How do you win at business? One can go into the philosophical questions of what does “winning” mean anyway or is that even the point?
But, let’s take the question at face value: how does one company outcompete others to succeed in the marketplace?
The seemingly abstract nature of this framing is important. Most business books tend to start off much more tactically, at a lower level of abstraction: how to build an audience, how to build a million-dollar sales funnel, or how to hire someone.
These are useful and important skills to winning at business. But, without a proper strategic framework within which to function, they are, at best, less effective than they could be. At worst, they are counterproductive.
Chet Richards’ Certain to Win is a book that seeks to look at the broader strategic question. Instead of offering cliches or various tactics that sound great but lack a coherent framework for making them effective, it appropriately sees the business landscape as a dynamic and complex system then helps to build a framework for operating effectively in an environment where best practices are constantly changing.
Chet Richards worked with John Boyd, most well known for his creation of the OODA Loop. OODA is an acronym for Observe, Orient, Decide, Act which were what Boyd identified as the four component parts of decision making (though he emphasized that the Orient stage was the most important).
In Certain to Win, Richards takes the lessons Boyd applied to modern warfare and seeks to apply them to business.
There are three core principles that I believe every business would benefit from understanding and implementing.
- Effective Orientation and “Fast Transients”
- The pre-eminence of Vision and Culture.
- The Farthest Down the Chain Principle (link to prior article)
Effective Orientation and “Fast Transients”
The essence of agility and of applying Boyd’s ideas to any form of competition is to keep one’s orientation well matched to the real world during times of ambiguity, confusion, and rapid change when the natural tendency is to become disoriented.
The ability to rapidly shift the focus of one’s efforts is a key element in how a smaller force defeats a larger one: see the emergence of guerilla warfare and the ability of small startups to outcompete vastly more powerful competitors. It enables the smaller force to create and exploit opportunities before the larger force can.
In Boyd’s terms, this is often discussed as “getting inside your opponent’s OODA Loop.”
While this point is often bandied about, it is still broadly underappreciated. To appreciate how important speed is, go find the best chess player you can and offer to play for $1,000 under the following conditions:
- Your opponent moves first.
- You move twice for every move of theirs.
Unless you are playing somebody at the grandmaster level, you can play pretty horribly and still win.
When we talk about “getting inside your opponent’s OODA loop“, this chess example is a helpful analogy for thinking about it. One of the key reasons for the success of Japanese Carmakers over Detroit in the 1970s and 1980s was that Honda and Toyota could bring out a new model in roughly 2 years, with superb quality, while it took Detroit at least a year longer.
There are a couple of key elements here that people often get wrong. One is that effective orientation, getting inside the competition’s OODA loop, is not about blindly moving fast, but about “the ability to rapidly shift the focus of one’s efforts”.
Boyd referred to this as a fast transient. A fast transient is not a traditional maneuver done more quickly. “Move fast” is usually interpreted as “let’s do more of what we are already doing just work harder and do it faster”. This is the precisely wrong interpretation.
Boyd developed his theory as a fighter pilot and actively opposed to the military’s focus on developing faster planes. Instead, he wanted more agile planes. Boyd’s signature move as a pilot was to let his opponent get behind him and just when his opponent was about to come in range and at his most confident, Boyd would slam on the brakes, causing Boyd’s plane to go vertical and the opponent to zoom by him and Boyd would then drop in behind him for the victory. (There is a scene in Top Gun where Maverick played by Tom Cruise executes this maneuver against his instructor, Viper, that I believe was based on Boyd).
The “transient” is not the speed, but the change between maneuvers. It’s the equivalent of hitting the brakes at full speed in a fighter pilot. The ideal fast transient is an abrupt, unexpected, jerky, disorienting change that causes at least a hesitation and preferably plants the seeds of panic in the other side.
It’s a “What-the fuck!” change in circumstances, and in the interval when the opponent is trying to comprehend what the fuck is, Boyd would strike.
