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|In: Cognitive Enterprise|Last Updated:

Dialog from Blazing Saddles:

Gabby Johnson: I wash born here, an I wash raished here, and dad gum it, I am gonna die here, an no sidewindin’ bushwackin’, hornswagglin’ cracker croaker is gonna rouin me bishen cutter.

Olson Johnson: I’m particularly glad that these lovely children were here today to hear that speech. Not only was it authentic frontier gibberish, it expressed a courage little seen in this day and age.

And so it is that some of my colleagues and I have added the acronym “AFG” to our vocabulary, for “authentic frontier gibberish.” There are skeptics who might want to apply the AFG seal of disapproval to some of the more vague and less useful discussions about Digital and why it matters to modern businesses.AFG

The AFG is unfortunate, because the Digital business model fits nicely into a list of about twenty we developed some years back at my old consulting company, IT Catalysts (credit where it’s due — our starting point was Michel Roberts’s excellent Strategy Pure and Simple (1993)).

At the time we called the business model in question the Technology/Competency model. The idea: Take something your business is already good at and find new, marketable uses for it. In The Cognitive Enterprise Scott Lee and I made it the third part of our Customers/Communities/Capabilities formulation, “capability” being our now-preferred term for “competency.”

And companies that adopt this business model don’t stop with taking advantage of the capabilities they’ve already mastered. They take the next step, making strategic decisions about what new capabilities to build, and for that matter which existing ones are declining in importance and should therefore be sunsetted.

Enter Digital strategy. Shorn of the AFG, adopting a Digital business strategy means using newly emerging or under-exploited technologies to build new business capabilities, which, once mastered, can be used to bring new products and services to market quickly, because so much of what’s needed to bring them to market is already in place.

Simple example: As a consultant, I’ve developed a decent bag o’ tricks for meeting facilitation. I’ve also developed a reasonably good set of techniques for taking strategic intent and turning it into a program of action.

These are, I think, two of my Capabilities, and if you disagree please don’t disabuse me of my conceit.

The point is that with these two Capabilities in hand (and some others, but the point here isn’t to extol my numerous virtues) … where was I? With these existing capabilities I’m in a position to develop consulting services for a variety of specific topics as the need arises and their potential catches my attention.

Digital, for example.

So … if Digital business strategy is a subset of the broader-based technology/capability-driven business model, which is the big deal, Digital, or capability-driven business models in general?

I’d vote for capability-driven business models, with this proviso: There aren’t many new business capabilities to develop that don’t require the use of new and interesting technologies.

But still, what matters (I think) are the capabilities more than the Digital technologies that enable them. The reason goes back to the ongoing, even accelerating trend of business temporal compression (AFG?). While it depends on what your business sells and who it sells it to, in many cases marketplaces are changing fast enough that traditional approaches to strategic planning just can’t keep pace.

As a general rule, the value of a capability will last longer than specific products, product lines, or even product categories. And so, building strategic plans around capabilities makes the most sense for many and perhaps most businesses today.

Take smart products and the Internet of Things (IoT if you want to be cool). Imagine IoT isn’t one of your capabilities, but a competitor has mastered it.

We in IT have become accustomed to products capable of detecting and reporting defects before they cause overt outages.

Imagine consumers start to expect all their major purchases to do this. This isn’t unlikely — customers might not be sophisticated about technology in all its gory detail, but they’ve become pretty savvy about what technology can do.

If you’ve mastered the IoT, you can add this feature to all your products fairly easily. If not, good luck — you’ll have missed a major marketplace shift.

Building a business that’s adept at detecting marketplace shifts early and adapting to them quickly will prove to be the path to sustainable success.

My guess is that Digital will part of the mix, because Digital technologies are what will give businesses the new capabilities they’ll need to adapt at the speed of customer expectations.

* * *

On an entirely different subject: I gave a speech last November at PhreakNIC in Nashville, about the Embedded Technology Generation and its implications. It isn’t exactly TED talk material, but if you’re interested, you’ll find it here.

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|In: Cognitive Enterprise|Last Updated:

If you want to understand what a Cognitive Enterprise is, look no farther than the OODA loop.

OODA stands for:

  • Observe: Look around you to see what’s going on that might affect you.
  • Orient: Interpret what you observe, recognize how your own biases affect your interpretation, and determine the implications of your observations for your current situation.
  • Decide: Choose the course of action that will give you maximum advantage … or that will put an opponent at maximum disadvantage.
  • Act: Do whatever you decided to do, skillfully and without hesitation.

It’s a loop because every time you Act, you then Observe the result and take it from there.

The OODA loop differs from other negative-feedback-loop-based mechanisms popular in business circles … PDCA (Plan, Do, Check, Act) comes to mind … in that these other loops all have an inward focus. They’re about monitoring, stabilizing, and improving internal functions.

This is why OODA matters much more than PDCA when it comes to making an enterprise cognitive.

When businesses engage in PDCA or one of its equivalents, they’ve decided what they’re going to do for a living. Their customers can either adapt to it or take their business elsewhere.

When businesses make use of OODA loops, in contrast, in most cases they should first decide which competitor or competitors they want to beat. And in fact, when my colleagues and I engage a client at the strategy level, this is often our first order of business: Choosing the right competitor. Once that’s done, it’s OODA all the way.

To understand why choosing the right competitor matters so much, consider the sad case of Best Buy. Back in the early 2000s, it focused its competitive tactics on winning customers from Circuit City — a goal it succeeded at in spectacular fashion, driving Circuit City clean out of business.

Its success was the source of its failure: It was by choosing Circuit City as its competitor to beat that Best Buy turned itself into Amazon’s showroom.

OODA isn’t, by the way, limited to competitions — it’s useful in any situation where understanding your situation and acting to achieve a better one is a good way to go about things.

OODA is, when you get right down to it, a pretty good model for what it means to be cognitive. Whether a wolf, human or business, any entity that’s aware of its situation (it observes), understands it and its implications (orients), uses that understanding to choose a course of action (decides), and then actually does something about it (acts) can with considerable justice be said to think.

Which is why OODA has such strong ties to enterprise cognition. Or, to be accurate, vice versa. OODA came first, and strongly shaped our ideas about the need for enterprises to be more cognitive. OODA is a model for enterprise cognition; cognitive enterprises build their plans around OODA loops.

While OODA isn’t limited to competitive situations, in competitive situations OODA loops have a fascinating property: Whoever has the shorter loops generally wins. Why is this? The answer is a thing o’ beauty: whichever side acts first changes the situation of both competitors. This makes the other side’s observations, orientation and decisions obsolete, forcing it to start over.

To the side with faster loops, the slower side becomes completely predictable, while to the slower side, the faster side becomes completely unpredictable.

Understand, this doesn’t mean OODA is good and PDCA is bad. Not at all: When an entity acts, its actual actions should be as close to its intended actions as possible. PDCA and similar feedback-driven improvement mechanisms are what make this possible.

So PDCA isn’t inferior to OODA. It’s subordinate to OODA.

* * *

Want more? Two colleagues and I authored a Dell white paper on the subject, “Winning with Digital Velocity.” It explores OODA in more depth, illustrating its possibilities using examples from Amazon, Apple, and ESPN.

You’ll find it here. And don’t worry about it having “Digital” in the title. While speed has particular significance for businesses engaging in so-called digital transformations, it’s just as important for businesses pursuing more traditional strategies.

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