Strategy

Leaders must balance purpose and direction with agility and resilience

Nearly forty years ago, the U.S. Army War College coined the acronym “VUCA” to describe a world they saw as volatile, uncertain, complex, and ambiguous. The acronym was born during a time of global transitions: the Cold War waning; the Soviet-Afghan conflict; globalisation gaining momentum; the world getting to grips with the World Wide Web – websites, e-commerce and emails. Scenario planner Clem Sunter summed things up beautifully when he wrote: “The future is not what it used to be.”

Specific drivers of change might have evolved, but the future continues to be unpredictable and ever-changing.

Against this backdrop, leaders must plan their firms’ futures and prioritise investments. They must balance the decisive, action-orientated strategies needed to grow with the foresight and agility needed to change direction those when the need arises. We help them do that.

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Views on what drives high performance in professional service firms are being constantly challenged. We identify five forces, complexly interlinked, that are disrupting law firm strategies and the confidence firms have in their futures:

Emergent technologies: Technologies like generative AI are reshaping markets and client needs, blisteringly quickly. Firms exploring these and other new technologies soon realize, though, that exploiting their potential requires significant changes to business models and behaviours. Law firms also have a major role to play in ensuring these emergent technologies remain safe.

Geo-economic trends: Shifting trade alliances, new regional economic blocs, and evolving geopolitical risks (including major wars) create novel legal challenges. Law firms must respond by building new capabilities and adopting more globally integrated approaches to service delivery, melding diverse legal systems and managing cultural nuances.

Environmental crises: Existential environmental and social impacts such as those triggered by climate change and biodiversity loss are escalating legal risks for investors and businesses. This offers opportunity for new services to clients but also for firms to enhance their reputations by managing their own environmental, social and governance (ESG) risks.

Cyber threats: Sophisticated cyber threats, exacerbated by trends like remote working, necessitate investments in cybersecurity and changes in behaviour. With several major law firms having fallen prey to cyber criminals in recent times, firms recognize the need for robust systems, processes and in-house expertise to safeguard against this.

Hyper-competition: Driven by a trio of regulatory, economic and technological disruption, inter-firm competitiveness has never been greater. Law firms must contend not only just traditional rivals but also with alternative service providers, technology platform companies and in-house legal teams. Mergers are becoming more common and increasing in scale and complexity. Business models that worked well in previous years are sometimes poorly suited to this new environment.

In this ever-shifting VUCA environment, law firms must make far-reaching decisions about market focus, service offerings, and client targeting. Strategic investments need careful prioritization. Objectives must be clearly set, and pursuit of their achievement relentless.

We have a rich history of advising global and other law firms on solving complex strategic challenges. Our experience ranges from conducting strategic assessments for some of the world’s largest law firms to aiding smaller firms in redefining their international strategies. We’ve collaborated with bar associations in emerging nations to influence policies around the rule of law and legal profession independence. We’ve advised leading law firms in a range of global and regional business centres.

As the strategic landscape continues to evolve, we stand ready to guide and support law firms in navigating these complex challenges and seizing the opportunities that they present.

Our strategy services

Reviewing and revising your current strategy

In military strategy, it is said that no plan survives first contact with the enemy. Just as military commanders must adapt to changing battlefield conditions, so law firm leaders must constantly recalibrate their strategies to align with changes in client needs, markets, actions of rival firms and expectations of partners and employees. Leaders must know what parts of their strategy needs to change but also what must remain constant, and how to manage tensions that arise between those.

We can help you:

  • assess how the assumptions upon which you based your strategy have shifted, and what that implies for your firm’s resources.
  • undertake formal scenario planning to develop a more objective, nuanced view of how your firm’s future might unfold.
  • assess performance across different components of your firm – for instance offices, service lines, and practice, client or industry sector groups – to determine which are enhancing and which are diluting profitability, and why.
  • align resource allocation with the newly defined strategic objectives, ensuring that resources are allocated to areas that contribute to sustainable competitive advantage.
  • identify gaps in your firm’s resource base and how to bridge these in order to be able to deliver client value propositions compelling enough to deliver the results you want.
  • reduce this analysis to a set of strategic objectives and an updated plan to achieve them.