In a business context, it is perhaps best embodied in the story of Intel. Intel developed the first-ever low-cost memory chip in the 1970s and for the decade that followed Intel dominated the memory business. However, Japanese firms quickly started catching up making memory chips cheaper and better every year
Under the leadership of Andy Grove, Intel decided that the only way to survive was to rapidly grow their microprocessor business. If they tried to grow it slowly, they knew the memory business would drag them down.
Under the new plan, Intel used their assets from the memory business to successfully expand their microprocessor business and came to dominate the microprocessor market. Andy Grove was named Time magazine’s Man of the Year in 1997 for the turnaround.
Without going into a full history of the microprocessor business, it’s almost impossible to state how big a shift this was. The first step in transition was that Grove laid off more than 7,000 employees, nearly a third of the entire company.
Intel survived and thrived not because everyone was working extra hard or long hours (though I’m sure they were), but because Grove and the Intel team successfully re-oriented to the new environment. Grove realized they were about to get “shot down” by their Japanese competitors so he slammed the brakes on the direction they were going and executed a fast transient to move into the microprocessor business.
Since what you’re looking for is mismatches between your current understanding and the environment, a general rule for the business strategist is that unexpected news is the only kind that will do you any good.
To thrive in any form of maneuver conflict, you must seek out and find data that don’t fit with your current worldview and you must do this while there is still time as Grove did. Otherwise, the world will change—or more likely your adversaries or competitors will change it for you—and you will find yourself disoriented and in the position of playing catch-up. You will have lost the initiative, which is dangerous in any conflict.
One essential component of being able to identify fast transients requires optimizing for interesting. Business consultant Tom Peters suggested that you can spot who is going to do great things by what they do on airplanes. They don’t pull out the laptop and grind spreadsheets. Instead, they read Zen and the Art of Motorcycle Maintenance or pick up insights on human behavior from the great novelists.
You never know what will prod your creativity, and the more widely you prospect, the more likely you are to find that something to set your offerings apart from all of your competitors.
Toyota’s production system came from the ideas of engineers who visited supermarkets in the United States after the war. Studies of innovation reveal that practically everything new consists of bits and pieces of other concepts, often from fields that appeared to be unrelated, that somebody had the genius to reassemble to form something new and exciting.
Boyd called this process of identifying fast transient opportunities as snowmobiling. Imagine three separate vehicles: a motorboat towing a skier behind it, a tank rolling across the desert, and a bicycle cruising down the street.
If you break them down into the constituent parts, you have: a motorboat with a hull, outboard motor, and a set of skis being towed behind it; a tank with treads, a gun, and armor; and a bicycle with wheels, handlebars, and gears.
You can use these constituent parts to make many different incoherent wholes, but a coherent and useful whole would be a snowmobile: you take the treads from the tank, an outboard motor and skis from the boat, and handlebars from the bike and combine them to make a snowmobile.
Snowmobiling is another way of just saying effective orientation to your environment. Intel succeeded because Andy Grove and the Intel team looked at the marketplace and Intel’s own internal competencies and capabilities and built a snowmobile in the form of a new microprocessor business.
Snowmobiling requires taking all the data you’ve gathered in the observation phase, breaking it down deductively into its constituent parts and then recombining those parts through creative synthesis to form a new model of reality that lets you orient in a way to make better decisions and actions.
From this follows the business axiom: Unexpected victories (or losses) are the best source of strategy. In Boydian terms: unexpected victories are the best source of fast transient opportunities that allow you to win.
Paypal famously succeeded on the back of eBay power sellers in its early days. As early Paypal employee Reid Hoffman recounted though “In the first week, everyone was like, ‘Oh, we should get these eBay people off our system.’ And then they realized, ‘Oh, these actually, in fact, are our customers.'”
As part of my weekly review I always ask myself “Was there anything unexpected this week and what can I learn from it.” Nearly all my best ideas have come from this question!
