Inevitably, however, even with the hypothesis-testing feedback loop, the ultimate end of the OODA process is an action of some kind. And because action inevitably influences the environment in some way-after all, that was its purpose in the first place-the process begins all over again with observing to assess the action's impact. This in turn begets a second iteration of the orientation step to determine how much impact the action had, whether it changed reality in the desired direction, and by how much. The size of the mismatch that results from this second orientation leads to another decision and subsequent action. And the process continues until the ultimate goal of the system is attained.

"Pro-Acting" Rather than Reacting

Superficially, it might seem that the OODA loop is reactive. However, Boyd's contention was that controlling an emerging situation was far preferable than reacting. Consequently, his prescription for using the OODA loop was anything but passive. He was highly motivated to "stir the pot"-to use the OODA process to create mismatches, especially in the perception of adversaries. In this respect, he recommended being pro-active, rather than reactive.

However, rational decision making and action depends on a conscious awareness of these four steps: observe, orient, decide, and act. In reality, most people actually do something like this, but they do it unconsciously or intuitively. They're usually unaware that they're doing it, which means that they are less likely to "keep the pressure on." Without consciousness about the OODA process, like the fabled hare they're likely to take a nap alongside the road while the tortoise passes them by.

Fast OODA Loop Cycles

Boyd went even further with the pro-active OODA concept. He contended that if one could cycle through these four steps faster than one's adversary could, a competitive advantage would begin to open up. The non-OODA practitioner would always be at least one cycle behind the OODA user. Moreover, if the OODA user could somehow complete two or more cycles in the time the adversary took to finish one, it would sow confusion in the opponent's camp. In battle (the context for which Boyd created the OODA loop), this ultimately results in panic, knee-jerk (wrong) reactions, and eventual collapse of the opponent.

The effect is not materially different in business settings. Witness, for example, the introduction of high-technology innovations by the Japanese for nearly two decades. It was commonly recognized that while the world's markets were enamored of their latest, greatest product introduction (first the Walkman, then CDs, then digital cameras, then compact video devices, then DVDs and MP3 players, etc.), the Japanese were hard at work on the "next big thing." The rest of the world was always at least one step behind.

Boyd himself provided the original, quintessential example of the fast-cycle OODA loop. As a U.S. Air Force fighter weapons instructor in the 1950s, he made a standing offer to all pilots: He would beat his opponent in 40 seconds or pay them $40. In eight years, no one was ever able to collect the $40 (Coram, 2002). The reason was that he was always able to execute what amounted to a near-instantaneous OODA cycle faster than any of his opponents could.3

Summarizing Boyd

Let's quickly review what we've just covered.

The OODA loop describes a process of observing, synthesizing those observations (orientation), deciding what to do because of the synthesis, and acting on that decision.

Although all systems go through this OODA process, most are completely oblivious to the fact that they're doing it.

The OODA loop was originally conceived as a way of mentally managing combat engagements to achieve victory, but its applicability in the development and deployment of strategy has yet to be fully realized.

The OODA loop appears, on the surface, to be reactive to changes in the environment; however, a deft practitioner can use it proactively to shape the environment or competitive arena to his or her own advantage.

The ability to cycle through the OODA loop multiple times while others do so only once can provide an insurmountable competitive advantage.

Armed with this knowledge of systems and the OODA loop, leaders can enjoy a substantive potential advantage over others (and the environment) in achieving their systems' goals. However, this advantage remains exclusively potential without discrete tools with which to execute the OODA loop.

The Logical Thinking Process

Concepts such as the OODA loop are eminently useful but sometimes difficult to translate to practical application without some kind of tool to bridge the gap between the conceptual and the practical. Fortunately, the appropriate tool for applying the OODA loop strategically is readily available: The Logical Thinking Process (LTP).4 The LTP is an outgrowth of the evolution of TOC. Originally conceived as a production scheduling and management methodology called "Drum-Buffer-Rope" (Goldratt, 1990), in the late 1980s and early 1990s TOC outgrew its former production-oriented boundaries and spread into the broader category of systems. One of the first such forays was the thinking process. When it became obvious that resolving production bottlenecks alone didn't always produce a more successful company, Goldratt needed another solution. He conceived the thinking process to address the application of his 5FS (Goldratt, 1990) when system-level constraints were not production bottlenecks-when the factor limiting overall system success lay in non-production areas.

