A few weeks back I had a fascinating discussion with an officer in the US Marine Corps about the current doctrines of military strategy and how they translate to business. He told me that a major current area of focus is finding ways to reduce the time that it takes to plan operations while, at the same time, disrupting the enemy's ability to plan. He also said that "everybody knows" that a strategic plan is out of date immediately after it is drafted.
In today's rapidly changing world, this makes perfect sense in business too. (The first part, at any rate!) Yet it is clear from the results of our August 2007 Managing Partners' Forum strategy survey that the "average" law firm, both in the United Kingdom and North America, uses neither the full range of information sources that they need for the firm's leaders to make good decisions, nor the tools available to get strategy crafted and executed as quickly and effectively as possible.
My fellow strategy researchers Bruce MacEwen and Andrew Hedley and I are still ploughing through the quite fascinating data and we will be releasing the full results within the next few weeks. In the meantime, herewith a few preliminary remarks about strategy velocity, data sources and tools.
The strategic information sources that more than 10% of law firms regarded as "absolutely critical" were:
- Financial performance trends (34%)
- Internal analysis of individual service area profitability (17%)
- Evaluation of success of current / previous strategies (13%)
- Formal benchmarking against competitors (13%)
Only 10% of respondents rated client satisfaction surveys as "absolutely critical." Adding those that rated it "very important" raises the percentage to 44%. Conversely, this latter figure for accounting firms in the survey was 80%! Surely accounting firms cannot value client perceptions nearly twice as much as do law firms!
The "average" firm's strategy process is clearly heavily skewed towards what has worked in the past and how the firm's financial performance compares to other firms. Important, yes, but more score-keeping than strategy. In a rapidly changing world, strategy needs to be MUCH more outwardly focused, proactive and sophisticated. It needs to be a dynamic, ongoing process rather than a static "strategic plan."
According to the survey results, market trends, economic data and information about what other firms are doing are of lesser direct strategic importance. Yet it is exactly this data that provides critical indicators on how the firm needs to change course to anticipate emerging trends. Not just react to the past. As somebody once said: "If we drove our automobiles the way that we manage our firms, with our eyes firmly on the rear view mirror rather than out of the windscreen, then there would be wrecks on every corner." In today's world, it is critical that firms develop better forward vision and master the art of thinking through the "what if" scenarios. Fortunately, this usually simply a case of developing the right process and selecting the right strategy tools.
In the section of the survey that researched these tools, though, the only tools that law firms reported they use frequently in their strategy processes were as follows. (The figures in parentheses indicates the percentage "always use" and "use often" responses by law firms.)
- Strategy retreats (68%)
- SWOT analyses (67%)
- Market positioning analysis (65%)
- External consultants (51%)
- Employee surveys (50%)
More sophisticated strategy tools such as analysis of the firm's culture, balanced scorecard systems and sophisticated comparative empirical analysis of the growth potential and profit drivers of individual service areas are largely absent from the "average" law firm's strategy toolbox.
Consider next, if you will, the "Top 5" strategic issues that law firm leaders reported that they face today:
No 1 (tied):
Increasing client demands; downward pressure on fees
No 1 (tied): Difficulty of balancing long-term growth with short term
profitability
No 3: Increasing levels of competition within the profession
No 4: Finding new ways to outplay the competition
No 5: Lack of management / business expertise amongst the firm's leaders
Given this, the extremely heavy emphasis on financial performance is completely appropriate. But it is not enough. To use another military analogy, most firms seem to be focusing on how well the last battle went, and what tactics worked best (which is important,) but not on what the enemy is doing and how the battlespace is evolving. This deficiency is as dangerous in business as it is in warfare.
There are many options to choose from for increasing both the velocity and the effectiveness of a firm's strategy process. The first step is to develop a good understanding of the information that the firm's leaders need to make good strategic decisions, continually as the market dictates, and the tools that can provide this information as quickly and accurately as possible. Also, a good understanding of the skills and resources that the firm's people need in order to execute strategy as quickly and effectively as possible.
Here are three things that any firm leader can do about this right now:
1. Convene a meeting of your firm's executive committee to consider what trends influence your market that might impact on either (a) the continued relevance of your firm's strategy or (b) your ability to execute. Determine what critical sources of information you need to track, in order to monitor these. Then put in place a process to collect this data and feed it to the people that need it, in the format makes best sense.
2. Educate yourself about the range of strategy tools that exist and decide which best suit the needs and culture of your firm.
3. Refocus your strategic efforts on developing the capability to reach decisions and plan, quickly and effectively whenever necessary, and also to execute strategy under a range of conditions. In Edge International, we call this capability 'dynamic resilience.' As Charles Darwin once wrote: "It is not the strongest of the species that survives, nor the most intelligent, but the most responsive to change."
Wouldn't this be a better use of this year's partner retreat, rather than clustering around flip charts again for another round of SWOT analyses and reviewing historical data?
