As the Korean War began, the situation looked bleak for the U.S. pilots and their allies fighting under the United Nations flag. North Korea, along with the Soviet Union and People’s Republic of China, could field more jets, and also flew superior planes. The American-made F-86 Sabre had entered active service only the preceding year and was unproven in combat. The Sabre’s swept-back wings cut a fine profile, but few experts considered it equal to its Soviet-produced counterpart, the MiG 15, which matched the Sabre on most performance dimensions and surpassed it on a few critical attributes. The MiG could ascend quicker than the Sabre, operated better at high altitudes, and had a large advantage in its thrust-to-weight ratio, a critical measure of power. The MiG also packed a bigger wallop, carrying three cannons with two hundred rounds, each capable of blowing an enemy out of the sky. The Sabre, in contrast, came equipped with six machine guns and eight rockets.¹

The North Koreans and their allies also enjoyed superior position. The communists massed large formations of MiGs on the Chinese side of the border with Korea, lay in wait, and scrambled to attack passing Sabres from high altitudes. If the MiGs won the upper hand, they could pursue the UN pilots back to their base. But when the MiG pilots got into trouble, they could retreat to the safety of Chinese airspace, off-limits to UN pilots. In the heat of battle, UN pilots sometimes disregarded these orders and pursued their adversaries across the border, but the deck remained stacked against the UN fighters.

Facing more planes, better planes, and superior position, military experts predicted heavy losses for the Sabres. In the early days of the conflict, UN pilots were expected to lose ten planes for every MiG they shot down in battle—in military parlance, a ten-to-one kill ratio. As the conflict proceeded, the kill ratios were indeed lopsided, but it was the UN fighter pilots who outgunned the MiGs by a ratio of ten to one. The official U.S. Air Force reports tally 792 MiGs shot down to 76 Sabres over the course of the Korean War.² How could this be?

Among the top brass, the lopsided victory in the Korean War inspired more pride than understanding. The advantages that typically confer victory—superior resources or position—clearly didn’t account for the surprising results. The UN forces had inferior planes and fewer of them, and they flew from less secure bases. In the end, the Air Force brass attributed the success to superior pilots—a facile explanation that said everything, explained nothing, and ignored the reality that seasoned Soviet pilots flew most of the missions.

WINNING THROUGH AGILITY

The Sabre’s success remained a mystery for well over a decade. By the late 1960s, however, a loosely organized group, known as the “Fighter Mafia,” fought to secure funding for two new fighter planes, the F-15 and F-16. John Boyd, a leader of the group, revisited the results of the Korean War to garner insights to help design the ultimate fighter.

Boyd was uniquely qualified for the job.³ He had flown two dozen sorties as a wingman in the Korean War and then served as a student and later an instructor at the Fighter Weapons School, the most selective fighter pilot training program in the Air Force, which served as the model for its navy counterpart, popularized in the film Top Gun. During his tenure as an instructor, he earned the nickname “Forty-Second Boyd” by issuing an open challenge to any pilot to engage in mock combat. The competition began with the adversary in the superior position. Boyd promised to gain the upper hand in under forty seconds or pay his challenger $40. Although many of the world’s best fighter pilots took the bait, Boyd never lost a bet.

During his tenure at Nellis, Boyd literally wrote the book on aerial combat. His 150-page Aerial Attack Study codified maneuvers in aerial combat and formed the basis for subsequent air-to-air combat doctrine within the air force. In a later posting, he developed a mathematical formula that allowed, for the first time, a systematic comparison between different aircraft. Lacking a mandate to test his model, Boyd appropriated computer time without official authorization. Discovering his theoretical contribution and his unsanctioned computer usage at the same time, his superior officers put in the paperwork for both a medal recognizing his breakthrough and a court-martial for misappropriation of government resources. In the end, the court-martial proceedings were dropped and Boyd received not only a medal but official awards for his contribution to aeronautical engineering.

Despite his many contributions to the air force, Boyd never rose above the rank of colonel. His intensity in flying spilled over into discussions, where he underscored points by poking his finger—or the lit end of a cigar—into his adversary’s tie, a tactic that stressed his point but ruined his chances to wear a general’s stars. He remained an influential voice within the air force, however, particularly when it came to designing the next-generation fighter jet. To design the new plane, Boyd reexamined the Sabres’ unexpected success in the Korean War and rethought how it had won so many dogfights.