A winner is someone (individual or group) that can build snowmobiles, and employ them in an appropriate fashion when facing uncertainty and unpredictable change. There’s no recipe for that, but it is skill that can be cultivated.
The Pre-eminence of Focus and Culture
Another key element of Boyd’s thinking (that was also prevalent with Sun Tzu) is a focus on the moral and emotional components of competitions over the merely military.
In Sun Tzu’s words: “Do not even consider risking a decision by cold steel until you have defeated the enemy’s will to fight”.
When discussing the notion of grand strategy, Boyd said that: “What is needed is a vision rooted in human nature so noble, so attractive that it not only attracts the uncommitted and magnifies the spirit and strength of its adherents, but also undermines the dedication and determination of any competitors or adversaries. Moreover, such a unifying notion should be so compelling that it acts as a catalyst or beacon around which to evolve those qualities that permit a collective entity or organic whole to improve its stature in the scheme of things.”
Herb Kelleher, former CEO of Southwest Airlines frequently said that competitors could copy the details of his system (the main structural differentiators being direct (as opposed to hub-and-spoke) routings, no reserved seats or meals, and using only a single type of aircraft to reduce maintenance costs), but they couldn’t copy the culture, the vibrant esprit de corps, because “they can’t buy that.”
By all accounts, he was right. There have been roughly 14 gazillion Southwest case study books and articles published yet very few companies have actually implemented it in an effective way.
That’s because establishing a vision, a culture which is “so noble, so attractive that it not only attracts the uncommitted and magnifies the spirit and strength of its adherents, but also undermines the dedication and determination of any competitors or adversaries” is really hard and requires making very hard tradeoffs.
It’s a lot easier to emulate the trappings of successful companies than to actually emulate the company: see every office of a failing company with foosball and bean bag chairs.
Recall that Andy Grove’s first step after determining a new direction for Intel was laying off more than 7,000 employees. That’s a really hard call to make that was ultimately necessary to save the jobs of everyone else.
It is ideal if a company’s highest-level focus serves the purposes of grand strategy: attract the uncommitted to our side while pumping up our morale and deflating that of the competition.
I quite like the payment processing company Stripe as a good example. What could be more boring than payment processing? Yet Stripe’s mission is to “increase the GDP of the internet”, which is grand and inspiring, akin to the Star Wars hero’s journey of “bringing balance to the Force”. Stripe is Yoda, helping your company (Luke) on the grand quest to sell products or services and increase the GDP of the internet. That’s a vision that inspires many to work for them and brings customers to them. Their discrete value proposition is something like “payment processing tools that don’t suck for developers to integrate” but that doesn’t have quite the same effect does it?
However, much more to the point focusing or vision statements are effective. Honda’s slogan during the Honda-Yamaha War was “Yamaha wo tsubusu!” which roughly translates to “We will crush, squash, butcher, and slaughter Yamaha!”
Boyd called this idea Schwerpunkt. It literally translates as the center of gravity or emphasis but is best understood as focus or the main priority.
In military terms, it is usually the geographic point of attack.
Having a clear focus, and emphasizing that over any particular tactic, empowers your subordinates to make decisions for themselves in an uncertain environment.
A good schwerpunkt helps you and your team make better decisions in an uncertain environment where rigid procedures close you off and isolate you.
Instead of giving others plans, you give them a schwerpunkt, what I like to call a focusing statement and let them figure out how to get there.
This both gives them a greater sense of ownership and empowers them to be flexible with trying different approaches.
One of the most common mistakes that people make as it relates to culture is that they pick “values” or a “vision statement” which is effectively meaningless.
It shouldn’t be necessary to explicitly state that a company values things like integrity, honesty, respect, creativity, communication, or other very obviously positive values. You should hire people that are already ethical, intelligent, and hard-working. That is table stakes. (Not-so-fun fact: One of Enron’s core values was integrity so you know that one in particular works really well.)
