Management Secrets of the Vikings Boyd for Business Chet Richards Release 2.04 February 1999.

Management Secrets of the VikingsBoyd for Business

Chet RichardsRelease 2.04February 1999

February 1999 © 1998,1999 Dr. Chet Richards 2

This is not an age of castles, moats, and armor, where people can sustain a competitive advantage for very long … This is an age that calls for cunning,speed, and enterprise.Richard D’Aveni, Tuck School, Dartmouth, Hypercompetition: Managing the Art of Strategic Maneuvering, 1995.

The Boydian Era

This will not be an easy time for control freaks. It will be a great time for the agile, the small, the cunning, and the brave. John Perry Barlow, “Cybernomics: Toward a Theory of

Information Energy,” Merrill Lynch On-Line, November 30, 1998


Scope of this Presentation

• We will assume you are familiar with the basics of Boyd’s ideas as applied to war (although there will be a quick synopsis)

• This presentation will illustrate

– Some of the differences between business and war

– Some ideas for applying Boyd’s concepts to business


Note how orientation shapes observation, shapes decision, shapes action, and, in turn, is shaped by the feedback and other phenomena coming into our sensing or observation window.

Also note how the entire "loop" (not just orientation) is an ongoing many-sided implicit cross-referencing process of projection, empathy, correlation, and rejection.

Feed Forward

Feed Forward

Unfolding Interaction With

Environment

Feed ForwardObservations

Decision (Hypothesis)

Action (Test)

Unfolding Environmental

Interaction

Feedback

Feedback

Observation Orientation Decision Action

The OODA "Loop"Sketch

Outside Information

Unfolding Circumstances

Insights

Implicit Guidance &

Control

Implicit Guidance &

ControlCultural Traditions

Genetic Heritage

New Information

Previous Experiences

Analyses/ Synthesis


Boyd in Business?

Generate uncertainty, confusion, disorder, panic, chaos,…to shatter cohesion, produce paralysis and bring about collapse.

John R. Boyd, Patterns of Conflict, Chart 132

What the hell does this have to do with business?

(I hear you ask)


First Answer: Business Is Conflict

• Market share is zero-sum

• In other words, a dollar spent on my company is a dollar not spent on yours

• Market share is zero-sum

• In other words, a dollar spent on my company is a dollar not spent on yours

“Is Microsoft anticompetitive? Isn't everyone in business, to some extent? After all, if you're not interested in smashing your competition, driving them to their knees, and threatening their ability to put food on the table for their children, you may not belong in sales or management.” Herbert Lovelace, The Secret CIO, InformationWeek Online, November 17, 1997


Moreover, Business is Boydian Conflict

• Therefore, in order for me to meet my goals of growth and profitability (and lifestyle), it may become necessary for me to deny your company its opportunity to grow, or survive on your own terms, or to survive at all.

• Cf., “Patterns of Conflict,” p. 10.


But Business is Not War

• Customers

• Laws

What business has that war doesn’t:

Some other differences:

• Multi-sided competition is the norm

• Negotiating an end to business competition is generally illegal

• But, suicide (merger, sale, etc.) can be an admirable end in itself


Customer

War: A vs. B

Commerce: Everything mitigated by the customer

Customers Change Things


Sun Tzu and $3.25 Will Get You a Grande Latte at Starbucks

I-Hate-Bill Disease. This malady has infected many an executive before Oracle's Larry Ellison, including Novell's Ray Noorda and Bob Frankenberg, Borland's Philippe Kahn and Sun's Scott McNealy. One symptom is an obsession with beating Bill Gates instead of delighting customers. Executives with this disease do things to hurt Microsoft instead of to help their constituency.

Jesse Berst, “Oracle's Hidden Weaknesses,” ZDNet AnchorDesk, August 12, 1998


Second (And Better) Answer

• Boyd’s central ideas of fast decision cycle (OODA) speed and the organizational climate that fosters them are as applicable to business as to war.