This was a critical breakthrough because it raised the whole idea of constraint theory to a system concept, rather than just being a production methodology alone. The thinking process afforded a means to examine systems of any kind, not just production companies, and identify the one factor limiting the system the most in its mission to achieve its goal.

Originally composed of five logic trees or tools,5 the thinking process represented a simple application of the scientific method to the challenge of complex system problem solving: what's the problem (what to change), what do we do about it (what to change to), and how do we do it (make the change happen)? For the first time, the thinking process offered a concise, direct way to logically analyze whole systems composed of myriad complex interactions and do so rapidly. Moreover, it also allowed for "hypothesis testing" without extensive real-world experimentation to verify the validity of proposed changes. In addition, what it also did that no other problem-solving methodology did was to include a solution implementation "module"-the prerequisite and transition trees. In other words, a complete package. Figure 19-4 illustrates the conceptual flow of the thinking process as originally conceived by Goldratt.

Over the intervening years since Goldratt introduced the thinking process, the trees and their application have evolved and been refined. Although the process was originally intended to solve complex problems by identifying system constraints and facilitating ways to break them, it was inevitable that other applications would emerge. One of these was the use of the thinking process for strategy development and deployment (Dettmer, 2003). However, applying the thinking process for strategy development purposes requires some modification of both the trees and their sequence. To distinguish these evolutions from the original thinking process, the term "logical thinking process" is used hereafter.

FIGURE 19-4 The Logical Thinking Process.

The Intermediate Objectives Map

The most significant modification to the LTP for strategy development is the insertion of a new type of tree-the Intermediate Objectives (IO) Map-at the beginning of the process (Dettmer, 2007). The IO Map is critical to the strategic application. In fact, without it, the remainder of the LTP is nearly useless for strategy development.6 The IO Map is a relatively simple structure, but actually putting one together requires some dedicated thinking. Figure 19-5 shows a conceptual version of the IO Map. An actual IO Map may be found in Fig. 19-11 at the end of this chapter.

The goal indicated at the top of the IO Map is the ultimate outcome for which the system strives. In a for-profit commercial company, this is usually maximum profit. In not-for-profit organizations, such as charities or hospitals, the goal is usually some favorable contribution to society. Goals of government agencies are likewise not profit-oriented, but rather seek the successful provision of some beneficial service to the general population.

Every goal is typically achieved by realizing a set of critical success factors (CSFs). These CSFs are terminal outcomes, or results. They're considered critical because they're indispensable to attainment of the goal. In any system, and for any goal, very few CSFs are normally required to declare goal attainment. For most systems, they would number no more than three to five. CSFs represent very high-level outcomes. They are usually somewhat generic to the category of the system under discussion. For example, the CSF for any profit-oriented company would be quite similar, differing primarily only in degree of emphasis. If the goal of a commercial company is to maximize profits, there are really only three CSFs: increased Throughput, minimized Inventory, and controlled Operating Expenses (see Fig. 19-6).

Notice that none of these differs, whether the company is an automobile manufacturer or an insurance company. If these CSFs are realized, then the inevitable outcome is a company that has maximized profitability.7 Where do the specific details of company activities (processes, products, competitive factors, etc.) fall? They lie beneath the level of the CSFs themselves, in what Fig. 19-5 depicts as necessary conditions. It is at the necessary condition level that the unique picture of a particular organization emerges. Figure 19-7 shows how this might look for a typical manufacturing company.

FIGURE 19-5 Intermediate objectives map.

FIGURE 19-6 Goal and critical success factors (commercial company).

The CSFs of a not-for-profit organization or government agency would be somewhat different from those of a commercial company. For one thing, neither usually measures its Throughput financially, but rather in terms of whatever non-pecuniary benefit the organization is in business to provide for society. Minimum Inventory and controlled Operating Expense might certainly be relevant, however.

