Don’t Pull the Trigger Until You Red Team It
1 August 2017
We make important decisions daily, in business, and some of those decisions have a high dollar value.
Executing a new strategy naturally comes with risk, but have you considered all the possible outcomes? Is there a way to mitigate potential failures and losses to your business?
Bryce Hoffman, author of the book Red Teaming: Transform Your Business by Thinking Like the Enemy, joins hosts Mike Lynch and Leigh Sujanto to discuss a new way businesses can begin to make better decisions.
Host: Mike Lynch
Guest Co-host: Leigh Sujanto
Accountancy Insurance Australia: https://www.accountancyinsurance.com.au/products-services/audit-shield
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Mike Lynch: Welcome to episode 11 of the Acuity Magazine Podcast. Don’t pull the trigger until you red team it. This episode is sponsored by Accountancy Insurance, providers of Audit Shield, the preeminent tax audit insurance solution for accountants in Australia and New Zealand. I’m your host, Mike Lynch.
Leigh Sujanto: I’m your co-host, Leigh Sujanto. We make important decisions daily. In business, some of those decisions have a high dollar value. Executing a new strategy [00:00:30] naturally comes with risk but have you considered all the possible outcomes? Is there a way to mitigate potential failures and loss to your business? Bryce Hoffman is a speaker, strategic advisor, management consultant and author, his latest book, Red Teaming: Transform Your Business by Thinking like the Enemy. He joins us on the line.
Mike Lynch: Bryce, welcome to the Acuity Podcast.
Bryce Hoffman: Thank you for having me, Michael.
Mike Lynch: I’m familiar with how the CIA, AZO and numerous governments have used the red teaming [00:01:00] method to test strategies but how is it applied to business to possibly affect decision making and consequently, the bottom line?
Bryce Hoffman: When I heard about this system, my immediate thought was that if this has been this game-changing for the military intelligence communities in the United States and Australia and New Zealand and other countries, it could be even more game-changing for business because businesses are in an era right now of unprecedented uncertainty, [00:01:30] unprecedented disruption and at a time when, in a lot of ways, the marketplace kind of feels like it’s shifting under your feet. This is a system that can help companies disrupt themselves before they become disrupted by new competitors, by new technologies, by external events. That’s the value this brings.
Mike Lynch: What are the advantages of implementing red teaming to a company?
Bryce Hoffman: If you boil it down, it’s really a system that’s designed to take [00:02:00] your strategies and plans and stress test them, to break them down into the assumptions they’re based on and then challenge those assumptions to make sure that they’re really true and likely to remain true under all circumstances. When you do that, you discover a lot of things that we often miss in a regular course of business because we don’t challenge our assumptions. It’s really this element of deliberate challenge that makes red teaming so different and so effective because [00:02:30] all of this is really based on the research that’s been done over the past 30 or 40 years in the cognitive psychology in human decision making process by people like Nobel Prize winning economist Dr. Daniel Kahneman.
Folks like Dr. Kahneman have discovered and proven time and time again in laboratory settings that no matter how smart we are, no matter how well-educated we are, no matter how experienced we are, we all fall victim to an array of blind spots and biases when we make decisions, when we [00:03:00] put together complicated strategies and plans. As Dr. Kahneman puts it, it’s a lot easier to see a minefield when someone else is about to stumble into it than when you are, so red team provides that other set of eyes to companies to help them see the minefield before they stumble into it.
Leigh Sujanto: Is red teaming for every business or does it suit a particular type of business?
Bryce Hoffman: There’s no type of business that can’t benefit from red teaming. I mean I’ll be honest with you. I’ve started using some of the [00:03:30] tools and techniques that I talk about in the book in my daily life. I mean it’s just ways to make better decisions on a certain level but any company and any industry of any size can really benefit from this. Now, how much of a red team you have and how much red team you want to do will depend, to some degree, on the size of business you have, on the type of business you have but the basic concepts and the core tools and the core techniques are things that you can apply whether you’re running a global corporation [00:04:00] or a mom-and-pop store.
Leigh Sujanto: Take us through the process of what a red team does and can the disruption be damaging to the day-to-day operation of a company?
