The only constant in business is change.

Red team thinking is all about challenging the status quo.

What is Red Team Thinking and Why Companies Should Pay Attention

Red team thinking is how companies should be thinking in today’s business environment. Every year, we hear of “disruption” in age-old industries. 2017 seems to be the year that marks the beginning of the end for traditional retailers like Macy’s (M) and Nordstrom (JWN). Only with nimble practices can today’s best companies hope to maintain their market position alongside internet-enabled upstarts.

In many ways, we need to think like the enemy to innovate.

We live in an age of unprecedented uncertainty and disruption, one which is forcing companies around the world to rethink their business models, reevaluate their strategies, and rewrite their rulebooks.

Every day brings new opportunities, but also new challenges and new competitors. The global geopolitical landscape is shifting below our feet. Trade agreements are being rewritten. New technologies are allowing startups to disrupt established industries.

Many of the business tools we have relied on for decades no longer work in a world where incremental improvement is not enough to stay in business, let alone succeed in it. We need new processes, new methodologies, and new ways of thinking if we are to become one of the disruptors, rather than one of the disrupted. Red team thinking is becoming one of the most coveted frameworks in modern business.

Where did Red Team Thinking Begin?

Red team thinking is a system developed by the military and intelligence agencies after 9/11 to help organizations stress-test their strategies, challenge their assumptions, and make better decisions.

2001 was a sobering time for America’s generals and spymasters. Ever since the fall of the Soviet Union and their stunning victory in a one-sided war with Iraq in 1991, they had believed America’s technological superiority and mastery of information would guarantee her future security at home and victory abroad.

In the ruins of the twin towers and the short-lived victories in Afghanistan and Iraq, they discovered just how wrong they were.

Drawing on the latest research in cognitive psychology and human decision making, the CIA and the U.S. Army began pulling together an array of critical thinking and groupthink mitigation techniques, and developing a systematic approach for applying them to complex problems.

They also began assembling teams tasked with using this system to evaluate strategies, improve plans, and support decision-makers. These red teams were soon offering alternative interpretations of intelligence in Washington and challenging existing strategies for combatting insurgents in Afghanistan and Iraq.

Their penetrating insights and sobering analyses began raising eyebrows—not just in the United States, but around the world. As such, red team thinking was born.

How Can Modern Businesses Use Red Team Thinking?

I first learned about red team thinking in late 2013.

When I did, I immediately saw the value it could bring to businesses as they struggled to contend with an increasingly complex and rapidly changing marketplace.

The most innovative and disruptive companies already employ some of these same techniques— albeit in a less formal, less systematic way. Critical thinking is part of the DNA of Amazon, Google, and Toyota. The best venture capital firms, such as Kleiner, Perkins, Caufield & Byers, use a similar approach to vet potential investment targets.

Learn about how Toyota used red team thinking to stay relevant against American competitors.

Red team thinking from Jeff Bezos at Amazon.

These are companies that many business strive to emulate, but their methods often obscure and hard to transplant. I saw that red teaming could help established companies think and act like innovative disruptors while also inoculating even successful companies against complacency and groupthink.

So I convinced the Pentagon to allow me to become the first civilian from outside government to take the Army’s Red Team Leader course at Fort Leavenworth, which is regarded as the gold standard for red team training worldwide.

How Red Team Thinking Works

Red team thinking is a framework for top performing businesses to continue thinking like the enemy to stay ahead of competition. Red team thinking is best broken into three distinct phases.

THE ANALYTICAL PHASE: QUESTIONING THE UNQUESTIONABLE

The best red teams check their assumptions at the door, perform a probability analysis to discern the likelihood of success and then map all dependencies and consequences.

THE IMAGINATIVE PHASE: THINKING THE UNTHINKABLE

Figuring out the different ways in which the future could unfold and understanding how those possibilities could impact a plan or strategy for better or worse is another aspect of red teaming analysis, one that is becoming increasingly important as the macroenvironment becomes more unpredictable.

THE CONTRARIAN PHASE: CHALLENGING EVERYTHING

Sometimes, our fundamental understanding of the problem a strategy or plan is designed to address is wrong. Too often, alternative perspectives within an organization are suppressed by groupthink or the internal politics of the organization.

We have worked with some amazing companies.

We would love to join forces. Visit red team thinking consulting for more information on how we might work together.

