Archive for the 'Clients' Category

What do clients need? Relationships and story-listening

It is difficult to imagine that anyone in law firm management is not yet aware of Bruce MacEwen’s masterful review of the current state of the legal market, entitled “Growth is Dead.” The series is now up to its tenth instalment and the focus has turned to clients. Whilst the whole series is required reading, this part resonated particularly for me for a number of reasons. It contains some truths that KM folk should reflect on, and one of the comments raises a common issue where a traditional approach often fails.

As all good discussion of clients should, Bruce starts with Peter Drucker. Drucker’s observation that all firms must have clients leads to a brief analysis of the evolution of client service in the law. Bruce identifies three phases:

Phase I: Sell what you make

Firms in Phase I find a comfort zone of things they (as proud and unbending autonomous individuals) enjoy doing, and they assume without, I imagine, really giving it much conscious thought, that since they enjoy it clients will appreciate it, or because they find it interesting clients will too.

Phase II: Make what sells

Phase II is a bit more mature and purposeful. In this phase, lawyers and firms try to analyze what services clients are seeking and purchasing, and then attempt to mold their offerings to client demand.

Phase III: Solve the client’s problem

This phase has several characteristics to commend it:

  • It goes straight to the heart of what the client needs professional counsel for;
  • It’s agnostic as to exactly which practice area or practitioner, if any, is best suited to the matter at hand;
  • And most important by far, it postures the entire offering and engagement around what the client needs, not what you can do.

Bruce is not convinced that many firms have made it to Phase III. (Indeed, he goes as far as to say that he believes “very few firms indeed” understand it, or even the fundamental shift in the market.)

I think the same phases apply to KM (certainly in law firms, and probably elsewhere as well).

The equivalent to “sell what you make” in Phase I is the repository-building approach to knowledge. It depends on a conception of knowledge as stuff that can be gathered, traded and measured. The knowledge or information professional is a gatekeeper for material that is held “just in case” it might prove useful in future.

The usual counterpart to “just in case” is “just in time” — this is the KM equivalent of Bruce’s Phase II “make what sells:”

The distilled pitch is something like this:

“Just tell us what legal services you need, and we’ll get right on it.”

While this takes the lawyer out of the very center of the picture, and gives the client a bit of breathing room alongside, it’s still passive and reactive. To begin with, what if the client doesn’t know or can’t articulate what they need? Worse, what if your firm really isn’t ideal for what the client wants? In that case “making it” for them might not be doing them any favors.

Bruce is talking here about lawyers dealing with clients, but it applies just as well to knowledge professionals working within businesses. This passive, reactive, transactional approach to KM will get you a bit further than the repository-building approach, but there is still no guarantee that your work will really make a difference. And making a difference is essential, otherwise the business can do without it.

Phase III gets to the heart of things:

It’s not about what the lawyers prefer to do or are in the mood to work on; nor how brilliant, experienced, and highly credentialed they are (though I’m confident they are exceptionally so); nor about how much other clients adore them and sing their praises; nor, finally, is it about the law firm at all. It’s entirely about making the clients life easier, less worrisome, and letting them focus on their business and not this potential legal landmine.

A very wise managing partner, who had studied at the feet of one of the builders of a great New York law firm, once told me that his primary job was making the client look good: “The wins are theirs; the losses are mine.”

Good KMers should also focus on making people look good. What does the firm need? That is what should be done.

This is where we get to the question in the comments to Bruce’s post: Bob Jessup asks how to get meaningful feedback from clients. This is also a problem for knowledge professionals. Just as clients may ask for something when really they need a completely different approach, so our colleagues may have preconceived ideas about their knowledge needs (they might want a repository, but never use it when it is provided, for example). How to get round this problem.

I think there are two very different approaches available. The first is to emulate Apple or the early BBC — don’t ask people what they want, but just give them something that you know to be high quality in the knowledge that they will come to love it. That might work if (a) you are absolutely clear about your purpose and never divert from it (something that only people of Steve Jobs’s or Lord Reith’s calibre can guarantee), and (b) your market is still in its infancy.

The second approach is to concentrate on relationships and on natural, authentic communication. In his comment, Bob Jessup says:

Clients, like anyone, don’t like to give bad news, and often find it hard to “put their finger” on what might be wrong. Those in-house counsel giving C’s to the outsiders probably aren’t giving those C’s when presented with an inquiry or a written evaluation form.

That isn’t a surprise — anyone familiar with the work of Dan Ariely and other behavioural economists will know that people often say very different things from what they do. But how do we find out what clients really feel, or what they really need. There is a clue elsewhere in Bruce’s post.

After describing how law firms approach client service, Bruce turns to the client perspective. Drawing on an Inside Counsel survey, he lists the law firm offerings that clients like but law firms don’t deliver. Here are the top three:

  • Secondments
  • Seminars at the client’s office
  • Regular service review meetings

Coincidentally, these are all the best ways to build genuine relationships with clients and learn about their business needs. (As a slight diversion, it is essential to understand that the real needs are business needs, not legal ones: Tom Kilroy has recently provided some useful insight into what in-house legal should be thinking about in terms of their internal relationships.) Having a lawyer embedded in a client’s business or legal team will always ensure that they have a much better understanding of the issues the client faces — no amount of direct questioning (whether by a lawyer or a third-party) will generate that level of knowledge. (Of course, the same is also true for knowledge programmes — as Dave Snowden famously says, “We always know more than we can say, and we will always say more than we can write down.”)

Like secondments, holding seminars on the client’s premises will often uncover issues that might not come to light through a questionnaire. The comfort of being on home ground will encourage people to say things that they would not express in more public situations. This might also be an opportunity to involve people other than the direct in-house client: do you know what your client’s contract managers, procurement teams or sales staff think of the contracts you draft? Again, this has resonances for knowledge people. Whilst we might think we can identify what is needed by talking to our colleagues, and building relationships with them, it is also valuable to find out what clients think of the work that our colleagues do. Armed with that insight, we can ensure that they have what they need to look good in front of the client next time.

When we get to service review meetings, I think we are close to the heart of Bob Jessup’s question. If those meetings feel like mechanical exercises (maybe using a set script or a written evaluation form), then they won’t build relationships and clients will persist in hiding what they feel. What is needed is genuine conversation. The insight we need is tacit knowledge (for want of a better term), and “tacit knowledge needs to be shared through conversation.”

Conversations need time to develop, but they generate narrative — anecdotes or stories — that are essential to make sense of things. Another way of generative narrative, which might be useful when there is no single client view, might be to use anecdote circles. Shawn Callahan and his colleagues at Anecdote have created the “Ultimate Guide to Anecdote Circles” — an excellent introduction to and explanation of the method.

