CRM for Fun and Profit: A Primer

CRM for Fun and Profit: A Primer

How your organization can leverage relationship management to drive growth and profitability

So … you are thinking about implementing CRM, or you’ve decided to implement CRM (or maybe it’s been decided for you) but you are not sure where to begin. There are any number of software vendors that would love the opportunity to sell you their software right now (because it’s their quarter-end now and the deals are just too good to pass up and the software is all you really need and could you sign right here please?). In this case resistance is not futile; politely decline, take 15 minutes and read on to get a better understanding of what lies ahead. CRM (Customer Relationship Management) has been part of the business landscape since the mid-1990s. The initial offerings were little more than enhanced contact management systems but in the twenty years since then both the philosophy and technology of CRM has matured and evolved to the point where CRM can be considered a mature offering; it represents a viable business strategy for an organization to follow.

Objectives of CRM

Any discussion of CRM would be incomplete without a reminder of the primary goal of the typical business: it exists to make money. Implementing CRM requires a significant investment in people, process and technology; the end result needs to deliver sufficient revenue to offset the initial investment and the continuing operational costs. CRM doesn’t necessarily make sense for all companies. If you are selling low-cost commodity items to the general public, like laundry detergent or a pound of butter you probably don’t need to establish a relationship with your customers (nor are they likely to want a relationship with you). But it’s different if you are selling a higher value, customizable product or service, like a financial product, a car or a vacation. There is value in understanding your customer and using that understanding to establish a long-term relationship. The fundamental objectives of CRM are twofold:

  • The first is finding the right customers and establishing long-term relationships with them. CRM is not particularly concerned with the value obtained from a single transaction with a customer; its objective is to develop enduring relationships and drive revenue and generate profit over a lifetime of transactions with the customer. Customer retention is paramount; customers are viewed as assets rather than just the buyer on the other side of the single transaction.
  • The second objective is increasing revenue through obtaining a larger customer ‘share of wallet’ – building a broader, more profitable relationship. In addition to increasing the length of relationships, CRM also strives to expand the breadth of relationships by more fully engaging customers and having them utilize a fuller range of the total goods and services provided by your organization (or by a partner organization).

It is critical to note that the value derived is mutual. Your company receives revenue, but the customer receives something valuable in return. He deals with a company that understands him (sometimes almost anticipating what is needed), actions requests promptly and accurately (following up when required), and treats him in a way that reflects the value and importance of his business. Following the principles of CRM allows your organization to provide to the customer the type of experience that he values. (Just a note: I know there are organizations that aren’t driven by profit, such as government agencies, not-for-profit, charities and the like. CRM can make sense for them too by ensuring that they deliver their services to their customers as effectively and completely as possible.) CRM became a very popular buzzword in the early 2000s, but most companies that implemented it were unable to fully realize the potential of CRM. Significant investments were made in tools and training, but few companies changed their organizational philosophies and strategies to align with a CRM approach. This need – to move away from traditional strategies towards those that are more customer focused – is the biggest barrier to the adoption of strategic CRM. If you take away anything from the document it needs to be this: CRM is a class of technology products but it is also a business philosophy that requires significant and fundamental changes to your organization to implement fully. But it can (and in many cases, should) be done.

The Fundamentals of CRM: 8 Factors to Consider

Before you look at CRM as a business philosophy you need to consider the fundamentals.

1.   It’s about the Customer

At its very core, CRM focuses on engaging with customers on a one-to-one basis. The goal is to satisfy the needs of the customer, but this also gives your organization the opportunity to better understand who customer is, what they value, how they wish to be engaged, their opinion of your organization and perhaps even what the competition is offering. Every contact with the customer is an opportunity to engage them in a deeper/more complete manner. CRM is a very long term strategy; one where time is measured and success is determined over the period of years and decades rather than months and quarters. In following a CRM-focused strategy, the organization must move from a product-based volume selling approach where the focus is on short term results to a strategy that concentrates on delivering what customers want when they want it over a much longer term. This approach – mass customization at the level of the individual customer – requires that an organization:

