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Certain to Win Boyd’s OODA Loop as a business weapon

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1 Certain to Win Boyd’s OODA Loop as a business weapon
Or, any position other than first is a tie for last. Welcome – be sure also to play this as a slide show. For an in-depth look at the topics in this briefing, please read the book version of Certain to Win: Thanks!! Chet Richards Author, Certain to Win Editor, and Defense and the National Interest Chet Richards J. Addams & Partners, Inc. March 2008 © Chet Richards • (+1)

2 Starting Point: Wars don’t always turn out as expected
Russia Chechnya Soviet Union Afghanistan United States Vietnam Various Arab States Israel As if you haven’t noticed – larger and/or more technologically advanced state on the left, winner on the right. Israel is up to about 1970, when it began to be captured by technology. For more details on this subject, I recommend Stephen Biddle’s superb book, Military Power. For a depressing but insightful look at where we may be headed, try Martin van Creveld’s The Transformation of War. © Chet Richards • •

3 Business doesn’t either
General Motors Market share fell from 52% to around 25% Sears Dropped to #52 on Fortune 500 American Airlines Lost billions in 2001, 2002, 2003, & 2004 Delta, Northwest, United Airlines, US Airways In Chapter 11 Digital Equipment, Compaq, Montgomery Ward, Eastern Airlines, TWA, Pan Am, McDonnell-Douglas Gone Every time I give this briefing, I have to update the list on the left – talk about depressing. Technically, Sears has now moved down to the bottom row. On March 24, 2005, it was acquired by another faded retail powerhouse, Kmart, in an attempt to prove yet one more time that ½ + ½ = 2 (this is called “synergy.”) USAirways was effectively bought by America West as it emerged from Chapter 11 in September 2005, and United Airlines will emerge in February 2006. As this is written, Ford has announced layoffs in the 30,000 to 35,000 range (hourly, salaried, and company officer) and a 26% reduction in capacity. In November 2005, GM announced a 19% reduction in capacity and 30,000 job losses that the company announced would be through attrition and buyouts. It wasn’t that long ago that Ford, GM, and the other companies on the left were the paragons of American industry and had all of the advantages thought to ensure success. © Chet Richards • •

4 But it’s not inevitable
Automobiles Toyota, Nissan Retailing Wal-Mart, Target Airlines Southwest, JetBlue, Singapore, Emirates, Ryanair, AirTran Computers IBM, Apple Can’t blame it on being in a “bad businesses.” Toyota made around $11 billion net profit in FY 2004, which ended in March. The March 2005 revision of this presentation removed IBM’s PC business, which was bought by the Chinese firm, Lenovo, and added Apple. © Chet Richards • •

5 © Chet Richards 2005-2006 • (+1) 404.231.1132
In other words, there are many times when the side we’d pick to win, based on: size/financial resources technology market share These are three of the underlying factors often thought necessary for business success. It this were true, the Fortune 500 would never turn over. In a July 2004 piece in US Business Review, Consultant Ray McKenzie of Fujitsu Consulting wrote: “All of this may have been fine prior to the mid-1990s or during the Industrial Age, when size and strength through accumulation of assets created barriers to entry and isolated or minimized competitive threats. With a business strategy that emphasized size and strength, the watchwords were efficiency and cost control, and hence the need to focus on those things that were core and to reduce the energy given to anything that seemed to be non-core. “Today, these Industrial Age tactics seem to be crashing headlong into the Information Age …” Actually, these were always dumb strategy (although at times, they could be clever tactics) since they entice their practitioners into the “Maginot Line Mentality.” For more information on this deadly but all too common syndrome, I modestly recommend my piece, “Riding the Tiger” at: Point is that at the local level, the Maginot Line worked – it channeled the German attack into the Low Countries, where an Anglo-French army was fully prepared to deal with it. Unfortunately, the Maginot Line, and the cost of building it, also removed anyone with an inclination use maneuver warfare (which we’ll cover in a minute) from the French high command. As a result, the Germans were able to penetrate allied defenses just to the north of the Maginot Line and maneuver into their rear areas, cutting off the main allied forces in Belgium and northern France. loses. © Chet Richards • (+1)

6 © Chet Richards 2005-2006 • (+1) 404.231.1132
Why? Indeed. A rhetorical device Boyd often used. It has to something unexpected, in a sense. © Chet Richards • (+1)

7 The military’s answer is something called “maneuver warfare”
And that is the business of decision cycles, or inside the decision loop, as people say … if, in fact, you can deceive him with respect to what you are going to do, to cause him further confusion and make him keep his force in place one day too long, then, in fact, you find yourself all the way to Baghdad. Here you see all the ingredients you need to succeed in war: timing, deception, ambiguity, surprise. I love that kind of talk. Gen Tommy Franks, Commander, USCENTCOM in Peter Boyer, “The New War Machine,” The New Yorker, June 30, 2003 © Chet Richards • •

