While thinking about this posting, I read the April 16 posting Which Managing Partner Do You Most Admire? (And Why)” by Bruce MacEwen at Adam Smith, Esq. that discussed the results of a survey distributed by Edge International that asked law firm leaders 2 questions:
• Which law firm Managing Partner/Chair/CEO do you admire the most for their leadership? [Outside your own firm.]
• Why does that individual stand out in your mind?
I also ran across a memorable quote from Rear Admiral Grace Murray Hopper, who said, “You manage things; you lead people." That quote – together with MacEwen’s posting - started me thinking about leadership and its link with strategy.
In Business Models, Competition, and Strategy, I noted that competitive strategist authors Bruce Greenwald and Judd Kahn (Competition DeMystified) and Gary Hamel and C.K. Prahalad (Competing for the Future) said senior management makes strategic decisions. Noted Harvard Business School Professor Michael Porter briefly discussed several of his ideas about competitive advantage, operational effectiveness, strategy, and leadership in interviews with Fast Company published under the title “Michael Porter’s Big Ideas” in the magazine’s February 2001 issue; Porter previously covered these topics in more depth in an article entitled “What is Strategy?” in the November-December 1996 of the Harvard Business Review. In Fast Company, Porter said:
The chief strategist of an organization has to be the leader – the CEO. A lot of business thinking has stressed the notion of empowerment, of pushing down and getting a lot of people involved. That’s very important, but empowerment and involvement don’t apply to the ultimate act of choice. To be successful, an organization must have a very strong leader who’s willing to make choices and define the trade-offs. I’ve found that there’s a striking relationship between really good strategies and really strong leaders.
Porter noted the primary goal of any enterprise is superior profitability or performance: “If your goal is anything but profitability – if it’s to be big, or to grow fast, or to become a technology leader – you’ll hit problems.” In the 1996 HBR article, Porter said operational effectiveness and strategy both are essential to superior performance; and all the activities in which a business engages in order to create, produce, sell, and deliver its products or services are the basic units of competitive advantage – an overall advantage or disadvantage results from “all a company’s activities, not only a few.” The difference between operational effectiveness and strategy lies in these ever-important activities: “operational effectiveness” means "performing similar activities better than rivals perform them"; while “strategy” or “strategic positioning” means “performing different activities from rivals’ or performing similar activities in different ways.” In Fast Company he also said:
The essence of strategy is that you must set limits on what you’re trying to accomplish. The company without a strategy is willing to try anything. If all you’re trying to do is essentially the same thing as your rivals, then it’s unlikely that you’ll be very successful. It’s incredibly arrogant for a company to believe that it can deliver the same sort of product that its rivals do and actually do it better for very long. That’s especially true today, when the flow of information and capital is incredibly fast. It’s extremely dangerous to bet on the incompetence of your competitors – and that’s what you’re doing when you’re competing on operational effectiveness.
In discussing the role of leadership in strategy, Porter said:
The challenge of developing or reestablishing a clear strategy is often primarily an organizational one and depends on leadership. With so many forces at work against making choices and trade-offs in organizations, a clear intellectual framework to guide strategy is a necessary counterweight. Moreover, strong leaders willing to make choices are essential . . . In many companies, leadership has degenerated into orchestrating operational improvements and making deals. But the leader’s role is broader and far more important. General management is more than the stewardship of individual functions. Its core is strategy: defining and communicating the company’s unique position, making trade-offs, and forging fit among activities.
At this point you’re probably thinking, “Interesting stuff, I know – but what relevance does it have to the business of practicing law?” Maybe nothing – but more likely it has everything to do with how the business of practicing law will compete for the future. I doubt many, if any, people would disagree either that we have a “knowledge economy” – a term generally accepted to have been used first by Peter Drucker in 1968 – or that the business of practicing law is a “knowledge business.” As such, law firms are active participants in what has been called an “information value chain.“ Simply put, business events create raw data, which then must be organized into information in order to be useful. That information must be analyzed, synthesized, and managed in order to become knowledge; and, knowledge then becomes the foundation for decisions. A graphic illustration of this chain is:
I first came across the term and its graphic illustration in a September 2001 article entitled, “Adding Value to the Profession: The Proposed Global Business Credential,” which discussed a new credential being considered by the AICPA as an offshoot of the CPA Vision Process, a collaborative effort between the AICPA and state CPA societies.