Or order your copy of my book, Red Teaming.

Red team thinking forces you to think differently about your business and consider alternative points of view. Red team thinking makes critical and contrarian thinking part of your company’s planning process and gives you a set of tools and techniques that can be used to stress-test your strategy.

Although he did not know it by that name, Fujio Cho at Toyata, he was advocating the same sort of rigorous, self-critical analysis that red teaming provides. And red teaming is exactly what Toyota did.

In August 2004, Toyota Motor Corporation chairman Fujio Cho was asked to give a presentation at the annual automobile industry conference organized by the University of Michigan’s Center for Automotive Research.

The Japanese automaker still considered Michigan hostile territory back then. The company had a modest research-and-development facility not far from the university in Ann Arbor and had just opened a new design studio there. But Toyota was so concerned about the backlash from its seemingly unstoppable march into the market space once dominated by Detroit’s Big Three that it kept its name and logo off the buildings.

For the past decade, Toyota’s share of the U.S. car market had increased year after year, while the share controlled by General Motors, Ford, and Chrysler steadily declined. That was the reason for the low profile in a state that was home to thousands of unemployed auto workers. It was also the reason why Cho had been asked to deliver the keynote address.

There was lukewarm applause as he took the stage. The auditorium was filled with executives from all the world’s major automakers, but the crowd was dominated by suits from the three home teams.

Cho began with a detailed slide presentation showing how Toyota was exceeding each of its strategic goals in every market around the world. It was impressive stuff, and many of the American automobile executives in the auditorium were scowling jealously by the time he was finished.

Then Cho stopped, looked up from his notes, and declared that the time had come for Toyota to rethink its strategy.

“Any company not willing to take the risk of reinventing itself is doomed,” he said.

For Toyota, the time to do that was now, while it was at the top of its game.

“The world today is changing much too fast,” Cho warned as he began detailing the steps Toyota was taking to reevaluate and refine its core business strategy. “Our industry has never been more competitive.”

There was dead silence in the room when Cho finished his remarks. Nobody seemed to know what to make of them. Half the executives there were smugly confident they could keep Toyota at bay, despite its impressive gains.

As one GM executive told me over coffee that afternoon, GM would stay number one because, well, it was GM. The other half were dismayed by Cho’s declaration. They were working overtime trying to match what Toyota was already doing, and here was Toyota’s boss talking about how worried he was about the future and vowing to make his company work that much harder to figure out how to confront the challenges that lay ahead.

What Cho was calling for that day in Michigan was red team thinking. Instead of taking its success for granted, instead of waiting for its competitors to catch up, Toyota figured out how to do what it was already doing well even better.

The next five years would see Toyota catapult to the top of the global automobile industry. It would stumble along the way, but it would take an unflinching look at the reasons for those missteps and move decisively to correct them.

GM would also stumble, but it would respond only with more excuses as Toyota gobbled up its market share, snatched its crown, and became the largest automaker in the world. That is what can happen when you bring red team thinking into your organization—and when you do not.

Companies like Toyota realize they will never have all the answers. That is why they continue to ask questions, the same sort of questions red teams are designed to answer. Done right, red teaming can pay huge dividends to any organization, not just by testing its plans and assumptions and making sure they are sound, but also by making everyone who learns about it more aware of potential problems, pitfalls, and opportunities.

The process of red teaming makes managers better planners and deeper thinkers. In the companies where I have been a consultant, red teaming discussions do not end in the conference room but continue outside in the hallway and at the next staff meeting. Red team thinking rapidly becomes part of a company’s lexicon, and the phrase “Let’s take a minute and red team this” becomes a common refrain.

You do not have to be in charge to benefit from red teaming. Yet if you are in charge, let me be clear about one thing: If you are just looking for validation of your existing strategies and plans, red teaming is not for you. But remember that the best companies and the most effective leaders know there is always room for improvement. If your red team fails to find it, then it is not doing its job.

So only use red team thinking when you are willing to make changes—changes that will make your organization more competitive and more successful. If you are happy with where you are and do not want to change, then don’t red team. Just sit back and wait for one of your competitors to do it for you.

Adapted from RED TEAMING: HOW YOUR BUSINESS CAN CONQUER THE COMPETITION BY CHALLENGING EVERYTHING Copyright © 2017 by Bryce Hoffman. Published by Crown Business, an imprint of Penguin Random House LLC.