8 © Chet Richards 2005-6 • • 404.231.1132
The primary advantage we want to achieve in all forms of maneuver is time. This is key. It is what distinguishes maneuver from, say, attrition warfare. The term “maneuver” may be confusing, with some distinguished military analysts still wanting to confuse it with “movement.” But there is also a lot of movement in attrition warfare, primarily to position firepower or to avoid the enemy’s. “Maneuver,” on the other hand, has the connotation of “maneuvering someone out of position” or “out of their comfort zone.” It is concerned with creating surprise, ambiguity, panic, breakdown of cohesion, and so on. If you look up “maneuver” in a good dictionary, you’ll see that it has the connotation of something skillful and intended as part of a stratagem. The Marine advance on Baghdad in March – April 2003 is (rightfully) considered as a masterpiece of maneuver warfare, but it you work the numbers, it averaged about 1 mph from crossing the Kuwaiti border to downtown Baghdad. © Chet Richards • •

9 Using time as a weapon: The “H-Y War” 1981 - 1983
Honda Motorcycles introduced or replaced 113 models, effectively turning over its entire product line twice. Yamaha, which also started with about 60 models, was only able to manage 37 changes in product line over the same 18 months. So, for one thing, Honda was able to incorporate (and test in the marketplace) a much wider variety of styling & technology. A very famous example of how a company can use time to shape itself and the marketplace, to the detriment of its competitors. Yamaha had built an enormous factory and proclaimed that it was now the world’s leading manufacturers of motorcycles. An American company would probably have responded by building an even larger factory – the business version of attrition warfare. A key point is that Honda wasn’t just throwing stuff out there but was learning from each iteration. © Chet Richards • •

10 © Chet Richards 2005-6 • • 404.231.1132
H-Y War: The Results But more fundamental: Honda succeeded in making motorcycle design a matter of fashion, where newness and freshness are important attributes to customers. Next to a Honda, Yamaha’s bikes looked old, unimaginative, unattractive. Yamaha was left with 12 months of unsold (and unsellable) inventory. Stalk & Hout, Competing Against Time, 59 And this is what they were doing with that learning. First two bullets are key. At the end of the war, the motorcycle market in Japan was a different beast than it was at its start. Both Honda and the marketplace had changed each other, leaving poor old Yamaha out in the cold. I can find no evidence that Yamahas were qualitatively or even technologically inferior. Comment: a classic example of “shaping the marketplace.” © Chet Richards • •

11 © Chet Richards 2005-6 • • 404.231.1132
A time-compressed company does the same thing as a pilot in an OODA loop … It’s the competitor who acts on information faster who is in the best position to win. One of Stalk and Hout’s conclusions on how Honda managed to make it happen. Notice their claim that it’s competitor who acts on new information faster. This implies, of course, that he or she must understand the new information and what it means. This is very close to what Boyd called “operating inside a competitor’s OODA loop” – changing the situation (“acting on the information”) before the competitor can understand what’s going on. And changing it again, and again. George Stalk, Jr. & Tom Hout, Competing Against Time, © Chet Richards • •

12 © Chet Richards 2005-6 • • 404.231.1132
Business is a dogfight. Your job as a leader: Outmaneuver the competition, respond decisively to fast-changing conditions, and defeat your rivals. That's why the OODA loop, the brainchild of "40 Second" Boyd, an unconventional fighter pilot, is one of today's most important ideas in battle or in business. A decade later they’re still talking OODA loops. This was just before Robert Coram’s bio of Boyd, the one on the title page of this briefing, was published. Keith Hammonds, “The Strategy of the Fighter Pilot,” Fast Company, June 2002. © Chet Richards • •

13 © Chet Richards 2005-6 • • 404.231.1132
This is the OODA loop Orient Observe Decide So what is an “OODA Loop”? This is how Boyd originally explained it. Act © Chet Richards • •

14 This is not the OODA loop
Orient Observe Decide Boyd has only himself to blame, since he originally explained it this way. In his defense, it must be noted that he never actually put the circular version in any of his briefings. The circular version isn’t very competitive because: It’s not a good idea to stop observing as you move to the other stages. It’s not uncommon to get wrapped up in internal decision making exercises, and stop paying attention to the world outside, but it’s not a good idea. In this model, operating tempo is limited by how rapidly you can cycle through the loop – that is, how long it takes to cycle past the Act stage. While you’re observing, orienting, and deciding, you’re on autopilot (presumably.) If you delay decisions, you delay actions. In the real world, delaying decisions can often speed up the operating tempo, if in the process you eliminate the need to revisit or revise previously made decisions. There are actually maneuver-based systems that work this way. A cycle such as this would be what is called a “linear” or sequential model and it would have great difficulty in dealing with the complexity of the real world. For all these reasons, it’s best to avoid terms like “cycling through OODA loops.” So what are we really doing? That’s shown on the next chart. Act © Chet Richards • •