In the end, then, the challenge that law firms face in really getting to the heart of what clients need from them has an exact counterpart for knowledge professionals. More than that, the tools for achieving this insight are actually knowledge tools, but only if we situate ourselves squarely in the Phase III approach to understanding and helping people.

Snippets on the future for law firms

I am intrigued by what the future historian will make of the economic and commercial change we are currently experiencing. Will this be another ‘world turned upside down’ moment, or just a blip in the continuum? Over the past couple of days, I have read a few commentaries suggesting that law firms at least are facing real upheaval. They also start to indicate what the way out might look like.

First, a couple of last month’s posts from Bruce MacEwen. It is trite to point out that the supply side of law firm economics is notoriously fickle: Bruce links the problem to change on the demand side.

Imagine for a moment you are in charge of designing the balance sheet of one of these firms (or any sophisticated law firm regardless of location and absolute size).  As you examine what role debt should play, perhaps the first question that should come to mind is “what assets do we have on the other side of the ledger, against those hypothetical liabilities?”  And the answer is:  Elevator assets.  That’s it, folks.  Your firm’s primary and only meaningful asset is its talent:  Its human capital, a/k/a its people.

And on the other side of the ledger?

What about accounts receivable, a pledgeable asset since the Peruzzi and Medici families in medieval Tuscany, if not before?  Normally, a law firm’s accounts receivable are a highly reliable credit—one with something approaching the creditworthiness of the firm’s clients themselves.  But consider:

  • Discounts and writeoffs are more widespread than at any time since I entered the practice;
  • Realization is systemically lower than at any time in memory (by “systemically” I mean industry-wide, not firm-specific);
  • And, most importantly, if a firm’s partners and/or clients begin to lose confidence in the firm, receivables decline in value abruptly and often irretrievably.

In sum:

Fundamentally, building long-term debt on to the balance sheet of an enterprise whose only material assets are readily marketable and freely mobile human beings is to repeat the classic mistake of the institutions at the core of virtually every post-World War II financial crisis in the United States: It’s to create a timing mismatch.

That is to say, firms doing this are securing long duration liabilities with short duration assets. Should anything imperil the value of the short-term assets, the roof can cave in before you can evacuate the building.

How can law firms protect themselves against this problem? In a later post, Bruce hints at the traditional way they have done this — by trying not to scare the troops.

Imagine a firm that allocates its talent, investment, and management focus consistently every year, making incremental changes but following the same “steady as she goes” broad pattern year after year.  Imagine another firm that consistently evaluates the performance of practice areas and offices over time and adjusts the allocation of lawyers and other resources based on relative market opportunities (be they expanding or shrinking).

Which would you guess is going to perform better over some suitably extended timeframe?

And which model do you think most law firms actually resemble?

The answer is that most law firms favour the ‘steady as you go’ approach, which is also the one in which performance is more muted. This reflects research done by McKinsey into successful strategy in corporate America.

McKinsey sums up the results this way:

  • Companies that reallocated more resources—the top third of our sample, shifting an average of 56 percent of capital across business units over the entire 15-year period—earned, on average, 30 percent higher total returns to shareholders (TRS) annually than companies in the bottom third of the sample. This result was surprisingly consistent across all sectors of the economy. It seems that when companies disproportionately invest in value-creating businesses, they generate a mutually reinforcing cycle of growth and further investment options.
  • Consistent and incremental reallocation levels diminished the variance of returns over the long term.
  • A company in the top third of reallocators was, on average, 13 percent more likely to avoid acquisition or bankruptcy than low reallocators.
  • Over an average six-year tenure, chief executives who reallocated less than their peers did in the first three years on the job were significantly more likely than their more active peers to be removed in years four through six.

In other words, not only did “high capital reallocators” generate superior growth and returns, they did so (a) with lower volatility and risk, including lower risk of bankruptcy or acquisition; and (b) with less managerial turnover.

Bruce suggests that this process of constant review of profitable and unprofitable activities is something that law firms need to start to emulate. Unfortunately, that process will affect the firm’s position in the market for lawyers. It therefore needs to be matched with real attractiveness in the firm itself. Businesses like Google or Apple routinely drop products or service lines if they aren’t working out. Inevitably this will induce a sense of volatility (and nervousness) in their people: will I still have a job tomorrow? But Apple and Google are still places where people really want to work. The law firm that can create the same sense of positive nervous energy must surely have a winning ticket.

So what might that winning ticket look like? Two unrelated posts elsewhere provide some clues.

First, Robyn Bolton of Innosight, writing in an HBR blog post:

Here’s a quick quiz for you. Is it easier to get

A: 1% of a huge, established market?
or
B: 100% of a completely new one?

If you work for Apple, you might have picked B. But too often when companies embark on innovation projects, they pick A: that is, they start by believing that nothing could be easier than to capture a small chunk of a very big, existing market.

But to unleash the power of innovation to capture big markets, what matters is not how big any existing market is but how many people are wrestling with some problem that no current offering really solves, what we here at Innosight call the “important and unsatisfied jobs” of consumers — and non-consumers. When sizing an innovation opportunity, what you should be looking for are jobs what are widely held and currently poorly served, not lots of people who haven’t bought your own products yet.

I suspect that many firms concentrate too much on one or both of (a) their own internal issues or (b) resolving the problems that clients bring to them. Robyn shows how this can go wrong by examining what happened when Kellogg first tried to enter the Indian market.

Kellogg invested $65 million in establishing an operational and marketing presence to launch Corn Flakes, Wheat Flakes, and its “innovation” — Basmati Rice Flakes — throughout the country. “Our only rivals,” declared the managing director of Kellogg India, “are traditional Indian foods like idlis and vadas.”

Things didn’t turn out quite as planned.

How is it possible that Kellogg could envision building a $3 billion business in India, invest $65 million in the first year alone, and end up, 16 years later, with only $70 million in annual revenues? And how can other business leaders avoid making similar mistakes?

Kellogg’s mistake (admittedly easier to see in hindsight) was that it had taken a far too simplistic approach to identifying its “huge” market, merely looking for people who might want its products.

Essentially, the cereal company failed to understand that Indians culture favoured warm breakfasts, so a cereal served with cold milk was unlikely to be more than a niche product. They also struggled with pricing: starting from a base that was 33% higher than the domestic competitors. Better insight into the needs of Indian consumers might have led Kellogg to create versions of traditional foods that could be stored and prepared more easily.

Law firms could therefore improve their product by really getting to the heart of what their clients need to achieve — not the explicit needs, such as getting this deal done or settling this litigation, but the more important unspoken ones. What is the client’s market like? What pressures are there on profitability, costs, income, competition, regulation? What would help the business to meet those pressures?

Alongside this focus on the product (what the firm does), there is also a need to look at delivery (how it does what it does). This is something that Ron Friedmann examines in his most recent post.

