Thriving in a Dynamic Environment, Part I
In our dynamic, even uncertain environment, inaction may be the riskiest strategy and the best solution is becoming a dynamic, challenge-setting organization. Here’s how...
"We always plan too much and always think too little. We resent a call to thinking and hate unfamiliar argument that does not tally with what we already believe or would like to believe." — Joseph Schumpeter
We live in very dynamic, even uncertain environment. Technology trends, social change, consumer preferences, regulations, and even geopolitics are affecting every business.
It’s unlikely to revert back to calmer waters. In this environment, not taking action can be as dangerous as taking the wrong action.
For weeks now, we’ve covered in this newsleter how to reduce the risk of failure when taking action. Today, and next week we are going to discuss the best model for taking action in an increasingly dynamic environment.
The solution lies in becoming what I called in my book, Transformative, becoming “challenge-setting organization" — one that proactively seeks and creates opportunities rather than waiting for disruption to arrive. Here’s an introduction and the model this week, and next week we’ll discuss the model in more detail.
The Pace of Change Has Fundamentally Shifted
More than 25 years ago, Intel's Andy Grove warned us about "strategic inflection points" — those technology shifts that could destroy businesses like "deadly and turbulent rapids." His message was clear: in the face of these "10x forces," you could lose control of your destiny unless you reacted quickly enough.
Today, that warning feels almost quaint. Ray Kurzweil observed that we're now in a period of accelerating change where "the pace of change is itself accelerating." We're doubling our rate of progress every decade. Because we're building technology that helps us create new technology, change has shifted from linear to exponential growth.
The implications are staggering. New technologies like AI, social media, and digital delivery platforms don't just create new products — they accelerate customer adoption rates. Growth hacking has become a profession, shifting entire markets faster than ever before. On the horizon are even more game-changing.
The Fatal Cost of Standing Still
Here's the paradox that has been true for decades: companies often fail to take adequate risks and strive for the status quo, yet they still fail. The corporate graveyard is filled with organizations that didn't do anything "wrong" — they simply failed to act when change was required.
Consider Nokia's former CEO Stephen Elop's haunting observation after losing the entire mobile phone market to Apple: "We didn't do anything wrong, but somehow, we lost." Nokia didn't lose because of poor execution of their existing strategy. They lost because they let their biases and existing capabilities dictate how they viewed the mobile phone market, causing them to miss the smartphone revolution entirely.
The pattern repeats across industries:
Kodak invented the first digital camera in 1975 but refused to commercialize it in the right way, fearing it would cannibalize their film business. Their reluctance led to bankruptcy in 2012, even as the market shifted decisively to digital.
Blockbuster dominated video rentals but dismissed digital streaming and home delivery. Their refusal to pivot from physical stores to digital platforms sealed their fate.
Borders failed to embrace e-commerce and digital reading while competitors like Amazon invested heavily in online sales and e-readers. They filed for bankruptcy in 2011.
Intel Corporation, Andy Grove’s has repeatedly missed strategic inflection points: data centers, cloud, mobile, and now AI. It has let its manufacturing dominance fall behind with old models that limited it’s production capacity. Intel’s board recently fired its CEO as it goes through an existential crisis.
These weren't companies that made catastrophic strategic errors. They were organizations that failed to recognize that the greatest risk was inaction itself.
Beyond Paranoia: The Opportunity Mindset
Grove's warning about being "paranoid" about technological disruption tells only part of the story. His viewpoint, shaped by Intel's near-misses, emphasized the defensive aspects of change. But there's a more optimistic perspective: an accelerating world doesn't just present problems — it frequently offers new opportunities that you'll miss if you're not actively observing.
As I outlined in Transformative, the greatest challenge organizations face isn't surviving the next disruption — it's developing the momentum to seek change even when the need to change isn't apparent. Doing this well is benefited by increase "clock speed" — the pace and cadence of execution, and the ability to recognize the need for adaptation.
Many companies have taken advantage of enabling technologies like Internet infrastructure, cloud computing, and mobile devices in the past. Many others will benefit from Artificial Intelligence as an innovation catalyst. But their real breakthrough came from and will continue to come from seeking to fulfill higher-level customer needs and creating better outcomes, sometimes before customers themselves understood what they wanted.