  • understand the needs and preferences of each customer
  • provide personalized offerings
  • provide ‘a perception of value’ (or value proposition) to each customer
  • retool technologies and processes to support CRM
  • partner with organizations that share a CRM-based business strategy
  • not have the need to maximize the profit from each individual transaction

Achieving this requires a complete rethink of how the organization operates. What culture needs to be in place for a relationship based approach to succeed? Ultimately there are two prevailing characteristics: it is patient, and the customer relationship is the primary focus of the organization. Sales, distribution, product – all remain important but are viewed through the lens of the customer relationship. At a one-to-one level, CRM is about ensuring that each and every customer feels that they have a personal relationship with your company; that the person on the other end of the telephone line (or web chat, text message or email) knows who they are, how they like to be engaged and understand what it is they need. CRM enables this by providing to its users a deep and comprehensive understanding of each customer. This degree of intimacy cannot be achieved without leveraging technology. The CRM application, the internet and communication capabilities (such as portals, email, telephone, web chat and social networking) can all be deployed and exploited to aid in establishing long-term, mutually profitable relationships with customers. One of the key differences between today’s environment and that of twenty years ago is the internet. The internet and the ‘always connected’ society changes everything and provides you with two opportunities: the ability to inexpensively create and execute marketing campaigns (that can range from mass marketing to large groups to selectively marketing to individuals), and increased access to information, both for your organization and for your customers. Organizational websites now allow a level of access to information and data that would have been unthinkable just a few years ago, and the advent of social media has added an additional dimension (as well as additional complexity) to the customer/company relationship. CRM allows an organization (through better understanding of their customers, their preferences and their history of interactions) to leverage the internet to better (and more completely) engage their customers, in both outbound and inbound interactions. CRM is about defining who the ‘right’ customers are for your organization. All customers are not created equal; segmentation of customers into logically related groups is essential for successful relationship marketing and servicing. Once this is determined, you can define how those segments will be served. (It is worth noting that customer needs and expectations are a moving target, and as needs and expectations shift your organization needs to respond accordingly.) Customers should be valued based on the current value they bring to the company plus the potential future value that they can be expected to deliver. The criteria used to create the segments are unique to each organization, but I believe there needs to be at least 4 segments:

  • Which customers are our ‘best’ customers – who do we focus on?
  • Who are our average customers – can we promote them?
  • Who are our less than average customers – how can we better engage them?
  • Who are our worst customers – who do we fire?

The best customers, those that provide the best total value to your organization, are the customers that should receive the best value in return. Remember Pareto – 20% of your customers drive 80% of your revenue. You need to decide what you are willing to do differently for high value customers. For the high value segment you could create an exclusive product, a custom website or perhaps provide concierge service with shorter turnaround times or better loyalty rewards. Customer care is the true ‘value-add’ of relationship management; it’s what can determine the success (or failure) of the entire customer experience. It goes beyond the transactional nature of customer service activities to the determination of what needs to be done, again on a one-to-one basis, to make the products and services more attractive to each specific individual and to increase the bond between them and your organization.

2.   Customer Measurements

Proper segmentation of customers can only be achieved once the required metrics have been established and a measurement program is in place. The prerequisite to achieving this is sufficient performance data. Your organization needs to be able to measure the performance of each channel and of each customer. CRM captures a great deal of data – interactions with the customer, administrative events (e.g. a bill payment or a change of address), personal data (preferences, demographic, financial and psychographic) and relationship data (how the customer relates to other customers [e.g. households or sales teams]). On an individual level this data provides you with the necessary information to tailor interactions with each specific customer – to engage the customer in the way that he wishes to be engaged. On a macro level, once all this data is aggregated you can interpret the information and perform detailed, complex analyses and data mining activities to uncover nuggets of knowledge that would otherwise remain hidden, and then leverage these insights for the benefit of your company and the customer. CRM relies heavily on analytics for gaining knowledge and insight about their customers as well as the effectiveness of their operations. Successful analytics requires data (organized in a manner that is conducive to analytics) as well as the necessary expertise to perform the analysis efforts. Neither of these is easy to come by; establishing an analytical capability typically requires a significant commitment. Fortunately analytics is an area where an organization can start with simple measures and evolve to more complex approach over time. The analytics effort can include such metrics as:

