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Detroit: Lawyers on the Case

2013 March 12
by John Wallbillich

Many in the United States think Detroit as an example of failure. Failed industry (autos), failed city (Chapter 9 looming?), failed leadership (see below).

As a life-long resident of the greater Detroit area, I agree that all those designations may be true. But they don’t tell the full story. I don’t see Detroit just as a current laggard. I also see Detroit as a potential leader. And lawyers are on the case.

The quick-rinse bankruptcies of GM and Chrysler were seen at the time as a virtual death knell for the US auto industry. Flash forward a few years, and GM and Chrysler are wildly profitable. Some of the high-end European automakers are starting to see what real worldwide competition is like while facing a horrible economic state and the mess that is the European Union (as a financial system).

Lawyers made the automaker bankruptcies happen. And one lawyer, involved in that, may be part of something more.

Detroit as a city had a lawyer as mayor (Dennis Archer, a former Michigan Supreme Court Justice) some years ago; he basically saw what was on the horizon (and the reality of an intransigent City Council) and took his formidable talents to the private sector. His successor, Kwame Kilpatrick, was a lawyer, until he resigned in disgrace and lost his ticket a few years ago. Yesterday we learned that a federal jury considered Mr. Kilpatrick a criminal, and their verdicts in the morning resulted in Mr. Kilpatrick to being remanded to the custody of federal marshals in the afternoon to await sentencing. It was a big win for US Attorney Barbara McQuade and her team (lawyers all, with AUSAs Mark Chutkow and Michael Bullotta on point).

But into the void of failed leadership rides someone new. That would be Michigan Governor Rick Snyder. He is–wait for it–also a lawyer (University of Michigan JD/MDA). He spent years in the private sector before running for governor. He is just about the least political politician you will ever meet. Under Michigan law, cities failing economically are reviewed by the state, and an Emergency Financial Manager (EFM) can be appointed. A hearing on such a financial emergency for Detroit will be held in Lansing today. All signs point to clear distress in Detroit; although, incredibly, some on the City Council disagree.

So who would Governor Snyder appoint as the Detroit EFM? Well, someone brave for starters. Press reports this morning mention one Kevyn Orr, a partner at Jones Day. Mr. Orr and his firm represented Chrysler in the bankruptcy mentioned above. I hope, if asked, Mr. Orr or someone of his pedigree accepts the challenge.

I have a hunch I’m not alone in thinking that there would be no more challenging public position in America than the Detroit EFM.

And the “Detroit as Leader” part? I see the challenges facing Detroit (financially and otherwise) to be present in many large urban centers and states around the country. Maybe not as urgent, maybe not in the same magnitude. Detroit is a sort of “leading indicator.” And if the Detroit EFM recommends to Governor Snyder that a Chapter 9 is required, it will be one for the record books (and the legal treatises).

Business Blogging 101 says you don’t stray into politics. That’s not really the focus here today. In much of what ails Detroit, there are serious legal challenges involved in fixing the results of 50 years of mostly failed leadership (and complex demographic trends).

Thankfully, there are some lawyers with courage who are willing to take the case.

skyline_sunset_1

(Downtown Detroit from Belle Isle; not today, maybe someday. Source)

Groupon CEO Departs, Honestly

2013 February 28
by John Wallbillich

CEOs of publicly-held companies leave with some regularity. It’s typically “retirement,” “other interests,” or “new strategic direction.”

We often know what really happened, but accept the duty to read between the lines like rookie CIA analysts deciphering Pravda editorials during the Cold War.

So when Groupon CEO Andrew Mason departed today, he did so with an amazing memo to staff. Here is the opening paragraph to the “People of Groupon,” via press reports:

After four and a half intense and wonderful years as CEO of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding – I was fired today. If you’re wondering why… you haven’t been paying attention. From controversial metrics in our S1 to our material weakness to two quarters of missing our own expectations and a stock price that’s hovering around one quarter of our listing price, the events of the last year and a half speak for themselves. As CEO, I am accountable.

I don’t expect to ever see a memo like this again. And that’s too bad.

CNN is reporting a severance package valued at $378.36 (this is corrected thanks to reader Jonathan’s comment, below). Looks like honesty in severance as well.

Legal Tech in the Age of the Consumer

2013 January 30
by John Wallbillich

On the second day of the powerhouse that is LegalTech, I thought it might be timely to look at two signs of change for technology as it affects the enterprise legal market.

The fact that you have a conference that goes for nearly three full days is a testament to (a) its staying power, and (b) that a lot of people want to go to New York on an expense account.

Many of the prime movers in the legal technology space use the conference as an opportunity to release new products and initiatives (Thomson Reuters is an example). When you peruse the conference agenda and the exhibitors list, you see that it’s really a who’s who of legal technology.

And you also have companies active just outside the exhibit hall, as we know that there’s often more interesting and open conversations there about what’s going on out in the field.