 

Developing a new strategy

Business strategy has come a long way since the concept was first invented in the 1960s. At that time, it was largely an adaptation of military strategy, characterised by “command and control” and deep secrecy. Today, best practice in strategy setting is a far more open process. It leverages the collective mind-trust of the firm for ideas, ensuring that decisions are based upon the best possible information and that people are highly engaged with achieving the objectives set.

We can help you:

  • conduct an arms-length assessment of your levels and sources of sustainable competitive advantage relative to your most important rivals, including how this translates into relative market positioning
  • undertake a SWOT analysis, switching the sequence to start with threats and opportunities and end with strengths – so a TOWS analysis.
  • undertake formal scenario planning to develop a more objective, nuanced view of how your firm’s future might unfold.
  • work with your partners and selected other stakeholders to envision a desired future for your firm, informed by properly grounded strategic intelligence
  • Prioritise options available and reduce those to strategic objectives
  • determine the resources and actions required to achieve those objectives, and plan accordingly.

Assessing your market position

A firm’s market positioning remains an important outcome of its strategy, and a measure of its success. We can help you compare your firm’s resources and capabilities with those of your key rivals, using metrics related to value proposition, client perceptions, cost structure, differentiation, and market share. Whether reviewing your current strategy or assessing your options from scratch, a clear view of where you stand in your market, relative to your closest rivals, is the starting point for most strategy work.

We can help you:

  • conduct an arms-length assessment of your levels and sources of sustainable competitive advantage relative to your most important rivals, including how this translates into relative market positioning
  • undertake a SWOT analysis, switching the sequence to start with threats and opportunities and end with strengths – so a TOWS analysis.

Assessing new markets

Penetrating new markets is the most common reason reported for why law firms merge. Selecting the right market and entry mode and, if a physical presence is required, designing the right “size and shape” of the office, are key decisions that represent significant investments. Entering new markets can also present risks that require careful assessment. In particular, the firm might need to operate differently in the new market, in ways that impact the overall business model.

We can help you assess:

  • the “size and shape” of the new market, particularly demand for your firm’s services, opportunities for new services, key client activities in that market, growth trends, and perceptions about your firm.
  • the competitive landscape, especially where your firm would likely fit, who your key rivals would be and their relative strengths and weaknesses compared to yours, and what it would take to achieve and sustain competitive advantage in that market
  • regulatory, geo-economic, socio-political and cultural risks associated with the new market
  • the best market entry strategy for your particular needs.

Merger and acquisitions

Mergers are not in themselves a strategy, but they are a powerful means of rapidly acquiring new resources in order to execute more ambitious strategy.

For more information on our merger advisory work specifically, please visit the section of our website devoted to mergers.

Newly merged firms sometimes battle to properly calibrate their strategies to their new situation. In major mergers, the combined firm usually occupies a very different market position, compared to the legacy firms. Its scale is far larger. The set of peer rivals against which clients assess its value propositions is different. Greater complexity frequently brings with it changes in the firm’s approach to governance, the role of partners and hoe business services needs to be configured and resourced. We can help you work through these issues.

Cultural alignment

The famed management guru Peter Drucker never did say “culture eats strategy for breakfast” but culture certainly does influence strategy – very heavily. It drives behaviour and norms in organisations. When a firm’s culture and its strategy are well aligned, the results can be stellar. When they are opposed, the opposite is usually the case.

We have particular expertise in assessing a law firm’s culture from a strategic perspective. Our proprietary culture diagnostic tool, CultureFusionTM,  is the only culture diagnostic tool of which we know that is specifically designed to measure and describe a professional services firm’s culture – especially but not only in contexts where two cultures need to be “fused” into one, such as in a merger of two or more firms.

