If life is coming back into the economy, and if, in John Maynard
Keynes’ famous phrase, the "animal spirits" of capitalism are about
to be unleashed anew, the rising tide might promise to lift all boats.
But according to this Strategy
101 article, the competitive landscape may be about to get tougher. Firms
that plan on being "winners" past this economic cycle must:
- select the practice areas where they can truly excel and invest
the needed resources to grow; - identify practice areas where, realistically, they will not be
competitive in the foreseeable future (a/k/a recognizing opportunity
costs); and - relentlessly quantify profitability by practice group, by region
and office, and by client.
I’ve long been a huge fan of the 80/20 rule—of wide applicability,
but here meaning that 20% of your clients generate 80% of your revenue—but
the author of this story ups the ante: He claims that 20% of
your clients generate 120% of your profits. The implication
is not subtle: Fire some of your clients.
Yet, after reading this, which I highly commend to you as your quarterly
analytic precis of firm strategy from the 30,000-foot perspective,
I’m left with one enormous question: How do organizations change?
Law
firms, delightfully and infuriatingly, are especially rich terrain
for addressing that question. This article doesn’t pretend
to acknowledge it, but I do, and shall.