FIGURE 19-7 IO Map (partial)-commercial company.

The question of where to put such non-negotiable requirements such as adherence to the law, compliance with regulations, or environmental responsibility inevitably comes up. None of these factors, and others comparable to them, directly affect profitability, so they clearly don't fit as critical success factors. However, they usually do serve to define the behaviors associated with fulfilling them. In other words, their proper place is as necessary conditions for the generation of Throughput, the reduction of Inventory, or the control of Operating Expense. This positions them at least three layers down in any IO Map, and probably even lower.

FIGURE 19-8 OODA loop and the Five Focusing Steps.

How far down should the IO Map be "drilled?" For constructing a subsequent Current Reality Tree (CRT), it's not necessary to go much below the CSF and perhaps one or two layers of necessary conditions. However, for resolution of conflicts that might develop in using the LTP for either strategy development or for complex problem solving, it might be advisable to penetrate down five or six layers.

When the IO Map is completed, it provides two crucial ingredients for the successful application of the rest of the LTP. First, it clearly delineates the discrete activities and outcomes required to ensure achievement of the system goal (without regard to what is actually happening at the moment). Second, it provides the basis for consensus among everyone within the system-executives, managers, and specialized employees alike-on what they should be doing to support one another in a coordinated way. This might be called a "unified vision" of where the company is going and what's required to get there.

Constraint Management Model: A Synthesis of TOC and the OODA Loop

The 5FS, the heart and soul of constraint theory, constitute the guiding framework for real system improvement. The OODA loop represents an articulated model for a true cybernetic system-one that is not only capable of self-improvement, but self-determination of direction as well.8 There is an implicit relationship between the two (see Fig. 19-8).

The 5FS are inherently a subset of the OODA loop. Identification of system constraints requires observation and orientation (the first two steps in the OODA loop). Exploitation, subordination, and elevation are all elements of the decision step in the OODA loop. The actions to follow the prescriptions of the 5FS are the same as the final step of the OODA loop. Both employ a feedback process to begin the cycle again. What makes the OODA loop more generic than the 5FS is its applicability to situations in system operations that don't involve identifying and breaking constraints or dedicated system improvement effort.

Boyd originally conceived the OODA loop to help manage tactical operations. The O-O-D-A (and repeat) cycle is inherent in activities as narrowly focused as driving a car safely on a winding road, or as broad as steering the progress of a corporation into its future. However, it's this last, broader perspective with which we're concerned when we talk about strategy.

If we accept the idea that developing and deploying strategy is an expression of the OODA loop, the question that naturally follows is, "How do we go about doing this?" This is where the LTP offers an ideal solution. The combination of the OODA loop and the LTP produces the Constraint Management Model (CMM) for strategy development and deployment (Dettmer, 2003). It's so named because the LTP was derived from the effort to apply TOC to whole systems, and in using the LTP to develop and deploy strategy the management of constraints is a natural byproduct. In other words, you can't effectively execute whatever strategy you might develop without identifying and breaking your existing system constraints. Figure 19-9 illustrates the CMM.

The CMM is, itself, a seven-step cyclical process.

Step 1. Define the paradigm. The first step in any strategy development process should be to define the system, its goal and CSFs, and the characteristics of the environment in which it operates. This is where the first three levels of the IO Map are developed. Besides some serious conceptual thinking, this naturally requires both internal and external observations to be made-the first step in the OODA loop.

FIGURE 19-9 The constraint management model. (From Dettmer, H. W. 2003. Strategic Navigation: A Systems Approach to Business Strategy. Milwaukee, WI: ASQ Quality Press.) Step 2. Analyze the mismatches. Once the system and its operating environment are defined and observations of the current situation made, it's time to synthesize what should be happening with what actually is happening. This synthesis is the essence of Boyd's orientation step in the OODA loop. The product of this synthesis is one or more gaps, or what Boyd referred to as "mismatches." In this case, the mismatch is between reality and our expectations. The size and scope of such gaps are specifically articulated. Inevitably, a system's current constraint will be found somewhere within the identified mismatches.

