In his book, Good to Great, Jim Collins describes an important business cycle called the doom loop, a negative cycle created by reaction without understanding. In a recent Knowledge Project podcast, he shared this about companies in the doom loop, “Here’s what’s really scary. You are going through the first three of five phases where looking in from the outside you still look healthy, but you are already sick… And you are not visibly sick where nobody can deny it anymore until stage four out of five stages. And the fifth stage is a stage you never come back from which is capitulation to irrelevance or death.” The doom loop illustrates the importance of the OODA (observe-orient-decide-act) loop as a model for responding to shifting market situations with intelligent agility.
What makes the OODA loop work for organizations is the ability to observe what’s happening, determine which of those observations are relevant to their business or situation, decide on a course to take, and act. Yet, as Jim Collins notes, companies in the doom loop appear just as healthy from the outside as OODA loop companies, until it’s too late. Why? Because although they appear to be exercising the OODA loop, they skip two vital steps: Observe and Orient. This presents the image of agility — the trademark of a healthy organization — while making organizations in the doom loop difficult to recognize.