An effective vision or effective principles must necessarily be in some way exclusionary. A culture is determined precisely by what it will not tolerate. That reveals the tradeoffs it is trying to make.
Facebook’s focusing statement for a long time was to “move fast and break things” and they had various things in place (such as having every engineer push something live on their very first day at work) to reinforce that cultural value.
Move fast and break things is not an obviously good principle for every business like integrity or creativity. If you run a nuclear power plant, “move fast and break things” would be a completely idiotic focusing principle. That’s what makes it effective! It necessarily excludes seemingly reasonable ideas that allowed Facebook’s team members to make decisions that aligned with the company’s strategic goals. if there was a tradeoff between getting something pushed out or doing another round of testing, you know what to do.
Every day, your team members encounter situations that no one has ever encountered before. A good focusing statement helps them to make decisions there that reinforce the company culture.
The focusing statement of the Toyota Production System was “shorten the time it takes to convert customer orders into vehicle deliveries”. This is probably one of the best vision/focusing statements in the history of business.
This allows fast transients to be much more effective. It tells everybody who works for Toyota that whenever they are in doubt about what to do or something unexpected happens, make the fast transient that will most reduce customer-to-delivery span time.
The company focusing statement should be something carefully thought out and then repeated over and over: in team meetings, one-on-ones and as part of any decision-making process.
When done well and actually used, a focusing statement gradually becomes company culture.
The Farthest Down the Chain Principle
The final key element is the Farthest Down the Chain Principle. In order to maximize the effectiveness of fast transients and the focusing statement, you have to devolve maximum responsibility onto the subordinate, in return for their pledge to use their initiative and creativity to accomplish the task, consistent with your ground rules.
You want the people making the decisions to have an intuitive knowledge, what Boyd called fingerspitzengefühl, of the customer and the competitive environment.
Fingerspitzengefühl is a German word that translates literally to “fingertips feeling”, but it’s probably easier to understand as “intuitive feel” or “having one’s finger on the pulse”.
In Medieval Japan, samurai practiced with their swords until the weapon became “an extension of their arm”. Once the fight began, if you stopped to think, you were dead. You had to be able to feel how the fight was going.
The Greeks called it mētis. Odysseus, the protagonist of Homer’s Odyssey, was praised for his mētis. Odysseus not only knew how to deceive Circe, the Cyclops, and Polyphemus but also knew when to drive his men harder and when to pull back.
You want to push the decision making as far down the chain of command as you can go because it’s the people on the “frontlines” that have the best intuitive feel.
In warfare, we talk about the “fog of war.” The soldier on the frontline always has a more complete view of the situation than the commander at headquarters and so they are in a better position to make an appropriate decision.
In order for this to work, you must have a clear focusing statement as well as create mutual trust among the members of your team, what Boyd called einheit.
When you are working with people you trust, you can each move through your OODA loop cycles much more quickly. When you ask someone who you trust implicitly, because we have a shared focus and they have a multi-year track record of getting things done, to execute on something, you don’t have to micro-manage them. You know they will get things done.
You do not need to check in with them on their new orientation because you can trust them to do it on their own.
Creating mutual trust takes time; it’s not something that can be done in a weekend retreat, only over a period of months or years of working together.
For leaders, the most important insight from Farthest Down the Chain Principle is that you can’t micromanage. You have to let people take ownership even if they are going to make mistakes. In the long run, letting them develop their fingerspitzengefühl and autonomy is more important than the small mistakes.
In summary then, one wins at business by developing the consistently keeping one’s orientation better matched to the environment than others and successfully executing fast transients that match the new update orientation.
In order to do this requires establishing a clear focus and culture (schwerpunkt) then allowing your team the autonomy to make mistakes and develop the intuitive knowledge (fingerspitzengefühl) and mutual trust (einheit) to execute fast transients more quickly than the competition.