He discovered that early comparisons with the MiGs overlooked two structural attributes of the Sabre that proved decisive in the dogfights over the Korean peninsula. The Sabre featured a bubble canopy made of see-through plastic, which provided the pilot with complete 360-degree visibility of the situation, while the MiG pilot peered through a smaller window encased in thick armor that protected the pilot from hostile fire and reduced wind resistance. Pilots compared looking out the MiG’s smaller window to peering through the bottom of a Coca-Cola bottle. Surrounded by the bubble canopy, the UN pilots could spot opportunities to strike ahead of their enemies.

Better visibility to spot a gap in the enemy’s defenses, however, is valuable only when combined with the ability to seize fleeting opportunities. The Sabre enjoyed a second advantage that allowed pilots to exploit opportunities as they emerged in battle. The American-made fighter included full hydraulic controls, which enabled pilots to switch from one action to another in the heat of battle. The MiG-15, in contrast, had only partial hydraulics and demanded great upper-body strength from pilots, many of whom lifted weights between sorties to better manhandle the plane in combat.

The Sabre pilots enjoyed greater autonomy to choose maneuvers than their Soviet counterparts, and they used their freedom to improvise. By repeatedly shifting from one tactic to another, the UN pilots neutralized the MiGs’ advantages in any specific operation. The ability to climb more quickly did not help the MiG pilot when the Sabre’s quick change in maneuver deprived him of a clean shot. With each successive change in operation, the UN pilot gained a slight advantage, no more than a fraction of a second, but as the number of shifts mounted, the cumulative advantage grew. The MiG pilot found himself on the back foot, responding to the Sabre’s initiatives. The gap between the Sabre and the MiG grew larger with every twist and turn.

Boyd’s analysis broke with the mental map of how to win wars that then prevailed within the U.S. military. Rather that smothering uncertainty with massive resources, Boyd argued, combatants should seek out turbulence, and when possible create it to generate opportunities. Seizing these opportunities, however, required agility, an aircraft’s ability to rapidly shift from one action to another in order to exploit gaps in the enemy’s defenses.

THREE TYPES OF AGILITY

Agility is a broad notion that applies not only in combat but in any other domain—including business, sports, and software programming—characterized by turbulence, opportunities, and competition. Leaders increasingly recognize the importance of agility. A survey by the consulting firm McKinsey & Company found that nine out of ten executives ranked organizational agility as both critical to business success and growing in importance over time.⁴ Boyd’s ideas have grown more influential in the military in recent decades, particularly within the U.S. Marine Corps, which embraced his insights as the core of maneuver warfare, the approach discussed in chapter 5. Among engineers, agile programming has become an important technique to develop software when users cannot predict their future needs.

Despite widespread understanding that agility matters, there is less clarity on what it is exactly. I define “agility” as the capacity to identify and capture opportunities more quickly than rivals. Different terms can describe the same notion—the Marines and U.S. Army prefer “maneuverability,” while some management writers prefer “nimbleness” or “flexibility” to describe the same idea. The specific wording does not matter, but the underlying idea does. Agility can help organizations seize a wide range of opportunities. Respondents to the McKinsey survey, for example, identified a host of potential benefits from enhanced agility, including higher revenues, greater customer satisfaction, improved operational efficiency, faster time to market, and greater employee satisfaction.

Agility is not raw speed. “The fast beat the slow” (or its Darwinian version, “The fast eat the slow”) has entered the conventional wisdom of strategy. This is incorrect. The best way to enhance raw speed is to develop a crystal-clear long-term vision and send the troops off at a dead sprint in pursuit. If the vision is wrong or the world changes, however, this approach only guarantees that an organization arrives at the wrong place before anyone else. People often forget this basic insight in their rush to secure “first-mover advantages” or to “get big fast.” Recall how pioneers like Charles Stack were too early to seize opportunities that later entrants like Amazon successfully exploited. Timing matters more than raw speed, and too early can be just as bad as too late.