Step 3. Create a transformation. This is essentially a "brainstorming" step. It's the point in the process where creativity is required-thinking "outside the box" to create breakthrough ideas. Such ideas must be created before any decisions about what to do can be made. "Creation" is an inspirational or inventive activity. There are several widely used idea-generation methods, such as TRIZ (Rantanen and Domb, 2002), that can contribute breakthroughs in thinking needed to close the gaps discovered in Step 2.

Step 4. Design the future. Once a breakthrough idea (or more than one) is created to close the gap defined in Step 2, it must be integrated into a whole-system plan that includes not just the changes to close the gap, but the continuing operations that had no mismatches associated with them. Hypothesis testing, whether in the form of a simulation, prototype, or just a logical verification, verifies the efficacy of various alternatives, from which one or more are selected. This is the essence of the decision step in the OODA loop.

Step 5. Plan the execution. Once the decision is made, an execution plan should be formulated, since "the devil is in the details." Resources, accountabilities, timelines, and measures of success are established in execution planning. (If this is beginning to sound like a project, it's because it is!) An execution plan represents the "front end" of the OODA loop's act step.

Step 6. Deploy the strategy. This is the conclusion of the act step. How long the execution actually takes will depend on the nature of the activities planned. Strategies are typically longer-range than business plans or tactical actions. Time horizons are often measured in years. However, the completion of Step 5 makes managing deployment better structured and easier to monitor. Moreover, as the inevitable surprises, deviations, or unexpected variations occur in execution, the plan can be expeditiously corrected to accommodate them. This is the second half of the OODA loop act step.

Step 7. Review the strategy. Presuming that no major breakdowns in strategy deployment occur, the only remaining task is to evaluate the strategy's overall effectiveness. This obviously brings us back to the OODA loop's first step again-observe. This time, however, we're not looking for deviations in deployment. We're determining whether the overall strategy we developed in Step 4 is really producing the results we want and expect.

Step 7 includes two feedback links. The more common one connects to Step 2 again (analyze the mismatches). Working with our previously defined paradigm and expectations (established the first time through the OODA loop in Step 1), we compare the second round of observations with our original expectations.9 Have the gaps identified earlier narrowed or even closed altogether? If not, or if they're not closing quickly enough to suit us, we must reevaluate our strategy and adjust it as necessary. Even if the gaps have closed, a proactive application of the OODA loop requires that we identify and develop "the next big thing" in our chosen field of operation. For example, Sony didn't sit on their Diskman audio players or Trinitron televisions after they stormed the market with them. They immediately began working on an MP3 player and a flat-screen video display. That's being proactive. The second, and less obvious, feedback loop takes us through Step 1 again. This is likely to happen much less frequently than the other feedback loop. This particular loop implies that a complete re-examination (and perhaps redetermination) of goals, critical success factors, and the external environment is required. In other words, it's possible that dramatic change in the external environment of such magnitude has precipitated a complete redesign of strategy. What kind of event might this be? How about an economic depression or some catastrophic event such as a world war? Take Toyota, for example (Holley, 1997). Originally (before World War II), it was a manufacturer of textile machines. By the end of that war, its surviving manufacturing base had been completely converted to automotive vehicles, at the insistence of the Japanese Imperial Army. That was a conversion forced on Toyota by circumstances. However, by 1997 Toyota was anticipating that within 100 years the automobile segment of their business would constitute no more than 10 percent of the total. The rest would be in low-cost prefabricated housing and information systems. These are strategic shifts-proactive ones.

The Role of the LTP in the CMM

How does the LTP fit in with the CMM? The preceding description of the CMM fairly begs for a structured tool to make Steps 1 through 5 happen. That tool is the LTP. Figure 19-10 shows how the LTP energizes the CMM.

The IO Map is used to establish the benchmark of expected or desired performance. For an organization that already understands that it's not yet where it wants to be, the articulation of the goal and CSFs in the IO establish a "stake in the ground"-the destination marker that determines where the organization wants to be at the end of the strategy's time horizon. Supporting necessary conditions represent the high-level functional milestones that must be achieved to reach the goal. Inherent in the development of the IO Map are research, observations, and information gathered about the external environment.