15 An OODA “loop” with power
Feed Forward Observe Decide Act Action (Test) Implicit Guidance & Control Observations Unfolding Circumstances Outside Information Unfolding Interaction With Environment Orient Decision (Hypothesis) Feedback J. R. Boyd, “the Essence of Winning and Losing,” 1995. Cultural Traditions Genetic Heritage New Information Previous Experience Analyses & Synthesis Unfortunately, it can not as simple as “observe, then orient, then decide, then act.” In fact such a sequential model would be very ponderous and would not well describe how successful competitors operate. The key to quickness turns out to be the two “implicit guidance and control” arrows at the top. In other words, most of the time people and groups do not employ the explicit, sequential O-to-O-to-D-to-A mechanism. Most of the time, they simply observe, orient, and act. There is data coming out to support this (see Gary Klein’s book, Sources of Power.) The question, of course, is, “What action?” A thinking opponent doesn’t provide us with a laundry list of his tactics so we can work out responses in advance. The mechanism which handles this uncertainty and makes the loop function in a real world situation is “Orientation.” As we suck in information via the “Observe” gateway, it may happen that we notice mismatches between our orientation and what we’re observing in the real world. If we don’t spot these mismatches and correct our orientation, the actions that flow from it may not be as effective as we intend. This can open up opportunities for our opponents. Boyd’s concept of strategy places heavy emphasis on attacking the other side’s orientation to open up just these kinds of opportunities, and he suggests many ways to do this. Note that “OODA” speed is quite different from the speed of our actions. Doing something dumb or irrelevant, but doing it at high speed, may not provide much of a competitive advantage. The “Decision/hypothesis” block is the learning part of the loop, where we experiment and in the process add new actions to the Implicit Guidance and Control link. You can also think of it as programming orientation for future intuitive actions. © Chet Richards • •

16 Observations on orientation for business
Implicit Guidance & Control Implicit Guidance & Control Cultural Traditions Genetic Heritage Action Observations Feed Forward Feed Forward Decision Analyses/ Synthesis New Information “Orientation” was Boyd’s concept for taking our interactions with the outside world and deciding what they mean. You could think of it as creating a mental model for what’s happening externally. It involves factors that can change at various rates, and some, like genetic heritage, not at all. This is why change can be difficult. It always seems to require a destructive phase, where previous experiences (reflected in things like existing processes and practices) are broken up and become less relevant. “Correction of error cannot always arise from new discovery within an accepted conceptual system. Sometimes the theory has to crumble first, and a new framework be adopted, before the crucial facts can be seen at all.” Stephen Jay Gould, Dinosaur in a Haystack, 127. (emphasis added - for “framework,’ substitute “orientation.) Previous Experiences Observation is the only feed into Orientation © Chet Richards • •

17 Orientation locked tight
The company (A&P), under pressure from Kroger, experimented with a new concept, “The Golden Key.” “It sold no A&P branded products, it gave the store manager more freedom, it experimented with innovative new departments … Customers really liked it. “What did A&P executives do with ‘The Golden Key’? They didn’t like the answers it gave, so they closed it.” Although I think the fundamental premise behind Good to Great is flawed, the book is a wonderful source of ideas. Jim Collins, Good to Great, 68. © Chet Richards • •

18 Battle of Orientations: 1
James E. Press, president of Toyota Motor Sales, said any top American company must first have a lineup that meets its customers' needs. It also must produce vehicles in the United States that lead their category in quality, resale value, comfort and design, he said. A leading American player has to have a strong brand image, a dealer network that offers good service and most important, put buyers first, Mr. Press said. Asked if Toyota meets those criteria, he said, "Not yet. We can improve on everything." © Chet Richards • •

19 Battle of Orientations: 2
Mark Fields, president of Ford's operations for the Americas, said: "Americans want to buy American cars.” Micheline Maynard, Toyota Shows Big Three How It's Done, New York Times, January 13, 2006 © Chet Richards • •