Bryce Hoffman: Red teams have to be sceptical without being negative. They have to be critical and contrarian without being destructive and negative. Red teaming is about asking tough questions and sometimes, those questions can be a little uncomfortable for organisations [00:04:30] to ask but red teaming, when it’s done right, is always done in a collegial and constructive way.
In fact, by making it a process, by making it part of an organisation strategic planning process, making it part of an organization’s decision making process, you can actually make these conversations a lot easier and a lot less personal because it’s just … As I was just talking with one of my clients here in the states, by making red teaming part of their process, it just becomes something they do before [00:05:00] making a big decision rather than, “Oh, you know, I don’t think Jim’s idea’s very good so I think we got to red team it,” type of thing. It becomes just part of the regular review. It is something to keep in mind but done right, it’s very positive and very constructive.
Mike Lynch: Is the purpose of red teaming to interrogate an idea or strategy that’s about to be implemented or is it ongoing process that looks at the whole business as it carries out its day-to-day operation?
Bryce Hoffman: It does not look at the [00:05:30] whole business. Though that said, we always recommend with our clients that they periodically, every few years at least, look at their fundamental business through a red teaming lens to make sure they’re not missing on anything about things they could do better or do differently and more effectively but that said, there’s really two primary areas where red teaming comes into play in the planning process or in the decision making process.
First is, one of the things that red teaming does besides what we’ve already talked about [00:06:00] is that it’s really based on this recognition that particularly in larger organisations like the military or intelligence agencies, there’s a lot of good ideas that never see the light of day because they’re held back by the bureaucracy or by organisational pressures or by the hierarchy. One of the things that the U.S. Army, and particularly, focused on when they were developing red team and the same methods are used quite effectively by the Australian army and New Zealand defence [00:06:30] force is this concept of what the U.S. Army calls liberating structures, which are basically set of tools and techniques that’s designed to kind of crack the organisation open and get at those good ideas that reside one or two levels down or more in the organisation.
You can use that part of red teaming early on in the process to get additional perspectives to hear ideas that you might otherwise miss from your own team, to get alternative points of view about the problem [00:07:00] you’re trying to solve. Then, those can become valuable inputs to your planners and decision makers as they put together a plant to deal with that problem or issue. Then, there’s really not a role for red taping in the middle.
When red teaming comes into its real power though is after you’ve got an idea of what you want to do, after you’ve got a plan, a strategy or a proposal that you’ve put together, you think is the right way forward, then the red team can take and provide this sort of [00:07:30] stress testing and critical analysis that I talked about, this other set of eyes to look at that, to really make sure that the plan that you’re about to execute is the best possible plan, that there’s not any kind of weak links in the chain you’re crafting, that there’s nothing that you’re missing and that there’s no opportunities that you’re missing, by the way, too, not just problems and that’s where it can be really game-changing and really powerful.
Leigh Sujanto: Red teaming is really about tearing apart an idea and finding [00:08:00] any faults that may exist within a strategy?
Bryce Hoffman: To find all its faults and also to find out what you may have missed, like I said. It may be something … It may be a positive that you’re missing. It may be an opportunity that you’re missing that better you find it than one of your competitors find it and exploit it. That is a good way of thinking about it though, is it’s really based on this idea that there’s no plan that can’t become a better plan by stress testing it, by pushing the envelopes of it a little bit and making sure that it really is [00:08:30] sound. When you do that, you find out if there are weaknesses in the planning.
Other thing that red teaming provides is a set of flag post, if you will, or signs to look for as you execute the plan or strategy that you’ll learn through the red team analysis, these are things that led to potential problems, so if we see them as we’re actually executing the strategy or plan, maybe we’d better be a little careful and make sure we’re not heading in a direction that we don’t intend to go [00:09:00] in. The problem is that when you don’t do this, you run into all sorts of really perilous sorts of situations for businesses.
I talk a lot about a lot of real world examples in the book and one of them that I talked about, for instance, is Polaroid, the camera company. Polaroid, people don’t remember this, but Polaroid, in the 1990s at one point, was the market leader in terms of consumer digital photography and consumer digital cameras. [00:09:30] Polaroid took a decision where they looked at their growing digital camera business and they saw they were making a decent return on investment, something on the order of 15, 25% margins but they looked at their film business, their old instant film business and they were making 70% margins on that.
