Avoiding 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 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, 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:

  1. 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
  2. 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
  3. 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
  4. 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 futher 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
  • Our top priority is keeping our existing clients happy
  • Our processes/systems are world class 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

“Knowledge Management Handbook” Law Society Publishing

And for personal Knowledge and process help and advice for your organisation, visit TheKnowledgeBusiness.

I teach in London on various KM-related topics, including KM Strategies. Find out what is on here.

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About knowledge4lawyers

I am a lawyer and a Knowledge Management expert. Through The Knowledge Business I help law firms improve their efficiency and profitability through knowledge services - consultancy, training and implementation help.
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4 Responses to Avoiding bad decisions – strategic red flags

  1. David Edwards says:

    There are so many things I’d like to say in response to this really interesting and thought-provoking piece.

    I see active inertia all around me right now; all four of the modes of thinking, and a lot of the bullet-points are very accurate, in my experience. How to overcome it? I have no solutions, regretably, but two things came to mind:

    “The reasonable man adapts himself to the world – the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man” (George Bernard Shaw). To overcome inertia, I think you need a leadership which is prepared to take risks, adopt disruptive ideas or technologies, put noses out of joint. But how many leaders really want to have to take that position?

    A long time ago I read Andy McNab’s Bravo Two Zero, from which I recall his advice about what to do if you find yourself exposed and under attack. Essentially, your options are to stay where you are and certainly be killed/injured/captured, or take the counter-intuitive, terrifying option of all-out, aggressive counter-attack. Again, I think this is a useful analogy implying that overcoming active inertia requires risk-taking.

    Basically: inertia is resistance to change so overcoming inertia ultimately requires the application of a force.

    I’ll not go on and on, but I have also noted some thoughts on your bullet-points which will give you an idea of where I think “we” are on the good-bad scale. This reflects not just on my current employer, but on most of the fourt firms at which I have worked.

    ■We know our market/clients/competition inside out – do we really, or are we just kidding ourselves that we do? Even if we do, are we using that knowledge effectively?
    ■We can’t allow ourselves to get distracted by all the new fads in the marketplace – email used to be a “fad”. If you wait to act or don’t assess the options, you will often be too late to take best advantage. Looking at ways to improve is not a distraction; it is of the essence of strategy implementation. Don’t get trapped by the argument from personal incredulity into thinking that something you don’t understand can’t be a good thing to have or do.
    ■If it ain’t broke, we don’t fix it – have fun using your unbroken but out of date technology/systems/processes as your competitors run off into the distance.
    ■We have carved out an enduring leadership position within our industry – carvings get eroded over time, as will any enduring leadership position if we don’t work to maintain it, e.g. by innovation.
    ■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 – there is plenty of evidence that clients want us to innovate and will want to know why if we are not doing so. How do our clients view us? Especially when our competitors are almost certainly courting them.
    ■Our top priority is keeping our existing clients happy – good idea, but what makes them happy this year probably will be different from what made them happy last year.
    ■Our processes/systems are world class and we follow them religiously – they will not be world class when your competitors find a better way while you rely on faith.
    ■Our processes/systems are so well tuned, the firm practically runs itself – in other words: we are complacent. Be careful that it does not run itself into the ground.
    ■Our corporate values are sacred; we’ll never change them – good idea. Provided they are good corporate values that can stand the test of time and continue to align with the values of your clients and those you would like to be your clients.
    ■We have a well-entrenched firm culture – if we are using the “entrenched” anywhere in our strategic thinking we are in trouble. All cultures must evolve.
    ■We have high levels of employee loyalty, but new talent seems to leave – If you are in jail for 10 years you are institutionalised; if you are in the same job for 10 years you are loyal. New talent is likely to want things to change, and can see where loyalty-based complacency and entrenched thinking/behaviour are doing more harm than good. Maybe we should ask our “talent” what they think we should be doing. After all, strategy is for the future, not the present, and new talent is the future.

  2. David, thanks for your interesting insights. You are right there are no magic answers.

    These issues are particularly pesky because at one level they support business growth/excellence (any marketeer will tell you that it is far easier and more efficient to sell more to existing clients than hunt/gather new ones) but if followed with blinders on, become a negative (all those camera companies which failed to spot the rise of the digital camera because their best existing clients were saying “the quality is too poor & we want more features”, failing to spot the massive potential market of casual users with a different social media agenda).

    I guess the important thing is to remain aware & keep exposing yourself to people from different firms, different industries etc, so you are exposed to new ideas.

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