But just as BigLaw is facing challenges from competition, so is BigTech (legal and otherwise). And that’s not just me speculating. There’s a recent interview and an imminent product launch that serve to remind everyone that no company is immune from the forces of change.

First, the interview. It’s here, and features Marc Andreessen, current uber-VC, and founder of Netscape (the first mainstream web browser). Mr. Andreessen gets why consumers are driving the pace of change in technology (hardware and software) and how this is affecting the enterprise. What used to be trickle-down (enterprise to consumer) is now moving the other way, from the consumer “grassroots”:

And the reason is because – the reason fundamentally is because now that you have got these things, you have — now that you have a computer in everybody’s hand, all of a sudden all these barriers — it used to be these barriers to market entry were so big, it used to be there just weren’t that many early adopters in the world. To bring out a new technology for consumers first, you just had a very long road to go down to try to find people who actually would pay money for something.

And now all of a sudden you have got this global market of all these early adopters that have smartphones connected to the Internet, and they can just pick up their things and run with them.

And of course consumers can make buying decisions much more quickly than businesses can, because for the consumer, they either like it or they don’t, whereas businesses have to go through these long and involved processes.

That last part will resonate with anyone trying to sell technology into the legal enterprise (law firms or legal departments). To call the sales cycle long is to make a glacier seem like a racetrack.

The interview is extensive, but it is a rare privilege to peer inside the active mind of a technology first-mover. Mr. Andreessen notes that the fascination with consumer markets over the enterprise is cyclical, and that, today, all business is hard:

There are no easy businesses in the world other than maybe Google, but other than that, there is no easy business anywhere in the world. So what happens is Wall Street gets enamored by the businesses that look like they are easy, until it turns out that they are not, and then Wall Street gets disillusioned and freaked out, and then rotates into the businesses that they think are going to be easy, and then they get endless disappointment. It’s like a seventh or eighth marriage at some point.

At some point the problem isn’t with your seventh wife. At some point the problem is with you.

I think we would all agree that the law business today isn’t easy. (I’ll leave the marriage part to TMZ).

And now a brief look at Exhibit B. To see another example of how business isn’t easy and how consumers play a big hand in it, we need only to look just down the street from LegalTech. To something that’s starting literally as I hit “publish” on this.

Today Research in Motion will announce its new BlackBerry 10 (handsets and operating system). If you show me a lawyer who never used a BlackBerry, I’ll show you someone who still has his first Etch-a-Sketch. In fact, I’d wager that at LegalTech there still are a number of BlackBerry users in attendance, hoping against hope that the new versions (including one with a keyboard!) are good enough to stave off the tractor-beam pull of Apple’s iPhone.

But BlackBerry hasn’t released a new handset in 18 months, which is like a decade in tech:

RIM’s market share has eroded substantially since it last released a new phone in August 2011. Apple and Android accounted for an estimated 87.1% of global smartphone shipments in 2012, up from about 68.1% in 2011, according to research firm IDC. RIM’s share, meanwhile, fell to 4.7% last year from 10.3% in 2011, according to IDC.

[Source]

For the longest time, BlackBerry relied on its dominance in the enterprise market and would dismiss “consumer” products as not fit for corporate use, not secure, and not whatever else they could throw up against the wall.

For the sake of competition, I hope the BlackBerry 10 lives up to the pre-launch hype. One lesson for people involved in legal technology is this: if a powerful company (RIM) and a pervasive product/software combo (BlackBerry) can stumble mightily, then there is hope for all of us who want to compete, and trepidation for those of us facing competition.

[Quick update @ 10:45 am EST: the company's now "Blackberry" so long RIM; and here's the two new handsets]:

bb10-launch

For now, back to the exhibit hall! There are bags and pens and notepads for everyone!!

Westlaw next

We Are Always Discounting

2013 January 28
by John Wallbillich

The subject of discounts holds perennial interest for enterprise lawyers. The best advisors tell leading law firms to avoid making fee discounts a strategy, and acknowledge that it often masks issues that run much deeper.

This is the definition of discount typically at issue in the corporate legal space:

A reduction made from the gross amount or value of something: as from a regular or list price.

Aha! There’s that pesky “value” word. Just when we thought we were making progress. Note the concept of “regular or list price.” High-end law firms employing top-shelf lawyers would argue that nothing they do is “regular” and “list price” is their our invoice says it is, and not a penny less. “We’re like Apple in legal” they say.*

Really? For every matter you work on? For all 1,000+ lawyers?

the price is right

But today I want to look at a different sense of discounting, something more like this:

To leave out of account: disregard; to minimize the importance of.

Outside counsel and In-house counsel approach this sense of discounting from different perspectives. Today a look at outside counsel; in a few days, I’ll return the favor to in-house counsel.

