GDP
1990: 18%
2015 (estimated): 30%
in instructions per second
1971: 60,000
2005: 10,800,000,000
to 2005: 215
2003: 25,000
2005: 400,000
Do I have your attention?
My point is a simple, if oft-neglected, one: "No firm
is an island," and enormous macroeconomic, social,
and business trends will affect how you do business,
and what business you do. Warren Buffett is fond of saying
that "bad industries trump good management:" If
so, how do you know you will still be in a "good industry"
10 or 15 years hence?
This is where global strategic scenario planning comes in.
As previously
noted, Clifford Chance engaged in just such
an exercise late
last year. With the help of Oxford
Analytica, CC’s worldwide managing partner Peter Cornell and his management team were
able to re-conceive the firm’s strategic direction
by focusing on the three scenarios Oxford Analytica
built:
- China being removed as an economic opportunity thanks to
their invasion of Taiwan, prompting economic isolation; - The US becoming fed up with its foreign adventures
and withdrawing into isolationism; and - Instead of globalisation, the world regresses “back
to the future” — countries and continents
become separate and protectionist. For instance,
America and Europe construct trade barriers
to block cheap imports from China and India.
As both The
Lawyer and the Sunday Times noted,
none of these scenarios is supposed to be "right,"
in the sense of being an accurate prediction of what
will actually come true. What, then, is the point? The
point, which could scarcely be larger, is to have
the firm’s leaders think deeply about whether its
strategy is aligned with where the world might be
going. If "change is the only constant," you
cannot foretell the future by linearly extrapolating
3—7%
compound annual growth (let’s say) in revenue, headcount,
and profits: More
fundamental shifts are surely in store.
Or, as
Cornell put
it, the world is dynamic:
"Cornell told The Lawyer: “So
many strategic reviews are done in a static environment, but
we have to get used to doing them in a dynamic environment.”"The review also underlines Clifford Chance’s shift
away from practice area groups to a more geographical
focus."
Chiming in, from the Times:
"Already the law firm plans to implement
a change in its corporate strategy. From now on, strategy
will be be less practice-based and more geographically
focused. In other words, instead of seeing its divisions
as, say, banking, energy or commodity practices, it will
think in terms of China, North America or Latin America
in future."
But wait a minute, whence this focus on geography?
Aren’t we supposed to be focused on clients, which means
industries, which means practice specialties?
Clifford Chance may be right after all, at least if you believe
McKinsey’s "Ten
Trends to Watch." Trend #1, extrapolating ten
years hence, is:
"Centers of economic activity will shift profoundly,
not just globally, but also regionally. As a consequence
of economic liberalization, technological advances, capital
market developments, and demographic shifts, the world has
embarked on a massive realignment of economic activity."
Sounds like geography matters.
What else does McKinsey think we need to factor into our strategic
planning? Most germane to law firms:
-
"In many industries, a barbell-like
structure is appearing, with a
few giants on top, a narrow middle,
and then a flourish of smaller,
fast-moving players on the bottom." Hmmm,
sound like any industry we’re familiar with? - As firms become bigger and more far-flung, "Long
gone is the day of the "gut instinct" management
style. Today’s business leaders are adopting algorithmic
decision-making techniques and using highly sophisticated
software to run their organizations. Scientific
management is moving from a skill that creates competitive
advantage to an ante that gives companies the right
to play the game." This means you need
to pay serious attention to "business intelligence"
software, for starters. Its effective deployment
across your firm will indeed become table stakes—I
assume only that your partners care about profit levels.
Thinking long and hard about these potential (and, I would
argue, highly likely) developments, as McKinsey puts
it drily, "will be time well spent." Clifford
Chance is there: When will your firm be?
With no direspect to any law or consulting firm named here, I am deeply skeptical about all this.
In the past, when asked to talk about the “Trends in the Profession” I used to use a 10-year-old slide which referred to no specific professionor country. Everyone fell for it – they all agreed that, yes these are the trends we will have to face.
I stopped talking on that topic because it became clear that our problem is being good at responding to the issues we *do* have, not adopting clever ways of spotting new ones.
The realchallenge is to be flexible, adaptive, responsive, and innovative. These are managerial questions, and few firms, even the elite ones, pass these tests.
Oh, and by the way: they taught me in Buinses scholl 30 years ago the barbell structure of industries and the need to move away from gut
instinct management.