  • Developing simple trends based on single factors like geography or product
  • Analytics that look at the profitability of individual customers and accounts
  • Analysis of customer behaviors and the factors behind the customer’s decision making process.
  • Differentiation of service delivery for different customer groups (for instance, through a customer segmentation strategy)

One of the key metrics is customer satisfaction, although ‘satisfaction’ is probably not a descriptive enough term. A typical customer expects to be satisfied; successful relationships are not likely to be built if satisfaction is the target. Organizations need to exceed satisfaction and move towards building customer loyalty. Part of a successful CRM effort should concentrate on moving your customers towards developing an affinity with your company and brand. It’s much harder to lose a loyal customer than one who is merely satisfied. Measurement is a two-way street – you also need to allow customers to measure your organization’s performance. The ability to listen to customer feedback and capture their views and opinions is a basic capability of CRM. The explosion of social media and of customers who are more than willing to proffer their opinions, is a logical starting place. The challenge is to rapidly triage the information that is captured and act decisively on those that will have the biggest impact to the customers as a whole.

3.   The Value Proposition

The value proposition that you offer to your customers is another key fundamental of relationship management. The development of the value proposition – what you are promising to the customer – needs to consider numerous questions, including these eight:

  • What products and services do our customers want (and how much are they willing to pay for them)?
  • What products and services will we choose to provide?
  • What investment are we willing to make in people/process/technology to support the creation and delivery of products and services
  • How can provide these products and services?
  • What scale is required?
  • What level of quality will be provided?
  • What value does the customer receive, and what value do we receive?
  • How do we demonstrate the validity of the value proposition?

4.   Capabilities

In order to deliver on the value proposition your organization need to develop a suite of capabilities to support the delivery of its chosen products and services. The capabilities of an organization need to be marshaled around meeting the expectations of the customers and fulfilling the value proposition. The capabilities question is one that needs to be asked very early in the CRM process. Following a CRM approach is not inexpensive, and an organization needs to decide how much of an investment it is prepared to make. It is better for your organization to focus on a limited set of capabilities and deliver them very well than to choose a wide breadth of capabilities and deliver them in a mediocre fashion. (An alternative approach to CRM is to approach it tactically, but more on that later). Capabilities include business processes. Developing processes that are ‘CRM-friendly’ is different than conducting a traditional process reengineering effort where the focus of the effort is the design of efficient functional processes. The intent of a CRM focused process is to deliver maximum value to the individual customer; the process needs to be intelligent enough to recognize what the customer values and flexible enough to deliver it. The primary goal of CRM processes is not concerned with delivering maximizing efficiency (work deliver per time unit) but on delivering effectiveness – maximizing the value exchanged during the interaction. And CRM processes are designed to facilitate the measurement of cycle times and the performance of individuals or groups. Capabilities also includes technology. CRM is also about computing, and it’s a complex undertaking. The CRM system itself, the integration of multiple supporting applications and data sources, storage of large volumes of data, the development of portals that allow customers access to information, the mining of data and the associated historical and predictive analytics are the primary areas where investments in computing technology are required. It’s definitely not trivial. Which comes first, the technology or the processes? It’s really an iterative approach. When using commercially developed software, in virtually every instance it makes most sense to build the business processes around the capabilities of the technology rather than adapting the technology to the business processes. But before the software is acquired it’s necessary to define the business processes in sufficient enough detail to ensure a good fit between how the business expects to run and how the technology can support it. Once the software is acquired the business processes are optimized to leverage the capabilities of the software. This approach results in processes that are streamlined, efficient and tightly integrated with the technology. Procuring software without a clear understanding of the anticipated business processes is a recipe for disaster. Software can (and should) be configured to deliver the ideal end user experience, but customizing software is something that should be avoided at all costs. When software is customized it is actually being modified to perform a task that it was not designed to do, and results in highly modified software that requires significant cost and effort to support (and has likely strayed from the upgrade path). Configure to your heart’s delight but customize at your peril.

