As a management consultant to law firms, perhaps the most consistently infuriating phenomenon I encounter (all the time and everywhere, I’m deeply sorry to report) is transparently bogus strategic advice.
Here are some examples:
- Have a struggling office? Hire lots of laterals! (So let me understand this; if the office is struggling, how are you going to attract desirable laterals? Pay them above-market rates? That’s a durable approach, to be sure.)
- Wondering whether to be in a new foreign jurisdiction? Do it! (Have you figured out precisely which clients will use you there [don’t count on new local clients coming to you right away-presumably they’re having their legal needs served, happily enough, at the moment]? And if not, what’s the rationale again?)
- Confused about your position in the market? Here’s a 2 x 2 matrix, and your firm should be in the top right quadrant. (Thanks, and I wish my firm was Skadden, too, but what if that’s unrealistic?)
- Having an existential crisis around what your firm should be? Merge! Mergers are the universal solvent that will cure all ills. (Because there’s a fat fee in it for the consultant, who walks away regardless of the upshot.)
Now, it may be “transparently bogus” only in the eye of the beholder–mine–but as someone with, I should like to think, exceptionally high standards in my chosen calling, few things gall me more. Yet I’ve never seen anything written about it.
Until now.
McKinsey just published a brilliant article (apparently no online link available) which consists (as I see it) of a diagnostic test of whether the Emperor has clothes. Written by UCLA management professor Richard Rumelt, it exposes the ugly underside of thoughtless, content-free, intellectually lazy, and congratulatory self-serving pap that passes for thinking in this area in too many ways.
It’s the first article I’ve ever seen about “Bad Strategy,” and its perils.
It opens with Horatio Nelson’s famous challenge confronting the armada of French and Spanish ships that Napoleon had dispatched across the English Channel to disrupt Britain’s commerce and set the stage for an invasion of the British Isles (Nelson is of course famously commemorated today in Trafalgar Square in the heart of London, up the street from Parliament and home to the National Gallery).
Why the battle of Trafalgar? Because Nelson exercised tremendous strategic insight. His fleet outnumbered, he dispensed with the classic naval battle strategem of the day, which was facing off in parallel lines and blasting away with cannons, and instead divided his fleet into two lines which attacked the armada perpendicularly, hoping that the more experienced British gunners would be able to compensate for the heavy swells that day while the less well-trained French and Spanish gunners would not.
He was right. 22 French and Spanish ships were lost (2/3 of their fleet) as opposed to 0 British ships.
That’s great strategy.
Which brings us to bad strategy.
Let’s assume, with benevolence, that no one sets out consciously to create or embrace a bad strategy. Where then are their roots?
They start in:
- indecision
- a desire to accommodate a multitude of conflicting demands and interests
- a resort to high-sounding generalities in lieu of specifics, and wishful thinking in lieu of hard fact-based confrontations with the market.
For example? A coach whose primary advice to his team is to “win.” This represents the embrace of broad, vacuous goals. (Not that “winning” is vacuous, but the exhortation to do so without providing any tools, training, techniques, or tactics for getting there is vacuous. You might as well advise a young person starting out in their career to “enjoy what you do.”)
Unfortunately, bad strategy is everywhere with us. Here are its key characteristics:
Failure to face the problem
If you don’t define the challenge to be overcome, you won’t find the way through (the strategy) to the other side. And if you don’t know what the strategy is supposed to overcome, you won’t be able to tell whether it could overcome it. For example, in 1979 International Harvester produced a very thick strategic plan proposing that it strengthen its dealer/distributor network and cut manufacturing costs. But it entirely ignored the grim reality that it had the worst labor/management relations in the industry, which effectively blocked any attempts to improve productivity or cut costs.
Mistaking goals for strategy
Have you heard the one about the 20/20 plan? Increase revenue by 20%/year and keep profit margins at 20%?
(Actually, in law firm land, a 20% profit margin would be pitiful, given that our typical ratios are 35-40%+. The only problem with that is, of course, that that profit calculation assumes our partners work for free, when in fact they work for the profits. So the “real” profit margin, after fully accounting for personnel costs, may be zero if the firm drains its cash on hand at the end of every year to pay its partners. A metaphysical accounting question.)