In a thought-provoking white paper entitled "The XYZ Concept: Turning Knowledge into Value" that discussed the proposed new credential, it was noted:
[T]he rules for businesses of all sizes are changing dramatically. Advances in technology and communication now provide opportunities to use knowledge in new ways and with unprecedented speed. The pace of commerce has accelerated and the ability to innovate quickly has become an essential criterion for success. Lines between industries and professions have blurred or have disappeared. Value must now be reckoned in terms of intellectual, human and brand equity as well as financial and physical assets.
Raw data comes from various sources, is of various types, and, certainly in the past, has been deposited in separate repositories of knowledge (one such repository, e.g., being legal). Today, however, there is value to be garnered from the information value chain by those who understand the linkages between once separate areas of knowledge, can capture relevant information from multiple sources, and can integrate that knowledge strategically for better decisions. Pause for a moment and think about the various areas and ways where the “legal information industry” historically has been and currently is involved in the information value chain. Think about the inroads that have been made through the leverage of technology to make legal information available through non-lawyer sources. Think about how companies like Wolters Kluwer (a company mentioned in Bill Gratsch’s posting entitled "Changing Models: Parallels Between Music and Legal Information" that calls itself “The Professional’s First Choice for information, tools and solutions that help professionals make their most critical decisions”) might increase its presence in the information value chain at the expense of the legal industry. As I suggested in my last posting, think about how you’d parse or “tranche” what you do into various skills, tasks, and knowledge – where do they fit in the information value chain and which of them in the future might be provided by some nontraditional competitor outside the industry at a greater value to the client? Picture what the legal industry’s position in the information value chain might be 10 years from now. Think also about how music may be a form of “information” and the parallels between the “legal vertical” and the music industry that Bill Gratsch mentioned in his posting. What different activities can law firms perform, or in what different ways can law firms perform their activities, in order to be a more valuable player in and contributor to the economic value that can be created by the strategic integration of knowledge?
The top 10 list of those most admired leaders according to MacEwen’s posting came from Latham & Watkins; Goodwin Procter; DLA Piper; Alston & Bird; Greenberg Traurig; Hogan & Hartson; Jones Day; Orrick, Herrington & Sutcliffe; Stites & Harbison; and, Womble Carlyle Sandridge & Rice. I enjoyed the posting’s list of the reasons why those singled out for admiration were so identified. I’ll mention here 5 of the major reasons: committed to making change happen; has an ambitious agenda; handles the tough issues directly; aligns people behind his vision for the firm; and, maintains core values. Those sound like some of the things people that are leaders do or some of the motives and traits possessed by people that are leaders. Some of it even may touch on elements of strategy. But are these leaders actively developing their firm’s strategy to compete successfully for the future? If so, it’s not clear from the enumerated reasons – I would not have expected someone to talk openly about their strategy, but I would’ve expected the word “strategy” or the word “strategically” or some similar variation to be used by someone. And, talk about “vision” is not enough. Strategy involves more than “vision.” It requires what Hamel and Prahalad call “industry foresight.” Strategy requires not only the creativity and imagination inherent in a “vision,” but also “deep insight into the trends in technology, demographics, regulation, and lifestyles that can be harnessed to rewrite industry rules and create new competitive space.”
O strategy, where art thou? I’m afraid it may be lost in an “operational effectiveness” focus or, even worse, to that great fall-back position I’ve heard constantly over more than 30 years of being in and around the legal industry whenever change or forward-looking thinking are mentioned: “We’ve always done it that way.”
With that, I’ll leave you with another great quote from Admiral Hopper:
I am now going to make you a gift that will stay with you the rest of your life. For the rest of your life, every time you say “We've always done it that way,” my ghost will appear and haunt you for twenty-four hours.