• In business, however, the primary focus of these concepts is on the customer, not (as in war) on the competition


In Particular

Companies with fast OODA speed, can seize the initiative in the marketplace and help shape customer desires. Examples include Toyota, Wal-Mart, GE, Oticon, Intel, and Nokia. For a more complete exposition, please see the required reading list (particularly my article, “Riding the Tiger”)

“Success in war depends on the golden rules of war: speed, simplicity, and boldness.” - Patton


For Example• Management of less agile companies are by definition slow to change and

as such are left behind as faster competitors change their businesses for them.

• Fast OODA speed is the “real nub of competitiveness.” (Tom Peters)

• Many businesses are finding that focusing on speed also helps cut costs and raise quality. (Kim Sheridan, Ch. Avalon Software)

• Most successful small companies possess three defining cultural traits: Self-confidence, simplicity, and speed. We wanted them. We went after them. (Jack Welch, CEO, GE, 1995 Annual Report)


Driving the Market

• Nokia is providing troubled Motorola Inc., the leader in old fashioned analog phones, with a humiliating tutorial on digital communications. Motorola CEO Christopher B. Galvin glumly concedes that “the analog market is trending downward.”

• Already Nokia pumps out new (digital) models every 35 days.

Stephen Baker, Roger O. Crockett, and Neil Gross, “Nokia,” Business Week, August 10, 1998, 54-60.


Boyd’s Strategy for Vitality & Growth—In Business or War

• Physically, we interact by opening up and maintaining many channels of communication with the outside world, hence with others out there, that we depend on for sustenance, nourishment, or support.

• Mentally, we interact by selecting information from a variety of sources or channels in order to generate mental images or impressions that match-up with the world of events or happenings that we are trying to understand and cope with.

• Morally, we interact with others by avoiding mismatches between what we say we are, what we are, and the world we have to deal with, as well as by abiding by those other cultural codes or standards that we are expected to uphold.

Strategic Game, Chart 49


Observation

Observations

Unfolding Environmental

Interaction

Feedback From

Action

FeedbackFrom Decision

Outside Information

Unfolding Circumstances

Implicit Guidance &

Control (Orientation)

(Orientation)Feed Forward


The Fundamental Importance of Observation






Ideas for Improving Observation• Send everybody on at least 2 customer visits each

year (Tom Peters)

• If you’re GM, buy Fords & Toyotas for company cars

• Abolish offices

• Insist that you company newsletter focuses outside the company (customers, competitors, the environment, etc.) and includes a “bad news” section

Hint: If you employ “focus groups,” you just don’t get it.


Best Bet: Be the Customer

• Example: If you’re a Delta VP, book your own tickets (directly & through travel agents). Stand in line to check bags. Fly coach. Now do the same thing on Continental. Talk to everybody while you’re there. Fly Delta no more than 50%

• Distribute what you found to everybody in the company (e-mail, intranet site, internal chat /newsgroup, coffee pot, etc.)


Don’t Leave It To Chance

• Hardest part: If you’re the Chairman of Delta, design a system that rewards this type of behavior

“Equally important is the opportunity that incoming e-mail gives me to be exposed to the thoughts, reactions, biases, and preferences of large numbers of people. (Andy Grove, CEO, Intel, Only the Paranoid Survive, 156.)

“Equally important is the opportunity that incoming e-mail gives me to be exposed to the thoughts, reactions, biases, and preferences of large numbers of people. (Andy Grove, CEO, Intel, Only the Paranoid Survive, 156.)


Observation Styles

Mr. Normal

Ms Large1

Ms. OK

Mr. Large2

Ms. Average

Mr. Large3

Mr. Big

The TruthMeasurement

Rumor

Innuendo

Complaint

Lie

Suggestion

Kudos

Threat

Gossip

Linear “Observation” TacticsFluid Observation Scheme

Fact


Arrogance is Often an Early and Fatal Sign of Problems in Observation

DEC was obsessed with technical excellence, and this came at the expense of understanding customers and the marketplace. With righteous indignation and a spare Yankee fervor, DEC all but said the products speak for themselves-take them or leave them. John Dodge, “A Eulogy for a Great Company,” PC Week On-Line, 28 Jan 98.