5.   Organizational Considerations

Organizations that focus on CRM move customer information as close to the front line as possible and provide the individuals who interact directly with customers the ability to make as many decisions as possible without need for approvals or the handing off of the request to more senior staff. The move from order taker to decision maker is a shift of significant proportions. Your organization will have to look at all aspects of human resources, training and talent management to make this transition successful. (Be prepared; not all your staff will be able to make the necessary transition.)

“People are the key to any relationship. Business is still people, but these people must be supported by technologies and processes to multiply their capabilities and make them even more effective ….The people at the front lines should have the ability to communicate with customers in a manner that recognizes them, remembers their contact history, understands the current customer issues, predicts anticipated behaviors and suggests appropriate responses, solutions or suggestions. Increasingly, the front-line people are becoming consultants, working with customers to add value to their company. This is a marked departure from historical practice and requires recognition, reward and incentives that support this redirection.”

Ian Gordon, ‘Relationship Marketing’

It also requires that organizations modify their structure to support CRM. Rather than having traditional product managers it may be necessary to organize by customer segment and have managers for each of these segments, or perhaps to change the focus of acquisition efforts to concentrate on finding customers who most closely match the profile of an ideal customer; not necessarily just someone who wants to make a purchase. No process or technology will provide the anticipated benefits unless trained staff is available to do the work. CRM is a complex undertaking, and the people, process and technology must work in harmony to deliver a customer experience that meets the expectations of both the customer and your organization. This can’t happen without thorough training at initial implementation time (as well as when new hires are brought on), supplemented by periodic refresher training. In conjunction with the training, the appropriate supports need to be in place to reinforce the training. This includes processes, rewards, and recognition for individuals who actively advocate and promote the building of relationships with customers, co-workers and partners. All this requires leadership. The leaders of a CRM-focused organization need to ensure that the organization stays true to its strategy. While strategy defines what your organization will do, perhaps more importantly it also defines what your organization will not do; it is the responsibility or the leadership to ensure that new opportunities that arise but fall outside of the adopted strategy are either not pursued, or are acted upon with a full understanding of the impacts on the existing strategy.

6.   Profitability, Value and Cost

Profitability of your organization is normally driven by two variables: growth and the efficiency of its operations. While neither of these variables is exclusive to a CRM-based approach, the strategies that you follow in pursuit of profitability will shape your adoption of CRM. These include:

  • Controlling the cost variables associated with the people, processes and technology as closely as possible
  • Developing and deploying new and improved products and services (and ensuring that the customers are engaged in the design)
  • Establishing new revenue streams – new channels and partners
  • Servicing customers in the appropriate manner in order to maintain the required persistency and retention
  • Terminating the relationship with low value customers

7.   Collaboration and Integration

CRM is about collaboration – bi-directional interactions between an organization and its customers. It’s conversational. Customers want their needs met and concerns addressed. We live in an age where information is king and access to that information is demanded. Customers expect visibility into internal processes that in the past were hidden from view. (Imagine ordering from Amazon and not being able to track your order.) This visibility is the new norm and it will require that you open up internal processes to customers in ways not previously considered. And it goes beyond sharing of transactional information; customers want to contribute in to such efforts as product design or the provision of new or improved services. The explosion of social media and the willingness of people to share their opinions is something that organizations can benefit from. When the customer speaks the organization needs first to listen and then to act. Regardless of the channel employed (which may include e-mail, webchat, SMS, IVR, social media and in some cases regular mail or a face-to-face interaction), when a customer engages an organization some action needs to take place. The key is to reduce the time of the decision cycle as much as possible to allow the action to be performed real-time and if not real-time then as quickly and transparently as possible. (How quickly? That’s determined by the service levels that you have defined.) At an enterprise level, CRM can help reach across departmental and functional boundaries in order to provide complete solutions to customers. It aligns customer touch-points so the customer experience is consistent across people, departments and even organization. By capturing and sharing all customer interactions you develop an ‘institutional memory’ that gives all employees an understanding of a customer’s history. There are three perspectives on collaboration that need to be considered:

