U.S. Air Force colonel John Boyd developed the OODA loop to assist fighter pilots in dogfights, where there isn’t time for analysis between actions. Each pilot is trying to quickly outmaneuver the other, reacting to the other’s moves and surrounding circumstances. Boyd showed repeatedly that the pilot who can adjust more quickly—who moves faster through the OODA loop—will usually win. They take an observing glance at the changing conditions, immediately re-orient their assessment of the situation, decide the next best course of action, act on it without hesitation, and then repeat this loop.
OODA Loop
The faster you can make your OODA loop, the faster you can incorporate external information, and the faster you’ll reach your destination, be that product/market fit or something else. The OODA loop applies best in situations where rapid learning will give you an advantage; not every situation is so uncertain and ever changing, though many are.
One area that is always changing and evolving is technology, making it a great example of an area where OODA loops are particularly effective. Increasingly, all major businesses, not just traditional “tech” companies, are trying to utilize technology to gain an edge on their competition. As a result, creating fast OODA loops is becoming more important over time. The organization with the fastest OODA loop learns faster than its competitors, consistently makes better decisions, and adapts faster to the unfolding technology landscape.
OODA loops may call natural selection to mind (see Chapter 4). Species that have faster life cycles evolve faster, so you might say they have a faster OODA loop. For example, some bacteria can create a new generation in fifteen minutes. This is a primary reason why it doesn’t take long for bacteria to become resistant to the drugs designed to fight them. Similarly, having a faster OODA loop helps you adapt faster to changing circumstances, including reaching product/market fit before your competitors.
If, after extensive customer development, you still cannot find this promised land of product/market fit, then you must pivot to something different. A pivot is a change in course of strategic direction, and there are many famous examples. You may be surprised to know that Twitter started as a podcasting network or that Nintendo actually dates back to 1889, when it was founded as a playing-card manufacturer.
Over the course of Nintendo’s history, it tried its hand at a variety of businesses with limited success (taxi service, motel chain, TV network, instant rice sales). After its stock price bottomed out in 1964 as playing-card sales dropped, it was saved by a pivot to the toy industry after a maintenance engineer, Gunpei Yokoi, invented the Ultra Hand toy. Yokoi thereafter took a leading role in transitioning Nintendo into a video game powerhouse.
Some pivots are less extreme. For example, PayPal started out as a way to beam payments physically between handheld devices before finding product/market fit with online payments. Similarly, Starbucks started out selling roasted whole coffee beans and equipment. In fact, Starbucks didn’t sell its first latte until thirteen years after the company was founded. After a trip to Italy, employee and future CEO Howard Schultz persuaded the founders to test the coffeehouse concept after seeing the popularity of espresso bars in Milan. Schultz eventually bought the company from them and expanded Starbucks to what it is today.
Pivoting is usually difficult because it cuts against organizational inertia, involves openly admitting failure, and requires finding a better direction, all at the same time. But it can also be necessary. Pivoting is appropriate when your current strategy is not going to bring you the results you are seeking. Consulting advisers, who can more easily see your situation objectively, can help you determine whether a pivot is a good move. More broadly, pivoting can apply across all areas of life: your career path, a difficult relationship, how you’re approaching meeting your child’s educational needs, and so forth.
When considering a pivot, you can use a few mental models to help you decide what to do. Harvard Business School professor Clayton Christensen named and championed the model of jobs to be done, which asks you to figure out the real job that your product does, which can be different than what you might initially think. An oft-cited example by Christensen is a power drill: “Customers want to ‘hire’ a product to do a job, or, as legendary Harvard Business School marketing professor Theodore Levitt put it, ‘People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!’”
Knowing the real job your product does helps you align both product development and marketing around that job. Apple does this exceptionally well. For instance, it introduced the iPod in 2001 amid a slew of MP3-player competitors but chose not to copy any of their marketing lingo, which was focused on technical jargon like gigabytes and codecs. Instead, Steve Jobs famously framed the iPod as “1,000 songs in your pocket,” recognizing that the real job the product was solving was letting you carry your music collection with you.
In a December 8, 2016, podcast with Harvard Business Review, Christensen describes another illustrative example, this one about milkshakes served at a particular fast-food restaurant. You might assume that a milkshake’s job is to be a special treat to cap off a meal. While it is true that many parents order shakes as an after-dinner family treat, this restaurant learned that almost half of their shake customers were using them for a different job—to make their long morning commutes more interesting. People felt their trips were more enjoyable as they sipped milkshakes while moving through traffic.
Doing two jobs at once sounds great, but that usually means at least one job isn’t being done particularly well. In this case, parents didn’t like how long it took their kids to drink the shakes. Yet that was one of the key features for the commuters.
