Making Strategic Decisions for your Law Firm’s Future — the 3-Box Solution

Topics: COO/CFO Forum, Corporate Legal, Law Firms, Leadership, Legal Innovation, Thomson Reuters

innovation

Balancing the demands of managing the day-to-day operations of a law firm while planning, creating and investing in the type of innovation a firm will need to survive and thrive in the future is probably one of the most daunting tasks law firm leaders face.

Now, one industry thinker is offering what he calls a “3-Box Solution”. Dr. Vijay Govindarajan, the Coxe Distinguished Professor of Management at Dartmouth College’s Tuck School of Business, recently published his new book, The Three-Box Solution: A Strategy for Leading Innovation.

 

Last October, in a keynote speech at the 14th Annual Law Firm COO & CFO Forum, Dr. Govindarajan (or VG as he is widely known), outlined his strategy, describing how law firms could both manage for today while innovating for tomorrow.

VG began by describing these three boxes and their purposes:

  • Box 1 — Managing the Present
  • Box 2 — Selectively Forgetting the Past
  • Box 3 — Creating the Future

Box 1 represents your “competition for the present”, VG said, and in that box you should store all that you are doing today. “What should be put into Box 1 is efficiency projects that focus on closing the performance gap between your firm and others,” he explained. “These projects are in response to clear signals and linear changes within your industry.”

Prof. Vijay Govindarajan

Prof. Vijay Govindarajan

In Box 2, you should place activities or strategies that purposefully force the firm out of its comfort zone and its attachment to established ways of doing things, even if those ways are currently working. It is only through Box 2 that you will be able to open up the firm to real innovative thinking of the kind it will need to survive in the future, VG explained.

And in Box 3 you should be placing projects that focus on the competition for the future — one that is seen in the earliest ripples of innovation — and should include projects or strategies that focus on closing the “possibility gap”. These projects are in response to early, faint signals and non-linear changes, and in fact represent the need for exponential or breakout change. “For example, the Internet itself is a non-linear change,” VG offered.

Indeed, he continued, both Boxes 2 & 3 represent your future-looking strategy, and to get to Box 3 — which would describe how you would operate 10 years from now — you must address Box 2 today.

3box

“The strategic question becomes, What do you create for your firm to perform in 2025, when you have to manage for the year 2015?” he asked, adding that part of the answer is to have projects targeted for 2025 already in Box 1 and to be willing to use Box 2 to break from the usual way of doing things. “Of course, common sense is rarely common practice”, VG said, and many conflicts naturally emerge between these boxes.

Overall, he explained, the key to success in the market of the future is to turn non-consumers into consumers, and thus, Box 3 is about creating the market that will allow you to do so.

He offered for example a situation in rural India where there was a demonstrable need for electrocardiogram machines (EKG or ECG) for heart patients, but the machine that General Electric (GE) was marketing cost $20,000 and weighed 500 lbs. It also ran on electrical current and produced EKG readings at a cost to the patient of $200 each. Each one of these factors alone made the use of these EKG machines a non-starter in the more remote areas of the globe. Then GE invented a light-weight battery-powered EKG machine that cost about $100 to manufacture, and produced EKG readings at 10-cents each.

So, while the market for the $20,000 machine still existed, now GE had a created a new market for the $100 machine, which soon flourished in more rural parts of the world.

“Firms and companies need to ask themselves, What projects are you doing today that will make you a leader in 2025?” VG suggested, adding that while many firms are still doing best-practices benchmarking, that is not a truly viable strategy for the future. “Strategy is about creating ‘next practices’ not about making small changes against the benchmark.”

So much of the future is unknown that firms need no more than a single sheet of paper to outline their future strategy, he said, and noted several questions firms and companies should be asking themselves in order to create a “strategy architecture” to better outline their future path. These questions included:

  1. What are the non-linear shifts in our industry?
  2. What is our strategic intent — That is, what is it that we want in the future? What is our end-point? (The beginning of every journey should have the end in sight, VG noted, adding that any strategic intent should encompass three criteria: direction, motivation and challenge.)
  3. What are our current core competencies?
  4. What are our annual priorities? This is listed in three horizons — core business, with 65% of resources devoted to this; the businesses in the adjacent spaces, or that allow for geographic or niche expansion, with 25% of resources; and those businesses in an entirely new space, or step-out projects, with 10%.
  5. How can we identify and develop new core competencies?

VG acknowledged that the demands of day-to-day operations of a law firm can keep even the forward-thinking leader too busy to focus on much else. However, the need to plan, create and invest in the kind of innovation your firm will need one or two decades from now is not a luxury that can be put off. You should be thinking now about how to manage your firm 10 years from now, he advised. “The key is not to predict the future, but to imagine the future.”