Are your customers getting a helping hand or the cold shoulder?

The great thing about big American businesses is that they give us many of the stories that become the fabric of our lives. Frankly, we'd rather not endure the circumstances that result in the stories, but like train wrecks and tornados, they are entirely unforgettable and we talk about them for years. I'm talking about customer service horror stories, of course.

We all have many of them. The stories get particularly interesting when they relate to monopolies or near monopolies, otherwise known as oligopolies. Why? Because any interactions we have with such firms are biased from the get-go by the distrust we have for important players in our lives over whom we have little influence and control. We feel victimized before we even pick up the phone to attempt to do business with them. From their business perspectives, this should present them with an interesting challenge: how do we make our customers trust and love us, so that they won't find ways to live without us? Unfortunately, such firms rarely seem to rise to the challenge.

A good example would be a very unpleasant run-in I had recently with my oligopolist ISP (Internet Service Provider). The setup for the story is that I moved about six months ago. I called my ISP during the move to have them disconnect DSL at my old address and transfer it to my new address-simple enough. Six months later, still no DSL; however, my credit card bill continues to be charged. I decided to give them a call, but having already called them three times previously in recent months, it's fair to say I was already not in the best of moods and pessimistic about the quality of service I would receive. Suffice it to say that they lived down to my expectations. The customer service interactions went like this:

1. My first call to them was, as expected, answered by the call center's auto-attendant. Similar to the voicemail systems that we all despise, the auto-attendant immediately proceeded into a long discourse on why I should "hang up now" (truly, its words) and give their online customer service capability a try. (Clearly, my ISP wants to reduce the expense of human-to-human interaction.) My first response was to say, "Nope, I want a person so I can clear this up NOW!" But after the lengthy intro, the auto-attendant went on and on with all of the self-service options, at which point I reconsidered, surrendered, and hung up as the stern voice had prompted me to do in the first place.

2. Then, having booted up my PC and signed onto the ISP, I navigated through their massive DSL self-help area ("Gee, I guess they have a lot of service problems with DSL," I thought.) I finally found the interactive customer support area, which appeared to require launching an applet of some sort. I'll never know how it works, however, since the program locked up as soon as I initiated it. I'll be darned if I'll try it again.

3. Fortunately, I was able to exit the ISP's "hung" software application without rebooting my PC, so I intrepidly went back into it in order to try another approach. I thought to myself that my problem was as much of a billing problem as a service problem, so maybe they'd be able to help me in their online billing support area. Again, no joy: I couldn't find a single bit of information about how to resolve a billing issue.

4. With a big sigh of frustration, I picked up the phone again. The horror story escalates to a new level at this point. I braved the big intro and all of the options again and finally got a human, who immediately sounded like she was having a bad day. "Uh oh," I thought. I explained my situation, to which she responded that it wasn't possible: her system was showing that DSL was still connected at my former home. I assured her that the phone had been disconnected months ago, to which she responded, "It MUST still be installed or else you WOULDN'T be getting billed." I said, "But THAT'S why I'm calling! I have a problem that needs to be resolved! By definition, problems are what you do NOT expect!" To that, she responded, "Sir, please don't get testy with me." Obviously, I could tell I was at loggerheads. The quality of the conversation was deteriorating by the second, so I asked to be transferred "to someone who actually cares about customer service." Her response: "My phone won't let me do that, sir, you're going to have to hang up and call back. I can't help you."

5. After taking a few minutes to compose myself, I called back. I went through all of the same automated cycles as before, but got a much friendlier helper this time. She sounded like she could have been from one of the Cornbelt states, so perhaps that had something to do with the improved attitude. In any event, her system also told her that DSL was still running in my former residence, but despite her incredulity, she was willing to show some faith and clear up the past charges to my credit card. Although she helped with the billing, I would have to be transferred to a DSL technician to find out about the installation of DSL in my new home.

