Is It Time to Red Team Your Company?
John F. Thompson, CPWA?, CIMA?
Private Wealth Advisor / Owner @ Congruent Wealth | Certified Investment Management Analyst?
Key Takeaways
It’s all too common for businesses to get stuck in a rut. Complacency throughout a firm can stop owners, managers and rank-and-file workers from asking important questions and challenging long-held assumptions about what the business should be doing—and how it should be doing it!
What’s more, any company can find itself stuck. It doesn’t matter if you’re in the fast-moving world of tech or a mature and relatively staid industry—any owner can fall into the trap of assuming that what they’ve been doing for years is right and doesn’t need to be reassessed.?
That rut can prove disastrous—especially if more nimble or flexible competitors come along with new ideas that really catch fire in the marketplace.?
The good news is that there is an effective way to prevent dinosaur thinking and corporate stagnation.?
It’s called red teaming.
Question those assumptions
Red teaming is a process for challenging your business plans and the beliefs upon which they are based. A red team is a group of executives and other professionals set up to make the company better by playing devil’s advocate and questioning its strategy—from the underlying assumptions to the conclusions.
This process is a way to stress-test your strategy by making contrarian thinking a key part of the entire business planning process. It pushes you and your firm to think differently about your business and consider viewpoints that are different from your own, so you can see how things might play out in different environments.?
Adopting a red team mindset means thinking about the future and taking nothing for granted. Everything about the company’s strategy can be questioned and challenged. You want to look at your firm from the perspectives of different stakeholders such as customers and investors, suppliers and vendors. You want to ascertain how competitors are thinking about you and themselves.?
When you challenge these underlying assumptions of a company’s strategy, the business decisions that you make going forward tend to be much more robust.
Example: Groupthink occurs when the executives in a company are so strongly motivated to achieve consensus that they suppress other viewpoints and fail to consider different interpretations of events and conclusions. Groupthink can readily lead to irrational decisions in all areas of life.
Red teams can eliminate the problem of groupthink because their role is to challenge consensus and produce alternative options.
Fighting biases that lead to bad business decisions
The military and many major companies regularly engage in red teaming. Increasingly, however, smaller firms and professional practices are also adopting red teaming.?
Red teams use tools and techniques to help circumvent and overcome the limitations and failings of human decision-making. Cognitive biases and faulty organizational processes can lead to a lot of poor business decisions. Red teaming is often highly effective in mitigating those issues and creating an environment where the best possible decisions are made more often than not.?
What do we mean by cognitive biases, exactly? We all use rules and mental shortcuts to make decisions. While these rules often serve us well, they can result in systematic mistakes that adversely affect a person’s decisions. These mistakes are our cognitive biases. Five of the most common are:
The red teaming process
The red teaming process usually consists of four phases, as summarized in Exhibit 1.
Phase I: Critically evaluate strategies and assumptions. A solid starting point is to question the thinking and postulations that form the basis of the company’s strategy. Many of the foundational elements tend to be unobserved and taken for granted. Their accuracy is almost never doubted.?
Phase II: Identify threats and potential missed opportunities. A lot of things can potentially go wrong. Here the objective is to think through what could potentially derail the company, and assess how well-prepared the firm is to address those issues. At the same time, it is useful to look at the flip side—those things that could go very right, and whether the firm is prepared to take advantage of these opportunities if they arise.?
Phase III: Think contrarian. Armed with a better understanding of the underlying assumptions, and the potential strengths and weaknesses of the company’s strategy and objectives, the red team challenges the plan and forces decision-makers to consider alternative courses of action.
Phase IV: Stop red teaming. It is possible to put a red team in place and have it evaluate and question ad infinitum. The end result of that approach: Nothing gets done. This is a situation commonly referred to as analysis paralysis. At some point, the red teaming has to stop so the company can take action.
Tools and techniques?
There are numerous structured analytic tools and techniques derived from intelligence tradecraft and corporate strategic methodologies that red teams use to make better decisions. Some of the most common and effective:
That said, critical thinking must underlie all the structured tools and techniques. There must be a willingness to question the situation and the strategy, as well as the answers to the questions. Some examples of questions addressing the situation include:
In judging the answers, the red team must guard against cognitive biases (see above) and logical fallacies—such as the bandwagon effect (presuming something is correct because others think it is), straw man arguments (greatly exaggerating a point so it becomes easier to counter) and whatabout-ism (making a connection to another issue in order to avoid dealing with the actual issue at hand).?
Setting up a red team
So how do you engage a red team in your business??
For starters, ask yourself if you really want to. As a business owner, you have to be willing to have others question your approach and assumptions about your own company—and be ready to hear them out when they confront you and offer alternative ways of approaching challenges and pursuing opportunities. If you can’t easily solicit and act on advice and different perspectives, don’t bother with red teaming—you’ll be wasting a lot of people’s time.
Assuming you want to honestly examine how you do business and look for ways to improve, take these steps:
1. Evaluate and fully understand your business strategy as it is right now. This is your baseline from which to move forward.
2. Enlist the help of people in your organization, ideally from different departments and/or functions. Bring them together to discuss the firm’s opportunities and threats, and to identify where things in the firm are going well—and where work needs to happen. You might also enlist people outside the business who know your operation well—such as your accountant or financial advisor. This will be your red team.
Important: You want contrarian thinkers involved in the red teaming exercise. Company sycophants and “yes men” won’t do you any good here. Do you have detail-oriented people in your organization who can see where the holes are in a plan, or who have a habit of anticipating problems down the road? Get them involved!
3. Have the red team consider scenarios. What can they come up with that would move the company in the direction of the opportunities and away from the challenges or land mines in the path to success?
Note: Usually these brainstorming discussions result in the refinement of existing strategies—not wholesale, mass changes to the company’s foundational approach.
You can also get professionals to come into your firm and set up red teams of both internal and external participants. Business advisors, consultants and coaches are increasingly offering structured red teaming exercises.
VFO Inner Circle Special Report?By John J. Bowen Jr.
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