The restaurant chain realized they needed two different products to do the two different jobs well. They decided to further improve the shake for the commuters by making it even thicker, adding more chunks, and moving the shake machine to the front of the stores for the fast on-the-go service that commuters wanted. They then needed to market a wholly different dessert product to kids and their parents.
When you truly understand what job people are really trying to get done by using your product, then you can focus your efforts on meeting that need. Asking customers what job they really want done can tell you the root of their problem and eliminate faulty assumptions on either side, ultimately resulting in a solution with a higher chance of success. In your analysis, you want to figure out what job your product is really currently doing and where it might be miscast, as in the milkshake example (see 5 Whys in Chapter 1 for a tactical technique).
When you talk to customers, beware of their focus on a specific solution instead of on the problem they’re trying to solve. For example, as a statistician, Lauren has often been asked to perform statistical analyses using a specific computational technique. However, the particular techniques suggested are often the wrong ones. That’s because non-statisticians are usually unable to determine the best statistical plan on their own, and so instead they suggest a technique they know, regardless of whether it is appropriate (see Maslow’s hammer in Chapter 6).
Telling a client or colleague that they are proposing to solve a problem in completely the wrong way can at times be difficult. Lauren recognizes, though, that using a particular technique is not really the job the client wants done. The client really wants a correct analysis, and will gladly accept that analysis from Lauren regardless of how she gets there. To approach these situations, Lauren tries to get the client to take a step back and define their ultimate objective, using layman’s terms.
Outside of business, you can ask yourself the same questions in the context of any personal connection (“What does this person really want out of this relationship?”) or anywhere you are contributing (“What did they really hire me to do?”). From this perspective, you can determine whether you are really getting the job done with your current strategy. Is there a different approach that might do the job better? Understanding the answer to these questions will help you determine
whether you need to make a pivot.
Another clarifying model is what type of customer are you hunting? This model was created by venture capitalist Christoph Janz, in a November 4, 2016, post on his Angel VC blog, to illustrate that you can build large businesses by hunting different size customers, from the really small (flies) to the really big (elephants).
What Type of Customer Are You Hunting?
Janz notes that to get to $100 million in revenue, a business would need 10 million “flies” paying $10 per year, or 1,000 “elephants” paying $100,000 per year. Believe it or not, there are successful $100 million revenue businesses across the entire spectrum, from those seeking “amoebas” (at $1 per year) to those seeking “whales” (at $10 million per year).
More commonly, with any project, and certainly with a business, you want to define what success looks like and whether it is achievable under reasonable assumptions and time frames.
Janz’s framing steers you toward a particular quantitative evaluation: How many “customers” will it take to achieve success? And what exactly do you need them to “pay” (or do)? Once you answer these questions, you can then ask whether there are enough of these types of customers out there. If not, you might consider pivoting toward bigger or smaller types of customers.
A key reason why this model matters is because how you interact with your customers depends on the type of customer you are hunting. If you need to reach ten million people, you can’t do that by talking individually to each one. Additionally, it is challenging to get ten million people to pay a high “price” for a product. In contrast, you can deal individually with one thousand customers and get each of them to “pay” you more.
In the business context, hunting different customers means deciding to put out a free or minimally priced service to millions of people (like Spotify or Snap) versus selling a high-priced product to large enterprises (like Oracle or Salesforce). Or, within an industry, it’s deciding between customer segments that choose to pay much different amounts, such as Rolls-Royce and Lamborghini versus Kia and Hyundai in the automobile sector.
In a political context, a candidate in a local election can try to meet all their constituents, but this type of outreach becomes impossible in larger elections. And in those larger elections, fundraising becomes increasingly important because of the need to turn to TV and the internet to reach everyone, which is relatively expensive. This political reality has the consequence that statewide and national politicians need to focus considerable attention on courting (hunting) deep-pocketed individuals (whales/dinosaurs/elephants) to foot the bill for this advertising.
A quantitative evaluation like this one is an example of a back-of-the-envelope calculation, a quick numerical assessment that you can calculate literally on the back of an envelope. A simple spreadsheet is the modern-day equivalent. This type of exercise forces you to quantify your assumptions and can quickly result in clarifying insights.
With jobs to be done, you are asking what stakeholders are “hiring” you for. With what type of customer are you hunting? you are asking how many “customers” you need to be hired by and what you want them to give you in exchange for your doing the job. Like customer development, both of these models ask you to think from the customer perspective. Thinking this way can also help you develop personas, fictional characters that personify your ideal customers, which will help you better reason through a realistic assessment of your idea.
What kind of people are your customers exactly—what are their demographics, likes versus dislikes, and hobbies? If you did customer development right, your personas should be modeled on characteristics of real people you’ve already met. Once constructed (say Bob and Sally are your personas), you can ask yourself: Would Bob and/or Sally do X?