So, yes, of course, what firm wouldn’t subscribe to the 20/20 plan?
But when this was pointed out to the leader of a firm who had embrace the 20/20 plan, here’s how the conversation went:
“The 20/20 plan is a very aggressive financial goal. What has to happen for it to be realized?”
“The thing I realized as a football player is that winning requires strength and skill, but more than anything it requires the will to win-the drive to succeed. Sure, 20/20 is a stretch, but the secret of success is setting your sights high. We are going to keep pushing until we get there.”
[Trying again] “When a company makes the kind of jump in performance your plan envisions, there is usually a key strength you are building on or a change in the industry that opens up new opportunities. Can you clarify what that point of leverage might be, in your company?”
You can imagine the rest of the conversation.
Bad objectives
Sometimes a strategic plan’s objectives simply aren’t strategic. Too many “strategic plans” devolve into laundry lists of things to do. So rather than being a strategic plan, they are….a list of things to do. How does this happen?
You know the syndrome, and law firms are preternaturally susceptible to it: We need to hear from everyone and incorporate everyone’s point of view. McKinsey tells the horror story (well, they don’t characterize it that way, but I do) of a firm whose strategic plan contained 47 strategies and 178 action items. Action item #122 was “create a strategic plan.” You cannot make this stuff up.
Want to fail differently with your strategic plan? Then make it a “we wish” document. As in, we wish our firm were in this position which we aspire to. Without any clarity about how exactly you plan to get there, especially given the nasty realities that clients have their own choices, other competing firms will respond and react, and your own partners, associates, and staff may have their own views.
To go back to the sports analogy, this type of plan is a bit like an NFL coach starting training camp with the exhortation that “we are Super Bowl champs,” without any attention to the basics of what it’s going to take to get there.
Vacuity
This type of strategic plan offense amounts to fluffy restatements of the obvious (and you can add buzzphrases from current management literature for bonus points). Here’s another one I couldn’t make up: A major retail bank in an internal strategy memo said “Our fundamental strategy is one of customer-centric intermediation.”
“Intermediation,” of course, means they accept deposits and loan out funds. In other words, they’re a bank.
But “customer-centric” is what gets the bonus points. If they actually offered better terms and service, they might have a right to lay claim to that, but actually they don’t. So it’s fluff. The strategy of this bank is being a bank.
Enough of bad strategy: I don’t know about you, but I for one am tired of it.
What, then, does good strategy consist of?
A situational analysis describing, with clear-eyed truthfulness, what your firm is up against. And simplifies it. It cannot be complex, it has to be reducible to, at most, a few short sentences. But they need to describe the critical issues facing your firm.
An approach to guide your firm’s response to the obstacles identified in your situation. This essentially constitutes a guiding policy to deal with reality.
Finally, specific actions to lead you to achieving the vision behind the guiding policy.
McKinsey uses the example of Nvidia, which was a troubled startup when we first encounter them, its initial product, a PC add-in board for video, audio, and 3D graphics a commercial failure. 3Dfx Interactive, its key competitor, had a commanding lead, and Intel was rumored to be about to enter the market.
Nvidia, in short, was losing the performance race. That was the situational analysis.
The guiding policy was to become the performance leader.
And so the specific actions, instigated by the CEO, was based on the insight that the standard rate of introduction of new chips was one every 18 months. What if Nvidia could triple that rate?
So Nvidia deployed three parallel development teams, working on overlapping schedules to meet the every-6-months timeframe, and invested substantial resources in simulation and emulation facilities to ensure chips could be built and delivered on time.
Result: In 1999 Intel exited the business it had entered, the year before; in 2000 3Dfx’s creditors forced it into bankruptcy, and in 2007 Forbes named Nvidia “Company of the Year.”
So if you’re thinking of a strategic plan re-analysis for your firm, don’t settle for the conventional, the thoughtless, the reflexive, the one-template-fits-all consultancies (no, I’m not naming names), the careless, the lazy, or the unfocused. Doing it the hard way-the right way-may be more painful in the short run, but anything else is sure to be far more painful in the long run.
