Thinking about the future

Blogging here has had to take a bit of a backseat while some other things take priority. Occasionally, I do manage to post some links to Twitter, or some longer quotes and notes to Posterous (and I am always adding interesting stuff to Delicious). Today, there was a bit of a theme in the things I saved to Delicious, which I wanted to capture here.

First, the always insightful Jordan Furlong, writing at Slaw:

For many … firms, though, the challenges are extremely serious. The prospect that emerges from all this is a legal services marketplace in which many law firms are simply irrelevant — they’re not structured in ways that deliver maximum value to clients and they can’t compete with rivals that are. There was a lot of talk at the Georgetown event about whether “BigLaw is dead,” and I have to agree with those managing partners who dismissed the notion: these firms are obviously up and about and making a great deal of money, and it’s absurd to pretend they’re dead men walking.

The worry, for me, is that many firms, of all sizes, aren’t ready for the radical ways in which the playing field is about to change. Their focus is either straight ahead, on their clients, or internal, on their own condition and competitiveness. They’re like a quarterback whose gaze is either locked downfield on his receivers or focused dead ahead on the defenders in his path. As a result, he never sees the hit coming, from his blind side, that flattens him and turns the ball over to the other team. It’s not just lawyers and clients who matter anymore. New players, with an unprecedented combination of size and speed, are charging onto the playing field like a storm and rewriting the rules of the game as they come.

This new post reminds me of another of Jordan’s that I have linked to previously: “The Market Doesn’t Care.” As the new post makes clear, the market for legal services in the UK (and elsewhere as well) has changed irrevocably. Even without the impact on ownership structures and legal practice brought by the Legal Services Act 2007, the legal profession has not been immune from the effects of the economic crisis. More importantly, clients have not been immune, and they have also had their eyes opened to new ways of delivering legal services (Richard Susskind lists 12 of these in The End of Lawyers, so don’t assume it is all about legal process outsourcing). Likewise both sides of the relationship need to be aware of the potential for disruptive legal technologies (again, Susskind identifies ten of these). In the face of these pressures, no individual firm and no business model can take the view that it has a market-defying right to continue unchanged.

Another quote, this time (via Jack Vinson) an encapsulation of a thought of Clay Shirky’s by Kevin Kelly:

“Institutions will try to preserve the problem to which they are the solution.” — Clay Shirky

I think this observation is brilliant. It reminds me of the clarity of the Peter Principle, which says that a person in an organization will be promoted to the level of their incompetence. At which point their past achievements will prevent them from being fired, but their incompetence at this new level will prevent them from being promoted again, so they stagnate in their incompetence.

The Shirky Principle declares that complex solutions (like a company, or an industry) can become so dedicated to the problem they are the solution to, that often they inadvertently perpetuate the problem.

The Shirky Principle offers one explanation as to why law firms have managed to get as far as they have without encountering serious disruption to their basic business models. Athough some practice areas have had to fight off competition from management and HR consultancies or tax accountants, the core business has been protected by an assumption of a symbiotic relationship by lawyers and their clients. As new entrants with challenging business models have set their sights on the legal market and as businesses look much more carefully at their legal costs, this assumption can no longer hold.

So where do law firms go from here? I offer no advice — the question needs an answer rooted in each firm’s culture, traditions, client needs and market. However, a summary of the Theory of Constraints to which Jack Vinson points is instructive:

Think of your system — your organization — in terms of a chain . . .

If you care about the capacity and capability of the chain, strengthening any link other than the weakest is a waste of time and effort. Identifying and strengthening the weakest link — the system’s constraint — is the only way to strengthen the chain itself.

In a similar vein, John Tropea alerted me to a series of guest posts by Boudewijn Bertsch on the Cognitive Edge site (published two years ago, but still insightful). One of those posts draws together a thought of Russell Ackoff’s (“Improvement must be focused on what you want, not on what you don’t want.”) and the Cynefin approach to complexity.

Another sin I often see in companies, is that executives focus improvements on what they don’t want, rather than what they do want. There are two reasons why this is wrong. First, if you eliminate what you don’t want, you don’t necessarily get what you do want. Second, by focusing on what you don’t want, your solution space is much smaller compared to when you focus on what you do want.

Many companies that are engaged in formal improvement initiatives like lean six sigma or operational excellence, are focused on elimination of defects and waste. Their executives mistakenly believe that if they remove defects and waste they improve the performance of their company. Not true. A case in point is Motorola who tried to apply six sigma to improving customer satisfaction by focusing on reducing defects in the late 1980s. While they succeeded in improving their manufacturing through six sigma, a much more ordered and stable environment than the market place for products – they failed when they tried to apply six sigma to improving customer satisfaction. Their assumption was that as long as you would reduce defects (“something we don’t want”) it would improve customer satisfaction. However, no matter how hard they tried, their own customer research proved them wrong. We can explain their failure using the Cynefin framework.

At some point I want to pick up the Cynefin point (especially as I became a Cognitive Edge practitioner in February), but for now the challenge for law firms is to work out where their weaknesses are, what kind of inertia prevents them from fixing those weaknesses, and what they want instead.

That thought process alone must take account of actors as varied as employees, partners, clients, other external agents, the regulatory environment, and so on. Even without considering the variations within those groupings (which may be immense) that feels like a complex system to me.