Avoid Bad Decisions – Strategic Red Flags

Good leaders make bad decisions. Good firms make wrong turns. When things change, it often seems to be the most successful businesses which are the slowest to adapt. I’ve just finished the Strategy module on my MBA and this is a topic which seems particularly timely and one that we debated at length.

There is no doubt that things are changing for the legal profession: limits on publicly funded work; ABSs; tighter court controls on costs; new entrants to the market; outsourced support services; in-sourced legal work to cheaper localities; new technologies and new ways of working.

As part of my MBA module, we looked at “Why good companies go bad” by Donald N Sull (details below), who points out that the majority of businesses in this situation do not fail because of paralysis, as previously thought, but due to active inertia. The challenges are often recognised, analysed and a flurry of activity results, and yet businesses still fail to respond adequately.

Strategic decision-making may be too large a topic for a blog post here, but I thought it would be valuable to share some of the red flags, types of agency relationships relevant to law firms and KM, that Prof Sull highlights, so that you can recognise them and challenge them in your businesses.

This may mean recognising them within your own internal dialogue and challenging yourself to think anew or recognising the thinking in others and challenging them.

Prof Sull highlights four modes of thinking that bring failure:

blinders – strategic frames/mind-sets shape how a business sees the world and concentrates managers’ minds on items that matter (who are we, who are our customers, what business are we in, who are our competitors), which are valuable until they start to restrict peripheral vision so that no one spots new options and opportunities, and most importantly, disruptive technologies and competitors

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routines – efficient processes can strip out waste and improve productivity, but where those processes become routines and employees stop exploring new ways of doing their jobs, adaptations and more appropriate processes are not explored

shackles – strong relationships with employees, customers and suppliers can be very valuable, but when conditions shift, a business needs to be free to consider whether or not it would be better off with different customers, suppliers or employees

dogmas – a business’s values often unify and inspire its people, however, if they begin to harden into restrictive rules and regulations, they can prevent innovation as people “circle their wagons” in the face of perceived threats

What is interesting about all these modes of thinking, is that they will have brought a business its first successes, but it is the business’s inability to adapt and change, which makes them insidious.

So, how do you know where you are on the scale of good – bad with these modes of thinking? Prof Sull lists a few suggestions of mind-sets which may suggest a problem, or at least need further investigation. I’ve adapted his list below, concentrating on those which most (to my eyes) affect law firms and their Knowledge professionals.

We know our market/clients/competition inside out

We can’t allow ourselves to get distracted by all the new fads in the marketplace

If it ain’t broke, we don’t fix it

We have carved out an enduring leadership position within our industry

We view our suppliers/clients as key strategic partners and don’t want to alienate them by rushing into new markets/new channels/doing X

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Our top priority is keeping our existing clients happy

Our processes/systems are world class government law cle and we follow them religiously

Our processes/systems are so well tuned, the firm practically runs itself

Our corporate values are sacred; we’ll never change them

We have a well-entrenched firm culture

We have high levels of employee loyalty, but new talent seems to leave

What do you think? Have you witnessed active inertia in the past? Have you seen it overcome? If so, how?

Read more”Why good companies go bad” by Donald N Sull, Harvard Business Review July-August 1999, pages 42-52″Why good companies go bad and how great managers can remake them” Donald N Sull, Harvard Business Review Press, June 9, 2005