Instead of increasing velocity, agility improves timing, the ability to do the right thing at the right time. Recall how Carnival timed its new ship construction and initial public offering, neither too early nor too late. Agility breaks the flow of time into smaller segments, allowing for more frequent reassessments of a changing situation. As the Sabre pilots pulled ahead of their counterparts and passed from one maneuver to the next they could wait for the ideal moment to strike. Agility increases the odds of matching the correct action to the situation at hand.

Any single opportunity seized through agility may confer modest benefits, but the cumulative effect of successive small wins can be decisive. It was not any single action that brought the Sabres victory, but rather their ability to shift from one maneuver to another more quickly than the MiGs. A series of tactical victories—operational improvements, cost cutting, incremental product extensions—that are linked to clear strategic goals and executed faster and better than rivals can cumulate to large leads over time. A 2007 survey of 769 CEOs from forty countries found that excellence of execution ranked first among 121 concerns, and sustaining execution in the future ranked as the third most important issue they faced.⁵ These executives recognized relentless execution—piling up lots of little wins—as the key to success.

A more agile competitor shapes the circumstances to which a rival must react. As the dogfights advanced, North Korean pilots found themselves responding to the UN pilots’ initiative, rather than dictating the flow of the battle themselves. It is often easy to identify an organization, army, or athlete who is winning through agility. They anticipate opportunities and threats that surprise rivals. They set the agenda their rivals must adapt to; time seems to slow down for them, while accelerating for their less agile opponent. The less agile rival despairs as the gap grows larger over time, and often loses any hope of closing it. Most of the MiG pilots who were shot down abandoned all hope of reversing the situation even before their defeat was inevitable. They gave up before their planes gave out. The psychological drain of responding to a more agile rival and watching the situation deteriorate saps competitive will.

It is important not only to define agility clearly but also to disentangle its various forms. Over the past decade I have researched dozens of firms that thrived in volatile markets, and identified three distinct types of agility. The first is operational agility: a company’s capacity, within a focused business model, to find and seize opportunities to improve operations and processes. These opportunities need not be sexy. Cost reductions, quality improvements, or refinements to distribution processes can be just as valuable as introducing new products and services—as the success of Wal-Mart, Toyota, FedEx, and Southwest Airlines illustrate. Chapter 9 describes how to build operational agility within an organization.

 

FIGURE 7.1 Three Ways to Be Agile

 

Organizations can achieve agility in three distinct ways. They can see and seize a series of opportunities in their core business faster than competitors, reallocate resources out of declining businesses into promising ones, and seize periodic golden opportunities that can propel them ahead of rivals. Below are some factors associated with each type of agility.

 

 

 

Operational

 

Portfolio

 

Strategic

 

Defined as an organization’s ability to:

Examples

Organizational enablers

Leaders should

Operational

Within a focused business model, consistently identify and seize opportunities more quickly than rivals

Wal-Mart

Southwest Airlines

Toyota

Tesco

Operational

Shared real-time market data that are granular and credible

A small number of corporate priorities to focus effort

Clear performance goals for teams and individuals

Mechanisms to hold people accountable and to reward them

Stay in the flow of information

Sustain a sense of urgency

Maintain focus on critical objectives

Recruit entrepreneurial staff

Portfolio

Quickly and effectively shift resources out of less promising businesses and into more attractive opportunities

Procter & Gamble

Samsung Group

General Electric

Portfolio

A diversified portfolio of independent units

A cadre of general managers who can be transferred across units

Central corporate control over important resources, such as talent and cash

Regular, unbiased evaluation processes

Structured process for decreasing investments or selling off units

Make unpopular calls on reallocating resources

Base portfolio decisions on rational rather than emotional or political criteria

Invest heavily on promising opportunities

Strategic

Identify and seize major opportunities as they arise—

Banco Santander

Oracle

Strategic

A strong balance sheet and a large war chest to finance big bets

A governance structure that permits executives to seize opportunities more quickly than rivals

Owners and executives with a long-term perspective

Be willing to take risks

Maintain the confidence of owners

Mitigate downside risk on big bets

Wait for the right opportunity

 

Portfolio agility is the capacity to quickly and effectively shift resources, including cash, talent, and managerial attention, out of less promising units and into more attractive ones. A recent study of more than two hundred large enterprises found that the reallocation of resources to faster-growing segments within a company’s portfolio of businesses was the largest single driver of revenue growth.⁶ Diversified enterprises such as Johnson & Johnson, Procter & Gamble, and the Samsung Group have used their portfolio agility to succeed over long periods, while private equity groups such as Blackstone, KKR, Carlyle, and TPG have earned high returns for their investors by actively managing a portfolio of businesses. Chapter 10 explores how organizations can enhance portfolio agility.

