Why You Need a Strategic Attorney

"Yeah, but are you trying to build a competitive advantage?" 

I was talking with a good friend of mine recently. We're both attorneys. We both work with a lot of inventors and innovative companies.

We both have a lot of experience. We've both spent significant time working as "in-house counsel" meaning we've been direct employees inside of an operating company. And now we're both building our legal practices.

In some ways, building a law practice is really different from building another type of business. But it shouldn't be different. Attorneys just make it different by ignoring many fundamental aspects of strategy and competitive advantage that so many businesses treat as top priority.

That might work for an attorney who is building their own practice. But when an attorney goes to work for a company, the attorney should learn to be strategic and contribute to the competitive advantage framework of the company.

Strategy is Survival

Attorneys, general counsel, and legal teams that don't learn to be strategic quickly get labeled as the "no" team and obstacles to be avoided within the business.

Some legal teams have tried to combat this stigma by transitioning to a "profit center" for the company. That's a great goal, but it's not always practical for every company. Nor should it be, unless profitability of the legal team also aligns with the overall strategy of the business.

The Key to Strategy

The key to being strategic fundamentally lies in whether or not the legal team operates in alignment with the strategy of the business. If profitability of the legal team supports the competitive advantage of the company, then build a legal profit center. 

Often, businesses really need legal services that build, de-risk, and defend the core strategy of the business more than they need a profitable legal business within the business. Think about it, building a secondary business with a different revenue model isn't necessarily the right answer to strengthening the primary revenue model of the business.

Here are three questions every strategic attorney should be able to address:

1. What is strategy?
2. How does a company establish a competitive advantage?
3. How can attorneys support the competitive advantage of the business?
   

Let's look at each of these questions.

WHAT IS STRATEGY?

Most discussions on "strategy" are all but useless because they simply point to another aspect of business discourse—goals, mission, vision, core values, etc.

Strategy is about long-term goals. But it is more than that. Strategy is about competitive advantage, but it is more than that, too.

Here's a 5-part definition of strategy that derives from a dissection of academic literature going back to the early days of Michael Porter:

Strategy is a guiding framework that requires: 1) a plan, 2) for deploying valuable resources, 3) to create a sustainable advantage, 4) toward a business leadership objective, and 5) in a competitive environment.

Let's quickly break down each of these 5 parts.

1. A PLAN is a coherent sequence of actionable steps over a defined period of time.
2. VALUABLE RESOURCES are unique assets, team members, and other resources owned or controlled by the company.
3. SUSTAINABLE ADVANTAGE is measurable, above-average market performance.
4. BUSINESS LEADERSHIP refers to the type of industry position in which a company can realistically be #1.
5. COMPETITIVE ENVIRONMENT includes the competitors, regulators, and other industry-wide influencers within a market segment.
   

Admittedly, this is just an introduction to the topics. Fair treatment of each of these topics requires separate, in-depth discussion.

HOW DOES A COMPANY ESTABLISH A COMPETITIVE ADVANTAGE?

The company you work for, whether as an in-house employee or as outside counsel, is characterized by certain unique resources and perspectives. When deployed strategically, these characteristics can combine to create a competitive advantage for the business.

A competitive advantage is a unique business approach that leads to a measurable improvement over your competitors. Some experts suggest that a company only has a competitive advantage if its profit margin, specifically, is higher than the average of its competitors.

While profit margin can be a normalized metric to measure competitive advantage, the specific circumstances of some industries might justify using a different metric. 

For example, growth-stage SaaS startups might be measured by customer acquisition rates. Emerging technologies might be measured by speed to market. Professional service providers might be measured by net promoter scores. However, profit margin is probably the most convenient metric, unless there is a reason to use another metric.

Creating Competitive Advantage 

So how is competitive advantage created? It is created by deploying the company's unique resources to create unique products, unique services, or unique combinations of products and services.

For products, perhaps your company enjoys a unique relationship with its suppliers so that competitors cannot replicate the same supply chain efficiencies or supply availability. Alternatively, maybe your company has intellectual property that grants exclusivity to the underlying technology.

For services, a team may have an unusually talented or famous member. Alternatively, the service provider may enjoy the benefits of a hot or established brand for a particular type of service.

For products and services that are not very unique by themselves, your company might have a contractually captive customer base. Alternatively, your company might create a combination of services that are rarely offered together with a particular product. Combining otherwise ordinary products and services in unique combinations can potentially lead to a competitive advantage because of the unique experience provided to the customer.

In each of these scenarios, the underlying resources available to your company can be viewed through the VRIO framework. The VRIO framework analyzes each asset or resource according to the following factors:

1. VALUE - does the resource provide value to the business?
2. RARITY - is the resource limited in its availability?
3. INIMITABILITY - how difficult is it to imitate the resource?
4. OPERATIONAL EXPLOITATION - is the business ready to exploit, or effectively deploy, the resource?
   

Referencing these factors can help companies determine how to position their products and services to achieve a sustainable competitive advantage that can be monitored and measured over time compared to relevant competitors.

HOW CAN ATTORNEYS SUPPORT THE COMPETITIVE ADVANTAGE OF THE BUSINESS?

Assuming a business defines a strategy related to an identified competitive advantage (and, to be sure, many companies haven't actually done this with any clarity), how does this relate to legal services? How can an attorney, or a team of attorneys, help the business build and sustain its competitive advantage?

While each business will have its own idiosyncrasies, legal counsel has a unique vantage point to contribute to strategic success in a number of ways, including the following:

1. Frame risk assessments from the perspective of reductions to the metric for competitive advantage.
2. Create and protect unique resources that enable the competitive advantage.
3. Empower executive and board focus on a structured strategy framework.
4. Emphasize competitive advantage metrics in contract language and milestones.
5. Utilize communication skills to distribute strategy knowledge throughout all levels of the business organization.
6. Prioritize legal tasks and initiatives according to the strategy framework of the business (this is true strategic alignment).
7. Implement intellectual property policies, procedures, and asset rankings aligned with strategy and competitive advantage (hint: correlate patent and trademark portfolio mix with technology and branding roadmap lifecycles).
8. Create outside counsel guidelines and compensation structures with incentives for strategy-informed efficiencies.
9. Build a cohesive legal team with a mix of legal and business strategy expertise.
   

Ultimately, as attorneys we've all been trained in critical thinking. Although business strategy might employ a different vocabulary than traditional legal matters, vigilant legal counsel will undoubtedly find ways to employ critical thinking skills to the frontiers of business strategy.

Conclusion

Even if an attorney is complacent about the strategy (or lack of strategy) in their own legal practice, in-house attorneys will be well-served by every investment to understand and practice with a focus on the strategy and competitive advantage of their business.

In fact, being strategic on behalf of your clients, including your employer, is arguably an ethical obligation for attorneys. In another post I'll walk through a step-by-step comparison of the definition of strategy above and the ABA Model Rules of Professional Conduct with reference to an attorney's roles as a representative, an advisor, an advocate, a negotiator, and an evaluator.

‍