6. Last stop, I hoped! I was transferred to the DSL technician, who brought up my account history on his work order system. "Hmm…," he said, "I don't see a problem here. What's your new address again? Hmm… I'm showing that the service went live at that address on April 13th." Since I was speaking with him six weeks after the supposed "live" date, I was incredulous at this point. Like a POW after six years of interrogation, I muttered, "But how could the service be on? I don't have any of those DSL filters connected on my lines and my regular phone is still working fine. A technician never came by the house either." Him: "Well, you don't actually always need the filters, sir, and we can get it running without always having to come by." Me: "Well, why wasn't I notified? It's unimaginable that it could be working for six weeks and I wouldn't know about it." Him: "Oh, we ALWAYS notify people, sir, you would have received an email." Me: "Hmm… Can you tell me when the email would have been sent?" Him: "No, I don't have a record of that, sir." Me: "Oh well, never mind. I'll try it out tonight and I'll call back if there's still a problem. Thank you." I don't think it dawned on the tech or the ISP that it may not be a great idea to send email to someone who is having difficulty getting online.

7. Later that night…DSL modem now hooked up, it worked. Simultaneous deep sighs of relief and great frustration echoed throughout Silicon Valley.

The scenario above is very common. For years now, companies have attempted to broaden their customer service capabilities and/or drive down operating expenses with e-commerce applications, technology-laden call centers, extranets, portals, Web or telephone self-service systems, voicemail, email, etc. All are attempts to provide critical customer care while minimizing the need for customer service personnel. For many companies, the cumulative effect of implementing these systems over the years is that the majority of their customer interactions are now decidedly non-human, or worse, inhuman. Electronically mediated customer experiences are those in which the customer interacts either directly with an automated system, or with a heavily technology-dependent customer service representative—a person who only knows what "their system" tells them. At Cooper, we call these customer interactions digital customer touch-points.

Upon reviewing the interaction I had with my ISP, which severely depleted my customer loyalty and put their revenue stream at risk, the digital customer touch-points I experienced (indicated in bold in the steps above) can be summarized as follows:

• Three interactions with heavily technology-dependent personnel
• Three tiring passes through the call center's auto-attendant
• Two initiations of the ISP's communications software on my PC
• One failed attempt to use DSL self-help
• One failed attempt to use the online billing center self-help
• Two indirect interactions with the call center reps' inaccurate customer information system
• One indirect interaction with the DSL tech's work-order system

That's 13 interactions with digital customer touch-points. Lucky 13! And that tally doesn't include the fact that the first call center rep couldn't even transfer my phone call—or so she said. Grrrr! Although not being able to transfer a call may sound trivial, corporations should always endeavor to provide a smooth, unified customer experience. It is problematic enough when multiple touch-points are presented to a customer to solve a single service problem, but it is even worse when those touch-points cannot be seamlessly bridged.

Shouldn't we expect our "digital employees" to be well behaved?

When viewed as an aggregate, digital customer touch-points represent the 21st century front line of communications with a corporation's most critical asset: its customers. Therefore, they have the potential to impact revenues, customer loyalty, and the corporation's brand in the same ways as can the corporation's employees—for better or worse. Hence, we should all think of such touch-points as being "digital employees."

Top-tier companies carefully hire and train their customer service personnel. They do not view any customer-facing position as being insignificant. For example, Home Depot refuses to put untrained cashiers onto the sales floor for fear that doing so would lead to poor customer service and poor employee morale. Instead, their cashiers are given a full week of training to equip them with solid customer service skills and confidence.

I think we would all agree that Home Depot's thinking is sound and commendable. By extension, therefore, we should also agree that when companies replace customer-facing humans with software systems—digital employees—they should somehow "train" those systems to behave in ways that will satisfy the customer and help nurture long-term relationships. Home Depot knows that it would speak poorly of its corporate standards concerning customer service and operational excellence if it were to put an untrained cashier onto the sales floor. But what does it say about a corporation—like my ISP—that puts an ineffective customer support system into the hands of a call center rep, or a poorly designed self-service capability onto the Internet? Moreover, what example does this set for the remaining human beings in the corporation who continue to be tasked with customer service? If their employer only pays lip service to its customers, then why should they bother to do any better? Once this customer service and employee morale death spiral begins, I would contend that it is the beginning of the end for that corporation.