Only a few firms will continue to win business on the strength of their name. The rest must provide clients with better service delivery to keep and win business. That means understanding client expectations and changing how how lawyers practice and the firm operates, for example, with alternative fee arrangements, process improvement, project management, KM, technology, new approaches to resource allocation, a better approach to staff support, value-add services (e.g., private content), and tailored business intelligence.

Ron’s post summarises three items from elsewhere, all of which point in the same direction: “firms must change how they deliver services.”

Let’s go back to where we started: the problem of elevator assets. Bruce MacEwen lists 26 law firms that are located within a 7 minutes walk of each other in New York. The point he makes is that this proximity could make movement between the firms a trivial matter. But that is only true (putting aside constants like the hiring process) if each of those 26 firms is practically indistinguishable — whether to its lawyers or to its clients. As soon as one firm stands out (as Google or Apple do in their markets), joining or leaving that firm is a much more significant step. The fear that constant change and improvement may bring could actually make the firm more attractive to join and more difficult to leave voluntarily.

Valuing KM: some hard figures

In general, I am not keen to get bogged down in debates about the financial value of knowledge management, or the RoI of particular activities. To an extent this is because I am not well-versed in financial management, and I suspect that those who are sometimes use their expertise as a black art in a way that constrains experimentation and innovation. Also, for knowledge-intensive businesses (like law firms) it should actually be difficult to argue against effective management of knowledge activities — they are a basic health requirement, not a luxury. However, a couple of recent blog posts (together with an old memory and a conference presentation) have brought the value question to the fore for me.

Some time ago, I attended a two-day workshop on knowledge management in law firms (probably the only formal KM training I have had). One of the principles that stuck with me was that KM value can be judged by how well it supports the core elements of law firm profitability. Memorably, this comes with an acronym: RULES.

  • Realization of billing rates;
  • Utilization of attorneys;
  • Leverage of lawyers;
  • Expense control; and
  • Speed of billings and collections.

KM can help improve all of these in one way or another, and it is always useful to take time to contemplate whether we are doing our best in each of these areas. As usual, it is also important to distinguish the knowledge component from other areas of management. KM is not about improvements in time recording, for example — that may be a joint effort between IT (building a system to automate timesheets), HR (designing processes to help partners recognise good practice and manage poor time-keepers), Finance (communicating the impact of good time-keeping, billing, etc), and BD (collating feedback from clients on good and bad practice). However, along with these functions, KM people will have a part to play — perhaps by unpacking what lawyers actually do when they work and exposing where the pinch-points are, or developing clear checklists and guidance to ensure that there are as few obstacles as possible to doing all the important elements of the job.

One of the interesting points in profitability is leverage. As Toby Brown makes clear in his 3 Geeks… post today, many partners fail to understand the financial importance of driving work down to the lowest effective level.

Yet most firms don’t get this. Primarily because comp systems reward a different behavior. They’re not designed to reward profits – they reward hours and revenue. This is the case since these compensation systems were designed under a different model. This was a cost-plus business model, where profit was built into prices (a.k.a. rates). So partners have not focused on the metric of profitability in this fashion.

Once partners understand this, then it becomes quite natural to shift work to its lowest cost, effective labor source. Ron Baker will likely appreciate this statement: Tasks should be performed at their cheapest, most effective, level of timekeeper. This behavior will lead to improved profitability for law firms. But more importantly, this same behavior will lead to lower costs of service for clients. On a simple, illustrative level this means partners should not be performing tasks associates or paralegals can perform sufficiently well. Doing so undermines profits and raises costs for clients.

That point about clients is important. One of the discredited arguments against law firm KM was to claim that “KM is about saving time, and we don’t need to do that because we charge our clients for our time and so saving it undermines our income stream.”

That was always a poor argument (and to be honest is a bit of a straw man), but now we know how much the economy has affected our clients and most firms, if not all, profess to understand their clients. However much lawyers try to empathise, many of them will miss the impact of overruns on legal fees. For me it was brought home by Tony Williams in the keynote I referred to in my last post. He pointed out that in addition to delivering commercial legal solutions for their companies, General Counsel will be under pressure from their Finance Directors to manage costs to a pre-determined budget. Any overrun on that budget will require a many-fold increase in turnover to cover the cost.

For example, take Tesco, which appears to have a net profit margin of about 4% at present. (I know nothing of that business, apart from being an occasional user of its retail services (usually under duress). All information replicated here is taken at face value from public sources.) In rough terms, this means for every £100,000 of revenue, Tesco spends £96,000, and only makes £4,000 profit. Any cost overrun eats directly into the profit (it can’t come from anywhere else), and so has to be matched with a significantly greater increase in sales. A law firm acting for Tesco that allows costs on a given transaction to increase by just £12,000 (maybe three associates taking a day and a half longer than they should have done on the job) will require the supermarket to make £300,000 more in sales just to maintain its margin. Which partner wants to tell their client that because of the firm’s shoddy KM, the client needs to find an additional £300,000 revenue? Maybe the RoI on KM needs to be measured by reference to a reduction in the number of difficult conversations partners have with clients?

The other point about valuing KM was made very forcefully by Nick Milton, developing a point made by Larry Prusak.

When I was at the KMRussia conference with Larry last week, he asked a question which made me really think hard, and its an interesting question for anyone concerned with KM metrics.

He asked “What percentage of a company’s non-capital spend, is spent on knowledge”?

Now I would be thinking in terms of 3% maybe – perhaps the training budget, or perhaps the budget spent on conferences, but Larry suggested that would be quite wrong.

His answer was – 60%

60% of an organisations non-capital spend, is spent on knowledge.

The 60% figure is difficult to pin down — it depends on what other non-capital costs a business has. (For a law firm, rent may be a higher cost than for many other businesses.) The basic equation is simple enough, though:

Take the company wages bill, take away what this bill would be if everyone was paid as a new graduate, and that’s the investment in knowledge. After all, if knowledge was not valuable, you could staff the company with smart young graduates at a fraction of the cost. The only reason you don’t, is because knowledge is valuable.

Nick’s post got me thinking. How much do law firms value knowledge and, more interestingly, what return do they get on it? That latter point was not part of Nick’s argument, but it is one that can be explored quite easily for a business (like a law firm) that charges directly for the use of its knowledge. Just as one can get a figure for the value of knowledge by totting up a notional wages bill as if everyone was a raw recruit, one can do the same for the return on this value by calculating notional fee income for these raw recruits and comparing that figure with the actual fee income.

I have postulated an imaginary law firm: with 1060 staff and partners, a total of 120 partners in three grades, 500 other qualified fee-earners (in four bands), plus 75 trainees. The 365 support staff are grouped into five bands. Unfortunately, it is not possible to embed Google spreadsheets here, but this link will go to the full set of data.