Thinking in terms of actual people, fictional or otherwise, can really ground you in the customer perspective and help you apply these assessment models more effectively. However, be careful not to allow availability bias (see Chapter 1) to limit the factors you consider for creating these personas. The most easily collected or available data might not lead to the most useful personas.
Looking at the totality of these models, you should now know what success looks like (how many customers you need and what you need them to do) and whether you see a realistic path toward that goal. So, should you pivot?
If the answer is still unclear, one litmus test is this: Do you have any bright spots, positive signs in a sea of negative ones? In a business context, this would be a small subset of customers who really like what you’re doing and are highly engaged with your product. Outside of business, you might look to the bright spots in your current job when considering the prospect of pivoting your career: What are the things you really like about your job? Are there enough of them to make you stay? What aspects would you like to retain if you do choose to pivot?
If you have no bright spots after some time, it is likely you do need to pivot. It’s like the old phrase “You don’t have to go home, but you can’t stay here.” If you do have some bright spots, you can try to figure out why things are working there and focus on growing out from that base. This is actually a useful strategy for advancing any idea, struggling or otherwise, drawing on the military concept of the beachhead. That’s where a military offense takes and defends a beach so that more of their force can move through the beachhead onto the greater landmass.
In other words, a beachhead is getting a foothold and using it as a launching point. Amazon’s beachhead was books. Tesla’s was its Roadster. These were positions they could stake out in the market, and then use to expand into adjacent markets. For your career, your beachhead might be your current skills and position, which you could use to launch toward a better position or more fulfilling career.
A beachhead strategy is only one way to navigate the process of taking your secret and turning it into a product that achieves product/market fit. More broadly, this process can be compared to navigating a maze, what investor Balaji Srinivasan calls the idea maze. Imagine a physical maze, as in a corn maze at a fall festival or a hedge maze in a formal garden. The entrance is you starting out on your idea, and the exit is your idea’s ultimate success. Within the maze are lots of dead ends, and it is your job to navigate the maze and successfully get to the other side. As he said in a lecture:
A good founder is capable of anticipating which turns lead to treasure and which lead to certain death. A bad founder is just running to the entrance of (say) the “movies/music/filesharing/P2P” maze or the “photosharing” maze without any sense for the history of the industry, the players in the maze, the casualties of the past, and the technologies that are likely to move walls and change assumptions.
Josh Kopelman, another investor, equates founders who can successfully navigate the perils of finding product/market fit with heat-seeking missiles. As he wrote on his Redeye VC blog on August 2, 2010:
It doesn’t matter where the missile is aimed pre-launch. Successful entrepreneurs are constantly collecting data—and constantly looking for bigger and better targets, adjusting course if necessary. And when they find their target, they’re able to lock onto it—regardless of how crowded the space becomes.
These metaphors can apply to navigating any path in life. Successfully navigating the idea maze means understanding how best to interact with the people in your life through understanding what you want and need from them and what they want and need from you. It’s recognizing when you are on the wrong path in the maze, deciding when and how to pivot, and having the resilience to find a way to navigate obstacles put in your path.
ACTIVATE YOUR FORCE FIELD
Once you achieve product/market fit or whatever type of fit you are trying to achieve, it is time to protect your position. Warren Buffett popularized the term moat, making an analogy to the deep ditch of water surrounding a castle to describe how to shield yourself from the competition, thereby creating a sustainable competitive advantage.
Moats are situationally
dependent. The following are some cases in which they are used (not mutually exclusive):
Protected intellectual property (copyright, patents, trade secrets, etc.)
Specialized skills or business processes that take a long time to develop (for example, Apple’s vertically integrated products and supply chain, which meld design, hardware, and software)
Exclusive access to relationships, data, or cheap materials
A strong, trusted brand built over many years, which customers turn to reflexively
Substantial control of a distribution channel
A team of people uniquely qualified to solve a particular problem
Network effects or other types of flywheels (as described in Chapter 4)
A higher pace of innovation (e.g., a faster OODA loop)
Elon Musk notably sparred with Warren Buffett on the concept of moats. In Musk’s words from a May 2, 2018, Tesla earnings call: “Moats are lame,” and “If your only defense against invading armies is a moat, you will not last long.” He was pointing out that, in his opinion, the most important sustainable competitive advantage is creating a culture that supports a higher pace of innovation, because that higher pace of innovation can overcome traditional moats.
In our opinion, though, a higher pace of innovation is really just another type of moat, and the metaphor of the moat shouldn’t be taken too literally. Instead of a static moat, consider the sci-fi equivalent of a force field or a deflector shield, which allows you to move at warp speeds while still offering protection. You can both continue innovating (at warp speed) and also employ other types of moats (for increased defenses).
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