(Article originally published on Forbes.com, March 19, 2017, Author: Bryce Hoffman)
General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV have all fallen victim to that ancient Chinese curse: May you live in interesting times. And it is times like this that call for red teaming.
The Trump administration has ushered in an era of unprecedented uncertainty for American businesses. Depending on which industry they are in, the far-reaching changes proposed by the new president will help or hurt companies in a variety of ways — sometimes both at the same time. But few industries are more squarely in the crosshairs of Trump’s policies changes, for better or worse, than the American automobile industry.
On one hand, GM, Ford and Chrysler all stand to benefit massively from Trump’s decision to roll back the tough new federal fuel economy regulations imposed by his predecessor. On the other, all three companies could well be among the biggest losers if the North American Free Trade Agreement, or NAFTA, is renegotiated.
You can be sure that GM, Ford and Chrysler are all working overtime to figure out how best to take advantage of relaxed fuel economy regulations and how best to insulate themselves from a less free North American trade agreement. But conventional planning approaches can only go so far in anticipating the far-reaching, long-term consequences of such significant policy changes.
The red teaming arsenal includes tools such as alternative futures analysis and what-if analysis that can help companies understand the different ways future events can impact their strategies, both positively and negatively, and adjust their plans accordingly. Red teaming can also help companies identify and evaluate the second- and third-order effects of such changes on their businesses and on the business environment as a whole. And red teaming recognizes that plans are never executed in a vacuum. Foreign competitors and future administrations will all have a say in the ultimate success or failure of the plans Detroit’s automakers are putting together right now.
Just as importantly, red teaming uses contrarian thinking to expose the potential risks of a seemingly positive development, as well as the potential upsides of a seemingly negative one.
For example, while relaxing fuel economy regulations might seem like an unmitigated boon for automakers, there are ways that this could turn out to be a big problem for them down the road.
It is true that Detroit’s Big Three were struggling to comply with the more restrictive requirements imposed by the Obama administration, yet all three companies have already invested significant resources in developing more fuel-efficient vehicles to meet those targets. The automakers have modified their manufacturing plans accordingly as well.
There is certainly money to be saved in not following through with those plans, but what happens when a future administration reverses Trump’s reversal and reinstates the more stringent requirements? The election of Donald Trump has not yet led to the discovery of new petroleum reserves, nor has it ended concern about climate change and greenhouse gas emissions (at least outside the Oval Office). So it seems almost certain that American automakers will have to make their cars and trucks more fuel efficient, even in the absence of federal mandates.
These are the sort of issues red teaming helps identify and address.
I don’t know if there is any upside for GM, Ford and Chrysler in the proposed renegotiation of NAFTA, but if there is, red teaming can help find that, too.
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