  • Internally, within teams and across teams
  • Externally, with customers
  • Externally, with partners

The collaboration must extend beyond the customer relationship into secondary relationships – your partners and suppliers – and the potential of providing value-added services. From your organization’s perspective, who actually provides the product and/or service is immaterial as long as the organization continues to own and manage the relationship with the customer and can derive some value from it. From the customer’s perspective, their relationship continues to be with a single organization – the delivery of products and services by third parties occurs transparently.

8.   Manufacturing and service capability

The rapid development of new products or services is a prerequisite to meeting the needs of your customers. Bringing a new product to market in a timely manner is essential to successful CRM, as the product design should be driven, at least in part, by the needs and requirements of the customers. Ideally, the product development process should be efficient enough to allow the customization of specialized products for specific customers or customer segments. The same holds true for service capabilities. Again, customization is key – the ability to adapt the service process to the needs of the individual or segment being serviced is a prerequisite for the success of CRM.

Non-Strategic CRM

In looking at the previous 8 considerations maybe you’ve lost your appetite for taking a strategic approach to CRM; it’s quite a lot to handle. Perhaps for your organization taking a tactical approach makes more sense. It still requires that you establish the necessary capabilities for CRM but represents a much smaller commitment in both time and money than a strategic approach. There are several fundamentals of CRM that are more tactical in nature and could be implemented independently of a larger CRM strategy. One reason for taking this approach is to deliver value to the organization in the short-term and demonstrate some ‘wins’ to the business stakeholders and CRM users.

Customer Segmentation

You can easily apply simple segmentation rules to your customers. At a tactical level, the main benefit of doing this is the provision of different levels of service to the different segments, most notably lower cost service to lower value customers.

Capture of all customer interactions and events

Tracking of all customer interactions and events and capturing this information in a CRM allows all employees (subject to security and privacy considerations) of an organization to have a 360º understanding of that customer. Of particular importance is being aware of other dealings that the customer has had with the organization. From the customer’s perspective, this prevents the need of the customer to re-educate the organization about past interactions and requests on every new interaction and help for a relationship to be established between the customer and the organization, not between the customer and a specific employee in the organization. Capturing historical data also permits the running of simple analytics independently of a larger business intelligence effort.

Rapid and accurate fulfillment of customer requests

Although ‘one and done’ was the mantra of the original CRM implementations, what is more important is the rapid and accurate servicing of requests. Many customer requests that appear simple on the surface are more complex underneath, requiring a multi-step workflow to complete. CRM can ensure this happens by accurately capturing the request and then orchestrating the workflow required to properly complete the request.

Measure and continuously improve

Using CRM to capture all interactions with all customers allows an organization to accurately measure its service times for every customer facing interaction. These measurements should be used to determine where bottlenecks exist within business processes or staffing levels and to then readjust the process accordingly. Depending on the granularity of the data, it is even possible to measure the performance of departments, teams and individuals.

More complete service

CRM allows the delivery of more complete and individualized service. It’s all about understanding as much as possible about the customer. Knowing what the customer wants and, perhaps more importantly, how the customer wants to be engaged allows an organization to hit each individual customer’s ‘sweet spot’ and drive engagement and loyalty.


CRM allows for the establishment of a relationship between a customer and an organization; what is essential is that the relationship be long-lasting. By determining the variables that establish customer loyalty and putting programs in place to leverage this loyalty, CRM can increase the ‘stickiness’ of relationships. Even tactical CRM requires a substantial commitment of money and time; it’s not an initiative to be undertaken casually. Regardless of the approach taken, CRM can be the path to higher revenues, more (and more loyal) customers and increased profits. It’s worth thinking about; your customers are waiting. Just remember, it’s about far more than buying software, no matter how attractive the price.