In his books, The Loyalty Effect and Loyalty Rules!, Director Emeritus of Bain & Company, Frederick F. Reichheld, makes the case for customer loyalty as being the key factor in achieving and increasing corporate profitability. In discussing the research he conducted with co-author, Thomas Teal, for The Loyalty Effect, Reichheld states:

"I documented the outstanding financial results generated by leaders who can build a measurable advantage in loyalty. By dissecting the microeconomic forces that link loyalty to profits, we explained the enormous growth and cost advantages of loyalty. We showed that in industry after industry, the high cost of acquiring customers renders many customer relationships unprofitable during their early years. Only in later years, when the cost of serving loyal customers falls and the volume of their purchases rises, do relationships generate big returns. The bottom line is this: An increase in customer retention rates of 5 percent increases profits by 25 percent to 95 percent." [1]

In Loyalty Rules!, Reichheld builds upon the case he establishes in The Loyalty Effect by creating a link between customer loyalty and employee loyalty:

"Customer loyalty hinges, as it always has, on committed teams of high-caliber employees and suppliers, which in turn require a core of owners committed to building an enduringly successful enterprise." [2]

So, employee training, employee loyalty, customer loyalty, and profits are linked, yet businesses are endeavoring every day to reduce employee interaction with customers. This begs the question: Are corporations potentially undermining their own success by de-humanizing their customer service functions with digital customer touch-points? If corporations are going to rely upon such touch-points, how can they be assured that they will adequately replace a human's ability to genuinely care, to go the extra mile, to provide insights into cross-sell opportunities and operational problems, and to maybe even provide the goodwill created by a warm hello or a little friendly banter? Unless corporate executives have evidence that their technology teams have thought through these issues in painstaking detail, it is incumbent upon them to start asking some very serious questions:

• What is the business risk associated with replacing a human interaction with a digital customer touch-point? What might we lose in terms of dollars and brand by distancing ourselves from our customers?
• If implementing a digital touch-point takes away a human interaction that the customer perceived as valuable, what can we provide them in return to make them feel whole again, or maybe even better off than they were before?
• When was the last time, if ever, that we assessed the quality of the customer care being provided by our digital customer touch-points? What risks are we absorbing without that risk being tracked, measured and managed? What kind of program can we put in place to mitigate this risk and remedy any deficient situations?
• Who do we have in charge of our digital customer touch-points: someone trained in humanizing technology experiences, or the IT people who implement networks and configure PCs? In other words, what are the qualifications of the people who are creating our face to the world, and managing the experience of our #1 asset?

Get with the program! An action plan any corporation can follow

Executives need to view their digital customer touch-points as either potential friends or potential foes; as either windows of opportunity or windows of vulnerability. Once a corporation decides to start opening these windows, it needs to be very careful about the quality of the services it passes through them. If an executive cannot get clear answers quickly to the important questions above, then a plan of action is needed immediately. Here is an approach executives can follow to begin to manage the risk associated with their digital customer touch-points:

1. Create service standards and a corporate value system. Establish baseline standards of customer service excellence: objectives, philosophies, attitudes and general approaches.
2. Communicate. Explain and repeatedly assert the corporate beliefs to all employees. Let them know that excellent customer service is job #1, and that the customer loyalty it inspires is the key to the corporation's future success-and to their future employment.
3. Go on a witch-hunt. Search out, characterize, and catalog all digital customer touch-points throughout the corporation.
4. Assess risk. Classify each touch-point by level of business risk. Identify and quantify, if possible, the revenue volume associated with each touch-point. In other words, measure what is at stake at each digital customer touch-point. Don't forget intangibles, like brand.
5. Prioritize. Beginning with the highest risk touch-points, perform customer research as necessary to clearly identify customer goals and needs.
6. Assess effectiveness. Use scenario-modeling techniques to simulate customer experiences. Analyze the effectiveness of current touch-points and operating procedures in satisfying the identified customer goals and needs.
7. Summarize. Prepare a comprehensive report summarizing the overall quality of the corporation's digital customer touch-points. List inadequacies on a revenue risk-prioritized basis.
8. Plan. Outline and prioritize the remediation effort. Prioritize on a "risk per dollar of cost-to-remedy" basis. Identify necessary resources. Prepare a budget.
9. Measure. Identify the key metrics that the renovations will endeavor to improve; create baselines of existing performance based on available data. Circle back to these metrics after improvements have been made. Measure success.
10. Implement. Your customers' loyalty and your revenues are hanging in the balance. Begin this customer-centric program ASAP.

In summary, Charles L. Fred, author of Breakaway: Deliver Value to Your Customers - Fast!, articulates the strategic importance of customer touch-point management very clearly:

"Consumers care more [today] about service quality than they did during the high-flying days of the 1990s. They have less money to spend, they are more discriminate about what they buy, and they are less trusting. The absolute unilateral focus must be delivering on promises. The companies that break away will have a pure external focus on the customer. They will think about gaining new customers, keeping the ones they have, and coming up with new ways to wow the customer." [3]

Manage your digital customer touch-points as if your corporation's very existence depended on it. Your customers and your shareholders will thank you.

