by Simon Clark, Managing Partner at Fidelity Growth Partners and Mentor at Smart Camp London
This week, a number of bright, visionary entrepreneurs in London are going to be pitching their companies at Smart Camp, the IBM initiative to promote businesses that are trying to solve some of the world’s toughest challenges. As they do so, they might want to cast a thought to the thoughts of a US Air Force Colonel of the 1960s. John Boyd was a stellar fighter pilot, who was famous for defeating all opponents within 40 seconds. He was also fascinated by the mental processes that pilots, and by extension all combat leaders, used to decide what they should do in highly stressful and confused situations.
He developed a model for this mental process which he called the OODA Loop, for observe, orient, decide and act. In this iterative approach, he described how successful combat leaders observed the environment around them, understood their position in that environment, made a decision, acted on it and then observed the results and repeated the process. The key to success, he preached, was to be able to run the loop faster than the opponent could, thus, in a phrase that has become a touchstone in the US military, “getting inside the decision loop of the opponent.” Much of the strategy of the first Gulf War was based on this concept.
This isn’t just about speed, it’s a much more interesting idea because it captures the inherent need to make decisions based on incomplete data and the best available observations, act on those decisions and then tune the next decision based on the results observed. It focuses the decision maker on the world outside, not on his own processes and rules, something that the military found hard to comprehend but that proved crucial to success. By doing so, the combat leader makes time his friend, as he is able to move faster and make changes more promptly than his opponent, thus disorienting and demoralizing any opposition.
The relevance to a startup becomes clearer when one considers the position of a founding team, in a confused and unclear market where all the important data are outside the startup company. The founders need to observe carefully the world around them and understand both the latent needs of their prospects and their position in that market as well as that of their competitors. They need to formulate testable hypotheses and decide which ones to act on, and then observe the results and repeat the process.
In an attractive market, there will be a number of startups going after a reasonably obvious opportunity. The one that can iterate fastest on this loop has the best chance of success as it will be able to discover the product/market fit and claim leadership in a nascent market.
The trick, and it’s harder than it sounds, is to build the startup to take advantage of this. Eric Ries writes well about this challenge in The Lean Startup, in which he explains how to create a company that is optimised for learning. This is a fundamentally different structure than a large organization has, and for a good reason, because it has a different objective: not to manage an existing, well defined process, but to discover a latent market need. Again, the crucial insight is that all the facts exist outside the building and that a startup needs to be organized to discover those facts.
The hardest task of all is to be brutally honest about the external data, and what it says. It’s all too easy to fall in love with a hypothesis for a business, particularly if it is technically elegant. But the OODA loop is clear that it’s only by acting, and observing the consequences, that a decision maker can improve the results. That’s not to say that the founding vision for the business doesn’t matter, if anything it matters even more in such an uncertain market. What it does mean is that founders need to test every product concept with the overall vision in mind but against the facts in the world around them. Understanding that world, and their place in it, making decisions and acting on them and then adjusting based on the results they observe is the path to success. So, the question for this week’s Smart Camp participants is not so much what they are building today but rather how are they configuring their business to evolve and to learn.
Take part in Smart Camp London in person, or right here or the Smarter Planet blog
The Smart Camp London finals will be held on the 16th and 17th November. From 9am GMT on Monday (14th Nov) till just before the winner’s announcement on the 17th Nov at 4:15pm GMT, you’ll be able to vote for a People’s Champion as each of our five Smart Camp London finalists pitch right here on the Smarter Planet blog – make sure you tune in and cast your vote!
If you’re going to be in London on the 17th November, we’d love you to come join us to see our five finalists pitch live on the Southbank. Register for the event now at: http://ibm.co/SmartCampLondon2011
In the meantime, why not join the conversation? Follow us on Twitter at http://www.twitter.com/ibmsmartcamp and take part in discussion using the #ibmsmartcamp hashtag.