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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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|In: Cognitive Enterprise|Last Updated:

The dullest, and probably the most important chapter in The Cognitive Enterprise (Bob Lewis and Scott Lee, 2016) addresses a central topic when it comes to cognition: What does it mean for an organization to “know” something?

We started with the tired old “knowledge pyramid” — you know, the one that starts with Data and progresses through Information and Knowledge until arriving at Wisdom (DIKW).

The old pyramid gets just about everything wrong, at least as it’s usually explained. And the flaws matter: For an enterprise to act as if it thinks, getting this right is essential.

Here’s an overview. To get the whole story you’ll need to buy the book. It pains me to say this, and I plan to continue in my agony until you … that’s right, you, the person reading these words right now … until you get yourself a copy and write an honest review on Amazon.

Where was I. That’s right — the old DIKW pyramid and what to do about it.

Start with Data. Most of DIKW’s proponents would have you think that every byte stored on your company’s hard drives, NASes and SANs is data. When you read an awe-inducing statistic about the data explosion, it’s probably based on the every-byte-stored definition. You’d think the GIGO principle (Garbage In/Garbage Out) was still waiting to be formulated.

Data (plural of datum if anyone still cares about such things) is actually a collection of individually verifiable facts. Your eye color is a datum. So are your driver’s license number, your annual income, and how many miles you walk every week.

Data aren’t always verified, but they must be verifiable.

Information next. No, it isn’t data that have been processed to provide something useful. Definitions like this entirely ignore the well-developed branch of mathematics upon which the entire data process industry is founded: Information theory.

Information is the stuff that reduces uncertainty. It comes in bits, one of which is the quantity of information that cuts your uncertainty about something in half. The classic example is a coin toss. You know it either landed heads or tails. One bit of information will resolve your uncertainty about the result.

For the most part, though, information doesn’t eliminate uncertainty. It reduces it — a very different matter. Even in the case of the coin toss, if someone tells you it landed heads you still aren’t absolutely sure. Your informant might, for example, be an untrustworthy source.

Information is, by the way, what a good system of metrics provides.

Which gets us to knowledge – a word that’s been hard to pin down since Plato first wrote about it a few millennia back, not that he got anywhere with his ponderings.

I’m not criticizing, mind you. Epistemology is an eyeball-crossing domain.

Scientists generally rely on Karl Popper’s approach to things: You start with a proposition and do everything you can to disprove it. A proposition that’s survived all the tests human ingenuity can subject it to — nobody can think of any more tests that might disprove it — is considered by scientists to be something they “know,” in quotes because they know that everything they “know” is just one additional test away from being something they used to know, only now they know better.

Business managers (and, for that matter, consultants) don’t have the luxury of subjecting their knowledge to testing that’s as thorough as what scientists are able to manage. We have to make do.

Scott and I are practical guys, not epistemologists. We figure you know something if you’ve looked into it extensively and have concluded there’s just no point in worrying about it anymore. You still might be wrong, but you’re more than certain enough to act.

Then we added a new layer: Judgment. It sits between knowledge and wisdom in the pyramid. Judgment is about tempering your knowledge about something with related insights that come from experience. It’s your safety net when making difficult decisions.

At the top of the pyramid there’s wisdom — broad principles about important subjects, which you don’t find very often, and when you do it’s rarely in the domain of commerce.

Now, finally, we’re ready to talk about what it means for an enterprise to be cognitive. It means the enterprise does a fair imitation of knowing things, as distinct from the people in it knowing things.

In a cognitive enterprise, when it comes to the most important subjects, most people share similar views, with similar levels of certainty, and so can be trusted to make similar decisions when it’s their turn to do so.

A different way of saying it: In a cognitive enterprise, knowledge becomes culture, and culture becomes the centerpiece of governance.

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