20 Improving orientation
Toyota calls this hansei Set aside specific times (e.g., at each staff meeting) to review feedback on possible mismatches (“Reflection must be institutionalized as a business process.” Michael Hammer, co-author of Reengineering the Corporation, and Steven A. Stanton, Fortune OnLine, Nov 24, 1997) Abolish the Executive Dining Room. Abolish “Management Clubs.” The problem with the last two is that they tend to focus internally. Also “management clubs” quickly become loyalty checks. It might be possible to use these things effectively, but it’s an uphill battle – just get rid of them. Toyota has put a lot of thought on how to improve Orientation (although I’ve never seen them use that term). These are tubs for drinking your own bathwater © Chet Richards • •

21 Improving orientation (II)
Post on internal web site (& invite discussion): Assessment of the current situation: customers, competitors, economy, government, our situation, etc. Post-mortems (proposals, projects, etc.) Specific competitor observations (esp. things they do better) Also include a competitive intelligence, “what competitors do better,” section in staff meetings. Tom Peters once wrote that the real business of any company is done around the coffee pot and water cooler. © Chet Richards • •

22 © Chet Richards 2005-6 • • 404.231.1132
What about “action”? The idea is that the vast majority of the time, actions should flow smoothly from orientation via the “implicit guidance and control” link. Thus, excellence in technique is vitally important – study, train, rehearse, practice, critique constantly, from the factory floor to the executive suite. “I don’t make decisions,” the fireground commander announced to his startled listeners. “I don’t remember when I’ve ever made a decision.” – Gary Klein, Sources of Power Specific action depends on what sort of competition you are in. A typical Boyd operation appears to the opposition as a series of violent, jerky, unexpected, disorienting maneuvers. While the enemy is disoriented (which against a worthy foe will be very brief) you eliminate him or her. It is unexpected because of the way it was set up – the art of cheng (expected) in combination with ch’i (unexpected) maneuvers. This is a fundamental concept in all forms of maneuver conflict, and is one way to unleash the power of time. © Chet Richards • •

23 Implicit Guidance & Control
Observation ___ ____ Implicit Guidance & Control (Orientation) Unfolding Environment: Customers Competitors Economy Government Employees Financials Other Indicators Etc. Observations Feed Forward (Orientation) What you’re looking for are “mismatches” between a) what your orientation is telling you the world ought to be and b) what the world really is. Observation is one of the two places (Action is the other) where the internal world comes into contact with external reality. All of the other machinations of the OODA loop are internal, with all the hazards (unstable feedback loops, entropy, etc.) that that implies. It follows that anything which hinders Observation in any way risks not only feeding bad information into Orientation but corrupting all of the other processes in the loop as well. Feedback From Action Feedback From Decision © Chet Richards • •

24 © Chet Richards 2005-6 • • 404.231.1132
In one of the first games he attended, [New Sacramento Kings Owner] Gavin [Maloof] missed an entire quarter waiting in a beer line. Knowing his father would have gone nuclear, Gavin arranged to have 20 minibars installed throughout the arena. Nobody waits for a beer now. Some companies actually work this way: genchi genbutsu*, as Toyota says, in action. By the way, the Kings were 15 years old when the Maloof brothers bought the team and the arena. This had been going on for 15 years, and nobody had noticed (or cared.) I would bet that previous owners had no problems getting beer in their sky boxes. Just incredible, but all too common. *genchi genbutsu – roughly, go and see for yourself. Hugo Lindgren, The Flying Maloof Brothers, New York Times, February 15, 2004 © Chet Richards • •

25 Decision Decision (Hypothesis)
Feed Forward Feed Forward (Orientation) (Action) Note: Decisions, in this sense, are needed when action does not flow from orientation. These types of decisions always slow down the OODA “loop” They can be considered as part of the learning process. Feed Back As I mentioned before, “decisions” in the form of “hypotheses” are generally part of the learning, rather than the execution process. In armed conflict, you train and then you fight – when you are engaged with the enemy, there isn’t time for developing a lot of new capabilities. Defeated warriors go into battle and then look for a way to win – Sun Tzu. Business is different from war in this respect, since you can and must be learning while you are operating. But the main idea is that until this learning gets into orientation and affects the implicit guidance and control feed into action, you really haven’t accomplished anything useful. Note that most “decisions” in the usual sense are actually actions: for example, you publish some type of document that promulgates what you have “decided” to do intuitively. In either business or war, the “decision” function is part of the shaping of future Orientation. Note: Decision is fed only from Orientation (Observation) © Chet Richards • •