References
[1] Frederick F. Reichheld, Loyalty Rules!, (Boston: Harvard Business School Press, 2001), page 10
[2] Ibid, page 2
[3] Fast Company, "How to Lap the Competition," April 2002, http://www.fastcompany.com/feature/02/fred.html

What do you think? Join the conversation in Comments

In my article last month, Innovate, one step at a time, I discussed how the process of innovation easily derails during difficult economic times, such as today's. When creating software and digital products, innovation typically spans many months, and it can become disrupted by unobservable or frequently changing business conditions that make it extremely difficult to form and evaluate viable options. When people can't see where they're going, they typically just stop. This is tragic with respect to innovation, since it is innovation that propels business and society forward.

To help explain why tough times make it difficult to keep innovating, I introduced Air Force Colonel John Boyd's decision-making model called the OODA Loop:

	Observation: observing your landscape, identifying the variables Orientation: making sense of the variables, formulating options Decision: analyzing the options, making a decision Action: executing the decision
Source: MindSim Corporation

Boyd's articulation through the OODA Loop model of how decisions are influenced and made—and of how to disrupt an opponent's loop—is very helpful in understanding the different reasons for what is commonly called "analysis paralysis." The gist of the model is that if one cannot make clear observations and form viable options, then the ability to make sound decisions and carry them out effectively crumbles.

Some tough love: Don't accept the notion of failure

Managing just about any process in tough times is difficult. Nonetheless, I believe we have become much too accepting of product failure. Excuses come easily, since statistically only 1 product idea out of 11 emerges into a new product. It would therefore seem OK to fail since the odds were against success all along. Clearly, this is flawed thinking that simply perpetuates failure.

Products fail for many different reasons. The roots of failure can be found at any point in the product development cycle. Failures happen because information is overlooked, taken for granted, misinterpreted, or acted upon inappropriately or with insufficient resources. Every one of these causes of failure can be tied directly into a failing in one of the OODA Loop steps. Properly navigating the product development cycle always comes down to obtaining solid information, accurately interpreting it, developing viable options, and forming the right conclusions to facilitate one's own actions, or to favorably influence those of another.

Analysis paralysis is the obvious sign that the product development cycle is off track. Unfortunately, by the time th effects of analysis paralysis catch an executive's eye, the situation is usually too far out of control to easily rectify. Try to be preemptive. Perform a mid-day check with y ourself every day. Ask yourself, "Am I moving forward decisively and effectively?" If you are not, make solving that problem your top priority.

Instead of focusing this article on the product development cycle from the perspective of how to create a great product, it will focus on ways by which product managers can increase their success in navigating the cycle itself. A great product follows naturally by extension.

Analyzing the product development cycle

The graphic above illustrates the product development cycle as we typically refer to it at Cooper. Other practitioners and academics have their own variations, but our version is indicative of the core elements that are widely recognized.

The cycle begins with an impetus: the discovery of a new technology, with or without clarity in advance as to how it might be commercialized—a great market opportunity identified through some form of market research, an obvious need to retire an existing product that has been eclipsed by the competition, etc.

The Ideation phase focuses on stating the problem and setting a general direction, including identifying plausible options. Concept Development involves converting one or more options into a high-level product concept, describing the product's purpose, its general use, and its value proposition.

Product Definition clarifies product requirements, which are the base-level functional elements necessary for the product to deliver its intended results. Ideally, ethnographic research and customer modeling inform and support the identification of the key functional elements. This eliminates the waste associated with developing unimportant or quality-compromising features by showing everyone the solid reasons for incorporating the key functions.

Moving forward into Product Design, scenarios are modeled and design principles are applied to generate exact specifications, which are not unlike an architect's blueprint—they provide all the detail necessary to begin construction. Construction is followed by the Product Launch, in which the product is released for consumption.

Once a product has been in the market for a while, a variety of techniques can be used to assess if the product is measuring up to expectations, or if opportunities exist to take the product in new directions. Executives and product managers can then determine whether to stand pat, perform minor design refinements, commence a major renovation, or move forward to Ideation, beginning the cycle for a new product. The ability to determine the right time to make the leap from an old product to a new one is an important skill. Design consultancies can help at this stage using their diagnostic and research capabilities.

