Everybody wants to talk strategy. And when we say “strategy,” we know what we mean, but then why do we never agree on what we’re talking about? Leaders often define strategy differently, flail around in theoretical conversations, and end up with something so diluted it’s not actionable or is a 15-element plan nobody fully understands. And that’s before we get stuck while trying to execute.
Strategy is undoubtedly important. The market demands leaders pay close attention to their strategy and make dynamic updates to win in their markets of choice. The challenge is knowing when, how, and how much to rethink it.

Deciding How (and How Much) to Do

We would all agree that a strategy should:

• Enable us to get what we want
• Be simple or straightforward enough for anyone in the firm to understand
• Contain all the key ideas to make a difference in the market and guide action
• Be actionable and relevant for a meaningful percentage of your people, even if in small ways
• Endure for a reasonable period, say three to five years, unless something dramatic happens

When thinking about how to conduct a strategic review, it helps to break up and localize where the issues are.
Firms need to ask themselves the following questions:

• Is our vision right? If we deliver on our vision, will we win?
• Will our strategic plan help us realize our vision?
• Is our plan achievable?
• Do people understand what we’re trying to achieve and how we will do it?
• Does everyone understand their role in the strategy?
• Is the core business doing enough new things in new ways to help us achieve the vision?
• Are we building and effectively implementing the right capabilities?

In many cases, firms don’t need to rewrite their vision of “who we are”and “who we want to be.” Their vision may not be perfect, but it’s good enough, and the game is won by executing and realizing the “good enough” vision instead of partially executing a perfect vision.

For many firms, the breakdown concerns the hearts, minds, and commitment to the strategy—alignment and motivation. People need to think, “Doing new things or the same thing in different ways is good for me.”

In other cases, the core business recognizes that its structure and processes need to change fundamentally, but it freezes up because the change is too daunting, or the business doesn’t know how to change.

In other cases, strategic initiatives flounder, take too long, or become over-engineered. They collapse under their weight without delivering the value you need from them.

Considering all the failure points above, most end-to-end strategy assignments are an over-investment. To get the most out of strategy, ask yourself, what do we really need?

Three Approaches to Maximize Strategy Impact

Accurately assessing the firm’s existing position helps leaders define the strategic focus needed to rethink, shift, or optimize the firm’s potential. Which one best describes your firm?

Rethink Everything: Some firms are in trouble—big trouble. The trouble is big enough that leadership knows it acutely and understands that quick, drastic action is required. Leaders might be saying to themselves and others…

• What we are doing is broken
• We want to change the game
• We are lagging our competitors in several key areas
• If we do not change significantly, and in short order, we will become irrelevant fast
• Our strategy process will require significant effort to redefine and recreate

Shift the Focus: Other firms may have parts of their strategy that work well and others that don’t. In a competitive environment, “good enough” doesn’t last. These firms can choose action or complacency (actively or passively), which will set them in a certain direction. Leaders might be saying to themselves and others…

• We need to accelerate performance to stay relevant and competitive
• Several external trends are impacting our business and we need to respond
• Things are “fine” now, but if we do not proactively and thoughtfully change for the future, we fear the future will not be bright for us
• We want to catch our leading competitors, and the gap is widening every day
• Our strategy process will examine each of our foundational elements and. This will lead to some tough choices.

Optimize What’s Working: Leading firms create flexible, dynamic, and direction-based strategies that allow for adjustments as the market evolves. The best strategies balance this adaptability with guidance so that employees, partners, and clients know what they are getting. Leaders might be saying to themselves and others…

• Our recent strategy helped guide the firm to successful outcomes
• We like the direction we are headed for the near future
• We do not like complacency; we understand the market and our competitors change and evolve, so we need to remain diligent and prepared to protect our lead
• Our strategy process will involve rechecking, calibrating, and adjusting what has worked for us and what we think will work in the future

Early Warning Signs

Most leaders and leadership teams intuitively sense their firm’s direction and may know what strategy the firm needs. However, intuition alone is insufficient to make informed decisions and needs to be combined with data, metrics, market considerations, and diverse perspectives. Fourearly warning signs help leaders know when to devote time and attention to strategy:

Competitor Set: How does your firm’s performance compare to your closest competitor set (five to 10 firms) on:

• Organic growth – an indicator of a sustainable, differentiated business
• Operating margin/profit per equity partner – impacts growth and investment in the business
• Revenue per person – highlights operational efficiencies and areas where the business should invest/divest

Client Portfolio: Are your clients the right ones to help you achieve the firm’s vision?

• Are your clients growing?
• Is your client portfolio stable or does it experience high churn?
• What kinds of services and expertise are your clients buying from you? Are those services more compliance or advisory-focused? What services do they buy from competitors that you could offer?
• Do your clients buy multiple services from you?
• Can you consistently pass along fair rate increases to your clients?

External Market Shifts: Is your firm and industry experiencing significant changes? Is your strategy dynamic enough to respond to today’s market changes?

• Transformational technology advances (e.g., AI)
• Rapidly shifting talent needs (e.g., talent pipeline shortages, skillset deficiencies, mental health concerns, work modality challenges, etc.)
• Changing client needs (e.g., clients have capabilities to operate more independently, clients need different things from advisors and vendors, firms are brought in for more technical or expertise-driven solutions, etc.)
• Industry consolidation (e.g., firms growing through M&A, entrance of PE funding, etc.)
• Entrance of non-traditional competitors

Strategic Alignment: Do you have enough internal alignment to your existing strategy to execute and realize the intended benefits? You can have the perfect strategy, but if no one knows what it is, doesn’t understand it, and doesn’t see their part in it, does it matter? Ask yourself:

• Do people understand the strategy? Are they able to articulate it in a simple, concise way?
• Do your leaders believe in the strategy? Do they actively advocate for it?
• Does every person in the firm understand what part they play in executing the strategy?

Conclusion

“Strategy” is often a heavy topic for busy leaders and leadership teams. So a good place to start is asking a few simple questions about the firm’s vision and strategic plan, determining the level of focus the firm needs, and identifying warning signs that support a leader’s intuition. This approach will bring clarity and simplicity to a complex topic and increase the chances of the firm realizes the intended benefits sustainably.

By Dave Kuhlman and Jay Russell

Originally published in American Lawyer, December 18, 2024