The best prospects for change come from setting up your organization to look for new opportunities deeply and constantly. Innovation isn't just a game of chance or waiting for the next strategic inflection point. True game-changing innovation starts with a vision to create something unique and valuable.
With this in mind, let’s talk about how to build a model that allows you to make decisions in a rapid changing environment and develop the agility and confidence to adjust quickly.
The model for this kind of dynamic leadership comes from an unexpected source: 1950s aerial combat. During the Korean War, aircraft speeds increased from 400 mph to over 600 mph in just seven years. By the 1960s, jets were reaching 1,600 mph — four times faster than just 15 years earlier.
United States Air Force Colonel John Boyd recognized that these rapid increases in speed were stretching pilots' ability to react in such dynamic environments. His solution became known as the OODA Loop — a framework for moving from understanding to action through four elements:
Observation: Collecting data about the current situation
Orientation: Analyzing and synthesizing data to form options
Decision: Defining and committing to a course of action
Action: Executing that course of action
Boyd's crucial insight was that reaction speed determined success in aerial encounters. The faster a pilot could observe, analyze, decide, and act, the better their advantage. He became known as "Forty Second Boyd" for his ability to turn any disadvantageous position into an advantage in 40 seconds or less.
The Foundation of Dynamic Leadership
I can’t stress enough what a radical departure this concept was from the overplanning orientation of the military at the time. The OODA Loop was designed to aid pilots while in the air to continuously observe, adjust analysis and understanding, decide on adjustments, and act in the moment. Boyd’s model received widespread interest and adoption in the military and eventually it was applied to other settings as well.
Boyd's model rests on a fundamental acceptance that our understanding of any situation is incomplete and constantly changing. Therefore, we must continuously refine and adapt our observations and adjust accordingly.
His research reached two critical conclusions that apply directly to business leadership:
First, the most critical factor for winning was putting the pilot in control as quickly as possible so they were acting based on their observations rather than outdated plans.
Second, speed of decision-making created compounding advantages. Even when pilots made wrong decisions, they were ultimately better off because they could reassess, understand their error, and correct it faster than their opponents.
Boyd's conclusion was that pilots needed to "operate at a faster tempo to generate rapidly changing conditions that inhibit their opponent from adapting or reacting to those changes." In other words, clock speed wins, every time.
The Challenge-Setting Imperative
In next week's article, I'll show you how to apply the OODA Loop framework to transform your organization into a challenge-setting powerhouse. We'll explore the specific steps for creating organizational worldviews, developing orientation through questioning, setting clear challenges, and building a culture of high-velocity decision-making.
The companies that thrive in our accelerating world won't be those with the best plans — they'll be those with the fastest ability to observe, adapt, and act. The question isn't whether change is coming to your industry. The question is whether you'll be the one setting the pace of that change or struggling to keep up with it.
Here are some questions to help you think about how to get started on working better in a dynamic environment.
For your consideration:
Understanding Your Current State:
What assumptions about our industry or market are we operating under that might no longer be true?
Where in our organization do we see evidence of "overplanning" versus taking action?
What trends or signals in our environment are we observing but not yet acting upon?
Learning from Disruption:
Which companies in our industry (or adjacent industries) have we watched get disrupted? What early warning signs did they miss?
What would our own "Nokia moment" look like? What disruption could blindside us?
Are we more focused on defending our current position or seeking new opportunities?
Examining Organizational Biases:
What existing biases, capabilities or investments might be limiting how we view new opportunities?
Where do we find ourselves saying "that's not how things work in our industry"?
What would an outsider with no industry experience do differently in our situation?
Assessing Your Clock Speed:
How quickly can we move from identifying an opportunity to taking action?
What slows down our decision-making process most: lack of information, too many approvals, or fear of failure?
When was the last time we made a significant strategic move that surprised our competitors?
Building Future Readiness:
If we knew our industry would be completely different in five years, what would we start doing today?
What new capabilities should we be developing now, even if the need isn't immediately apparent?
How can we create more "40-second Boyd" moments in our organization?
Until next time, lead with purpose.
Will
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