We can help you:

  • Measure and articulate the culture of your firm, or a firm with which you are considering a merger
  • Assess synergies and conflicts between a firm’s strategy and its culture
  • Develop a roadmap for aligning strategy and culture or, following a merger, for “fusing” multiple cultures into a single, coherent culture that aligns with the intended strategy of the combined firm and drives high performance.

Business model transformation

In times of radical business transformation, strategy and business model overlap a great deal. Integrating new technologies into the firm’s operations can have great impact on how the firm optimises its core sources of sustainable competitive advantage, and profitability. This is especially true of integrating new technologies into its service delivery channels and other client-facing aspects of the firm.

Our digitalisation advisory services are focused on the strategic aspects of so-called digital transformation. We focus particularly on how it impacts the firm’s core client value propositions, new resources required to deliver those value propositions, and how the firm needs to organise itself to derive the most benefit from the changes.

We always decline invitations from software vendors to represent them and earn commissions on sales of their products, so are entirely technology-agnostic.

To learn more, please visit the section of our website devoted to digitalisation.

    Remuneration

    At the heart of how professional services firms operate is the issue of how much and how individuals are paid. These invariably have a fundamental impact on behaviour and, to a large extent, determine performance and strategic outcomes. The principle underpinning any effective remuneration system should be that it rewards individuals for doing what the firm’s strategy requires rather than incentivising them to do so.

    Reviewing the firm’s remuneration arrangements is an option that is frequently considered when a firm feels that it is under pressure. This is sometimes akin to treating symptoms rather than causes and we can help you determine the root cause of the pressure. This might the, or might not, reinforce the need for a remuneration review.

    In mergers where the businesses are being integrated, a negotiation is almost inevitable between the merging firms, concerning the arrangements to apply in the combined firm. We can help keep the framework for such negotiations objective and aligned with the intended strategy of the combined firm. The challenge is to calibrate each of the contributions a partner makes to the firm’s success and to measure performance accordingly.  Any performance management system will only work if it is systematically designed with and agreed by partners and is clearly aligned with a firm’s strategy.

    We design and develop performance management programs linked to remunerations systems whilst balancing various contributions which might include:

        • lawyer development and delegation of work
        • client origination
        • client retention
        • quality and timeliness of work
        • partner productivity
        • seniority in the partnership
        • firm management roles
        • teamwork and collaboration
        • mentoring of juniors
        • partner input in non-billable firm building activities
        • professional and community activities.

    This is key in any broader review of a firm’s business model.

    Resolving specific strategic challenges

    Strategic instructions that we receive from clients are frequently highly focused on specific challenges. Some of the questions that we have been called upon to help firms answer include the following:

    • How do we align priorities and measure performance across the multiple dimensions of geography, practice area and industry sector?
    • How does our client value proposition compare to those of our rivals?
    • Does our partner compensation system support achieving our strategic objectives?
    • How do we extract ourselves from a long-standing international alliance that no longer works for us, without harming relationships that are important to us?
    • How does our “size and shape” in different parts of the world compare to what the objective ideal would be, given demand for legal services in various regions?
    • How do we approach both opportunities and challenges presented by ESG?
    • What opportunities are we missing, that could enhance our performance?
    • How can we best transition our governance to the next generation of leaders?
    • What do our clients want us to be doing about new technologies like generative AI?

    If you have such specific questions, please contact us. If we cannot help you answer them ourselves, the chances are we will know somebody who can, and refer to them.

    Examples of our strategy advisory work

    Advising a large US law firm on penetration and growth in key European markets

    A prominent U.S. law firm wished to explore its options for bulking up its operations in Europe, especially the Benelux region. We helped them articulate the strategic objectives that they wished to achieve in those markets. With our help, they identified the capabilities and other resources that they would require in order to pursue each of a range of options. We assessed the opportunities and challenges involved with each, which led to them selecting one of the options.

    The engagement emphasised developments in intellectual property in Europe and the opportunities and challenges that these presented for our client. Also, opportunities presented by a joint venture the firm had with a professional service firm, not in legal services.