Decision-making within the product development cycle

Following each step in the product development cycle through the Product Design phase, a decision is made to move forward to the next step, terminate the project, or move back to the previous step to bolster research and to iterate previous conceptual or design work. The cycle is deliberately staged to permit verification of the work to date, to validate previous assumptions, and to potentially avoid disaster by rejecting a flawed concept before additional resources are committed. Thus, these decision points are import risk management safety valves.

Although carefully traversing decision points can be tedious, doing so ensures the integrity of the product and the well-being of the company. Note that OODA Loop theory can be applied to any decision point, and can be very helpful in gaining advantage over someone else whose loop is intersecting yours. A relevant example of such a loop owner would be an executive with approval authority over your project. You can boost the success of your project by helping that executive negotiate his or her loop. To do so, you should provide clear information, viable options, and reasonable projections of the likely results of exercising those options.

Let's take a closer look at the final "go/iterate/terminate" decision, which is made following the Product Design phase. It is implied that if all stages through Product Design are traversed successfully, then no further go/no-go decisions are needed. Through the end of Product Design, all work has been limited to paper or other inexpensive media. The enormous expense of actual construction has not yet begun. By addressing all concerns before entering Product Development, the risk of expensive and time-consuming iteration, second-guessing, and changes of course are eliminated. Hence, this final decision point is arguably the most important, since it represents the last chance to avoid spending the lion's share of the cycle budget on a flawed product.

5 insights

Now that we've examined the product development cycle, let's move from observation into analysis and draw some strategic conclusions.

1. Plan to avoid analysis paralysis.

Although it is possible to iterate at each step in the product development cycle, doing so contradicts the objective of moving quickly to save time and money, and to preserve executive commitment. In OODA Loop terms, the worst-case scenario is when any step, particularly the early steps, in the product development cycle degenerate into a war of attrition, in which time, money and patience are exhausted in an endless loop of iteration and indecision. So the big question is, how can one obtain assurance that observations are clear and comprehensive, that acquired information is properly interpreted, and that the best options are formulated to ensure sound decisions at every critical juncture?

To obtain such assurance, product managers must examine the composition of their teams to ensure that all essential skill sets are present. Additionally, all internal and external team members should be involved throughout the entire cycle, especially in the early stages of Ideation and Concept Development, which are about charting a course, unifying vision, generating project participant enthusiasm, and winning initial executive buy-in. Moreover, a collaborative approach should be followed to establish consensus and to make sure all opportunities and constraints are properly identified before the course is set.

2. It's not always easy to know what step of the product development cycle you're in.

Considering whether to retire an existing product or begin developing a new one is a critical juncture. Probably 60% of Cooper's involvement with companies is at this important decision point. Companies sometimes conclude that they need a new product, when in fact their circumstances really warrant a renovation of their existing product. Obviously, the converse can also be true. It is imperative to bring well-honed skills in requirements gathering and analysis to bear at this decision point—the Observation and Orientation steps in the OODA Loop.

At the highest level of triage, product opportunities tend to fall into two categories: 1) making the right product, or 2) making the product right. Making the right product relates to properly defining the very essence of the product; i.e., the purpose it is intended to serve, and the functionality required to best provide that service. Making the product right relates to properly initially designing, or later improving, the usability of a correctly defined product. It is important to know which challenge you face, since this will impact how you build your work plan and how you structure your project team. Determining functionality requires ethnographic and other research methods, coupled with design methods that enable a smooth transition from needs to concepts to requirements to detailed design. Optimizing usability, on the other hand, requires diagnostic skills coupled with a surgical ability to apply very specific design principles to very specific problems.

When addressing usability issues, some user and domain research is helpful, but much less is required than when designing a new product. Generally speaking, the broader the usability problem, the more research will be required. For example, more research may be needed when reexamining an entire navigation schema for a broadly used e-brokerage site than when refining a single-user interface for a network management application. When usability problems are both abundant and serious, the line between design refinement and new product design becomes blurred.

3. Avoid fuzzy terms and clearly articulate your objectives and constraints.

The words "new" and "innovative" have their places at the philosophical or conceptual level, but they are very loaded terms when it comes to establishing work plans. Both terms imply that ideation and conceptualization are needed, meaning that a heavy application of research methods will likely be required. In fact, depending on a product manager's frame of reference, achieving his or her definition of "new" or "innovative" may actually involve making only minor usability refinements, which typically require little research. Clearly, avoiding confusing terms is a great help when performing the OODA Loop processes of observation and orientation.