Lawyers in larger law firms discount; here’s a broad brush approach to four discrete groups:

1. Managing Partners: They can discount how much pressure competition is placing on firm clients, and how this affects the procurement of legal services. Some partners with key client relationships tell me that the response they get from managing partners or firm CFOs on discounts (yes those discounts) or AFAs is “We’re better, sell harder. I did.” Perhaps, maybe ten plus years ago, which in the dog years that frame legal change is more like 30.

2. Key Client Partners. This group is the point of the spear in enterprise legal these days. They find the clients and mind the clients. Some may be discount the reality that most GCs can get service X from firm Y or Z (and soon many others). They can also discount the fact that some services that experienced monthly demand may become more episodic. GCs who pay top dollar for all services all the time are known as “ex-GCs” in the industry.

3. Subject-Matter Expert Partners. These partners used to be seen as the real core of larger law firms. Their value was forged in a crucible that mixed the ore of high-end knowledge with the heat of consistent deals, cases or controversies. Alas, what this group sometimes discounts is the fact that when you are seen as a mile deep and an inch wide, it doesn’t take much to knock you out of the game.

4. Hail-Fellow, Well-Met Associates. They are hoping to get to (3) soon, and maybe (2) someday. Or land a gig in-house. There is a lot of virtual ink spilled on the plight of law students these days, and what the future means for them. It’s fair to look closer at law firm associates, since the firm probably doesn’t need more of those in group (3) generally, and jumping the shark to group (2) directly is really hard early in a career. Group (3) can hoard work and not want to train “cheaper rivals;” group (2) wants to grant them some client contact, but will be in hot water with group (1) if anything goes wrong.

So the take-away is this: before you look at a discount in terms of price, consider what you yourself may be discounting in terms of your honest view of the enterprise legal market today. Where do you fit in? Where is your firm or practice specialty headed? What are your competitors doing? (If you think you don’t have competition, it’s OK, but only if your name is Martin Lipton).

Price discounts are a lagging indicator of many decisions that happened much earlier. Next time, a look at what in-house counsel are discounting, and how this factors into what law firms are (or should be) doing.

____________________________________

* NB on Apple: Yes Apple doesn’t discount its latest products and premium prices them to boot. But buried in the latest earnings release was information that Apple’s most supply-constrained product was the two-plus years old iPhone 4. It’s “free” on a two year contract. So a message to all big-time law firms that think discounts are for lesser legal lights: sure, don’t discount. Just be really really confident that your service design and delivery is better than Apple is with its products. And even if you are, somewhere there is a looming Samsung to your Apple.

Two for You #2: You Better Get Better

2013 January 11
by John Wallbillich

We are getting personal about 2013 to start off the new year on a positive note. Last week, we learned about the importance of creating more value than you capture.

This week, the reality that what you do today may not be enough next month. Or perhaps sooner than that.

I’ve honestly struggled writing this, because it risks coming off as either trivial or obvious. That said, here it goes…

Here’s the big-picture concept: if we are moving to more of a value-based universe, how are enterprise lawyers supposed to work better? Put another way: how can you price by value but clamber along working as usual by the hour?

The fact is with all the efforts spent to improve lawyerly output, we still work in much of the same way as we’ve done for the past 20 years: spending too much time staring at a computer, and at our email inboxes in particular. When we are liberated, we go to a meeting, and surreptitiously stare at our smartphones, at our email inboxes in particular.

Pam Woldow touched on a part of this last year when she wrote about the inefficiencies caused by “digital distraction.” I won’t try to summarize it; just read it. But it touches on a profound reality for many lawyers: we are told to provide value, yet we aren’t taught how to work better.

Since most of us were historically taught to work more, when time comes to provide added value, we are left to our own devices. Figuratively and literally.

This is nowhere more apparent in the admonitions to “work as a team,” to “collaborate,” to “run a winning project.” Many meetings resulting from these worthy goals involve a bunch of people sitting around a table waiting for someone to take the lead; for anyone to point the way.

That won’t work if you want to get better. You will have to take the lead.

I think getting better in 2013 will involve more lawyering skills than just additional legal knowledge. I know that this sounds a bit squishy; I have the first verse of “Kum Ba Yah” running through my head as a write this. (Although when you sing it around a campfire, just think of the teamwork, and collaboration!)

In the coming weeks, I will outline what some of these new skills are. I am testing them in other places. In the meantime, I suggest this. You look around your workplace or your circle of influence. Find someone you admire for a personal quality or skill, and invite them to lunch. Somewhere between sports and the weather, ask them how they “got good at X.” Most people worth learning from are happy to help if asked sincerely.

This isn’t about trying to set up a formal mentor-mentee relationship. Those are not easy to come by, and can end up in some people losing their jobs.

Try it. See how it works. And don’t thank me. Thank Bueller.

(Apparently the German version of YouTube hasn’t gotten a C&D letter yet. Bonus points in the video for Gordie Howe’s No. 9 Red Wings jersey. Yes, hockey is back in Hockeytown! Teamwork on ice; with skates, sticks and a hard rubber disk…).