Using some rough data for salaries (I have given the partners a salary for the purposes of the calculation, even though they would usually see a share of profit), fee rates, and so on, I have arrived at the following figures.

  • Actual salary bill: £56,350,000
  • Actual revenue: £178,887,500
  • Notional salaries: £25,750,000
  • Notional revenue: £93,200,000

Please take a look at the figures in the spreadsheet and suggest amendments n the comments — I don’t claim that this is a perfect model. However, it does suggest that this firm pays its people a knowledge premium of £30,600,000 annually, in return for which it recoups additional income of £85,687,500. This looks like a pretty spectacular return on investment to me.

The corporate-professional spectrum: law firms, KM and the future

Last week, I was at a meeting discussing an aspect of learning and development in law firms. One of the speaker’s slides referred to a dichotomy between attitudes within law firms (and some other professional service firms) and big corporations. This probably isn’t particularly insightful for others, but I hadn’t thought about it in the terms he used before, and something clicked for me.

Bear in the Bärengraben, Bern

The essence of the distinction is that the corporation is founded on a stable aim, whereas the professional service firm is more opportunistic, and that this is reflected in the way people work. Within an organisation like Boeing, for example, everyone knows that the company’s aim is to make planes. Everything they do is focused on that aim. In a law firm, by contrast, the nature of the work done (beyond the vague aim of helping clients) depends on the opportunities presented by those clients, the capabilities and interests of the lawyers (in combination with the support available).

As a result, the law firm tends to be more individualistic and pragmatic, where the corporation is hierarchical. People within law firms perceive themselves to be entitled to more autonomy than in the corporation. (As an outsider coming to the firm from a university background, I was completely at home within an environment where everyone considered themselves to be self-employed, whereas a colleague of mine who came from a retail business was quite shocked.)

These are, of course, extreme characterisations, but there is still an element of truth in them. They explain why KM and L&D people (as well as HR people) in law firms find a different set of challenges from their counterparts in commerce and industry. If the purpose of a law firm is emergent rather than pre-ordained, and contingent on the lawyers present in the firm at any given time, where is the value in knowledge continuity or succession planning?

That said, as I suggested in my last blog post, things are going to change in the next few years (and that change will make some of the freer souls feel like the relative of Mary Plain pictured above, in the now-closed bearpits at Bern). Any law firm that hasn’t already got a strategy is going to need one, and adherence to that strategy will become more important than ever — success will depend more on people doing what they are told than it does currently.

That is not to say that the essential nature of law firms will be lost. Law is still a more agile business than the building of aeroplanes — innovation will depend on people successfully following their own creative instincts. They will just have to do that within a more corporate framework. Two blog posts I picked up on today reinforce that quite well.

The first is a note by the always thoughtful Scott Berkun on a long interview with Tim O’Reilly. Scott picks up and re-tells a story Tim tells about an early encounter with an investment banker (Bob):

Bob made a statement that really struck me, and the more I thought about it, the more I saw in it, both to agree and disagree with.

The statement was this: “You don’t fish with strawberries. Even if that’s what you like, fish like worms, so that’s what you use.”

Bob was referring specifically to finding out what the real needs of the potential strategic partners might be, since they might be focussing on something other than what we think is most important about what we have to offer.

That’s really good advice for any sales situation: understand the customer and his or her needs, and make sure that you’re answering those needs. No one could argue with such sound, commonsense advice.

At the same time, a small voice within me said with a mixture of dismay, wonder and dawning delight: “But that’s just what we’ve always done: gone fishing with strawberries. We’ve made a business by offering our customers what we ourselves want. And it’s worked!”

Until now, most law firms have been in the fortunate position of being able to fish with strawberries. Even when they pay lip service to understanding the client, many of them are more interested in comparing themselves with other law firms. As a result, the shape of the legal market has not changed significantly over the past twenty years or so. There is still scope for strawberries, but we need to be better at considering the worms our clients relish (and that requires a discipline that has not often been seen amongst lawyers. A balance is possible, as Scott makes clear:

To only make strawberries makes you an artist. And to only make worms makes you a capitalist. To make both at the same time, or some of one now and then some of the other later, perhaps makes a successful artist. Or an artistic capitalist. Or in Tim’s case, it means you’re having a successful life that has helped people like me make successful lives, and perhaps that’s the best kind of fishing of all: fishing that helps other people learn to fish.

The other blog post is more clearly relevant to law firms. Bruce MacEwen has turned his laser-sight on the competing conceptions of ‘quality’ held by lawyers and their clients.

Clients on Quality Firms on Quality
Often “good enough” is good enough We need to run down every conceivable contingency no matter how remote-and extinguish it with a string cite
80/20 rule 99.99%
Financial metrics, cost-benefit, ROI Professional ethics and intellectual tradition
Business judgment The traditions of excellence in our firm

 

This is an excellent characterisation of the strawberries/worms dichotomy applied to service delivery. But whilst Bruce is generally keen to support the client perspective, he raises a valid concern.

Here’s my worry:

  • You and your firm agree to a client’s request/demand that a certain matter is only worth “good enough.”
  • You give it good enough-plus 10%, let’s say, just because you can’t help yourself.
  • Case closed.
  • Tick….tick….tick
  • Sometime later, things go seriously south with the matter formerly deemed closed.

Is good enough good enough any more?

And who’s to blame-your firm or the client-for the fact that merely sufficient legal advice has come back to bite?

Actually, you might not want to let your malpractice carrier think about this too long.

So doing things the lawyerly way could be beneficial to the client in the long run. The challenge must surely be to find a way to explain this to clients and to deliver it to a cost that increasingly price-sensitive businesses will tolerate. This is an excellent example of the difficult decisions that will need to be taken by firms, rather than individual lawyers, and where leadership and discipline will need to be exemplary for success.

And, needless to say, there is a role for knowledge management to play — how else will the firm learn from its mistakes and successes?

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.

Canal boats, Pontcysyllte

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.

Making time

One of the things that can prevent us from getting things done is time, and how we manage it. Even without anyone else’s help (or hindrance), the average worker has to deal with procrastination and thinker’s block.

Montepulciano

When those challenges are added to the need to work with colleagues and clients in a managed environment, things can get even more difficult. It is easy to get carried with the flow of life and work without really thinking about how best to use one’s time. Clients have demands to which lawyers are keen to respond, and most firms have financial imperatives that require particular approaches to work management. One consequence is that it can be hard to find time to do other things. In fact, in many organisations, this is intended. Tony Quinlan highlights the problem:

The drive for efficiency and perfect accounting for time is a constant anachronism — and far too much attention goes there, with added implications that activities like lunchbreaks and socialising were wasting time or somehow detrimental to the organisation. It’s often the implication that a work contract indicates a straight exchange of salary for workhours, and that any hours used at work for non-efficient work purposes is time stolen from the organisation. A very dangerous mindset to get into — and one that I’ve challenged more than a few times at conferences (typically, someone talking about email and spam and how many hours can be saved, with a spurious figure of what that means on the bottom line. Spare me.)