FeedForward Observations

Orientation

Observations on Orientation for Business

NOTES

• Without genetic heritage and cultural traditions, the influence of previous experience increases

• In particular, it exerts a much stronger effect on analyses and synthesis

• Therefore, it becomes vitally important to beef up the feed forward into “New Information”

– Quantity– Quality

NOTES

• Without genetic heritage and cultural traditions, the influence of previous experience increases

• In particular, it exerts a much stronger effect on analyses and synthesis

• Therefore, it becomes vitally important to beef up the feed forward into “New Information”

– Quantity– Quality

Observation is the only feed into Orientation

Cultural Traditions

Genetic Heritage

New Information

PreviousExperiences

Analyses/Synthesis

Feed Forward Decision Action

Implicit Guidance &

Control

Implicit Guidance &

Control


Orientation: Foundation for Decision & Action





(Decision & Action)


Observation Feeds - and Drives - Orientation

Arrange setting and circumstances so that leaders and subordinates alike are given the opportunity to continuously interact with the external world, and with each other, in order to

more quickly make many-sided implicit cross referencing projections, empathies, correlations, and rejections

as well as

create the similar images or impressions, hence a similar implicit orientation, needed to form an organic whole.

Organic Design, 23


“I know myself as a skeptic of many aspects of this project, and suddenly somebody interrupts me in the middle of my lecture asking: is everybody in Oticon as excited about this as you are? And suddenly I saw myself enthusiastically unfolding the vision with all its good intentions and beautiful words in front of these people.” (An Oticon manager, quoted by Mette Morsing, “Transforming Identity by Transforming Image: The Media Boomerang”)

The External World Driving Orientation: An Example


Orientation at Wal-Mart: An Explicit and Implicit Process

• Each of the 15 Regional VPs spends Monday - Thursday on the road. At 7 am.. on Saturday, “the company’s entire management” assembles, along with invited associates

• “The company doesn’t have a management organization so much as a whirling cloud of executives that coalesces at the end of each work week.

• “At these Saturday fests, the company will make decisions about anything from how to set up displays to where to put new stores.” CEO Glass says, “We all get in there and shout at each other, but the rule is that we resolve issues before we leave.”

Saporito, op. cit.


Improving Orientation• Only 3 things to work with:

– New information

– Previous experiences

– Analyses/Synthesis (formal studies & much more)

• 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 offices & the Executive Dining Room

• Abolish “Management Clubs”These are tubs for drinking your own bathwater


Improving Orientation (II)

• Discuss constantly, and at all levels; maintain environment and market assessment pages on the Internet & your intranet; welcome & reward feedback

• Hardest part (again): devising a company system that rewards those who rock the boat

The other (a “key technologist”) could explain his views on RISC designs with the unstated premise of, “Hey, Grove, you’re out of your depth here, let me teach you a few things.” (Only the Paranoid Survive, 120.)

The other (a “key technologist”) could explain his views on RISC designs with the unstated premise of, “Hey, Grove, you’re out of your depth here, let me teach you a few things.” (Only the Paranoid Survive, 120.)


Decision

Feed Forward

Feed Forward

Decision (Hypothesis)(Orientation) (Action)

Feed Back

(Observation)Note: Decision is fed only from Orientation

Note: Feedback directly from Decision to Observation (A decision tends to narrow the focus, to detect the effects of the decision. Also, “My mind is made up; don’t confuse me with facts.”)


Getting Decisions Implemented

If your employees don’t have an opportunity to test your thinking in live sessions or electronically, your message will seem like so much hot air … Resist the temptation to do what’s easy here. Communicating strategic change in an interactive, exposed fashion is not easy. But it is absolutely necessary. (Andy Grove, Paranoid, 157.)

