Part two in a series on strategic planning essentials
Entering a strategic planning session without the voice of the client whispering in your ear or without performing a data-driven self-assessment leads to unfounded conclusions. That’s why step one in any strategic planning process is to step back and be self-aware, which I covered in part one in this series. Firms are successful in strategic planning when preconceived notions are set aside and instead, data and intelligence inform the process – beginning with a solid internal review. The second step is to decipher reality from fiction using competitive intelligence and market awareness.
First let’s start with fiction. In part one of this series, I told the story of an influential consultant of years past who espoused the belief in the failure of regional firms, prompting many firms to merge or break apart to form boutique shops. The consultant was wrong, and many firms paid the price either in profitability or complete shutdown. Some are advising firms that the most profitable way to grow is through mergers and lateral hires, while others believe that the firms that are growing through acquisitions are making more money than ever. What’s reality and what’s fiction? The truth is – what’s right for one firm may not be right for another. The real challenge is to determine which path is best for your firm.
As a business advisor, I’ve worked with a lot of firms on strategic planning. By far the top question I get asked is, “What are other firms doing?” Some are seeking competitive intelligence, while others want to mitigate risk. They’re okay with a strategic planning outcome or strategy as long as it’s something another firm has also tried. Consider associate salaries. If a peer firm goes up or down in first-year offerings, then everyone follows suit. The same can be said on the modeling of partner compensation. Heck, even real estate locations and layout inspire the copycats to follow suit.
This begs the questions – does your firm want to be a leader or a lemming? Sometimes, reward only comes with taking calculated risks – after you’ve done the right background preparation, of course.
In an industry clamoring for strategic differentiators, this instinct to not differentiate and simply copy other firms is alarming. When it comes to strategic planning, it is especially concerning. However, with each strategic planning meeting I attend, it doesn’t matter how much data and deep analysis we bring to the table – someone who has read an article or talked to a peer at another firm will inevitably toss out an idea even though it may not align at all with where their firm should go. Therefore, during the strategic planning exercise, we spend an inordinate amount of time quelling these externally driven distractors.
Merging and globalization rear their heads during these conversations too. We all know the firms that have gone “very big.” What is not fully known, at least in the numbers that are published, is how successful these activities have been. Sure, growth has gone up, but what about profitability? What about the stability of the firm? What about the client perception? When engaging in strategic planning, firms need to avoid being swept up in other firms’ strategies and unverified returns.
Now onto reality. I’m not saying that an understanding of the marketplace and competitors isn’t needed. It is just that the review of that information has to be done properly. Firms that have stringent competitive intelligence programs have been able to augment their already vast internal data to further enhance where opportunities and threats exist in the marketplace. I will not go over all the value of competitive intelligence here as it has been done by others (see this article by Ann Lee Gibson from all the way back in 2008). I will say that it is the combination of this competitive intelligence along with that aforementioned business intelligence that will provide the right path forward and easily squash false narratives.
Data, both internal and external, should be the only information guiding your planning process. Fiction and rumors should be ignored.
The next post in this series will review the creation of a strategic action plan.