Introduction

The Sustainable Market-ing Enterprise model1 may be a useful business development strategy model for all entities to consider, including law firms. It comprises three sub-models:
1.   Sustainability;

2.   Market-ing; and

3.   Enterprise.

To achieve sustainable success, every organisation, must be willing to change and transform where the environmental circumstances so require. An ability to adapt through a willingness to creatively destroy and productively create new rules, new ways of working, new products or services, will help the firm to control its destiny and remain sustainable.

The sustainability spirit must be backed up by “Market-ing” a concept advocating the need to continuously sense and respond to changes in the environment. There are three components in “Market-ing” – “Strategy” to capture the Mind Share; “Tactic” to capture the Market Share and “Value” to capture the Heart Share. “Market-ing” requires a firm to continuously assess the outlook, adopt an appropriate marketing architecture whilst balancing the various needs of the different stakeholder groups. To complete the business development strategy process, a solid enterprise system is needed.

Sustainability Sub-model

In their book, