The Red Cell is an idea borrowed from the military world and adapted for use in the business environment. It provides a competitive advantage due to two primary deliverables. Firstly, it provides a thorough and objective view of the environment from the standpoint of an outsider. This perspective may primarily be that of a competitor but could just as well be that of a customer, supplier, or regulator. Secondly, it confronts plans and strategies from this external perspective. In so doing it ensures that an organization does not develop a ‘yes Sir’ bureaucracy, but rather an environment of critical thinking and rigorous planning.
The concept is named Red Cell due to its military origin. Red is the color used to depict enemy forces on NATO maps, and a cell is a small room or cubicle within a headquarters. The term is unofficial and those with a military background would also recognize terms such as G2, Intelligence Officer, and most importantly IPB (Intelligence Preparation of the Battlefield). In this context we use the colloquial term Red Cell as it characterizes three aspects of the concept:
- Red is the color of the enemy and it is this essential perspective that we seek to bring into the organization in order to anticipate the possible actions and reactions of our competitors. It allows us to prepare contingency plans today based on what may happen tomorrow thus accelerating our tempo.
- A cell is a something that is self contained and separated from the rest of an entity by a membrane. Similarly, the Red Cell is autonomous and to a certain extent cut off with full time staff, who live in an adversarial mind-set.
- Finally, the red blood cell is something that brings an essential external element into the body, oxygen. The Red Cell does the same for an organization.
In short the concept is to create a Red Cell in an organization staffed by full time employees. Their role is to build up strategies and plans from the point of view of external stakeholders. With this information they perform two essential functions. The first is to brief not only planners and strategists, but all staff on exactly what the external threats, trends and developments are likely to be. This allows all plans to be built on this basis and not just checked against competitive reaction at the last minute. Secondly, the Red Cell is used by the CEO to confront and challenge the plans and assumptions of the organization. The perfect way to do this is via a war-game but why stop there? The Red Cell should be free to identify fallacies, gaps and over-confidence wherever it can thus, strengthening all areas of an organization’s activities.
The red cell forces people to challenge their own assumptions and reduces over confidence. It engenders an environment of critical thinking and honest analysis. It also guards against the formation of a bureaucracy of ‘yes men’.
Many businesses have a limited outside view: strategies are being developed internally or with assistance of external consultants, but they are rarely checked against potential competitors’ moves. The same happens with customers’ views: they are being considered, but insufficiently affect the potential strategy. Suppliers’ and new entrants’ reactions are even less considered, thus making strategies disconnected from reality.
Although Shell introduced the concept “scenario planning”, we think this is not enough and could be taken a step further. First, it could challenge new ideas and projects to enhance a better success rate. Second, it could generate knowledge within an organization to bring the outside-in perspective and allow management decisions without the constant “manager’s approval”. And third, it could promote internal talent that will encourage employees to engage in bold ideas that will sustain the future of the company.
So, time, resources and energy spent developing strategies do not lead to creation of real paths, solid and robust, that would help the company reach its goal. Not enough people in companies dare criticize the path without being properly authorized and trained.
Current corporate structure of many companies does not include a special unit of trained professionals, whose main task is to strengthen the strategy by finding its weak spots and crushing it if necessary to rebuild it.
Such units can be created…
Therefore our proposed solution would be to create a free-ranging Red Cell; the objectives of which are: First to provide this outside-in viewpoint from a competitor’s standpoint. Second, to challenge the assumptions of proposed plans. Third, to provide an intelligence landscape of potential moves the competitor would make. And fourth, subsequently to co-create with the strategic teams a contingency roadmap or reactionary plan to competitor’s moves.
In the military, the Intelligence Officer would initiate the brief with the disposition of enemy forces coupled with their read on the enemy’s actions and potential plans. Similarly in a corporate setting, the Red Cell would have to work faster than the strategic team to come up with this disposition for the competition in order to provide the briefing. This initial analysis is not a construction of speculation, but a combination of intelligence gathered from the competition coupled with in depth analysis and reinforced with local knowledge hired from the competitors themselves.
Following this intelligence briefing, the strategic teams then come up with their own plans for the projects, which will then be closely scrutinized by the Red Cell. The objective of this is twofold; first to challenge the assumptions made by the strategic team in coming up with the plans. Second, to provide a well thought out and in depth reactionary strategy that the competitor could reasonably be expected to come up with.
This review system would feed back into the planning process to then create more robust, wide ranging and waterproof plans.
The ultimate end of the Red Cell is to provide an external view into an organization’s strategic planning and tactical implementation. The practical impact of this external view manifests in three areas: assumption testing, contingency planning, and leadership development.
Internal and external consultants can be instrumental in helping a company develop their strategy, albeit with an inside looking out perspective. What is lacking is the view of competitors, customers, suppliers, substitutes, and regulatory agencies on this plan. This is where the Red Cell can add significant value, as a means to test the underlying assumptions that drive strategic planning. As the company drives forward, the Red Cell will be one step ahead, predicting the actions of external stakeholders.
The purpose of the Red Cell is not to serve as a plan ‘buster’ that unravels the work of the strategy department, but to inspire contingencies and adaptations to existing frameworks. This will be accomplished by identifying ‘named areas of interest’ along a timeline or spectrum of actions. When these areas are triggered a subsequent action or observation will follow that may have been over looked without a deeper understanding of the competitive point of view.
Finally, the Red Cell offers not only a home for industry expertise that may exist inside or outside of the company, but also as a development tool for future leaders of the company. Just as in a rotational program or internal consulting role, the exposure would be high, but more importantly, future leaders are developed with a more holistic frame of reference that is not guaranteed by other programs. By contributing to planning and not just problem identification, the future leaders in the Red Cell will also gain a positive reputation in the organization.
The first steps to undertake the Red Cell into an organization will start by defining the extent to which the unit will be exploited. The extent ranges from performing an exercise base on a case-by-case analysis, which is not the case of this hack, to having a full deployment unit specialized – the purpose.
There are 5 key steps any given organization should undertake to implement a Red Cell:
1. Red Cell Strategy
The strategy will be able to help identify the mission, vision and objectives of the Red Cell. It will also highlight the outputs of the unit and the different activities it will undertake. Finally, the team formation, KPIs, incentives, differentiation, corporate alignment and communication will be detailed.
Mission. Purpose of the Red Cell in the organization. Vision. Long-term objective – aligned with the overall strategy. Objectives. Short-term and easily communicated. Outputs. Goals to which the unit will be measured. Activities. Every-day activities of the unit. Team formation. Number of people, capabilities and rotation program. KPIs. Measurable, simple and related to the strategy. Incentives. Aligned to performance but independent from organization. Differentiation. Clear differentiate from consultants and scenarios. Corporate alignment. Avoid criticism of the team and tackle bureaucracy. Communication. Constant to build credibility
It is imperative for the strategy to highlight the importance of the outside-in perspective
2. Unit Leader
The unit leader should be a seasoned ‘dog of war’ who knows the industry very well, has the credibility and understands the entire context to which the Red Cell will play. The leader should be a champion of the purpose with proven leadership skills and an experienced global mindset. Understanding of the competition, suppliers, buyers, substitutes, new entrants and trends is essential. He or she will also have the sensitive task of selling the concept internally.
3. Unit Team
Comprised of future talent within the organization to develop the future leaders, the individuals comprising the team will ideally be four, having two of second year and two of first year. The individuals will not last more than two years, to which they will be deployed to further positions within the company. The team could either be MBAs from other industries to join the company or promising inside talent, assuring employee encouragement.
4. Incentive System
It should align the rewards to promote success of the projects or ideas challenged and not only identifying the gaps. The red cell’s incentive should be differentiated from the overall strategy of the organization to avoid biased criticism. The organization could be incentivized by the number of times being challenged by the Red Cell and whose project was strengthen and thus delivered more impact than expected.
Focus on prioritizing projects based on strategic focus and value to the organization and then communicate it across to encourage employees to access the Red Cell for their ideas and projects to help manage without managers.