The contractual exchange of time for money is absolutely explicit in a law firm, where fee-earners record time in six-minute blocks, which then get converted into bills for clients. (I know many firms are moving away from the extreme version of that model, but very few of them have actually done away with the need to record time.) This can have a corrosive effect on any activities (including knowledge sharing) that are not “fee-earning” or which make it harder to reach time-related targets. Tony goes on to recall life in a more relaxed working environment.

I remember the tea trolley at Racal, back in the 1980s when I was testing radar systems.  It was actually a very useful social space — a specified point in the day when a bunch of people from different areas and specialisms met and talked as we waited to buy anything that I’d probably not allow my children to have today.

There’s a serious denigration of such social spaces these days, usually on efficiency or bottom-line grounds but (as in the case of smoking rooms) health ones too.  The value was in building cross-functional networks and communication channels and talking in non-formal environments.  And non-policed too, which made them more powerful for sharing problems or warnings of potential future issues.

Like Tony, I think the social aspect of work is crucial. If we make it harder for people to interact casually, we lose a real opportunity for creativity, change and insight. Gossip (of the non-malicious kind) almost always conveys more useful and actionable information than the formal corporate communications channels. (We need those too.)

[I]f the smoking room, the tea trolley, the staff canteen (and lunch hour) are all disappearing, where do we meet other parts of the organisation except in meetings?

A good question, Tony, and one which would frighten many people.

Do we have too many meetings? Possibly, and they may well be poorly focused as well. However, Paul Graham puts his finger on a more subtle issue. Different people are affected by meetings in different ways.

One reason programmers dislike meetings so much is that they’re on a different type of schedule from other people. Meetings cost them more.

There are two types of schedule, which I’ll call the manager’s schedule and the maker’s schedule. The manager’s schedule is for bosses. It’s embodied in the traditional appointment book, with each day cut into one hour intervals. You can block off several hours for a single task if you need to, but by default you change what you’re doing every hour.

When you use time that way, it’s merely a practical problem to meet with someone. Find an open slot in your schedule, book them, and you’re done.

Most powerful people are on the manager’s schedule. It’s the schedule of command. But there’s another way of using time that’s common among people who make things, like programmers and writers. They generally prefer to use time in units of half a day at least. You can’t write or program well in units of an hour. That’s barely enough time to get started.

When you’re operating on the maker’s schedule, meetings are a disaster. A single meeting can blow a whole afternoon, by breaking it into two pieces each too small to do anything hard in. Plus you have to remember to go to the meeting. That’s no problem for someone on the manager’s schedule. There’s always something coming on the next hour; the only question is what. But when someone on the maker’s schedule has a meeting, they have to think about it.

Where do lawyers fit into this model? Are they makers or managers? And clients — where do they fit? I don’t think there is a simple answer. However, it is a question we should always ask. Will this meeting that feels innocuous to me actually disrupt another person’s day to such an extent that they feel unable to spare the time to do something that might deliver more value instead (like chatting to someone as they make a cup of coffee)? Or, alternatively, is this meeting actually the time when something critical gets done — like finding out from a client exactly what their commercial objectives are?

Who are you looking at?

Something puzzles me. Why do law firms find it so hard to ignore their competitors? More than that, why do some firms (US ones, typically, I think) dedicate significant resources to finding out as much as they can about other law firms? Is this a lawyer thing or is it more widespread?

Canal boats, Pontcysyllte

The questions come up because I have seen a flurry of interest in Competitive Intelligence in a number of places.

It started with Emma Wood, reporting in Steve Matthews’s blog on a CI session at SLA 2009. The whole thing was a bit new to Emma as well.

Coming from the relatively small Canadian legal market, I was fascinated to hear about the competitive nature of major law firms in United States. I described it afterwards to a friend as it almost being like the rivalry between McDonalds and Burger King. I knew that the American legal industry was bigger and different from ours, but I didn’t realise just how fierce the competition between major law firms is.

So what do these firms get by way of information about their competitors?

McAllister created a newsletter that captures information in seven categories: mergers & acquisitions; office openings/closings; lawyer moves; law firm management trends; finances, fees, bonuses, salaries; the firm in the news; and special reports such as AmLaw 100, etc.

What puzzles me is the result of all this information. In my previous incarnation as a competition lawyer, I was very conscious that the competition authorities were often particularly interested in markets with high levels of transparency (especially with regard to pricing, which I assume is not relevant here). The reason for this interest is that the authorities consider that transparency can often lead to a reduction in pricing and product differentiation between companies where there is a degree of concentration. (For an economics view of the question, see this paper.)

Aside from this, I feel instinctively that a business that focuses as much effort as Emma describes on learning about its competitors is probably looking in the wrong direction. Surely it would be more sensible to concentrate on what clients need, on the directions their businesses are heading, and on more general economic and market trends (outside the legal sector).

Another guest blogger, Laura Walters on the 3 Geeks… blog provides a worked example of CI in action for a law firm, using LinkedIn (originally written by Shannon Sankstone).

A quick search for a well-known law firm listed one of their attorneys as the top result. Although Mr. Lawyer made his connections private, he did not shy away from requesting recommendations. He lists over 40 recommendations, 26 of which are from clients. Some of these clients are (names have been withheld, but are available on Mr. Lawyer’s profile):

  • A publicly listed hotel and resort corporation;
  • A large biotech company; and
  • A private equity firm.

At first glance, the CI pro now knows at least 20 of Mr. Lawyer’s clients (some clients had more than one person recommending Mr. Lawyer). Were a firm considering approaching Mr. Lawyer as a lateral hire, they would include this information, and an analysis of the clients, to determine if Mr. Lawyer’s client base was in line with the firm’s business development goals.

If, on the other hand, a firm was competing with Mr. Lawyer’s firm for work from a company in the hotel industry, then Mr. Lawyer’s recommendations might be leveraged to the CI pro’s firm’s advantage. While Mr. Lawyer may point to his recommendations as proof that he has delighted clients in this industry, the competing firm may highlight this as Mr. Lawyer having a better relationship with a competitor company.

If I were a client, I think I would be more impressed by a firm that highlighted the real benefits of instructing them, rather than raising allegations of conflicts of interest with my existing lawyers. The latter argument tells me nothing about (a) why I should change lawyers at all, or (b) why the pitching firm should get my business. In short, I am not sure that I would be especially impressed by even an implied impugning of my choice of lawyer. This kind of comparative advertising sits poorly in a profession that sets great store by the creation of genuine working trust-based relationships.