If your employees don’t have an opportunity to test your thinking in live sessions or electronically, your message will seem like so much hot air … Resist the temptation to do what’s easy here. Communicating strategic change in an interactive, exposed fashion is not easy. But it is absolutely necessary. (Andy Grove, Paranoid, 157.)

(Businesses don’t have commanders, whose legal orders must be obeyed)

“I wish I could get them to make more.”

Roger Smith, Chairman of General Motors, on his Pontiac Division’s planned production rate for the then-hot

selling Fiero (1982)


Re-Orientation & Decision at Intel

But in a few months we came to the inevitable conclusion that this halfway decision was untenable and we finally worked up our determination and clearly decided—not just in the management ranks but throughout the whole organization—that we were getting out of the memory business, once and for all. Grove, 92.

I gathered them all in an auditorium and made a speech. The theme of the speech was, “Welcome to the mainstream.” I said that Intel’s mainstream was going to be microprocessors. Grove, 93.


Role of Decision• Set a schwerpunkt (“vision,” “overarching goal”): “Intel operates by

following the direction set by three high-level corporate strategic objectives…Grove, 183.

• “Putting these threads together suggests that appreciation and leadership offer a more appropriate and richer means than “command & control” for shaping and adapting to the multifaceted aspects of uncertainty, change, and stress.” (Boyd, OD, 32)

• Suggests that the role of Decision in business is primarily as a re-harmonizing device


Action

Feed Forward(Decision)

Implicit Guidance

and Control(Orientation)

(Observation)

Feedback

Unfolding Interaction with

Environment

Action(Test)

e.g., prejudice, instinct, reflex

Feedback


Did Wal-Mart Kill Woolworth?

The charm of the stores, however, was often outweighed by their flaws: old cash registers with scan guns that could read only half the merchandise; a toy department full of moth-eaten puzzles but no action figures; small, confusing aisles and a lack of customer service.

Jennifer Steinhauer, “Woolworth Says Goodbye to the Dime Store,” NYT OL, July 18, 1997


What if You’re Suddenly In Charge? (Part I)

The next 5 charts consider the question of how to take a group of people who aren’t doing so well and turn them into consistent winners.


A Few Suggestions• Convince yourself there are no alternatives

– If there are, you would be well advised take one

• Hire a sensei with a track record

• Eliminate 60% of management positions– Follows Machiavelli, Walsh, Neutron Jack– Lends immediate credibility to “Create a sense of urgency.”– Avoids Death of a Thousand Cuts– Focus of survivors can be on building & growth – If necessary a second time, your name should be at the top of

the list


A Few More Suggestions• Engineer an early success

– For manufacturing, “single piece flow” is a good candidate since it produces spectacular results and the technique is well understood

• Establish a few simple rules within which the survivors will evolve a new system– “Complex adaptive system” approach– Follows Oticon, Tom Peters, etc.– Assumes your people can read Lean Thinking as well as you can– Both Toyota’s production and development systems evolved

over three decades


Laws of the Jómsvíkings• Kinship doesn’t count

• No member can flee from anyone as well armed as himself and his equal in bravery

• Each member must avenge any other member as if he were his brother

• No one may to act or talk as if afraid, no matter how hopeless the situation

• No women allowed inside the fort

• All booty belongs to the community before being distributed

• All news is to be distributed by the leader

• The leader is also the sole judge of disputes


Complex Adaptive Systems

• (Oticon’s) change process was contrary to all the golden rules of organization change. It was a process in which a general outline of a field of potentials was made by means of a vision which was subsequently gained, defined, and filled out in practice.

• It was not a rational, narrowly planned process … The course of change was established on its way.

Mette Morsing, Introduction to Managing the Unmanageable for a Decade


Yet One Last Suggestion• Lead from the front

– Frederick the Great had 4 horses shot out from under him during the Seven Year War (1756-63)

– N. B. Forrest killed 4 enemy in close combat after his promotion to Lt Gen (1865)

– A Toyota susha (program manager) typically has 15-20 years experience and has earned the professional respect of his/her peers before assuming responsibility for a new vehicle.