Recall that turbulent markets typically produce a steady flow of small opportunities, intermittent midsize ones, and periodic golden opportunities to create significant value. Strategic agility is an organization’s capacity to spot and seize major opportunities when they arise. Such opportunities include scaling a new business, aggressively entering a new market, betting heavily on a new technology, or making significant investments in capacity. The agility to make a big bet quickly does not, of course, guarantee that the gamble will pay off—recall AT&T’s cable acquisitions. But companies that avoid big bets altogether risk falling behind more aggressive competitors. Chapter 11 examines strategic agility in greater detail.

FROM LINES TO LOOPS

Boyd viewed the dogfights over the Korean Peninsula as the distilled essence of all combat, where a more agile combatant defeats a better endowed enemy by seizing the opportunities that arise out of turbulence. Boyd was not the first warrior to recognize the importance of agility, a central theme for Sun Tzu, Napoleon, and the architects of the German blitzkrieg. He was, however, the first to conceptualize battle as a series of iterative loops, in which the pilots cycled through four steps: observe, orient, decide, and act.⁷

The cycle begins when a pilot observes the situation, including the hundreds of readings from the cockpit instruments and outside signals—the glint of the sun off a turned wing or an unexpected vibration. The bubble canopy opened the Sabre pilots’ vista. In the second step, the pilot orients himself by forming a mental map of the situation, including the terrain, location of enemies, and wind. Based on his map of the circumstances, the pilot decides what to do, and acts. The Sabre’s hydraulics allowed pilots to translate decision into action faster than the MiG pilots could. After moving through the loop, the pilot would observe the new situation and go through the cycle again.

FIGURE 7.2 Boyd’s OODA Loop

Boyd referred to this cycle as the OODA loop, to denote the constituent steps of observe, orient, decide, and act. Boyd believed that the dynamic of two fighter pilots cycling through the OODA loop applied more generally to armies clashing on land or navies engaged at sea. The absolute tempo is slower for an infantry battalion or fleet, to be sure, but victory still went to the army or fleet that moved through the loop faster than their adversary. Boyd used the loop to illuminate how smaller armies prevailed in battles ranging from the Greek victory over the Persians at Marathon in 490 BC through to recent conflicts in the Middle East.

Boyd was not the first thinker who used an iterative loop to explain action in the face of turbulence (see figure 7.3). Recall Karl Popper’s loop of conjecture and refutation. Boyd studied Popper closely and built on the philosopher’s insight that knowledge grows through iterations.⁸ Shortly before Boyd developed the OODA loop, W. Edwards Deming applied the plan, do, check, act cycle to manufacturing process improvement, while engineers adopted iterative processes to develop new products in the 1950s. Variations of these early approaches later evolved into agile methods of developing software.⁹ At the same time, venture capitalists institutionalized the process of staging investments in rounds to alternate between working through a business plan and testing it in the real world. Precursors undermine Boyd’s claim to novelty but reinforce the validity of the OODA loop. Engineers, venture capitalists, and scientists working in separate domains independently concluded that some variation on an iterative loop could help them act more effectively in the face of turbulence.

The iterative approach contrasts with the linear approach many leaders follow when they attempt to predict the future, craft a long-term plan, and implement it methodically over time. This linear approach confers the illusion that leaders have conquered turbulence to gain control of a situation. Throughout history, the apparent rationality of linear planning has attracted leaders, including French generals who plotted attacks on World War I trenches to the last bullet, CEOs who formulate elaborate long-term visions, Soviet central planners micromanaging an entire economy, and software programmers attempting to plot out a detailed plan for a multiyear software development project.

