Mark McGrath: The Adaptive Entrepreneurial Method: VUCA, OODA, IOT
Austrian economics is distinctive in its recognition and, indeed, embrace of continuous change: customer preferences change, competitors’ actions change, markets change, technology changes, prices change, business methods change. New knowledge is continuously created and accumulated. And Austrian economics equally recognizes that entrepreneurial businesses must change in response: capital combinations change, supplier and customer relationships change, organization structure changes, business portfolios and value propositions change. Continuous change is required — which is something business has not traditionally been designed for. How do businesses manage continuous change?
In the current digital age, the rate of change in the external business environment is accelerating, largely as a consequence of rapid technological evolution and the ways in which customer behavior and preferences change in response. We plan to cover the issue of continuous change from multiple angles in the coming weeks and months.
This week, Mark McGrath joins us to review a tool for value creation amidst continuous, roiling change. It has been around for a while and so is proven in multiple arenas and situations. It goes by the name of OODA.
Key Takeaways and Actionable Insights
The OODA loop is a deeply sourced tool that draws on eastern philosophy, western science, and aligns with Austrian economics.
When a firm as a network of individuals, knowledge, ideas, tools, processes and resources works with clients and customers and their systems, all should be better off as a result of their co-ordinated action. The better the capacity to learn and make adjustments together, the better the capability to recognize and seize opportunities, and to act at co-ordinated speed. Those who can handle the rate of change fastest will be the most successful.
The originator of the OODA loop model, John Boyd, synthesized thinking from multiple sources about this problem. In business, we can call it the Adaptive Entrepreneurial Method.
The loop is triggered by uncertainty, or what is referred to in the model as VUCA:
Volatility — circumstances change abruptly and unpredictably;
Uncertainty — knowledge is incomplete and the future is indeterminate;
Complexity — we are individuals in a dynamic interconnected whole with emergent outcomes;
Ambiguity — multiple interpretations from multiple observers, and multiple conclusions.
VUCA enters the OODA loop as unfolding interaction with the ever-changing external environment or market, as information and data coming into the company, and as unfolding circumstances, whether these are the company’s own sales trends
Article from Mises Wire