In order to form viable options, it's very important early on to clearly identify your time, financial, and technical constraints. You must avoid fuzzy terms and be direct about just how much of a clean slate you want to begin with, how much of your legacy you're able and willing to jettison, and how many previous notions you want to challenge about your customers and the purpose of your product. This will determine if you're really going to develop a new product, or whether you'll just be refining what you already have. The distinction is important, since there is no point spending valuable resources questioning the fundamental nature of a product in Concept Development and/or Product Definition if constraints dictate that any ideas that would emerge from those stages would not be actionable anyway.

4. It takes persuasion as well as great product ideas to keep advancing through the cycle.

As noted previously, there are many decision points in the product development cycle. Typically, these critical decisions are made by an executive who is not particularly intimate with the project, yet who cares deeply about managing risk and properly allocating resources across multiple initiatives. In OODA Loop terms, the executive's approval represents a separate loop. Drawing from OODA Loop theory, when someone else has the upper hand, yet is favorably inclined toward you, you win them over through education and coaching; i.e., making it easy for them to provide a favorable decision. Hence, focusing on communicating status, recommending obviously sensible options, and clarifying next steps allows an executive to complete his or her loop with favorable results as quickly as possible.

Product managers can become consumed with detailed product creation tasks, but they need to periodically remind themselves that their project is just one of many potential options to the corporation, and that their project becomes more discretionary the higher up one must go to obtain approval. For example, a million-dollar project may seem like an absolutely critical corporate initiative to an individual product manager, but to the CEO of his or her corporation, it is just one of many options vying for attention and financial resources, many of which will never be granted approval to go full-cycle. Therefore, the product manager needs to be persuasive, which means that he or she must build a project team with all the skills needed to communicate project vision, status, results and next steps. This requires diverse, expert skills from day 1, which may need to be supplemented by outside help.

5. Build separate teams for new product innovation and existing product improvement.

The OODA Loop reminds us that one can only observe and interpret so much at once. This helps us understand why product managers frequently feel conflicted. When focused on day-to-day customer satisfaction problems, they often go into overload and miss long-term opportunities. Issues concerning extending the life of a product or improving its usability to alleviate customer complaints, for example, can become all-consuming. Hence, organizations should give serious consideration to formally separating new product development from the process of refining existing products. By doing so, parallel cycles can be kept in motion for purposes of maintaining user satisfaction and market share during the lengthy period of time needed to run the circuit on a new product cycle. The financial benefits of not losing customers between releases are obvious.

It is important to recognize that product managers are as much in the risk management business as they are in the new products business. Accordingly, they should not underestimate the complexity of the product development cycle. Realistic expectations should be set, and constraints should be clearly communicated. Product teams should be prepared to win executive approval every step of the way in order to keep moving forward in the cycle. Design consultancies should not be overlooked as valuable resources in providing both decision-support tools and expert product recommendations. Brilliant ideas are great, but brilliant results are better.

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I believe most things run in cycles: the economy, the stock market, fashion, moral codes, even one's own personal status and influence (your personal "stock price," so to speak)—sometimes you're hot, sometimes you're not. The past couple of years have been particularly harsh in reinforcing a history lesson for us: when the pendulum swings very hard and far in one direction, it will most assuredly swing just as decisively in the other eventually.

During recessions, uncertainty prevails, and like a driver trying to weave his way along a mountain road in heavy fog, many businesspeople eventually tire and just pull their businesses over to what seems like a safe embankment, turn off their engines of innovation and progress, and wait for the fog to lift. But how long can one afford to sit on the roadside? At what point does it become riskier to do nothing than to proceed with caution? One has to wonder if there's a better way, a way to keep moving forward in measured, confident increments, rather than eventually creating an additional element of uncertainty by deferring innovation altogether.

Understanding human behavior in uncertain times

A few years ago, when I was trying to improve my understanding of human behavior in order to become a better negotiator of business transactions, I spent a considerable amount of time learning about a decision-making model called the OODA Loop (Observation, Orientation, Decision, Action). Colonel John Boyd, a U.S. Air Force fighter pilot, invented the model. Reportedly, Boyd never lost in aerial combat during the Korean War or as one of the first instructors at the Air Force's Fighter Weapons School, so he must have known something about accurately interpreting ever-changing information and making sound decisions quickly. Boyd's articulation through the OODA Loop model of how decisions are influenced and made—and of how to disrupt an opponent's loop—is considered by many to be the most important military breakthrough of the twentieth century.