    We conducted thorough desktop market research and analysis and discussed the outcome of that with a wide range of partners and other stakeholders across the firm.

    We have advised clients similarly on market entry and growth strategies in a range of markets in mainland Europe, the United Kingdom, Asia, Middle East, Latin America and Africa.

    Assessment of strategic options for an office following partner departures

    Several key partners in a strategically important office of a large global law firm announced that they were leaving to join a rival law firm, leaving the remaining partners in that office concerned about the future viability of their business.

    We conducted a strategic review of their options, including an assessment of inbound and outbound referrals and opportunities for deeper collaboration with other offices. This included identifying key international clients of the firm that were located in the jurisdiction in question and who were serviced by offices elsewhere in the world. Also, finding new areas in which the partners could create distinctive value propositions in their hypercompetitive market.

    The process of deeply consulting with affected partners (we conducted many more partner interviews than was originally anticipated) defused concerns and created a constructive sense of optimism about new directions the office might (and subsequently did) take.

    Arms-length worldwide market assessment for a global law firm

    The incoming chair of a leading global law firm wanted to take an ‘arms-length’ view of their global strategy. Our brief was to assess, objectively and without reference to their distribution of offices or mix of practices across markets, where a firm ‘like them’ should choose to invest. We designed a set of geo-economic and socio-political metrics to assess future demand for legal services of a kind that a global law firm would typically provide and applied those to all global markets.

    On that basis, we prioritized the markets and then assessed the key characteristics of those with highest priority. The model so created was then matched against where the firm was focused and where its key clients were concentrated. We also benchmarked the firm’s key competitors.

    The result of the analysis was a rich template against which the firm could assess its strategic growth priorities.

    Performance enhancement in a European office of a leading US law firm

    A leading global law firm engaged us to explore opportunities to enhance the corporate practice in one of its offices in a mainland European jurisdiction. We conducted a thorough analysis of the deal flow into and out of that jurisdiction, including which law firms were doing the legal advisory work, and where. We conducted extensive interviews with partners in that office, as well as in other offices with whom they had referral relationships.

    Melding the objective analysis and internal perspectives created new insights into where business development initiatives should be focused and how the firm should pitch its value proposition to clients, emphasizing connectivity across multiple offices.

    Growth strategy for a mid-tier African law firm

    Our client was a comparatively recent entrant to its market, with a relatively young partner group. Our brief was to walk them through their options for growth, ultimately to become one of the preeminent law firms in their market. We provided quantitative and qualitative analysis of their market positioning, practice by practice, relative to their rivals in the market, and also on geo-economic and other macro trends in their region that impact demand for the legal services that they provided. This data was used to inform a rich debate over two days about where the firm should focus its development investment to raise both the scale and the quality of its offering to clients. The options were then prioritised and reduced to an action plan.

    International strategy for a leading Asian law firm

    Our client had a sophisticated practice portfolio, well regarded in league tables. It was (and remains) arguably the leading law firm in its jurisdictions. The firm had operated as a subsidiary of an international firm for some years but the partners wished to move forward independently. We were recommended to the firm’s managing partner by a client that we had previously advised.

    We worked with the firm’s partners to assess the options available, including remaining with their parent firm, striking out as an independent firm and linking up with another international firm. They selected the second option. We then worked with them to develop the negotiating parameters for their exit from their parent firm, the governance arrangements including partner compensation for their new firm, and a strategy for growth in adjacent markets, which included China. As an independent firm, our client has since established offices in two other markets, grown significantly in scale, and considerably enhanced its reputation in the markets (as reflected in league table rankings.)

    We similarly advised a leading law firm in Latin America that had recently severed its formal alliance with a European firm on the best strategy for it to follow independently.

    Strategy advisory work for a quasi-governmental regulator

    For more than a decade, we have advised a quasi-Governmental regulator in the Caribbean region from time to time, on its strategy. This has included negotiations with Government, establishment of Special Economic Zones, facilitation of discussions with key business leaders, economic development planning and grassroots perception testing of such plans amongst local communities.