For our last guest post, Robert and I would like to share our experiences using the five pathways in the classroom to teach legal strategy to business students. Overall, applying this research in the classroom has been a rewarding experience that has challenged us to improve the framework’s conceptual foundation and demonstrate its relevance in the business world.
When we first experimented using the five pathways in our respective graduate business courses three years ago, we were unsure about how well it might be received. To our relief, the framework was well received from the start. In a recent end of year survey that I give to my MBA students, several of them mentioned that the framework was one of the learning highlights in their required business law course. Various students mentioned that the framework allowed them to view the law in a different way and also helped them appreciate the opportunities and benefits of engaging attorneys to help solve business problems. This is in contrast to the viewpoint, held by some managers, that law is an external, dense and static force that constrains business behavior as opposed to enabling value creation.
Robert and I introduce the framework early in our courses, and then apply it to examples and cases throughout the term. To drive home the framework’s applicability, we created a specific team-based homework assignment (Download HW 1) that asks students to choose a recent news story involving a business law issue that follows the prevention, value or transformation pathway, and to analyze the issue from a law and strategy perspective. The articles that students recently have chosen to analyze include stories about NFL contract negotiations, the FCC’s review of the Comcast Time Warner merger, and Airbnb’s legal fight against the New York Attorney General. These cases provide plenty of material for discussion in class, and serve as potential research topics.
Although the framework has yet to be applied in the context of a law course, we think it could potentially engage law students and attorneys who seek to understand how the law strategically relates to their clients’ business.
Ultimately, we’d like to see the framework applied in diverse learning environments, so we encourage you to make use of the framework and contact us if you have any questions or ideas about how to apply it. If you decide to use the five pathways in your classroom or company, we’d love to hear about your experiences.
We’d like to conclude by extending a warm thanks to The Conglomerate and its readers for allowing us this opportunity to share our ideas related to law and strategy. We’ve greatly enjoyed participating as guest bloggers in such a distinguished collaborative space.
David and Robert
In our last post, we discussed our framework for legal strategy called the five pathways. Today, we’d like to address how companies navigate within these pathways to attain the best results. As we mentioned in our MIT Sloan article, there is no one-size-fits-all approach to developing a legal strategy. Companies and industries are simply too diverse for such a simplistic solution. Instead, what we find is that legal strategy often is dependent on internal and external variables, such as company size, corporate culture, regulation, pace of technological change and the company’s maturity stage.
That is not to say, however, that a large and mature company in a regulated industry cannot cross the divide from risk management to a value creation pathway. One well established transportation company recently engaged in a strategic and cross functional (legal and finance) assessment of freight contracts to evaluate which ones to renew, cancel or negotiate. The company, which was operating at full capacity, changed its legal strategy to optimize its operations for the near and medium terms. This type of strategic contract assessment clearly fits within the value pathway.
To cross the divide and move from a risk management pathway (avoidance, compliance, prevention) to a value-enabling pathway (value and transformation) we suggest that C-level executives must view the law as an important and enabling resource for achieving strategic goals. This perspective requires a strong working knowledge of law, or legal astuteness, and organizational commitments such as the deployment of resources and authority to develop and test legal strategy.
Our research suggests that successful legal strategies require a champion, or what we refer to as a chief legal strategist. This is someone who is authorized by top management and recognized across the organization as the point person for driving legal strategies. Sometimes that individual is the general counsel, such as Twitter’s former chief legal officer, Alexander Macgillivray, who once stated that fighting for free speech is more than a good idea, it is a competitive advantage for the company. We find, however, that an associate general counsel is more often able to devote time to legal strategy execution. These individuals often possess strong legal and business fluency, leadership capabilities and the ability to work dynamically in teams.
For our next post, we'll offer more examples of companies operating within each pathway.
Peter Klein, referring to my post from last week, is on the case: "The emerging field of non-market strategy (1, 2), led by people like David Baron, Vit Henisz, and the de Figueiredo brothers, studies how firms use not only law but also the regulatory system, bureaucracies, and other non-market features to achieve competitive advantage."
Looks like I have some weekend reading ...
"The laws of economics explain how people make money. But another kind of law -- written by legislatures, bureaucracies, and courts -- often determines who gets what share."
Make the Rules or Your Rivals Will by Richard Shell is a book about law and strategy. Law professors teach and write about topics like public choice, agency capture, rent seeking, etc., but I don't often hear law professors talking systematically about the use of law for strategic purposes.
We tend to organize our thinking around doctrinal areas and around various legal skills. The systematic study of law and strategy seems different. It is not defined by a particular subject matter or set of skills. Even when we talk about law more generally, we generally do not analyze it through the lens of strategy.
In simplest terms, the study of law and strategy views the world from the perspective of a business and asks: how can we use law to gain a competitive advantage? This question ought to be of interest to lawyers, but does any law school teach a class on law and strategy?