With the IO Map as the entering argument (desirable state), a CRT10 is constructed to depict the relationship between reality and the end results depicted in the IO Map. The resulting gaps are reflected as undesirable effects (UDEs). The construction of the body of the tree, down to the critical root causes, embodies the synthesis (or orientation) of newly acquired knowledge about the external environment with experience, expertise, custom, tradition, etc.-the existing paradigm, if you will. The CRT produces the logical causes of the gaps (UDEs), without regard to whether they are politically acceptable to consider changing.

Especially in the latter situation, the transformation created in Step 3 is facilitated by the use of Evaporating Clouds (ECs), which are specifically designed to resolve intractable dilemmas such as political feasibility. The output of the ECs, and the beginning of this transformation process, is one or more injections that represent breakthrough ideas. These ideas become initiatives, or new projects that will provide the impetus to move the organization from where it is to where it wants to be. Some of these initiatives (changes) will undoubtedly be externally focused. Others will be inwardly directed.

The Future Reality Tree (FRT) takes these initiatives, or ideas, and logically structures them to verify that, in fact, they will move the organization toward its ultimate goal. The reflection of that movement is in the narrowing, or complete closure, of the gaps identified in Step 2. This narrowing/closure is represented as a desired effect (DE) in the FRT. Besides logically verifying that the initiatives created will, in fact, advance the organization toward its ultimate goal, the FRT will include the "ferreting out" of negative branches-those conditions under which the whole strategy deployment (or key aspects of it) might be derailed. The "trimming" of these negative branches becomes contingency plans. The completed FRT, with trimmed negative branches,is the organization's strategy. The FRT injections are the strategic initiatives, programs, projects, etc. required to impel the organization toward its goal.

FIGURE 19-10 The logical thinking process and the constraint management model.

Once the strategy is developed in Step 4 as the second part of the decide stage in the OODA loop, the action stage naturally follows. Step 5 is the detailed execution planning. Each of the injections, or initiatives, defined and verified in the FRT (Step 5) is "fleshed out" in a Prerequisite Tree (PRT). Obstacles are overcome and important milestones and sequential/parallel tasks are identified. The resulting PRT forms the basis of a project plan-a project activity network-that can be managed using Critical Chain Project Management (CCPM). The consolidation of all PRTs into multi-project CCPM becomes the organization executive's tool for managing the overall long-term deployment of the strategy.

What about Steps 6 and 7?

The natural question at this point is, "But what about Steps 6 and 7 of the CMM?" The answer is that at the conclusion of Step 5, the role of the LTP ends. Strategy deployment (Step 6) is an ongoing leadership responsibility. Effective executives use a variety of tools and techniques to shepherd a deployment along. If the execution planning in Step 5 included conversion of PRTs to a CCPM schedule, then one of the obvious TOC-related tools a leader might use at this point is Buffer Management (BM).

Step 7 is an executive function, too. It requires a conscious, deliberate effort to repeat the observe step of the OODA loop again with the objective of identifying failure of the strategy to deliver the intended results and the reason for that failure. In many, perhaps most, cases such failure has less to do with the inadequacy of the strategy than it does a rapid, possibly catastrophic shift in the environment. How many perfectly good strategies do you think might have been rendered ineffective by the 9-11 terrorist attacks in 2001, or the collapse of the U.S. economy in 2008? Even if the triggers are not quite so dramatic, such environmental changes can prompt a need to reevaluate and adjust strategies-or even replace them altogether. And so begins the second iteration of the OODA loop with a return to the IO Map and CRT.

Summary and Conclusion

Formal strategic planning in business dates back only to about 1965, although the development and employment of strategy have been practiced since the days of Sun Tzu some 2500 years ago. In contemplating strategy, there are some worthwhile points to keep in mind.

Distinguish between the development of strategy and a strategic plan. The latter is no more than the capture in some written form of the former. Strategy development, not the written plan, should be the primary focus.

For businesses, strategy is about far more than just marketing and sales. It's concerned with the long-term attainment of the organization's goal. If that organization is a commercial company, Marketing and Sales will be but one part of that effort.