OODA Loop

Article byPriya Choubey
Edited byCollins Enosh
Reviewed byDheeraj Vaidya, CFA, FRM

OODA Loop Meaning

OODA Loop refers to a decision-making model where an individual or organization adopts a four-step process (Observe, Orient, Decide and Act). The model is implemented for quick decision-making during critical situations.

This decision-making model enables managers to make prompt decisions based on proper analysis of available information. It is an information processing framework that is applied widely in the military and corporate sectors. Businesses follow the OODA process to scan the external environment, understand the issue at hand, and develop a problem-solving mechanism.

Key Takeaways

  • OODA Loop is a strategic decision-making model. The term OODA is formed from the initials of the four critical stages—(O)observe, (O)orient, (D) decide, and (A) act.
  • John Boyd proposed the information processing framework during the 1950s Korean War. Colonel Boyd was an American air force pilot, military strategist, and Pentagon consultant (combat operations).
  • Later, the military concept was widely applied to business, everyday decision-making, and tactical decisions. This method is used by doctors, marketers, lawyers, athletes, politicians, and law enforcement officers.

OODA Loop Explained

The OODA Loop was originally developed for winning wars on the battlefields. But later, it was applied broadly to various fields—business, medical science, law enforcement, sports, politics, marketing, and so on.

It is a well-structured mechanism of decision-making comprising four stages:

  1. Observation
  2. Orientation
  3. Decision
  4. Action

You are free to use this image on your website, templates, etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: OODA Loop (wallstreetmojo.com)

Business operations are carried out in dynamic environments. The OODA Loop is used to solve critical everyday problems, avail new opportunities, adapt to changes, and remain competitive long-term. Moreover, it is a proven model for fast decision-making—even with less information.

It all started in the 1950s; during the Korean War, US Airforce pilot John Boyd discovered that the F-86 fighter planes were more efficient than the MiG planes. Colonel Boyd was a military strategist and Pentagon consultant. He further elucidated that F-86 efficiency was caused by the plane’s wider vision and hydraulic control.

Based on the experience, Boyd highlighted the importance of observation, orientation, decision, and action behind quick combat decision-making. In 1974, Boyd presented his ideas in the Destruction and Creation essay.

However, the OODA concept has its critics—the model is not accepted universally. The implementation of the OODA method delivered unpredictable results. Moreover, the user must implement the right strategy at the right time to avoid the chances of failure. Also, the user needs to be analytical, intuitive, attentive, and quick in understanding the situation and making a sensible decision. Otherwise, a user might make an incorrect decision in a hurry.

–>> If you want to learn Financial Modeling & Valuation professionally , then do check this ​Financial Modeling & Valuation Course Bundle​ (25+ hours of video tutorials with step by step McDonald’s Financial Model). Unlock the art of financial modeling and valuation with a comprehensive course covering McDonald’s forecast methodologies, advanced valuation techniques, and financial statements.

Process of OODA Loop

The OODA loop is a problem-solving mechanism used for immediate decision-making— without overlooking facts. Clearly, it suits businesses that operate in a highly competitive environment. 

The four critical stages are discussed below:

  • Stage 1 – Observe (O): First, adequate information about the problem is collected. It is essential to gain a broader perspective of the internal environment, external environment, competitor’s strategy, business strengths, and business weaknesses. Data collection is an indispensable step behind every decision.
  • Stage 2 – Orient (O): Next, the collected information undergoes proper interpretation—the decision maker evaluates the current position and the desired outcome.
  • Stage 3 – Decide (D): Then, decision makers agree upon a specific plan of action. This includes strategies and problem-solving mechanisms for the team.
  • Stage 4 – Act (A): Finally, the decision is implemented to cause the desired change. Ultimately outcomes depend on actions and not the intent behind them.

Example

The OODA loop model is not only used for problem-solving but also for finding beneficial opportunities. Renowned cookies brand ‘Oreo’ implemented the OODA concept during the 2013 Super Bowl.

Oreo was a sponsor at the 2013 Super Bowl that took place in New Orleans. Oreo’s social media team found a marketing opportunity amidst a 34-minute power outage—during the third-quarter football battle between Baltimore Ravens and San Francisco 49ers.

Let us look at step-by-step implementations of the concept:

  1. Observe:  Oreo’s social media team gathered the information pertaining to the power outage immediately. The football match telecast was halted suddenly, and viewers were left in a blackout. 
  2. Orient: Very quickly, Oreo’s marketing interpreted the situation as a marketing opportunity. They managed to respond in real-time and gained a competitive edge over other brands.
  3. Decide: It was sheer spontaneity with which the marketing team came up with a Twitter campaign. Team communications and decision-making were prompt.
  4. Act: Oreo’s official handle posted an improvised punch line: “You can still Dunk in The Dark.” The tweet took the internet by storm. Within minutes, Oreo’s official handle posted the ‘Dunk in The Dark’ punchline on Facebook as well.

The post was retweeted 15000 times and got 20000 likes on Facebook. Moreover, for the ‘Dunk in The Dark’ image, the brand earned a media impression worth $525 million. Oreo’s followers on Twitter and Instagram rose by 8000 and 34000, respectively. On social media, Oreo’s followers posted around 16000 ‘Dunk in The Dark’ images.

Frequently Asked Questions (FAQs)

What is the OODA loop?

The OODA process is an information processing framework that involves four stages of decision making–observe, orient, decide and act. It is an effective model adopted by business organizations for quick problem-solving and quick decision-making.

What does the OODA loop stand for?

The term OODA is made up of initials taken from the four decision-making steps—(O) observe, (O) orient, (D) decide, and (A) act. The term Loop suggests a circle or cyclical process where one step follows another. Thus, it is a four-step chain reaction that is witnessed during quick decision-making.

Who developed the OODA loop model?

It was developed by John Boyd. Colonel Boyd was an American air force pilot, military strategist, and Pentagon consultant. Boyd invented the OODA concept in the 1950s to handle combat operations and make prompt decisions. The concept was based on his Korean War experiences and observations.

Who uses the OODA loop?

The OODA loop was primarily developed for military use. But later, it became an essential decision-making model for doctors, entrepreneurs, managers, marketers, lawyers, athletes, politicians, and law enforcement officers alike.

This has been a guide to what is OODA Loop and its Meaning. We explain John Boyd’s OODA LOOP, the decision-making model, process, and examples from the military & business. You may learn more about it from the following articles –

Reader Interactions

Leave a Reply

Your email address will not be published. Required fields are marked *