Innovation in the Modern Age: Strategies for the New Reality

We’re halfway through 2014. How’s your practice strategy coming along?

If you’re feeling stuck, you might find inspiration in “The End of Competitive Advantage” by Columbia Business School’s Rita Gunther McGrath. McGrath’s framework makes a lot of sense for firms dealing with rapidly changing environments.

The new “playbook for strategy” outlined in McGrath’s research is premised on the creation of transient advantages instead of exploiting business-as-usual to sustain historical performance. Her logic will resonate with anyone preparing firms for new realities:

“The presumption of stability creates all the wrong reflexes. It allows for inertia and power to build up along the lines of an existing business model. It allows people to fall into routines and habits of mind. It creates the conditions for turf wars and organizational rigidity. It inhibits innovation. It tends to foster the denial reaction rather than proactive design of a strategic next step.…

…A preference for equilibrium and stability means that many shifts in the marketplace are met by business leaders denying that these shifts mean anything negative for them [until they’re forced to deal with a full blown crisis].”

McGrath thoughtfully illustrates how organizations such as Infosys and Wolters Kluwer have reconfigured to identify opportunities earlier, qualify risks better and respond faster and more appropriately, based on a new mind-set.

Granted, these examples are public companies, not partnerships, but some of the principles are transferable. It isn’t impossible for law firms to do this. But it isn’t for the faint of heart, either.

Some of my favourite ideas come from the chapter on building proficiencies for innovation. We often discuss the need for innovative legal services, but how can they actually be created? McGrath advises us to “start with what clients want to accomplish, but can’t get done” rather than generate ideas from within the firm. It saves time and it’s grounded in external market realities. She then suggests practical steps to get started, along with a case study.

You might think this sounds obvious, but if your firm isn’t in the habit of asking clients about their problems beyond your immediate mandate or conducting rigorous market research, how many opportunities to do something unique, lucrative and/or relevant are you missing? How many of your assumptions about future growth might be wrong?

I’ve written before about the need to build trustworthy relationships within law firms; it creates an atmosphere of collaboration and creativity, enabling firms to leverage the intellectual capital housed in their office(s). At the same time, firms will need to be much more disciplined about training lawyers to identify and qualify opportunities…which will require different approaches to governance, budgeting and the concept of ownership, not to mention our individual careers.

A framework based on transient advantages would represent a sea change for the way strategic planning processes unfold in most law firms. It’s worth considering, though, if only to start conversations with clients about what the future could look like, and your place in it.

I originally published a version of this post in the Canadian legal blog, on July 9, 2014.