Lawyers: It’s not all about relationships. Sometimes, it’s about strategy!
Lawyers: It’s not all about relationships. Sometimes, it’s about strategy!
I recently returned from running a series of mini-war games or strategy sessions inside the legal industry. Senior partners at large law firms are very smart, very quick-thinking individuals. Unfortunately, they are also used to a clubbier, almost cloistered competitive environment. But that’s all changing, very rapidly. Whereas ten years ago, there were a handful of mega one-thousand-plus lawyer firms, today there are dozens. The clubby atmosphere has all but evaporated; competition has filled the void.
Managing partners at these firms seem to know they have competitors, but continue to focus on clients almost exclusively, while ignoring other competitive forces, as well as the shaping of competitive strategy. Sure, you must tend to customer matters: Customer satisfaction, customer relationships, pricing, bids, and relationship management–all these are important.
What happens when a rival cuts prices off shore as part of a larger strategy? Does the rival have the fiscal and management capabilities? What other strategic moves might the competitor make in support of such a strategy? What are that firm’s drivers? What are its assumptions about the market, its own place, and the competition? These are questions about competitive threats and future plans, to supplement the focus on customer activity.
Wake up mega-firm partners. Move beyond giving lip service to strategy. You have lots of smart people with strategic foresight. You need to harness this talent and operate your firm with a more rigorous competitive strategic view (that includes rigorous intelligence-gathering – not just the passing along of rumors or hearsay).
Western firms, your future may lie with outsourced back offices in India, or in partnering with new entrants into your market. Some firms can amass capability quickly, while others are awkward in their mergers and may shoot out wonderful press releases but not realize their promises to the market.
Where’s the reality? Who knows? One thing is for sure: Reacting to events based on the past clubby procedures of yesteryear is a mistake. Law firms need strategy, strategic thinking and intelligence, not just relationships.
The Problem When Your Competitive Intelligence is an Authentic Imitation of an Imitation
The other day I received a holiday gift catalog in the mail. One ad caught my eye. It promoted an antique-looking desk lamp with a green hood and brass frame. On the base you could see the word, Lionel (as in the toy electric train many of us grew up with). The ad copy read something like this: “Press the button on the base and you will hear an authentic sound of a Lionel train.”
This phrase amused me. The product was an imitation antique lamp that produced an authentic sound of another imitation, a toy train. I chuckled, “An authentic imitation of an imitation.” What does all this have to do with competitive intelligence?
A few days later, I visited a company whose competitive intelligence capability we were helping to assess and build. The CEO told me he was frustrated. The only information his CI group brings him is rewritten data from the Internet or from various news sources. Nothing is original, he complained. At best, it is the same information everyone else, including his competition, is reading. It provides no competitive advantage. Just like the lamp, it is an authentic imitation of an imitation.
The solution, he knew, lay with pushing these competitive intelligence analysts into the outside world to trade shows, conferences, and meetings with government experts and industry veterans. While this CEO is very proactive and is burning up the shoe leather, talking to all sorts of people who influence or track his industry, he knows he is only one man.
Intelligence begins with the reality on the ground. In my latest book, The Secret Language of Competitive Intelligence, I chronicle some of the great CEOs who either demonstrate this on-the-ground intelligence necessity or encourage others to follow their lead. They include Daniel Vasella of Novartis; T. Boone Pickens, the oil and gas speculator; Warren Buffett, billionaire investor; Richard Branson, the in-your-face entrepreneur, along with many others.
Imitations are fine when they adorn your desk or fireplace but they are wholly unacceptable when it comes to competitive intelligence. Management wants to know what is happening on the ground, ahead of its competition. Anything else will not do.
Don’t Expect the “Wow!” on executive compensation revelations to last forever
One more thought from the Directorship conference: Board members in the room, who themselves are or were CEOs are sensitive when it comes to disclosing their pay. A number of compensation experts in the room commented that the SEC’s new Financial Disclosure rulings of the past two years force companies to pull all aspects of a CEO’s salary and bonus packages items in one place in an SEC filing.
“Wow!,” goes the press. Such disclosure, these compensation experts complained, sometimes muddles the argument. The notion of relative compensation (that is, one CEO’s package compared to another based on performance) seemingly disappears when a reporter sees the entire number. To many reporters, these experts claimed, the number is absolute (absolutely outrageous), and not relative to anything.
Sure some CEO’s have taken egregious advantage of the system and paid themselves far beyond what is rightfully theirs. Not in all cases, though.
More than likely, you will see many companies in the near future arguing cases before the SEC to once again hide a CEO’s package IF they can prove it will give a rival, reviewing its filing, a competitive advantage. More companies in recent months appear to be applying to the SEC expressly for this purpose.
So, enjoy the Wow! while you can. It won’t last forever.
Controlling the information outflow – A Different View of the HP Dilemma
What happens when a company is in crisis? Many companies, including HP, try to close ranks and assess. They try to shut down information flow to the media – at least at first.
That reflex action is often mistaken, in the view of several directors attending the Directorship meeting, and I found their insights refreshing.
Thomas Plaskett, Chairman of Novell, and a director of Radio Shack, a company that recently suffered some bad press when its CEO was found to have falsified his resume, said during a panel discussion that the board’s responsibility is to control the process. That the board, along with company executives, must know how they want to talk to the press, and when.
Tom Clarke, Chairman of TheStreet.com, added that if you deny information to the media, you allow the media to create the agenda. You “go black,” he stated, and you allow the media to just take over. That was HP’s mistake.
Bill Holstein, editor of Directorship and panel moderator, added with a smile that with regard to the media, companies had better “feed the sharks, or the sharks will eat you.”
In the competitive intelligence arena, we understand that it’s virtually impossible for large, publicly traded companies to lock up all their information. Quite the opposite: They must assume they live inside of buildings with transparent walls. Just as you need to act on intelligence expediently in order to gain competitive advantage, so, too, you need to act as quickly when events turn against you. Companies need to respect the information flow both ways – collecting AND dispensing the information critical to their businesses.
Back dating options a good thing? A refreshing example of unconventional thinking
Last week I attended Directorship’s Boardroom Forum in New York City. It was a meeting filled with a couple hundred outside directors of some of America’s largest corporations, a former SEC chairman, TV market commentators, and on and on the list went. I’m accustomed to being around senior managers and directors, but this mound of wisdom and experience was impressive.
Jim Cramer, co-founder of TheStreet.com and host of CNBC’s Mad Money, was commenting on various corporate scandals of late, including the back dating of options. Did he feel this is wrong? Of course, he said. That wasn’t profound. What was interesting was his investing take. Here is where his insight was refreshing.
A former hedge fund manager himself, Cramer ruthlessly looks for opportunities. Back dating of stock options, when revealed, becomes an intelligence ah-ha! It becomes an opportunity – and not for shorting the stock.
Why do companies choose to back date options for their senior execs (legally wrong though it may be), asks Cramer. Because the company and its execs see a rosy future for the firm.
In Cramer’s view of things, a back dating infraction is a signal to buy. Yes, the stock may dip on the announcement, but then the drop frequently reverses and the stock price rockets up.
Sometimes intelligence is simply looking at things differently from the crowd. Cramer’s comment on back dating is exactly that, a counter-intuitive intelligence moment.