Alan Baker is the President of SpitfireInnovations.com, a boutique consulting firm based in Toronto, Canada. He has led or directed projects (including CRM implementations!) that modernized technology, re-engineered business processes, improved organizational effectiveness, introduced processing efficiencies, won awards and spurred and accommodated remarkable growth.

photo credit: hz536n/George Thomas via photopin cc

How to make better decisions

How to make better decisions

Can a fighter pilot can teach us something about decision-making? For a long time I viewed a decision as a point-in-time event. It seemed pretty straightforward – gather the pertinent facts, consider them and then make the decision. I was much more concerned that the decision was made rather than how it was made; any delay in making a decision would impact my project schedule and I sure didn’t want that to happen. Over the years I learned to better prepare the decision makers, and I learned to build some slack into the schedule around decision milestones. It wasn’t until I looked back at some of the decisions made, by both myself and others, and realized that while some very good decisions were made, there were quite a few that were sub-optimal, and other decisions were just plain bad. I wondered if following a generic decision making process or framework could improve the quality of decisions. This brings us to John Boyd. John Boyd was a fighter pilot who served in the Korean War. He was also a mathematician, an aircraft designer, a military analyst, a historian and a philosopher. His accomplishments include being:

  • Widely acknowledged as being the best fighter pilot in the history of the USAF
  • An air-to-air combat tactician
  • Directly responsible for design of the F-15 Eagle, F-16 Fighting Falcon and the F-18 Hornet
  • Indirectly responsible for the design of the A-10 Thunderbolt
  • A military strategist – one of the primary planners of Desert Storm (the 1991 invasion of Iraq)
  • A major contributor to the study of decision theory

His work on decision theory started when he looked at the outcomes of aerial dogfights between the American F-86 and the Russian MIG-15 in the later stages of the Korean War. In comparing the two planes, the MIG-15 had a higher top speed, a greater operational ceiling and a better turning ratio; three capabilities that should have stacked the odds in favour of the Russian plane. But the actual kill ratios were close to 14:1 in favour of the American plane. An easy assumption to make was that the skill of the American pilots was the deciding factor, but that not the case. The study concluded that there were two design elements of the F-86 that resulted in the lopsided results: a bubble canopy and a fully hydraulic control system. The bubble canopy gave the pilot better visibility and allowed him to gather more complete information before he made a decision. The hydraulic control system allowed the plane to react more quickly to the pilot’s commands once the decision was made. The combination of better informed decisions and accelerated execution resulted in devastating superiority in combat situations. Boyd continued with this train of thought; over the ensuing years he developed a decision support construct that he called ‘The OODA Loop’. It’s also known as ‘the decision cycle’. OODA is an acronym for Observe-Orient-Decide-Act. Boyd’s belief was that decision making occurs through the execution of a series of iterations through this loop, where the decision-maker repeatedly evaluates his situation, makes decisions, acts and re-evaluates and continues until the outcome is reached. His focus was on military matters and more specifically on fighter pilots; he was documenting the optimal process that a pilot should follow in determining his circumstances, gathering and evaluating information, determining the proper course of action and taking it. Success was determined by the validity of the information, accurate evaluation and rapid decision making and execution. It’s sometimes simplified into a diagram that looks like this: OODA Loop Unfortunately this diagram is a gross over-simplification. (It also looks an awful lot like Deming’s Plan-Do-Check-Act cycle.) When Boyd finally got around to drawing the diagram, it looked like this:

Source: Wikipedia http://en.wikipedia.org/wiki/File:OODA.Boyd.svg

Source: Wikipedia http://en.wikipedia.org/wiki/File:OODA.Boyd.svg

The first time I saw this model I wondered if it could be applied to projects or to change management, particularly transformational change. Is there a business application? One thing that is apparent is that the OODA loop is misnamed; it’s not a loop, it’s a network of loops that connect each of the stages in various ways. Another thing that may not be so apparent is that the model is much more reactive than proactive. The goal of the OODA loop is more tactical than strategic. It’s not used to define and attain specific objectives – used it’s to increase the quality of decisions and the speed with which they are made. And it’s worth noting that while it has a military heritage the terminology leans more to the scientific method (which is appropriate, because Boyd used such varied sources as the Second Law of Thermodynamics, Heisenberg’s Uncertainty Principle and Gödel’s Incompleteness Theorem in the development of his theory).


