Doom Loop is another term for a vicious cycle, where an attempted solution just makes the situation worse because of the underlying system.

In a common retail example, same store sales are falling. In response, management steps up the intensity of promotions. This has a temporary impact, but whenever the promotions end sales return to free fall, faster than before. Management accelerate promotions again, until operations can’t handle it and the supply chain breaks down.

The Doom Loop occurs when a superficial solution is chosen, without an understanding of the underlying problem. In the retail example, the real problem could be that the store could have lost it’s differentiation in customers eyes, and cluttering it up with price-based promotions just increases this perception. The short term solution just made the fundamental problem worse.

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Further Reading:
Senge, Fifth Discipline
Jim Collins, Good to Great