Friday, March 22, 2013

You Know Your Firm’s in Serious Trouble When …

The only reason for a law firm to invest in competitive intelligence is to help its decision makers prepare to benefit from (or avoid the dangers in) near- and long-term opportunities and threats. Therefore, among their other duties, CI professionals and their clients must track leading, lagging and coincident indicators that identify specific opportunities and threats and that forecast their timing.

Yes, the US economy is recovering from the Great Recession. But like all downturns, it stressed our industry. Some firms, more vulnerable than others, were tested hard. Happily, some of those firms’ leaders took major corrective actions, and their firms are emerging stronger than before. But some firms will not recover.

Below are 20 indicators that your firm—or a competitor firm—probably won’t make it, at least not in its current incarnation. I thank my esteemed colleagues (you know who you are) for suggesting some of these indicators. 

Twenty ways to know your firm’s in serious trouble …

1.    You dread coming to work.

2.    Partners’ doors are closed all the time.

3.    The coffee’s gotten worse.

4.    Firm revenue and headcount have shrunk, and net operating income has fallen even more.

5.    Profits per equity partner are shrinking or flat, kept aloft by partner de-equitizations.

6.    The only thing growing at your firm is the number of non-equity partners.

7.    Women at your firm are third-class citizens, not firm leaders or full equity partners.

8.    You don’t recruit government officials without business because you can’t afford to invest in them.

9.    There’s a big donut hole in your firm’s partnership, where future leaders used to be.

10. All the firm’s largest client relationships are controlled (“tattooed”) by the firm’s oldest partners.

11. Clients are viewed primarily as revenue sources, not objects of real affection and service.

12. Partners won't delegate work to other lawyers until they make their own production numbers.

13. Equity partner compensation is decided by a few partners, black-box style.

14. Your firm has downsized marketing and eliminated the CMO position.

15. You’re still using MS Office 2003.

16. You haven’t had a real firm retreat in years.

17. Your firm has recently been sued for malpractice, discrimination and/or sexual harassment.

18. Clients have started to ask you about the firm’s health.

19. You’re open to a combination, but “worthy” firms’ leaders won’t take a meet and greet.

20. You’ve finally started to say the M-word, assuring reporters your firm is not interested in a merger.

What other leading, lagging or coincident indicators do you think identify a law firm that’s in imminent danger of failing? 

Tuesday, March 12, 2013

Global Trends 2030 Released by NIC

Every four or five years, the US National Intelligence Council (NIC) publishes a Global Trends report. And now Global Trends 2030 has just been released. A short (5-page) briefing can be found here. The longer (160-page) report can be downloaded in pdf, iPad and Kindle formats here.

The executive summary describes the NIC’s goals for this massive effort:

This report is intended to stimulate thinking about the rapid and vast geopolitical changes characterizing the world today and possible global trajectories during the next 15-20 years. As with the NIC’s previous Global Trends reports, we do not seek to predict the future—which would be an impossible feat—but instead provide a framework for thinking about possible futures and their implications.”

Since the mid-1990s I’ve studied these Global Trends reports carefully, using them to ground myself about changes I see in the economy, the legal industry, and my personal investment options. Below are my very quick Cliffs Notes on this latest report.

Global Megatrends

The global megatrends (relative certainties) presented and discussed in the 2030 report include:

Individual empowerment

·         Rapidly expanding middle class (for the first time, most of world’s population aren’t in poverty)

·         Life expectancy increases rapidly, with deaths from communicable diseases dropping more than 40%

·         Religious, ethnic and national identities are strengthened

·         More technological breakthroughs in information, communication, manufacturing, healthcare, warcraft are great levelers for good and evil

·         Individuals and states experience greater stress levels

Diffusion of power

·         Asia surpasses North America and Europe in global economic power

·         Power/impact of Europe, Japan and Russia lessens

·         No global hegemonic political power remains – regional conflicts and regional partnerships are both possible

Demographic patterns

·         World population becomes increasingly urbanized (from 50% to 60%), and urban construction explodes

·         Economic growth may decline in demographically aging countries

·         Youthful countries are politically unstable (the “demographic arc of instability”)

·         Global migration and immigration increases

Food, water, energy nexus

·         Huge increases in demand for food (35%), water (40%) and energy (50%)

·         Addressing demands for each of these commodities is linked to supply and demand for the others

·         Severe weather patterns intensify – wet areas get wetter, dry areas get drier

Critical Game Changers

The report posits six critical variables whose trajectories are far less certain and are subject to control by state and non-state actors:

1.    Crisis-prone global economy - Will divergences and increased volatility result in more global breakdown? Or will the development of multiple growth centers lead to increased resiliency?

2.    Governance gap - Will current forms of governance and international institutions be able to adapt fast enough to harness and channel change instead of being overwhelmed by it?

3.    Potential for increased conflict - Will rapid changes and shifts in power lead to conflicts?

4.    Wider scope of regional instability - Will regional instability, especially in the Middle East and South Asia, spill over and create global insecurity?

5.    Impact of new technologies - Will technological breakthroughs occur in time to solve the problems caused by rapid urbanization, strain on natural resources, and climate change?

6.    Role of the United States - Will the US, as the leading actor on the world stage and with its new energy independence, be able to reinvent the international system, carving out potential new roles in an expanded world order?

Four Alternative Worlds / Scenarios

Like the preceding global trends reports, the 2030 report includes four different global 15-to-20-year scenarios for use by organizations that engage in scenario planning. The four Alternative Worlds posited are:

1.    Stalled Engines – In the most plausible worst-case scenario, the risks of interstate conflict increase. A pandemic hits, the US draws inward, and globalization stalls.

2.    FusionIn the most plausible best-case outcome, China and the US collaborate on a range of issues, leading to broader global cooperation.

3.    Gini-Out-of-the-BottleInequalities explode as some countries become big winners and others fail. Inequalities within countries increase social tensions. Without completely disengaging, the US is no longer the “global policeman.”

4.    Nonstate WorldDriven by new technologies, nonstate actors take the lead in confronting global challenges.

What's Next?
I know how full the days (and nights) of law firm CI professionals can be. However, I hope you will find time to explore this new report. I also hope some of you will comment about it. I’ll soon be posting more here about 16 disruptive technologies, 8 possible black swan events, and other topics discussed in the Global Trends 2030 report.