The ritual of predict, plan, and implement may allay anxiety about the future, but it is a crummy way to advance into an unknowable future. A linear approach forces planners to lock into a mental map without benefit of information that will emerge in the future. New information can be safely ignored when circumstances remain relatively stable. Writing a grocery list works because people know what they like to eat, retailers seldom change formats from one week to the next, and neighbors don’t corner the market in steaks to foil a planned barbecue. In stable contexts, the costs of strict adherence to a preconceived plan are not tragic—a rigid shopper may miss a special on fish or fresh blueberries. Running a start-up, fighting a battle, or designing novel software, however, is nothing like a trip to the grocery store. The ceaseless churning of external forces produces unexpected opportunities and threats, churns up new information, and defeats the best-laid plans.

 

FIGURE 7.3 Comparison of Iterative Approaches

Experimental loop

Key Advocates

Karl Popper (1930s)

Objective

Create and test theories

Steps in Process

Define problem

Develop tentative theory

Submit to error elimination

Important Insights

Experiments should seek to disconfirm a theory

Anomalies point to productive areas for further research

Knowledge emerges from trial and error

Deming cycle

Key Advocates

Walter Shewhart (1930s)

W. Edwards Deming (1950s)

Objective

Improve quality of standardized processes

Steps in Process

Plan objectives and process

Do by implementing process

Check results against objectives

Act to improve the process

Important Insights

Processes can be improved continuously

Good data are necessary to identify gaps versus plan

Variations from plan signal opportunities for improvement

Complex systems require ongoing adjustment

Iterative new product development

Key Advocates

Various (1950s–present)

Objective

Develop products or software that meet customers’ changing needs

Steps in Process

Vary by approach (e.g., Extreme Programming, Scrum)

Important Insights

Successive prototypes can produce a better product than a predefined plan

Ongoing dialogue with customers preferable to written product specification

Staged investment in new ventures

Key Advocates

Various venture capitalists (1960s–present)

Objective

Invest to build promising start-ups

Steps in Process

Evaluate and refine business plan

Agree on objectives for a round

Oversee progress

Reassess investment

Important Insights

Break funding into rounds to force revision of plan

Identify key risks at each round and take steps to reduce

Stage investments, increasing funding as key sources of uncertainty are resolved

OODA loop

Key Advocates

John Boyd (1960s–1970s)

Objective

Defeat enemy in combat

Steps in Process

Observe situation

Orient oneself

Decide what to do

Act

Important Insights

Competitive iteration

Tempo defined relative to rivals

Turbulence favors the agile

Agility loop

Key Advocates

Donald Sull (2005)

Objective

Achieve agility in organizations

Steps in Process

Make sense of situation

Make choices

Make it happen

Make revisions

 

Important Insights

Agility consists of four different types of discussion

Each type of discussion has distinct requirements and pitfalls

Managers can enhance agility by structuring and leading discussions

Software programming illustrates the folly of a linear advance into a turbulent future. Traditionally, large software development projects assessed users’ needs, translated them into features, parceled features for coding, and assembled the code at the end. Sounds sensible, but, unfortunately, it doesn’t work. In 1995, the Department of Defense published a study reviewing software projects that had cost the taxpayers more than $35 billion, and found that only 2 percent of the code was used as written, with the rest either requiring significant revision or going unused.¹⁰ Software developed for the private sector did not do much better, with less than 5 percent of code used.¹¹

The problem was not a failure to deliver the planned features. The same Defense Department study found that half of the software features met the requirements requested by users in the design stage. By the time programmers delivered the software, however, the customers wanted something different. Users changed their minds for many reasons: They struggled to articulate what they wanted until they saw a prototype, software interacted with hardware in unexpected ways, the new software spawned new requirements, or competitors upped the ante.¹² By freezing features too early, the linear approach kept programmers from incorporating new information.

Linear planning is a siren’s song that lures leaders to disaster with a seductive promise of control. In a turbulent world, it is better to bend the line into a loop, and proceed through iterations that allow adjustments to changing circumstances. But an iterative approach is easier to describe than implement. A pilot can quickly proceed through a loop, but how can organizations with tens of thousands of people, divided into discrete units spread across multiple continents, achieve comparable agility? The next chapter argues that leaders can enhance agility by structuring and leading discussions to make sense of turbulence, make hard choices, ensure execution, and revise their mental maps in light of new information.