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In Praise of Competitive Advantage: Advice for Firm Leaders in a Revolutionary Time

It’s never been easy to lead a law firm of any size. But if you’re a firm leader these days—be it chair, managing partner, practice or industry group leader, client team leader or otherwise—the pressure’s really on. Your people expect you to point the way to smoother waters ahead. Yet where do you find safe water when revolution is in the air?

Tasked with this tough mission, chances are you don’t find the hecklers in the bleachers helpful—meaning those who rail that firms of every size and stripe are unresponsive to clients’ needs. Frustrated by the legal industry’s fabled resistance to change, these seeming Jeremiahs are energized by the confluence of economic trauma, increasing buyer power, and changing labor supplies and commitment levels. They urge sweeping changes to old models and functions to align legal services better with market demands. Here are some questions and concepts for you to consider in determining how to respond.

 

Are Law Firms That Resistant to Change?

There’s plenty of evidence that law firms are initially very resistant to doing things differently. Some of us remember when it was revolutionary to hire word processors; use fax, voice mail and e-mail; give Internet access to lawyers and employees; use document automation software to draft contracts and briefs; train partners in client relationship skills; and assess clients’ satisfaction with our services. Today, these once-unthinkables are so widely implemented no one considers them anything other than the norm.

And that’s the flip side of law firms’ resistance to innovation: obsession with conformity. After a few firms have innovated somewhere, somehow (and you can always depend on those few to do so), fast-followers jump on the bandwagon, soon followed by those afraid to be left behind. Before long, almost everyone’s doing the last new thing. So when everybody changes, which competitors benefit?

Of course, all industries experience broad change, even the legal industry. And, while perhaps it’s my Pollyanna attitude, I see much evidence that law firms are changing rapidly in response to the revolution of today. They are analyzing and improving work processes, staffing matters with lawyers and others who work in a variety of full-time, part-time, in-sourced and outsourced arrangements, and pricing services in so many ways that the term “alternative” won’t apply much longer.

But when all competitors change in the same ways, none of those changes offers any competitor an advantage. Everyone has simply converted from old ways of doing things to the same new ways of doing things. Where’s the competitive advantage in that?

If keeping up with the Joneses doesn’t lead a firm to long-term competitive success, how can it find the smoother waters it longs for? It’s all about sustaining a competitive advantage.

What’s a Sustainable Competitive Advantage?

Law firms that thrive for a long time do so because they have found, leveraged and sustained a competitive advantage that makes them more attractive to some buyers. In fact, this is the most basic definition of strategy. That’s right, it’s time to talk strategy. Again. Still.

Without a competitive advantage, a firm cannot be unique in any way and, therefore, cannot be more desirable to at least some buyers. This has always been true, and after this and all future revolutions have ended it will still be true. Put another way, without one or more competitive advantages, a law firm will become a powerless vendor whose structures, functions and very existence are defined and permitted by the availability and demands of clients and suppliers.

So what offers your firm a sustainable competitive advantage? It’s something your competitors cannot copy, your clients won’t outgrow, substitutes can’t supplant, and society doesn’t make obsolete that continues to make your services more attractive to at least some buyers. It could stem from your lawyers, practices, size, locations, culture, working style or connections. It could be your firm’s distinctive business savvy or professional development and knowledge management leadership. It might have something to do with what you offer or don’t offer, or what you insist on doing or refuse to do.

As a result, some buyers will find your services safest, cheapest, fastest, closest, most convenient, most predictable, most reliable, producing the best results or making your lawyers easiest to work with (or most inspiring or fun or reassuring) or some hard-to-replicate combination of these or other benefits.

How Will You Stay on Top as Market Conditions Change?

Competitive intelligence is vital in today’s marketplace. And like it or not, a firm’s leader carries the heaviest burden of developing and using that intelligence. If your firm has a CI unit, congratulations—you can put those resources to work for you. (To learn how to do it, see the author’s article “How to Create and Use Competitive Intelligence: 45 Tips for Law Firms” in the March 2008 Law Practice.) But with or without these resources, you must still shoulder the burden of knowing more than anyone else at your firm about your clients, competitors and competitive environment. Because you are your firm’s leader, you must also be your firm’s chief intelligence officer.

This means you must build and maintain a strong network of people who share insights with you that otherwise would be hard to find. You must get the best briefings you can afford or wrangle—about the legal industry, client industries, and the economies and cultures in which your firm operates—and you must read constantly. You must listen more than you pontificate, especially to those who don’t agree with you. You must ask more questions than you hope to find answers for. The best leaders keep long lists, if only in their heads, of what they didn’t know they didn’t know that they just found out about.

You must also be aware of how your own blind spots can lead your firm into dangerous places. Blind spots commonly come in the form of unchallenged assumptions, firm myths and firm taboos, and no one in a law firm is more predisposed to blind spots than its leaders. (See Benjamin Gilad’s Business Blindspots: Replacing Myths, Beliefs, and Assumptions with Market Realities, Infonortics, 1996.)

When market conditions are changing quickly, all the strengths that powered your firm’s past successes have the potential to keep you from seeing and taking advantage of new opportunities and threats. It’s even possible that what helped your firm succeed before may drag it down in the future. Plus, your own psychological makeup, habits and styles can also present blind spots. When times are good, some (perhaps even most) law firm leaders feel compelled to do only what they see others doing. And in times of stress, doing something differently than other firms can feel especially risky. Other leaders feel psychologically driven to take immediate action, any action, to reduce the stress they feel in the face of uncertainty and to demonstrate their decisiveness.

To help avert the pitfalls, make a list of your own and your firm’s core values, best practices, cultural sacred cows, founders’ maxims, ways your firm is “special,” hard-to-discuss topics and secrets. By keeping front and center this list of “things I hold most dear,” you may keep them from blinkering your ability to see all available options and evaluate them accurately.

Is Someone Else Having Your Bright New Idea?

If you’re not the kind of person to play follow the leader, then bully for you. However, when planning where to make your investments for future success, it’s best not to fall in love with the first bright idea that occurs to you. It may also be occurring to your arch competitor. Likewise, your first bright idea probably won’t be as good as one that occurs to you later.

Another mistake some leaders make is assuming their shiny new plans will be pitted against their competitors’ old strategies, models and tactics. But why would your competitors continue to practice law as they did two or three years ago? If you’re savvy enough to respond to today’s changing market conditions, surely many of those who would like to eat your lunch are just as savvy.

Once you’ve settled on a strategy, invite those who think it’s brilliant and, more importantly, those who don’t to red-team it in a war-gaming session to learn these things: What could go wrong? How will your clients respond? What unintended consequences could ensue? How will your competitors likely respond? How will your suppliers likely respond? Who else might have had the same bright idea, and what might that mean for the success of your own strategy?

If you can think your way through questions like these, you might ultimately land your firm at the safe end of the revolution.

About the Author

Ann Lee Gibson, PhD , is principal of Ann Lee Gibson Consulting. She consults with law firms on competitive intelligence and business development initiatives. She is a Legal Marketing Association Hall of Famer and a Fellow of the College of Law Practice Management.

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