26 What OODA “loop” speed really means
Observe Orient Feed Forward Observations Unfolding Circumstances Outside Information Unfolding Interaction With Environment Quickly understand what’s going on Implicit Guidance & Control Implicit Guidance & Control Know what to do Act And be able to do it Unfolding Interaction With Environment Action (Test) Feedback Decide Decision (Hypothesis) Feed Forward Feedback While learning from the experience IF action is flowing smoothly and (nearly) instantaneously from orientation, as it should the vast majority of the time, then the speed that counts is the speed to reorient in response to changing external and internal conditions. That speed is symbolized by the Intel Core Duo™ chip. There is no case where slower is better. You may not take any action (that is, no action may flow from your current orientation), but your internal processor should always be faster than those of your competitors. Note that in the “incorrect” concept of the OODA loop (the O to O to D to A variety), speed and accuracy of decisions will tend to trade off. That is, you improve one only by shortchanging the other. This doesn’t happen in the OODA loop that Boyd actually drew. © Chet Richards • •

27 © Chet Richards 2005-6 • • 404.231.1132
Key Points: When you’re doing OODA “loops” right, accuracy and speed improve together; they don’t trade off. A primary function of management is to build an organization that gets better and better at these things. Recently some people have criticized the OODA loop by claiming that we can improve our decisions only by hurrying through observation and orientation. This would be true if the OODA “loop” were “observe, then orient, then decide, then act.” But Boyd never drew it that way. © Chet Richards • •

28 © Chet Richards 2005-6 • • 404.231.1132
According to Boyd, a fighter pilot didn’t win by faster reflexes; he won because his reflexes were connected to a brain that thought faster than the opponent. Bing West and MajGen Ray Smith, USMC, Ret. The March Up, p. 11 This is a good summary of what we’ve been discussing. © Chet Richards • •

29 © Chet Richards 2005-6 • • 404.231.1132
Question How can your corporate “brain” think faster? Answer: Ultimately, a culture or climate that encourages people to use their initiatives to further the goals of the organization. Under such a culture, people will solve the technical & operational problems. If we agree that OODA loop “speed” is an important part of competitive advantage, we can ask how to increase it. Certain to Win (the book) is all about how to improve OODA speed, and why. You can make progress applying proven techniques to your existing processes, as the insurance industry, for example, has done for claims processing. Similarly, you can get ideas from the Toyota Production and Development Systems, both of which are roughly twice as fast as most of their competitors. But your competitors can apply the cookbooks, too. I think you will find that competitive advantage must come from something more fundamental. What you want to do is establish a culture or environment within which people will invent ways to improve, develop, and produce new products/services more quickly than the competition. This Toyota stuff, for manufacturing as well as development, has been out there for a while. If your people aren’t using it, why? That is the fundamental problem that you must solve. “People” means everybody in the organization, from the president on down This approach depends on the personalities and leadership skills of the people within the organization. But then, do you know any human activity that doesn’t? Why do some college and professional coaches have astonishing win/loss records, even though they use the same equipment and recruit from the same pool as all of their competitors? Some analysts draw a distinction between “culture,” which pertains to the organization as a whole, and “climate,” which is established by individual leaders or managers. Clearly, there is a potential for the two to conflict. [thanks to US Army MAJ Don Vandergriff for this observation.] © Chet Richards • •

30 The Principles of the Blitzkrieg
Fingerspitzengefühl - Zen-like quality of intuitive understanding. Ability to sense when the time is ripe for action. Built through years of progressively more challenging experience. Einheit - Has the connotation of "mutual trust" and implies a common outlook towards business problems. Built through common experience. Fingerspitzengefühl at the organizational level. Boyd’s “Principles of the Blitzkrieg,” which came partly from established German doctrine and partly from extensive interviews during the 1970s, provide a framework for creating competitive cultures. According to this scheme, any culture or leadership climate will work if it advances these four attributes. John didn’t like the term “Principles of the Blitzkrieg” because of its connotations. He preferred to call these four, “An Organizational Climate for Operational Success,” thereby tying it to any type of organization. Another important point: Since this “climate” permeates the organization, it tends to accelerate OODA loops (particularly reorientation time) from top to bottom. This is far more likely to produce a competitive organization than trying to identify OODA loops one at a time and then devising new processes to speed them up. In any case, under the mission/Auftrag concept (next chart), if people can figure out how to shorten and simplify something, or eliminate it entirely, they just do it. One foolproof way to tell that people have “taken ownership” of a process is that they’re spending time and energy to improve it. © Chet Richards • •