– How can you expect to do your job without getting your hands dirty? - Kiichiro Toyoda


An Aside: OODA Loop Pathologies

Item: Feed-back from Orientation to Observation (Implicit Guidance and Control).

“A man hears what he wants to hear and disregards the rest.” - Paul Simon, “The Boxer.”

Definition, “Objective Analysis”: You tell me the objective, I’ll do the analysis.

She sees the world through rose-colored glasses.

There is none so blind as he who will not see.

“A man hears what he wants to hear and disregards the rest.” - Paul Simon, “The Boxer.”

Definition, “Objective Analysis”: You tell me the objective, I’ll do the analysis.

She sees the world through rose-colored glasses.

There is none so blind as he who will not see.


QuestionWhat determines OODA loop speed?

Answer:

• Ultimately, a moral climate/culture/environment that encourages people to use their initiatives to further the goals of the organization

• (Under such a climate, people will solve the technical problems)


The Moral Foundation Of It All






This is Widely Recognized

• Institute leadership (Deming’s Point 7)

• Drive out fear (Point 8)

• The waste due to fear is enormous (Wm. W. Scherkenbach, The Deming Route, P. 76)

• We began to cultivate self-confidence among our leaders by turning them loose, giving them independence and resources, and encouraging them to take big swings. (Jack Welch, Ch, & CEO, GE, 1995 Annual Report)


Oticon did not want to establish permanent new structures in the form of new business processes. In fact, it did not look at business processes at all.

… these would simply emerge from the work of individuals and the sharing of the work with other colleagues in face to face project groups.

Niels Bjørn-Andersen and Jon Turner, “The Metamorphosis of Oticon,” in Managing the Unmanageable for a Decade, 125-133.


What does this have to do with moral interactions?

The expectation was that if it (Oticon) removed all constraints on the employees and provided them with the most advanced productivity enhancement tools, the employees could be given a much broader job (cf., empowerment), and would more or less automatically perform much more in the interests of the company and its customers. (emphasis added) Bjørn-Andersen and Turner, op. cit.


Constructing A Climate for Fast OODA Loops

The issue of human nature is the most basic problem … The most important factor is maintaining a relationship of trust between labor and management. Shigeo Shingo, one of the architects of the Toyota Production System. (emphasis added)

The Tao of military operations lies in harmonizing people. Zhuge Liang, c. 300 AD


Oticon’s CAS• The vision: “ Instead of perceiving ourselves as a manufacturing

company with a service to its customers, we are to see ourselves as a service company with a physical product. Oticon will change from a hearing aid manufacturer to a hearing care company.”

• The “rules”

– Philosophical cornerstone: personal dialogue and volunteering

– Multi-task job profiles

– Multi-disciplinary project teams with no fixed hierarchical positions

– Mobile and open offices (i.e., for everyone)

– Electronic offices (e.g., telecommuting)


Boyd’s Organizational Climate (The Principles of the Blitzkrieg)

• Without focus and direction (Schwerpunkt) at all levels, people will not know what to do

• Without mission responsibilities (Auftrag), people will not take the initiative

• Without intuitive competence (Fingerspitzengefühl), people will not spot mismatches

• Without mutual trust (Einheit), there is no moral force to put group goals above individuals’


Einheit at Wal-Mart

• Today, the company still shares information, right down to single-store results, with the associates—as Wal-Mart calls its employees.

• Profit sharing, equal to 5% to 6% of an associates earnings, extends to the lowest levels. Says Bogle, one of the many people Walton made wealthy, “That profit sharing is the yeast that keeps this thing going.”

Bill Saporito, “What Sam Walton Taught America,” Fortune, May 4, 1992, pp. 66 ff


Einheit at Toyota

… as a young Toyota manager, he and his colleagues concluded that no one could become a member of the Toyota (internal) board of directors if they gave a damn what anyone else thought.

