Strategy 101

If life is coming back into the economy, and if, in John Maynard Keynes' famous phrase, the "animal spirits" of capitalism are about to be unleashed anew, the rising tide might promise to lift all boats.

But according to this Strategy 101 article, the competitive landscape may be about to get tougher.  Firms that plan on being "winners" past this economic cycle must:

• select the practice areas where they can truly excel and invest the needed resources to grow;
• identify practice areas where, realistically, they will not be competitive in the foreseeable future (a/k/a recognizing opportunity costs); and
• relentlessly quantify profitability by practice group, by region and office, and by client.

I've long been a huge fan of the 80/20 rule—of wide applicability, but here meaning that 20% of your clients generate 80% of your revenue—but the author of this story ups the ante:  He claims that 20% of your clients generate 120% of your profits.  The implication is not subtle:  Fire some of your clients.

Yet, after reading this, which I highly commend to you as your quarterly analytic precis of firm strategy from the 30,000-foot perspective, I'm left with one enormous question:  How do organizations change? 

Law firms, delightfully and infuriatingly, are especially rich terrain for addressing that question.  This article doesn't pretend to acknowledge it, but I do, and shall.