31 © Chet Richards 2005-6 • • 404.231.1132
Blitzkrieg, continued Schwerpunkt - Any concept that gives focus and direction to our efforts. In ambiguous situations, answers the question, "What do I do next?” Requires leadership. Auftragstaktik – Convey to team members what needs to be accomplished, get their agreement to accomplish it, then hold them strictly accountable for doing it - but don't prescribe how. Requires very high levels of mutual trust. The most important idea is that in order to use mission orders (Auftragstaktik) successfully, the other three elements must be in place. You earn the right to use Auftragstaktik, after you do the hard work of establishing the other three elements of the culture. “A practice of breeding and cultivating a culture in which there is an unending quest for perfection. It is ingrained throughout both teams, starts at the top, and pervades every level of the chain of command.” “The ‘Birds & Blues’ embody the pursuit of excellence,” editorial, AviationWeek, March 21, 2005, p You would be surprised, or perhaps not, at the number of managers who believe this describes their companies, although they have done nothing to create such an organization. The AvWeek article gives some idea of what is required, as does even a cursory look at the training of elite military units. © Chet Richards • •

32 Fingerspitzengefühl: excellence at the level of tactics
Every day the sales team met at 7am for two hours of training that involved role playing, sales strategies, and videotaping of mock sales calls. Don Sumner, 38, an account executive, says Winkler has handed him a three-page performance analysis more than once, after overhearing one of Sumner's phone pitches. "Dealing with someone who can be such an S.O.B. has made me more thick-skinned," says Sumner. Since his arrival the number of clients at SecureWorks has grown from 100 to 800 … New orders at the now profitable company are growing at 200% to 300% a year ~ Fortune Small Business, “The Best Bosses,” October 2004. The company is SecureWorks in Atlanta, and “Winkler” is Tyler Winkler, who took over as VP of Sales in Virtually all Winkler’s sales force are making several times what they made before and most say they would follow him to another company. People with a military background aren’t surprised by this chart: Drill sergeants are the soul of any army. You would be surprised, though, how many companies consider training a cost (i.e., to be minimized.) Question – if you are a CEO, how do you know for sure where your company stands? © Chet Richards • •

33 Fingerspitzengefühl as strategy
There is a surface version of genchi genbutsu (go and see for yourself) and a much deeper version that takes many years for employees to master. What the Toyota Way requires is that employees and managers must deeply understand the process of flow, standardized work, etc. Jeffrey K. Liker, The Toyota Way, p. 224 emphasis added So, you wonder how many companies today have anything about them that is worth studying for years in order to “deeply understand.” In addition to genchi genbutsu, Toyota employees at all levels also study, practice, and attempt to master gemba, nemawashi, hansei, hoshin kanri, and of course, hourensou. And that’s just for the “Way” in general. If they are in production, for example, there’s more to master: kaizen, kanban, jidoka, heijunka, mura, muri, muda, single piece flow, pull system, standardized work, and so on. They take this obligation very seriously, which is why Toyota is consistently the most profitable car company in the world. This may seem like a lot, but ask any member of a top military unit, such as the Marines or a member of a special operations force or other elite unit, what they have to master over the course of a career. Now compare that again with what your company requires. And it’s not just elite units. I added up the formal training I had during a typical (and decidedly non-elite) AF Reserve career: (Army) ROTC - 8 academic semesters plus a 6-week summer camp at Ft. Bragg, NC (Army) Engineer Officer Basic in residence, Ft. Belvoir, VA - approx. 10 weeks Air Force Squadron Officer School (Correspondence) – about 6 months Air Command and Staff College (Correspondence) - took about a year Six weeks intelligence cross-training in residence at Lowry AFB, CO Air War College (Seminar) - took about 18 mos. to complete, including 2 research papers Reserve Attaché Course - 4 weeks in residence, plus 6 weeks rotation in selected offices at DIA Six weeks in-residence Arabic at DLI and 2 years of Basic and Intermediate Arabic via tapes, workbooks, correspondence, and weekend seminars © Chet Richards • •

34 © Chet Richards 2005-6 • • 404.231.1132
“The Operating System is GE's learning culture in action. “It is a year-round series of intense learning sessions where Business CEOs, role models and initiative champions from GE as well as outside companies, meet and share intellectual capital.” Note that the Operating System is the culture in action, and not a conglomeration of lines and boxes on a chart. - 2/25/2003 © Chet Richards • •

35 © Chet Richards 2005-6 • • 404.231.1132
Einheit hits the beach It is not more command and control that we are after. Instead, we seek to decrease the amount of command and control that we need. We do this by replacing coercive command and control methods with spontaneous, self-disciplined cooperation based on low-level initiative, a commonly understood commander’s intent, mutual trust, and implicit understanding and communications. MCDP 6, Command and Control, p. 6 This is maneuver warfare in a nutshell. But it applies to any group that must work together to accomplish something in an environment of uncertainly and stress. I’m not a big fan of formulas and memorization, but any one who hasn’t internalized this page should not be a member of your team. © Chet Richards • •

