Where Will Your Firm Be in 2015?

Do I have your attention?

My point is a simple, if oft-neglected, one:  "No firm is an island," and enormous macroeconomic, social, and business trends will affect how you do business, and what business you do.  Warren Buffett is fond of saying that "bad industries trump good management:"  If so, how do you know you will still be in a "good industry" 10 or 15 years hence?

This is where global strategic scenario planning comes in.

As previously noted, Clifford Chance engaged in just such an exercise late last year.  With the help of Oxford Analytica, CC's worldwide managing partner Peter Cornell and his management team were able to re-conceive the firm's strategic direction by focusing on the three scenarios Oxford Analytica built:

• China being removed as an economic opportunity thanks to their invasion of Taiwan, prompting economic isolation;
• The US becoming fed up with its foreign adventures and withdrawing into isolationism; and
• Instead of globalisation, the world regresses “back to the future” — countries and continents become separate and protectionist. For instance, America and Europe construct trade barriers to block cheap imports from China and India.

As both The Lawyer and the Sunday Times noted, none of these scenarios is supposed to be "right," in the sense of being an accurate prediction of what will actually come true.  What, then, is the point?  The point, which could scarcely be larger, is to have the firm's leaders think deeply about whether its strategy is aligned with where the world might be going.  If "change is the only constant," you cannot foretell the future by linearly extrapolating 3—7% compound annual growth (let's say) in revenue, headcount, and profits:  More fundamental shifts are surely in store.  

Or, as Cornell put it, the world is dynamic:

"Cornell told The Lawyer: "So many strategic reviews are done in a static environment, but we have to get used to doing them in a dynamic environment."

"The review also underlines Clifford Chance's shift away from practice area groups to a more geographical focus."

"Already the law firm plans to implement a change in its corporate strategy. From now on, strategy will be be less practice-based and more geographically focused. In other words, instead of seeing its divisions as, say, banking, energy or commodity practices, it will think in terms of China, North America or Latin America in future."

But wait a minute, whence this focus on geography? Aren't we supposed to be focused on clients, which means industries, which means practice specialties?

Clifford Chance may be right after all, at least if you believe McKinsey's "Ten Trends to Watch."  Trend #1, extrapolating ten years hence, is:

"Centers of economic activity will shift profoundly, not just globally, but also regionally. As a consequence of economic liberalization, technological advances, capital market developments, and demographic shifts, the world has embarked on a massive realignment of economic activity."

Sounds like geography matters.

What else does McKinsey think we need to factor into our strategic planning?   Most germane to law firms:

• "In many industries, a barbell-like structure is appearing, with a few giants on top, a narrow middle, and then a flourish of smaller, fast-moving players on the bottom."   Hmmm, sound like any industry we're familiar with?
  
• As firms become bigger and more far-flung, "Long gone is the day of the "gut instinct" management style. Today's business leaders are adopting algorithmic decision-making techniques and using highly sophisticated software to run their organizations. Scientific management is moving from a skill that creates competitive advantage to an ante that gives companies the right to play the game."  This means you need to pay serious attention to "business intelligence" software, for starters.  Its effective deployment across your firm will indeed become table stakes—I assume only that your partners care about profit levels.

Thinking long and hard about these potential (and, I would argue, highly likely) developments, as McKinsey puts it drily, "will be time well spent."  Clifford Chance is there:  When will your firm be?