The observe stage is fairly straightforward – it’s gathering information about the current situation. It looks at the environment, external information, internal information – I would call it a ‘current state model’. From the military perspective it’s concerned about what both you and your enemy are doing. From a business perspective it’s more about your organization’s vision, strategies and capabilities, the marketplace and what your competitors are doing. Think about the contents of a SWOT matrix – that’s the type of information that needs to be collected. One of the challenges of the observation phase is making sure that your observations are complete and ensuring that you are focusing on the correct information.


At one level the orientation phase is equivalent to the traditional analysis phase of a project or change initiative; it can be viewed as a situational analysis. However in Boyd’s model it goes deeper than that; it becomes a complex assessment or interpretation of the observations previously made, viewed through several different lenses. He realized that our analysis is distorted by our previous experiences, our heritage, traditions and value systems. They act as screens that filter out some of the information. Care must be taken to ensure that information isn’t filtered out for the wrong reason. The OODA model requires objectivity; it’s required to cope with our inherent biases and predispositions. This ensures that all information is considered, even that which doesn’t necessarily fit in our world-view. Ultimately, the goal of this phase is to analyze all the information and synthesize it into one or more actionable plans. Here’s a personal example.   My first car was a used 1971 Datsun 240Z. When it ran it was a great little car. Unfortunately it spent far too much time not running; it was spectacularly unreliable, in need of constant repair and was a colossal (and expensive) headache. I was not that sorry to see it go. Fast forward thirty-three years. I’m shopping for a new car. Do I go into a Nissan dealership? No, I don’t. Even after all that time the memory of the 240Z causes me to deselect Nissan. It’s neither reasonable nor rationale, but there it is. The amount of time spent in the orientation phase is another critical consideration. Too little time and the analysis and synthesis efforts are not adequately informed, leading to unreliable scenarios. Too long a time (‘analysis paralysis’) and the observations lose their validity; too much has changed between when the observations were made and when they were acted upon, resulting in scenarios that address the wrong things.


The decision phase is just that; choosing the best scenario from those that were developed. The criteria could be anything and may include a combination of risk/reward, ROI, time to market or any other of a host of variables. It’s considering how your enemy (or competitor, marketplace or maybe even your own organization) will react to the change and then picking the scenario with the best fit. What I find interesting is that Boyd has used the word ‘hypothesis’ in conjunction with the word ‘decide’. To me this implies, in a manner similar to the scientific method, that the decision needs to be tested. It predicts an outcome but the results need to be examined in the next phase before the decision can be considered correct. And this in itself is interesting, because it’s been my experience that individuals and organizations don’t normally test their decisions; they just assume that the decisions are correct and continue as if they are, sometimes even after it’s apparent that they aren’t!


The act phase executes the decision. It’s testing the hypothesis and evaluating the result. It is only after action has been taken that the correctness of the decision can be properly evaluated. This evaluation as well as all the other information gathered during the execution of the cycle are captured for use in the next iteration; this closes the loop and either completes the cycle or beings the next execution. There’s one other aspect of the model that’s worth examining – ‘Explicit Command and Control’. In the military these could be considered the chain of command and rules of engagement; in business they are organization charts, regulations, policies, procedures and operating principles. Sometimes command and control has the effect of short-circuiting the decision cycle by limiting the solution space and reducing the number of possible scenarios. If can also cause problems by micromanaging and overcontrolling, or by abdicating its responsibility and not managing. Command and control also monitors execution of the decision cycles to make sure that things are progressing smoothly. It’s important to note that there is not just one decision cycle occurring at any one time; there are any number of decisions cycles occurring simultaneously. I visualize them almost like a stack of pancakes.   Everyone is involved in a cycle – from the general down to the private (or the CEO to the mail room clerk). Part of command and control is ensuring that these concurrent cycles are aligned and are executing in harmony.