36 Flowdown: Schwerpunkt for manufacturing
The Toyota Production System, quite simply, is about shortening the time it takes to convert customer orders into vehicle deliveries. This is an excellent example of the Schwerpunkt concept in business. The more you study the Toyota Way and its various systems, the clearer it becomes how everything they do supports this objective. Notice: the use of time, as in all forms of maneuver the anchoring of this statement firmly on the customer An external focus is essential for a Schwerpunkt in either business or war. In war, the focus is on the enemy and in business it is on the customer, and as maneuver warfare guru Mike Wyly has noted, competitors can be considered as malevolent and mobile parts of the environment. Note that this does NOT say that each shop in a TPS has a Schwerpunkt of shortening its own throughput span (that would put the system out of balance and lead to accumulation of inventory – puddling.) People who work in the TPS or similar systems must be well trained (“deep understanding”) in the system itself and their roles in it. Just like people are in elite military organizations. This tells everybody in Toyota manufacturing: “When in doubt, take the action that has the biggest impact on order-to-delivery time”. © Chet Richards • •

37 Augtragstaktik—missions and contracts instead of tasks
The concept of mission can be thought of as a contract, hence an agreement, between superior and subordinate. The subordinate agrees to make his or her actions serve superior's intent in terms of what is to be accomplished. The superior agrees to give the subordinate wide freedom to exercise his or her imagination and initiative in terms of how intent is to be realized. J. R. Boyd, Patterns of Conflict, 76 A few points: A “contract” implies a freedom to choose (to paraphrase Milton Friedman.) If there is no choice, then you have a “Befehl,” directive, like “Right face!” Communication even after accepting the Auftrag is critical If the subordinate doesn’t ask intelligent questions, he/she may not be the right person for the job. There are times, by the way when you don’t manage this way: With the members of your organization who aren’t ready (i.e., haven’t completed sufficient training – don’t have the common mind-time-space scheme.) This means that you have to lead different people in different ways. With people whom for whatever reason you don’t trust. If you’re dealing with nuclear weapons (really don’t want a lot of individual initiative with these things.) For most transactions involving money – strict financial procedures must be followed. Any other time that the law prescribes specific processes, procedures, or reporting © Chet Richards • •

38 Augtragstaktik—what “commitment” means
As part of this concept, the subordinate is given the right to challenge or question the feasibility of the mission if: he feels his superior's ideas on what can be achieved are not in accord with the existing situation or he feels his superior has not given him adequate resources to carry it out. As part of the scheme, the subordinate communicates regularly, although briefly in most cases, with the superior. The superior may also use a “directed telescope,” that is, members of his or her staff who accompany the subordinate, to report on the operation (this also relieves the subordinate of the need for a lot of reporting.) Finally, the superior may “lead from the front” or in the case of business, use genchi genbutsu, to develop an appreciation of what’s going on. There are a lot of subtleties here, and Einheit/mutual trust is essential, or the subordinate will feel as if the superior is spying. But until the contract is relieved, the subordinate must continue using all his or her energy, creativity, intelligence, and initiative to fulfill it. Likewise, the superior has every right to expect his subordinate to carry out the mission contract when agreement is reached on what can be achieved consistent with the existing situation and resources provided. © Chet Richards • •

39 Auftragstaktik—focused initiative
Abbott recruited entrepreneurial leaders and gave them the freedom to determine the best path to achieving their objectives. On the other hand, individuals had to commit fully to the Abbott system and were held rigorously accountable for their objectives. They had freedom, but freedom within a framework. More great material from Collins. My problem with his book is that it depends on “core competences.” I mean, who cares what your “core competences” are? The only core competence you need is to provide products and services that people want to buy more than they want to buy those of the competition. Also, BHAGs are at most a minor part of strategy. The trick is to create an organization that constantly gets better – in time it will blow by any “BHAG” you can think up. And if you don’t do the hard work of creating such an organization, what right to you have to be assigning “goals” of any sort? Jim Collins, Good to Great, 123. © Chet Richards • •

40 It’s really pretty simple
II. Einheit I. (Individual) Fingerspitzengefühl IV. Auftrag III. Schwerpunkt People without Fingerspitzengefühl would be shapeless blobs. (I’m still working on this one – it’s explained better in the book.) By drawing Einheit as a larger version of the Fingerspitzengefühl box, I’m trying to get across the idea that it implies some harmonizing of our individual orientations. This “lining up” of orientations is very important, since it minimizes the amount of explicit communications that an organization needs. Basically, if we all share something of a common outlook towards the business, then the only things we need to spend time discussing are the exceptions and disagreements. Everything else will work smoothly. This is what the Marines are driving at in Chart 32. Military organization build common orientation through their long basic and advanced training programs and by studying a common doctrine. The same way Toyota does. © Chet Richards • •