They had this discussion amongst themselves where they said, “Look, we could keep growing this new digital photography business but as it’s growing, it’s [00:10:00] kind of eating away at our old film business, so maybe a better option is just to kill it and double down on our film business.” That made a lot of sense to these guys when they were behind closed doors in the board room at Polaroid. The result of that decision was that Polaroid went out of business though because while they may have killed their digital photography business, no one else did and in fact, their competitors simply took the fact that they were pulling back out of their market and doubled down on it and put them out of business.
It’s easy to look at a story like that and say, “ [00:10:30] Boy, what a bunch of idiots these guys were to think that way,” but really, if you think about it, they weren’t idiots. They were just blinded by their own success. The success they’d had to date with that film business, blinded them to the fact that that business was not a viable business going forward and that really, this new business that they had stumbled into kind of half-wittingly was really their future. That’s an extreme example but companies that don’t take the time to do this sort of analysis make those types of blunders [00:11:00] all the time.
Mike Lynch: Part of the process has to involve looking at what your competitors are doing and what they might do once you launch a strategy.
Bryce Hoffman: Absolutely. I mean one of the things that’s very easy for companies to do is, particularly for successful companies, is to kind of think that they’ve cracked the code, to think that because they’re so successful, that all I have to do is keep doing what they’ve been doing and they’ll just continue to be successful in the future. That may have worked at some point [00:11:30] in the past but it doesn’t work anymore. If you look at a couple years ago when Google, instead of spinning off another company, spun itself off from a new company Alphabet that it created as its, the new mother ship.
When Alphabet was created, Larry Page, the founder of Google, sent a message, a memo to employees explaining the rationale behind this dramatic move. What he said in that memo amongst other things was, “We’ve reached a point in business today where just incremental [00:12:00] improvement is not enough to stay in business anymore, let alone stay on top of our industry. If we want to continue to be a leader in business, we have to make these great leaps forward into new areas, to new ways of doing things. We have to blow ourselves up a little bit and kind of try to figure out how to do what we do better because if we don’t do these things, someone else will.” That’s the value of red teaming, [00:12:30] Michael. It’s all about blowing yourself up before a competitor puts you in their cross hairs and blows you up instead.
Mike Lynch: Where do you start? How do I set up a red team in my business?
Bryce Hoffman: My first advice will be to recommend folks read the book because, not as a shameless plug only, but because it walks you through how to use the different tools and techniques and the different models of red teaming. There’s not necessarily one … There’s not a right answer [00:13:00] to that question, is why I say that. There’s an array of different ways to use red teaming and they range from, at the most formal kind of large scale level, creating a standing red tape within the organisation that has, as its kind of primary job, providing this sort of alternative analysis. In practise, that’s something that only the largest companies, the largest organisations are really going to be able to do.
On the other end of the spectrum, Michael, you’ve got [00:13:30] what I call kind of informal red teaming where you take these tools and techniques that I described in the book and you just kind of use them yourself amongst you and your leadership team to just kind of analyse your plans and strategies a little bit more thoughtfully. In between, there’s an array of other options that range from ad hoc red teams where maybe you have someone in your organisation who’s trained in red teaming who then kind of stands up some of his or her colleagues to do a red teaming engagement [00:14:00] or perhaps bringing in an outside red team facilitator to lead your company through a red teaming analysis. There’s ways to do this. Like I said, the book itself is a great introduction to these tools and techniques. We’re also looking at bringing classes to Australia and hopefully New Zealand at some point in how to do red teaming.
Leigh Sujanto: To implement red teaming effectively, do the team members [00:14:30] have to come from outside the circle of the people who initially came up with the idea or strategy?
Bryce Hoffman: Yeah. There’s two ways to answer that. One is you can absolutely do that. That’s the whole idea of having a standing red team, is that you have a group of people who are not part of the regular planning process who are trained in these tools and techniques who then provide this sort of analysis or you bring together a group of people from another function in your company to do that. Another [00:15:00] thing that can be very effective too that we do with a lot of our clients is we come in as outside facilitators and then, lead the senior leadership team of an organisation through red teaming analysis of a strategy or plan that they’re interested in evaluating.