Speed – The Key Factor

The key to success is speed. The OODA loop must be executed rapidly. In the military application of the OODA loop, the key to victory is getting inside your adversary’s decision cycle; making him react to what you are doing until he is unable to continue, at which point he is defeated or quits the field. Victory favors the side that can recognize changes in a dynamic environment (Observe), analyze and synthesize appropriate responses (Orient), choice a response (Decide) and execute it (Act) and do so rapidly and decisively. It’s no different in business. Organizations that can adapt to dynamic situations and that can execute their plans rapidly have much greater likelihood of success.

Projects and the OODA Loop

What do we need to consider if we want to implement a decision making model like the OODA Loop in our own projects or change initiatives? When we observe, we need to observe as completely as possible. Capturing just a subset of the available information provides a false sense of confidence and will likely result in problems as the process moves forward. It’s a lot like the parable of the blind men and the elephant; you may understand part of the situation but you will never perceive the complete whole. When we orient, we must continue the holistic approach and take a comprehensive look at all the information that is available, including our own perceptions and biases, and build one or more plans of action. In doing so we triage the information, deciding what is essential (and should be retained) and what is irrelevant (and can be discarded). Make sure that outlier information is not discarded just because it is an outlier; make the decision to discard information a conscious one and not just a convenient one. Decision balances the risk and reward of the plan(s) of action and selects the best option. The longer the decision takes the higher the risk; what we have observed may no longer be true, the conclusions of our analysis may be based on incorrect information, the plans developed may not be addressing the correct issues. And in order to manage risk the decision should almost always be tested in a controlled environment before being implemented in a more widespread manner. Then we act – quickly and decisively. Allow me to go off on a tangent for a moment.   In his book Sources of Power: How People Make Decisions, Gary Klein describes a study that was performed on the decision making by firefighters; specifically the process that captains used to decide how best to fight any given fire. The assumption was that the captain would develop multiple approaches and choose the best one. But that’s not what happens. After arriving at the scene the captain quickly assesses both the fire and the resources he has on hand; based on his assessment he immediately constructs a single plan that he believes to be best. He then takes this approach and tests it mentally. If it passes he immediately implements it; if it fails he tries to adjust the approach to compensate for the failure, and if he cannot he constructs a new approach, continuing the iterations until he arrives at an acceptable approach. Klein also documents at least one situation where a volunteer firefighter brigade spent 3 days trying to extinguish a refinery fire before calling in professionals.   The professionals put out the fire the next day. Based on this, I think it’s valid to assume that expertise is a requirement for effective decision making. Working with an individual who has experienced similar situations is a tremendous asset to the decision making process. They have learned what is material and what isn’t and can add their knowledge to the information gathered and the analysis and synthesis performed. Their expertise allows them to recognize conditions and qualities that may otherwise go unnoticed. This knowledge doesn’t even have to reside in an individual; any formal ‘body of knowledge’ can fulfill the same role. Finally, speed. The decision process needs to be executed with a sense of urgency. There are constraints to how fast the process can be proceed, but to be successful those constraints can’t be administrivia, bureaucracy or individuals who, for whatever reason, are unable to make a decision. Decision making is serious business. In a military setting good decision making can be a matter of life and death. In business it could mean the success or failure of your career, your project or, in some extreme situations, your business. Good decisions are more likely to happen if a decision-making process is followed; any framework is better than none. I think John Boyd’s OODA loop is worthy candidate for your consideration. John Boyd died in 1997 at the age of 70. He was buried with full military honours at Arlington National Cemetery in Virginia. Interested in learning more about John Boyd? Can I suggest: The John Boyd Compendium – http://dnipogo.org/john-r-boyd/ The Mind of War: John Boyd and American Security by Grant Tedrick Hammond Boyd: the fighter pilot who changed the art of war by Robert Coram photo credit: mrBunin via photopin cc

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