Related by consultant Allen C. Ward, co-author of “The Second Toyota Paradox,” Sloan Mgmt Rev., Spring 1995

Point: without serious einheit, CYA rules


Schwerpunkt at Microsoft

At Microsoft, strategy starts with Mr Gates, but loses nothing as it is taken up by the people who run different parts of the business. If anything, it is burnished until it glistens, harder and more perfect than ever.

As a result, no company has a stronger sense of where it is going and how it intends to get there. That destination is “Windows Everywhere”. “Microsoft’s Contradiction,” Editorial, The Economist, January 31, 1998.


Effect of Speed on the Moral Dimension

The last several pages have looked at how moral interactions affect an organizations OODA loop speed.

The converse is also true: speed affects the moral dimension of warfare:

“In battle, the soldier enters a lottery with death as the stake. The only saving clauses in this gamble lie in time and the demoralizing effect produced on the enemy by the rapid and uninterrupted advance of the attacker.” Patton

“You use an advantageous rhythm to arrest the powerful determination of the enemy.” Musashi


What if You’re Suddenly In Charge? (Part II)

The next 6 charts return to the question of how to take a non-competitive organization, particularly a business enterprise, and turn it into a lean and opportunistic competitor using the principles of Patterns of Conflict.


Depend on PAT teams

You look at a process, operation, or function and ask, ”How can we do this better?"

Start with an in-depth flowcharting of the current processes

Start by sending everyone to training

How to tell you'redoing it wrong


Your primary goal is to reduce costs

Your primary goal is to improve quality

You believe the big problem is the company culture

You believe that “agility” is rapid response to customer needs, market demands, etc.

How to tell you're still doing it wrong


Shibboleths: core competences value added internal customers“hard for competitors to

imitate” Hamal & Pralahad synchronized flowquality peopleoutsourcingoverhead/indirect reduction rightsizing

How to tell you're headed off into oblivion


What Can Possibly Be Wrong with Core Competencies?

(Steve) Jobs wanted to tie all of this—the hardware, the basic software, and the graphical user interface—together to create a computer system that would be in a class by itself. It took a few years, but … the Next computer and operating system delivered on basically all these objectives.

Comment: Jobs excelled in all the “core competencies” of the personal computer industry. Unfortunately:

While Jobs was burning the midnight oil inside Next, in the outside world, something changed.

Andy Grove, Only the Paranoid Survive, p. 58


Aren’t we supposed to eliminate non-value-added work?

• Yes, and “value added” work, too, if it will shorten/smooth the overall flow that ends with a external (i.e., paying) customer

• “Value” results from the combination of such things as design, engineering, factory performance, vendor selection & management, and marketing, and depends on the competitive environment, and the world economy

• People on the factory floor only add cost and are practically never even the largest component of that

• In a capitalist economy, “value” can only be measured at points where real money (not internal work orders) changes hands.

• You can eliminate non-essential functions whether they add value or not, but you cannot eliminate “non-value-added” activities if they are also essential. You have to change your system, first.


Value and Essence

Aren’t “non-value added” and “non-essential” really the same things?

Well,

• “Non-value added” is a subjective judgement: we look at something and decide that it doesn’t “add value”

• “Non-essential” is objective: can be tested


Epilogue: Deming’s Last Interview

The customer invents nothing. The customer does not contribute to design of product or the design of the service. He takes what he gets. Customer expectations? Nonsense. No customer ever asked for the electric light, the pneumatic tire, the VCR, or the CD. All customer expectations are only what you and your competitor have led him to expect. He knows nothing else.

The customer invents nothing. The customer does not contribute to design of product or the design of the service. He takes what he gets. Customer expectations? Nonsense. No customer ever asked for the electric light, the pneumatic tire, the VCR, or the CD. All customer expectations are only what you and your competitor have led him to expect. He knows nothing else.

Tim Stevens, “Dr. Deming: ‘Management today does not know what its job is.’“ Industry Week, January 17, 1994, 21 ff.

Management Secrets of the Vikings Boyd for Business Chet Richards Release 2.04 February 1999.

Documents

Transcript of Management Secrets of the Vikings Boyd for Business Chet Richards Release 2.04 February 1999.