Any business that concentrates its efforts on working out what its competitors are doing makes it very difficult to generate new ideas, to find points of difference that appeal to clients or customers. This is the point of “differentiation” — a goal of most businesses. Any organisation can do things differently (although that can be hard too). Real value only comes when those different things (whether they be core legal services, or a way of working) actually resonate with clients — there is real differentiation from competitors. However, an understanding of what will differentiate the firm cannot come from an examination of what one’s competitors do — that can only result in painting the same products in different colours. As this summary shows (drawing on this HBR article), the questions to be asked all focus on the client.

  1. Have you researched your clients’ requirements and preferences?
  2. Do you know what the points of parity or hygiene factors are?
  3. Do you know what the motivation factors are?
  4. Do you understand, from the client’s perspective, what the relevant importance of each of the motivation factors are?
  5. Can you substantiate how your offering creates value for your clients?
  6. Can you deliver a resonating CVP – one that really appeals to the client’s key motivation factors?

Unfortunately, the lack of differentiation that comes from examining competitors rather than clients is extremely visible to outsiders. We should not fool ourselves that it is not. Eric Karjaluoto recently gave a splendid example of how obvious this failure to understand differentiation can be.

A few weeks ago we met with a company that was having exactly this problem. They’re a respectable law firm whose website just didn’t seem to be doing what it needed to. They particularly liked a website that we had crafted for another firm, and decided that they should get in touch with us.

The meeting went swimmingly. They were all pleasant and had a lovely office space. They explained to us that they were quite different from other law firms, and that while others were rather boring and stodgy, they are in fact much younger, more progressive, and “out of the box” thinkers*. They didn’t think this came across in their current materials, and were highly dissatisfied with their existing website. They felt that if we built a site for them like the one we built for their competitor, it would remedy this problem.

*Incidentally, Almost every law firm we’ve met with has told us exactly the same thing. I have yet to encounter the law firm that claims to be “boring and stodgy”.

Unfortunately for Erik, the engagement didn’t work out, but he is at least able to draw a wider conclusion from the firm’s behaviour.

Although I’m talking about one specific operation, my point applies to many. In our (nearly ten) years in business, we’ve spoken with a lot of people. Almost all face similar challenges, and they typically lack one of two requirements needed to remedy the situation and spur change. The first and most important is a willingness to differentiate; the second is the allocation of appropriate funds, in order to make this happen.

The law firm in question knew their problem–they came off as “beige” and boring like everyone else. They then looked to all of their competitors and decided to copy the site that they liked most. While I understand what leads to this, it’s a rather perverse notion: “Let’s differentiate our firm by copying the one that we like the most.” (Riiiiight.) They wanted the result without the price–a price which is both monetary and psychological in nature. In order to actually stand out from their competitors, they’d have to find a story of their own to share. With this does come some small amount of risk; it also brings with it the opportunity to create something powerful.

You don’t differentiate by copying the most attractive brand you can find. (If we did, KFC would be marketed like Louis Vuitton, and that would be sort of weird, wouldn’t it?) No, you have to isolate that which is uniquely yours and amplify it compellingly. You need a story that’s plausible (and one that people want to hear) and then you need to share it effectively. Not doing so leads to what one might consider the marketing “doom loop”, in which new campaigns are crafted and deployed haphazardly–destined for failure before they’re even out of the gates.
Although I’m talking about one specific operation, my point applies to many. In our (nearly ten) years in business, we’ve spoken with a lot of people. Almost all face similar challenges, and they typically lack one of two requirements needed to remedy the situation and spur change. The first and most important is a willingness to differentiate; the second is the allocation of appropriate funds, in order to make this happen.

The law firm in question knew their problem–they came off as “beige” and boring like everyone else. They then looked to all of their competitors and decided to copy the site that they liked most. While I understand what leads to this, it’s a rather perverse notion: “Let’s differentiate our firm by copying the one that we like the most.” (Riiiiight.) They wanted the result without the price–a price which is both monetary and psychological in nature. In order to actually stand out from their competitors, they’d have to find a story of their own to share. With this does come some small amount of risk; it also brings with it the opportunity to create something powerful.

You don’t differentiate by copying the most attractive brand you can find. (If we did, KFC would be marketed like Louis Vuitton, and that would be sort of weird, wouldn’t it?) No, you have to isolate that which is uniquely yours and amplify it compellingly. You need a story that’s plausible (and one that people want to hear) and then you need to share it effectively. Not doing so leads to what one might consider the marketing “doom loop”, in which new campaigns are crafted and deployed haphazardly–destined for failure before they’re even out of the gates.

I can see that there is a natural inclination to compare ourselves with the neighbours, but that is not a useful long-term strategy. It leads one down avenues that do not fit our real preferences, or into courses of action that lead to social, emotional or real bankruptcy.

Our competitors do not have the key to improving our businesses, but our clients do. I think we should look (and listen) to the right people, and spurn the siren voices.

Navigating the seven Cs of knowledge

It dawned on me today that a lot of our knowledge-related activities reflect, depend upon or contribute to things beginning with ‘C’. In that spirit, today’s post is brought to you by the letter C and the number 7.

On the rocks near Kilkee

In no particular order, here are the things I had in mind. Feel free to add more (or detract from these) in the comments. (And I apologise for inadvertently stealing a idea.)

Conversation. As mentioned in my last post, this is a critical part of knowledge sharing. Be aware, though, that this realisation is not enough:

simply being smarter isn’t the whole story. Clever people still do stupid things, often on a regular (or worse, repeated) basis. Wise people, on the other hand, change their ways.

Collaboration. Good collaboration may be a product of good knowledge sharing. It may even produce it. We need to be confident that what we think is collaboration really is that

So what is collaboration then? It’s when a group of people come together, driven by mutual self–interest, to constructively explore new possibilities and create something that they couldn’t do on their own. Imagine you’re absolutely passionate about the role that performance reviews play in company effectiveness. You team up with two colleagues to re-conceptualise how performance reviews should be done for maximum impact. You trust each other implicitly and share all your good ideas in the effort to create an outstanding result. You and your colleagues share the recognition and praise equally for the innovative work.

The important factor is mutual self-interest. When people create things they really want to create, and it is also good for the company, it energises and engages people like nothing else.

Communication. Don’t forget that this is not something you can judge for yourself. Good communication comes when someone else can understand what you say. They will judge whether you are communicating well. Empathy is required.

One way of talking that inhibits the exchange of knowledge is speaking with conviction. That may seem contrary to what we’ve all learned in communication and leadership workshops, where one of the lessons often taught is to speak with confidence- “sound like you mean it”. Yet, as I examine conversations in the work setting, stating an idea with conviction tends to send a signal to others that the speaker is closed to new ideas. When speaking with conviction people sound as though no other idea is possible, as though the answer is, or should be, obvious.

Connection. I can’t decide if this flows from the points above, or if it is a necessary pre-condition for them. The fact is, it is pervasive. Without good connections, we cannot function properly as good knowledge workers.

