data collected in the Observe stage, we deep dive into our business’ internal capabilities to assess our current reality.
Stage-3 Decide :
We choose among the various alternatives generated in the Orient stage to move forward with our best hypothesis viz. “possibility” about which mental model(s) will work.
- What booking process will we roll out to inspire customer confidence in terms of fairness and transparency in pricing, adherence to regulations and ease of use and refunds?
- What Airport Check-in process should we implement which will ensure ease of passenger handling, customer comfort, adherence to safety protocols, improved operational efficiency and aircraft turnaround time?
- What routes, frequency and aircraft capacities should we deploy?
- What internal resource group do we need to create to work with Governments and Regulators to ensure smooth, consistent and safe customer experience?
- What Alliances and Marketing partnerships have we shortlisted?
Mechanics of Decide : As we start deciding on the courses of action, we need to be aware that Success or failure will be based on our competences, our practised experience and the quality of our observations and orientation. For every trip around the OODA loop, new data will be transformed into new information, driving new suggestions, giving us opportunities to modify our decisions and drive subsequent actions.
Stage – 4 Act (Test) :
Why “Test” has been put next to “Act,” is to emphasise that the OODA Loop is not only an execution decision process, but also a learning system; we get to perpetually test our new hypotheses in a shifting world. Action stage is where we find out if our mental models are correct. If they are, we achieve the objective; if they aren’t, then we start the OODA Loop again using our newly observed data and modified models.
- Evaluation and reporting of the following parameters:
- Revenue and Expense accounting
- Interline billing of alliance partner airlines
- Proration and fare audit
- Loyalty and marketing program effectiveness
Mechanics of Act: . Making a decision and taking action will have an impact on the data you have observed, which drives the information you’ve created and influences the decisions you have made.The loop perpetuates until the opportunity is fully resolved by either completion or disengagement.
How we could use OODA Looping speed ( tempo) to gain competitive advantage:
In an uncertain and volatile environment, mission does not solely end with deploying the OODA loop effectively. It is also about how relevant our organisation ( airline) can remain in comparison to other airlines under constantly shifting parameters.
An organisation should operate at a faster tempo or rhythm than its competitors or, preferably, get inside the competitor’s decision time cycle ( OODA Loop) to gain an advantage.
- Analytics: Our Airline system generates a large volume of data at a very high velocity. How could we use Analytics to collate and analyse this data in the subsequent looped Observe (1) and Orient (2) stages ?
- How could we synchronise our pre-departure processes like Check-in, flight operations, airport operations, transit services, post travel issues etc.with real time shifts in market conditions and own performance?
- How could we do inventory based dynamic pricing upto flight departure to force competitors review their pricing strategy ( Observe & Orient stages)?
Mechanics of Looping Speed ( Tempo)
By continuously collecting, connecting and testing data that is generated the airline would create a data repository for use in any phase of its decision process (Strategic or Tactical). This would also enable an upstream and downstream impact analysis of all decisions.
How can you apply the OODA Loop to your own domain and business? Feel free to reach out to me.
Acknowledgement: The Tao of Boyd: How to Master the OODA Loop By Brett & Kate McKay, May, 2019