The OODA Loop model comprises four major steps:

	Observation: observing your landscape, identifying the variables Orientation: making sense of the variables, formulating options Decision: analyzing the options, making a decision Action: executing the decision
Source: MindSim Corporation

The fundamental issue to understand about the OODA Loop model is that the ability to properly execute each successive step is entirely dependent on the preceding step. Thus, if one's landscape cannot be accurately viewed, then the quality of any formulated options will be compromised, as will any decisions derived from those options. From a military perspective, this is a crucial point. For example, if Opponent A enters Opponent B's OODA Loop and disrupts his ability to make sense of his situation, then Opponent B will become trapped in the first stage of the process—observation—and will be unable to formulate options and make decisions. While Opponent B is trapped and becoming progressively more confused, frustrated, and exhausted, Opponent A has the opportunity to successfully work through his own process, hopefully identifying a way to bring the battle to a peaceful conclusion in his favor.

During recessions, factors such as unpredictable demand, declining profits, budget uncertainty, lack of consensus, and constrained resources are the enemy. They all cloud the businessperson's landscape. In the best of times, the businessperson can follow a linear path of observing, orienting, deciding, and acting. Implementing the decided action absorbs most of his time, and actions can be taken more decisively because there's plenty of money for additional resources; more money also means that failures can be absorbed more readily. Taking risks is more acceptable, which produces actions that tend to be broader and more complex.

In uncertain times, however, it becomes very difficult to move forward in the OODA Loop due to the uncertainty created by constant change and lack of predictability. Even when a modest level of clarity can be achieved, it is still difficult to formulate and evaluate options due to time and resource constraints and the aversion to risk. As summarized in the table below, attempting to set the stage for making decisions, rather than executing them, consumes an enormous amount of time during hard economic periods. Moving from just one step in the loop to the next can represent a major victory in itself.

Recognizing the need for new approaches

Everyone would prefer to work in the "boom times" situation described above. Businesspeople hate spinning their wheels when assessing their situation and developing options. They like being decisive, and they enjoy watching their actions unfold and take shape. In good times, design firms work with businesses to provide them with innovative options and highly detailed plans for how to implement them. For both parties, there is one goal: identifying and designing the big idea, then implementing it.

But what happens when the business landscape is turned upside down? How can the decision-maker and design consultancy work together when it's so hard just to stabilize the environment enough to create a jumping-off point for a project? Why even begin a project when there's a high probability that the course will need to change halfway into it?

The answers lie in recognizing that the "big bang" theory of innovation—one big idea, one big implementation plan—is just one approach. In reality, change is more frequently implemented in small doses than in large. Designers can work just as effectively in more tightly-defined situations. The key insight is that innovation is not a goal in of itself; rather, it is a process that comprises many smaller goals.

The table above illustrates that many goals need to be achieved to break through stalemates in the decision-making process on the way to innovation. How time and resources are allocated to tackling those goals depends on the variables encountered in the process, which, of course, are a function of the times. Since variables are radically different between boom and bust times, by necessity businesspeople must reexamine their approaches to solving problems and pursuing opportunities when the good times fade away. Specifically, resources need to be heavily allocated to the first three stages of the OODA Loop during difficult times, since achieving clarity and forming and evaluating viable options are the key to breaking through the paralysis so typical of times like the present. And, as demonstrated above, designers have many processes perfectly honed to addressing these early stages.

With a flexible design methodology, one goal at a time can be knocked off the executive's to-do list, with time in-between for overall situation reassessment. This enables the business to measure its risk of moving forward—or not—each step of the way. Moreover, this approach further enhances risk management, since the cost of satisfying each goal can be forecasted with more accuracy than that of the entire innovation process when the goals are aggregated. Also note that, depending on the circumstances, the client-designer relationship does not need to follow the sequential path articulated in the table above. With a clearly stated opportunity or problem, the designers may be able to jump into product refinement quickly, depending on the magnitude of the changes required and the work already performed by the client.

Interaction design is a valuable user- and customer-focused resource that can be deployed flexibly, at any time in the decision-making process. During uncertain times, attacking specific business goals with an appropriate design process enables organizations to keep innovating, one step at a time.

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