The reason in why that can still be effective is even though they’re the ones that put the plan or strategy together, is having this outside guide that kind of forces you to ask tough questions and kind of makes you answer them honestly also can [00:15:30] provide some of that kind of second set of eyes that you’re looking for in red teaming. Again, you can also just use some of these tools and techniques to make better decisions. The thing you’re going to lose them at is that second set of eyes that’s so valuable because no matter how smart we are, no matter how well trained we are, no matter how good a red team we are, we’re still going to fall victims to our own blind spots and biases.
One example that I like to tell people is I’m a writer amongst other things [00:16:00] and you could be the best writer in the world. You could be Shakespeare or Forester or any of these people and you still can’t edit your own books. You still can’t edit it at your own place because what every writer knows is that when you leave out a word or a piece of punctuation, your mind sees it there. You don’t notice that you’ve left it out because in your mind, it’s there and so I can read and I have read pages of writing of mine over [00:16:30] and over again where someone said, “You’ve got a problem on that page,” and I can’t see it. Then, they point it out to me and it’s as clear as the nose on your head looking on the mirror but you don’t see it until someone else points it out. That’s something really simple. That’s grammar and punctuation. Think about a complex business plan, a complex business strategy, how much harder it is to see what you’re missing in a situation like that. That’s why there’s so much value in having that second set of eyes.
Mike Lynch: Am I right to say that in [00:17:00] order to be effective and to see real results that positively affect the bottom line, red teaming has to be something that is ingrained into a business, an ongoing process, not just a one-time thing?
Bryce Hoffman: Absolutely. You’re absolutely right, Michael. I really think that the companies that use this most effectively make it part of their strategic planning process. That doesn’t mean that you red team everything that you do. There are problems that call for red teaming and there are plans and strategies that call for red teaming [00:17:30] and there are plans and strategies that don’t. Red teaming is for those bigger, tougher issues. One of the things that I talk about too is that red teaming can never get in the way of making a decision when you have to make a decision right now but that said, even if you just have 15, 20, 30 minutes to spare, there’s things you can do to red team a decision to make it a little bit stronger, a little bit better, a little bit more likely to succeed.
Leigh Sujanto: If I’m thinking of implementing a red team strategy for my business, where do I start?
Bryce Hoffman: [00:18:00] Well, the best thing that you can do is just be careful. If you’re contemplating a big strategy, a big plan, a big decision, at least have somebody else look at it before you pull the trigger on it because just giving something to somebody you trust and saying, “Hey, can you tell me … If this is going to fail, how do you see it failing?” If you get that sort of honest feedback [00:18:30] from people, that can be tremendously powerful and valuable. If you want to implement formal red teaming in any capacity in your organisation, my advice is to really think about it, take a look at the ideas and the concepts that I talk about in the book, try some of them out maybe amongst your team and see, get a sense of what’s possible and then think about what makes sense for your organisation both in terms of human resources and capital resources that you have to [00:19:00] devote to red teaming.
Other than that, my biggest piece of advice is whatever level you can do, do it because something is better than nothing, in this case, absolutely. The companies that are most successful right now are the companies that do some of this either formally or informally and organically but they do it nonetheless so do it too yourself and you can become one of the disruptors in your industry rather than one of the disrupted.
Mike Lynch: Bryce, [00:19:30] thanks for your time in chatting with us about red teaming.
Bryce Hoffman: Thank you for having me, Michael.
Leigh Sujanto: Bryce Hoffman is speaker, strategic advisor, management consultant and author. His latest book is Red Teaming: Transform Your Business by Thinking like the Enemy.
Mike Lynch: That concludes episode 11 of the Acuity Magazine Podcast. We encourage you to subscribe to the podcast at acuitypodcast.com or on iTunes. Acuitypodcast.com is also the place where you can keep up to date with our latest interviews or view [00:20:00] the show notes for each episode. You can also e-mail us directly, [email protected] There’s lots more ahead in the Acuity Podcast. Until next time, bye for now.
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