The key to strategic management lies in balancing fast decision loops with slow decision loops.
The longer I live, the more I realize that life is all about the pace at which you make decisions. But that doesn’t always mean really fast is best.
I’ll use the concept of the “OODA loop,” made famous by Air Force Col. John Boyd. The idea is that strategic action depends on establishing and executing on decision loops that run from observation to action and back again. OODA stands for: observe, orient, decide, act. A strategic actor needs to establish and execute this loop in order to act effectively within a competitive environment. And cycling faster than the competition creates an advantage.
But (and this is important), the pace at which a manager must “loop back” to ingoing assumptions about a strategic variable changes drastically based on the factor and the business environment. You can think about this practically by envisioning the difference between the fuel gauge and the throttle position in a race car. The race car driver likely assigns the fuel gauge a decision loop that runs minutes or longer during most of the race—the driver looks at the gauge and establishes an action plan at least every few minutes. The throttle has decision loop that is drastically shorter—fractions of a second at times.
Different variables mean different loop lengths. This is a crucial concept in business management and strategy. I’ve been in the middle of discussions at technology companies that involve planning for growth in a specific, established product line that exceeds 100 percent per quarter. And I’ve spent much of my career amid product lines that do well to eek out a couple of percentage points of growth above GDP. Both circumstances had something in common: They required sets of very deliberate strategic decisions, and they required sets of very rapid ones. They had long loops and short loops.
The loops didn’t look the same in both instances, but there were fast ones and slow ones. And the same is the case with your business. You not only need to know the variables to manage, but also the loop lengths you handle them within. In strategic management, there are short loops and long loops. You have to know the difference.
Short-loop strategic variables might include:
- Marketing and sales plans
- Account plans
- Flexible capacities (shift structures)
- Customer feedback cycles
- Product enhancements
These items have loop lengths that range from days to weeks—or, in some businesses, maybe a quarter. They are highly strategic (being resource allocations and positions), but many people think they are tactics.
Long-loop strategic variables might include:
- Workforce planning
- Technology roadmaps
- Asset footprints
- Market assessments
- Statements of strategic intent
- Overall organization structures or operating systems
These items have loop lengths that, in most businesses, last at least a year. Management “OODAs” on them on an annual basis (in the case of strategic intent, often much longer).
They key to strategic management, then, just might be establishing the variables and loop lengths that matter for your business. A business in the semiconductor space likely can’t afford to wait for annual strategic planning if the industry moves in six-month cycles. Likewise, pushing a regulated utility to do monthly strategy updates might be a waste of time—the world just doesn’t move that fast.
Where this gets really useful is when you start to see your day-to-day activities get out of sync with your expected loop lengths. Perhaps you know it’s time to act on that staffing problem you’ve had for months now, but you just don’t have the energy to do it—you are “off loop” and likely off strategy, as it were.
One thing is for sure: You have to establish what fast and slow are, know what variables fall into the two categories for your business, and learn to lead them both.
I’ll continue to develop this further, and would love your thoughts on this one.