As the economy has worsened, there’s been some talk about eliminating “nice to have” functions such as KM.  Think again.  Without good matchmakers, it’s hard to have good matches.  Without good matches, it’s hard to have much productivity.

Creativity. This is not something that is reserved to highly-strung artists. We all need to think in interesting ways about the problems that we face. Unless we do so, we will just come up with the same old answers. And in many cases the same old answers are what created the problems in the first place.

…we need two processes, one to generate things we can’t think of in advance, and another to figure out which of the things we generate are valuable and are worth keeping and building upon. In science, the arts, and other creative activities, the ability to know what to throw away and what to keep seems to arise from experience, from study, from command of fundamentals, and—interestingly—from being a bit skeptical of preset intentions and plans that commit you too firmly to the endpoints you can envision in advance. Knowing too clearly where you are going, focusing too hard on a predefined objective, can cause you to miss value that might lie in a different direction.

Culture. We can use this as an easy escape: “I am doing what I can, but the culture doesn’t support me.” Yes, there are dysfunctional organisations which cannot accept that the world around them is changing. But we have a part to play in bringing a realisation that the wrong culture is wrong.

…the magic of the corporation (and the thing that makes the corporation the best problem-solving machine we have at our disposal) is that it can be all things to all people. Anthropology can help here because it understands that the intelligence of this complicated creature exists not just in the formal procedures and divisions of labor of the organization, but in also in the less official ideas and practices that make up the corporation. Once again, anthropology is about culture, but in this case the culture is the particular ideas and practices of a particular organization. Anthropology can help senior managers re-engineer their organizations.

Clients/customers. Why do we do this? It is easy to forget that the organisation does not exist for its own reasons. It exists to fulfil a purpose, and that purpose often means that there are consumers, customers or clients. When we know what they need, we are in a better position to understand what the business should deliver. That may hurt. Things would obviously run better if we didn’t have to worry about client demands, but that is just facetious.

This is a hard lesson for marketers, particularly technical marketers, to learn. You don’t get to decide what’s better. I do.

If you look at the decisions you’ve made about features, benefits, pricing, timing, hiring, etc., how many of them are obviously ‘better’ from your point of view, and how many people might disagree? There are very few markets where majority rule is the best way to grow.

Five continents

There are some additional things that are often linked to knowledge activities. I am not entirely sure about some of these. 

Change. This is often linked with culture. In addition, some knowledge management activities bring change with them. Doesn’t it seem odd (and a serious risk) that one project is supposed to bring about significant organisational change? Surely we should try and fit with what people are already doing?

Why won’t this work for you?

Capture/conversion. Traditionally, KM projects have focused on squeezing knowledge out of past actions, or in converting so-called tacit knowledge to explicit. John Bordeaux torpedoes both of these.

Lessons learned programs don’t work because they don’t align with how we think, how we decide, or even an accurate history of what happened.  Other than that – totally worth the investment. 

and

…it should now be evident that relating what we know via conversation or writing or other means of “making explicit” removes integral context, and therefore content.  Explicit knowledge is simply information – lacking the human context necessary to qualify it as knowledge.  Sharing human knowledge is a misnomer, the most we can do is help others embed inputs as we have done so that they may approach the world as we do based on our experience.  This sharing is done on many levels, in many media, and in contexts as close to the original ones so that the experience can approximate the original. 

Content. Otherwise known as “never mind the quality, feel the width.” Need I say more? We shouldn’t have been surprised by the Wharton/INSEAD research, but in case people still are:

The advice to derive from this research? Shut down your expensive document databases; they tend to do more harm than good. They are a nuisance, impossible to navigate, and you can’t really store anything meaningful in them anyway, since real knowledge is quite impossible to put onto a piece of paper. Yet, do maintain your systems that help people identify and contact experts in your firm, because that can be beneficial, at least for people who lack experience. Therefore, make sure to only give your rookies the password.

Control. David Jabbari nailed this one:

This trend is closely related to the shift from knowledge capture to knowledge creation. If you see knowledge as an inert ‘thing’ that can be captured, edited and distributed, there is a danger that your KM effort will gravitate to the rather boring, back-office work preoccupied with indexes and IT systems. This will be accompanied by a ritualized nagging of senior lawyers to contribute more knowledge to online systems.

If, however, you see knowledge as a creative and collaborative activity, your interest will be the way in which distinctive insights can be created and deployed to deepen client relationships. You will tend to be more interested in connecting people than in building perfect knowledge repositories.

Before we leave the alphabet, a quick word about ‘M’. If we dispose of the continental Cs above, what happens to measurement and management? That is probably enough in itself for another post, but for now a quick link to a comment of Nick Milton’s on the KIN blog will suffice:

Personally I think that dropping the M-word is a cop-out. Not as far as branding is concerned – you could call it “bicycle sandwich” as far as I am concerned, so long as it contained the same elements – but because it takes your attention away from the management component, and taking attention away from the management component is where many KM failures stem from.

Management is how we organise work in companies, and if we don’t organise it with knowledge in mind, we lose huge value. What doesn’t get managed, doesn’t get done, and that’s true for KM as much as anything else. See http://www.nickmilton.com/2009/03/knowledge-management-in-defence-of-m.html for more details.

Direction-finding

Yet again, Mary Abraham has hit the target. In a blog post earlier in the week, “Off-Route, Recalculate”, she uses satellite navigation as a metaphor for planning KM activities.

As we plan and carry out our knowledge management efforts, it can be difficult to identify the correct route.  And, it can be unpleasant to be informed that we’re off-route and need to recalculate.  Many of us have taken the current economic situation as a call to recalculate our routes.  Unfortunately, given the extent of the economic turmoil, it can be hard to identify our alternatives and most of us are all too conscious of the pressure on us to get the route right.  Further, few of us have knowledge management GPS.  So what should we do?

I was intrigued by the GPS system that Mary described at the beginning of her post. It sounded very bossy, and not at all like the one in my own car. As I put it in a comment on Mary’s blog (the “she” described is the voice of the satnav system):

For me, she is very good at applying all the information that she has (and I don’t) about the road network (and some other points of interest) to help me get to the destination I specify. Occasionally I make a detour along the agreed route, but she is very amenable to finding a new way to get to the final destination. She also has an array of different ways to show the key information that I need, but she doesn’t force me to choose any particular one of them (I can even see two different views at once if I want). Ultimately, her goal and mine are the same — to reach the specified destination. Otherwise, she is happy to respect the decisions I make about the position of the steering wheel.

Sometimes, I need to change the intended destination. That is easily done, and all previous instructions are put aside without rancour. Her role, after all, is to support me in achieving my objectives.

Mary responded, “It sounds like your GPS ‘person’ is a bit more competent than the one I met in my friend’s car last weekend. After being presented with several unattractive route alternatives during the trip, my friend actually turned her GPS off in frustration.”

This conversation made me think about extending the metaphor in a slightly different direction. As lawyers, we can be compared to navigation assistance for clients. They are the ones who specify the ultimate destination, and lawyers (together with other advisors) suggest different routes to get there, and keep things on track if diversions are made (whether those diversions are necessary or frivolous). Within law firms, those supporting KM and other internal activities need to adopt a similar role. Admittedly, our advisory role can be very different from that of a GPS system — we can influence the decision about the destination itself as well as the route taken to get there — but ultimately we have to respect the client’s choice of destination. This means that our advice should not be tainted by regret that a different destination was not chosen or that the business prefers to use back-roads rather than pay the tolls on the autostrade.

Like all metaphors, this one shouldn’t be pushed too far, but at its heart I think there is an element of truth. It is also worth remembering when you find yourself in the position of being a client. To what extent are you being led to a destination that isn’t quite where you wanted to be, or taken along a route that is not really the way you wanted to go?

Knowing how to be disruptive

If nothing else, the state of the economy must make us wonder what things are going to be like when it is all over. At a personal level, there are people whose careers have been forced in a direction they neither expected or wanted. Some household names (such as Woolworths in the UK) have already disappeared, and there will doubtless be others.

Mary Abraham has taken a look at what firms may need to do to see a clear way through the current economic crisis.

Rather than focusing on what doesn’t seem to be working, focus on your organization’s strengths. Ask yourself, what are we doing right? How can we do more of that? How can we do it better? Then, look at your mission. Is it the right mission for your organization? Does it line up with your organization’s core strengths? Are your colleagues and their activities aligned with that mission? Is all of this supported by your organizational culture?

In the midst of all this upheaval is a golden opportunity to reinvent ourselves, to create something new. The “Clean Sheet of Paper” exercise is just a tool to help you get started. Don’t let this opportunity pass you by.

I commented on Mary’s post, but I want to develop some of those thoughts a bit further. My initial reaction to the post was to refer to something else I had read recently on a similar point.

The questions you suggest as part of the “Clean Sheet…” exercise leave out an important part of the equation. What do our clients want? What are people buying?

At the end of his recent long article (“The Great De-Leveraging“) Bruce MacEwen reminds us of Andy Grove of Intel’s reaction to a similar crisis:

Better yet, or more realistically yet, perform Andy Grove’s famous thought (and reality) experiment when Intel was a low-end maker of commodity DRAM chips, having their lunch eaten in the late 1970′s by the voracious and talented Japanese, threatening Intel’s very existence.

I paraphrase: Grove said to his top management team, “If we don’t turn things around in a very serious way, the Board will fire us. So why don’t we ‘fire’ ourselves. Let’s march out of this conference room and march back in assuming we’re the new team the Board has hired. What would we do then?”

They performed the exercise, decided to abandon DRAM’s and invest in microprocessors. The rest is history, and it’s history residing under your desk or in your lap.

I think the Andy Grove approach is an essential part of the clean sheet exercise.

There is a real problem for businesses that want to innovate their way out of the crisis. We are used to working with clients to identify what products and services they need. This symbiosis requires a degree of stability. Even if someone doesn’t know what they need until they see it (and who knew they needed an MP3 player with such minimal controls and so few features before Apple created the iPod?), disruptive innovation depends on people realising when they see it that the new product or service does actually fill a hole. The need, niche or desire is created in the same moment as it is fulfilled. At the moment, it is extremely difficult to know how the market will react to novelty. We can’t rely on understanding our clients’ needs to get us through this — we need to walk with them and discover together what is required. We cannot know what the outcome of this perambulation will be. In particular, I don’t think we can assume that the status quo ante will be any part of the future. As Seth Godin puts it:

It’s amazing that people have so much time to fret about today’s emergency but almost no time at all to avoid tomorrow’s.

A glimpse at the TV and internets shows one talking head after another angsting about today’s economy. These are the same people who needed to devote entire hours to mindless trivia nine months ago when they could have done an enormous amount of education about avoiding this mess in the first place.

His point is that we need to concentrate on what is coming, not what is happening now. In a business that depends heavily on the brain-power of its people, like a law firm, that means that we need to focus a significant part of our knowledge efforts on working our what we and our clients need in that future. Tending to our past knowledge needs will not get us safely out of this crisis.

There is another strand to this. Whose knowledge are we talking about? To what extent will the stresses and strains of the current economy affect firms themselves, especially when coupled with tools that could facilitate very different organisational forms. Consider John Roberts’s view of the firm, couched as an objection to a hypothesis that “the firm is simply ‘a nexus of contracts’ — a particularly dense collection of the sort of arrangements that characterise markets.”

While there are several objections to this argument, we focus on one. It is that, when a customer “fires” a butcher, the butcher keeps the inventory, tools, shop, and other customers she had previously. When an employee leaves a firm, in contrast, she is typically denied access to the firm’s resources. The employee cannot conduct business using the firm’s name; she cannot use its machinery or patents; and she probably has limited access to the people and networks in the firm, certainly for commercial purposes and perhaps even socially. (The Modern Firm (Oxford, 2004): 104) 

What does this mean for knowledge-intensive firms? The resources that Roberts refers to are less relevant — the machinery is either freely available (Google has a few useful tools on offer) or is located in the heads of the knowledge workers. The networks that he highlights as important are increasingly located outside the firm — in Facebook, LinkedIn or twitter, for example. One consequence of this may be that firms which fail to reinvent themselves or provide other compelling reasons for their existence could end up as empty shells — with their people relocated to other firms or new forms of self-organisation.

The brick building in the centre-right of the picture above was one of Manchester’s Victorian railway termini, opened in 1880 and closed in 1969. As the railways were rationalised and nationalised, and as passenger numbers fell, there was clearly no need for a city the size of Manchester to have six major railway stations. There are now just two. Of the others, one is at the heart of a museum, one is a car park, the one pictured is an exhibition hall, and one is derelict. The building on the left of the picture is the Bridgewater Hall, home of the Hallé Orchestra (Britain’s oldest symphony orchestra). The Hallé’s previous home, the Free Trade Hall, is now just a facade for a hotel. Rising above the old station is Manchester’s tallest building, the Beetham Tower. The solidity and apparent permanence of all these buildings was (is) no guarantee that they would always fulfil the same purpose. In fact, the longest-lasting thing in this tale is the orchestra — an excellent example of a group whose purpose cannot be separated from its form. A symphony needs to be played by a symphony orchestra: individual musicians cannot replicate the sound by playing on their own. As long as people are willing to pay to hear symphonies, the Hallé and orchestras like it will continue to exist.

Is your firm an orchestra or a collection of soloists? Is there still an audience for its repertoire?


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