Gold is apparently trading this morning at $1780 per ounce. Assuming no religious or ethical obstacles, would you bet more money than you could afford to lose (against reasonable odds, of course) that the price will be within 10% more or less than that …. tomorrow? Say, between $1,600 and $2,000 per ounce?
Would you take that same bet with the timeframe set at one week hence? Six months hence? Three to five years hence? My guess is that: (a) most readers would stop betting between one week and six months and (b) there would be no takers at all for three to five years hence.
But we routinely make assumptions about what the world will be like in 3 – 5 years and we develop strategies and make investment decisions for our firms that are based upon those assumptions. Clear strategies are essential, of course. Without them, chaos reigns. In a VUCA world, though, the chances are very good indeed that at least some of those strategic assumptions will prove to be wrong. We need look no further than the past few months for a lesson in how true this can be.
Uncertainty increases not linearly but exponentially over time, so the validity of our assumptions also decays exponentially. That is the way of things. It has always been so and always will be. In legal services, one has only to reflect on how much change we have seen since 2010, to imagine how different the legal sector might be by 2030.
How then does one balance a strong sense of strategic direction and the discipline to maintain that, with the ability to pivot quickly and efficiently when ‘life happens’? This seemingly simple question lies at the very heart of what strategy is and how it is meant to deliver value. In the first instance, a firm’s strategy does not exist within a vacuum. It is bounded by values and beliefs that must remain constant over time, well beyond that 3 – 5 year horizon usually used for strategy. Also by regulatory, economic and other factors that limit the scope within which the firm can behave. The former set the context for the direction in which the firm moves forward and the latter the ‘guide rails’, if you like, within which it moves.
In a VUCA world, one must have great clarity about which values and beliefs really do need to be permanent and which one should be open to modifying. Deeply challenging one’s assumptions here almost always yields novel insights on how to better align the firm with client needs and create competitive advantage.
For instance (assuming strong demand from clients and a sound business case) might you:
- move from being a firm that only practices law, to being a multi-disciplinary advisory firm (perhaps with a strong legal core) with fellow-equity owners who are not lawyers?
- adopt a business model that is radically different to the usual law firm model fundamentally predicated on ‘trading time for money’?
- consider acquiring a technology company that owns or can develop platforms to digitally deliver legal services (and how would you fund that [expensive] acquisition?)
- consider being acquired by such a technology company – in which case how much change would you tolerate to your business model and culture, to align with your new owners?
Just twenty years ago, any of these would have been ludicrously radical questions. Some would still be so today, at least in markets where lawyers are prohibited from sharing fees or profits with others. But will they still be radical in 2025 – 2030? That remains to be seen.
Once you have a clear template within which strategy must be bounded, your thinking can move on to the shorter timeframes involved in developing strategy, and business planning. But those can wait for another blog post. Start with the long view.