41 A case study in cheng / ch’i
In October 2001, Apple introduced the iPod. It did what you’d expect - play music - but also what you didn’t expect - be intuitively easy to operate (in 2002, this was unexpected in MP3 players). Application to business is the subject of Chapter 6 in Certain to Win. Building fanatical customers is a well known effect to people who study time-based (maneuver) strategies in business. The Japanese even have a phrase that describes it: miriyoku teke hinshitsu. Now to our case study, the iPod. First, truth in consulting – I have a 3rd Generation 30 GB iPod with dock connector and an 8GB 2nd Gen Nano. I use a 12” PowerBook as my personal computer. My wife also has a second gen Nano and is lusting for a 24” iMac. One of the big topics of debate in the business press is “who will create a music player that dethrones the iPod, which has about 75% of the market?” The answer is “Apple!” This is a huge contrast with many companies, where the bean counters go ballistic if someone proposes phasing out the most profitable product line. But it fits in nicely with Boyd’s concept of changing the situation before the opposition figures out what’s going on. © Chet Richards • •

42 A case study in cheng / ch’i
iPod Exploit! “Penetrate”: Learn the marketplace; build Fingerspitzengefühl & Einheit 1 Gen 2 Gen 3 Gen 4 Gen 5 Gen It turns out that the real iPod killer is Apple itself. Last week, the company eliminated its top-selling model, the iPod mini, and topped itself with the iPod nano, an even smaller device that becomes the new target dangled in front of the competition — Seattle Times, Sept 17, 2005 6 Gen Mini 1 Gen 2 Gen Nano 1 Gen 2 Gen 3 Gen Note that there were: 1 intro in 2001 1 intro in 2002 1 intro in 2003 2 intros in 2004 4 intros in 2005 2 intros in 2006 3 intros in 2007 plus the iPhone “penetrate” is a metaphor; exploit is not. Shuffle 1 Gen 2 Gen Touch 2002 2003 2004 2005 2006 2007 © Chet Richards • •

43 And how well did Apple’s strategy work?
2002 2003 2004 2005 2006 iPod 1 Gen 2 Gen 3 Gen 4 Gen 5 Gen Mini Nano Shuffle 2007 6 Gen Touch 100 million © Chet Richards • •

44 How well did Apple’s strategy work?
© Chet Richards • •

45 © Chet Richards 2005-6 • • 404.231.1132
Cheng After 8 hours sitting on a ramp in Austin, American Flight was out of water and food and all the toilets were overflowing. “This wasn't a story about the "perfect storm," but about corporate cultures that don't put customer service first.” American's Mr. Hotard says the airline is truly sorry for the mess. He says one reason the airline may not have contacted customers to apologize is that its Fort Worth headquarters, where customer-service specialists work, was closed for four days over New Year's. -Scott McCartney, Wall St. J. © Chet Richards • •

46 © Chet Richards 2005-6 • • 404.231.1132
Ch’i Bob Hamel: "I had a similar experience with Southwest last summer. Sat in Chicago for five hours to go to Detroit. The difference was Southwest sent me two $50 vouchers and a letter of apology. In this case, it wasn't even their fault, it was the weather.” “Southwest staff took care of me and made sure I was as comfortable as possible despite the long lines and what I was sure had been long hours for them. Yeah, there were a couple of glitches, but these were taken care of in a manner that definitely put the customer's needs first. Finally, Southwest staff never seemed to lose what I consider to be one of the best things about flying Southwest -- a great sense of humor. Even when they may have been laughing just to keep from crying." © Chet Richards • •

47 © Chet Richards 2005-6 • • 404.231.1132
Military analysts say we [US Navy SEALs] are becoming skilled disciples of John Boyd. That is, we execute the Boyd Loop—observation, orientation, decision, action (OODA)—far better and far quicker than our enemies. — Dick Couch, The Finishing School, p. 258 Dick Couch commanded a SEAL platoon in Vietnam. He also wrote The Warrior Elite, which details the experiences of SEAL Class 228 in their initial SEAL training, BUD/S. The Finishing School describes the second phase of SEAL training, SEAL Qualification Training, where they actually earn their SEAL Tridents. Only one out of every five applicants accepted into BUD/S becomes a Navy SEAL, and it’s not that easy to get into BUD/S in the first place. © Chet Richards • •

48 © Chet Richards 2005-6 • • 404.231.1132
You don’t wait for the future. You create it. Hwang Chang Gyu, President, Samsung Semiconductor Sounds like a winner to me. © Chet Richards • •

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