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Making Decisions and Leading People with the OODA Model

How to lead the company strategy and operations in a crisis situation or period of change

The current pandemic, the supply problems it has led to, rising energy costs, plus the shift toward sustainability place a variety of demands on companies – on a number of levels, and sometimes in conflicting ways. If you follow financial indicators, short-term financial and operational measures are required – “flying on visual” with paying customers. By contrast, sustainability commitments necessitate strategic decisions of a medium- and long-term nature, including regulatory and normative decisions – “off the radar” for stakeholders in other areas. Support with this is offered by the OODA model, which helps companies make the best possible decisions in any given situation. Steinbeis expert Dr. Peter Meier explains the benefits offered to companies by the model.

The planning scenarios currently used by companies range from worst-case threats – posing short-term risks to the existence of the company due to financial insolvency – to best-case opportunities to add long-term value in response to all of the demands and expectations of other stakeholders. Faced by uncertainty regarding future developments, companies try to identify relationships between the causes and effects of value-adding activities – in all areas of value creation, for all stakeholders. They also seek to plan for different scenarios, make the right decisions, introduce the right measures, and evaluate outcomes. It is therefore still about the decisions and actions of business leaders, partly taken in situations of ignorance, tinged with a great deal of uncertainty.

To make such decisions, companies need different types of information. This forms the basis of all “intelligent” and “intuitive” activities at companies. Currently, information can be supplemented with AI techniques and tools, but the eternal dilemma between intelligence- and intuition-based decisions remains.

Theory: The four cornerstones of the OODA model

The OODA model is used to define quick and best-possible decisions and actions in a state of uncertainty and missing information. It was developed as a military concept for the U.S. Air Force during the Korean War in the 1950s, and since then it has been adapted as a business and public sector model. [1], [3] The OODA model has four parts:

Practice: Use OODA to reorganize information management

How the OODA model can be used by companies is shown by a project conducted by the Steinbeis Transfer Center for Risk Management on behalf of Suthor, a paper processing company from Nettetal, west of Dusseldorf. A family-owned, mid-sized company, Suthor uses an integrated management system – spanning two areas of its multiple-link value chain according to ISO requirements – to manage quality processes (ISO standard 9001) and environmental issues (ISO 14011).

Given the current situation, the company makes daily decisions on short-term and operational changes, versus medium- and long-term strategic plans. There are major deficits with the current ISO standards when it comes to information management and translating this into reality. As a result, the company has been working with Steinbeis expert Dr. Peter Meier and has turned to the OODA concept to place greater emphasis on information management. Meier transfers the formal methods and models used by large companies to the actual situation and processes of medium-sized companies.

Applied to Suthor, the four parts of the OODA model look like this: