Red Team Thinking is a systematic way of making critical and contrarian thinking part of the strategic planning process and execution of any organization. It provides a robust set of tools and techniques designed to challenge your assumptions, expose hidden threats, identify missed opportunities, and stress-test your plans and strategies, enabling you to ultimately make better decisions faster. Specifically, for public market investing, Private Equity and Venture Capital, Red Team Thinking can provide further confidence in an investment thesis and ensure all risks have been highlighted and planned for.
When carrying out due diligence for an investment, you will analyse some key domains for the business you are looking to invest in such as Legal/IP, Finance, HR, Market, Competition, PPE, Customer, Product/Service.
To assess your level of understanding and confidence for items within these different domains you can use the matrix below; the two bottom quadrants require special attention and this is where the value of Red Team Thinking comes to the forefront:
Below is a brief introduction to some of the techniques that can be used in a short timeframe, to surface issues in the bottom two quadrants, and also validate the items in the top two quadrants:
Assumptions Challenge™ - identify and pressure-test both stated and unstated assumptions in your investment thesis in order to make better decisions.
Swan Dive™ - explore the consequences of events that might not occur, but that would have a major impact on your strategy or plan if they did happen.
Alternative Futures Analysis - reveal the different ways a strategy could unfold, allowing your organization to plan for the worst even as it prepares for the best.
Pre-Mortem - works like a post-mortem, but is far more useful because it takes place before a plan is executed, while there is still time to address weaknesses and avoid failure.
Using a combination of the above techniques, you will expose areas of risk and other threats to your investment thesis, as well as new opportunities you might have missed, leading to a better investment decision. These are just a few of the many techniques which are part of the Red Team Thinking tool kit.
In a world with increasing VUCA (volatility, uncertainty, complexity, and ambiguity), every investment professional will greatly increase their likelihood of success by applying critical and contrarian thinking, and in doing so, keep ahead of the competition.
It is my goal to help you think differently and challenge your thinking through my writings in this newsletter.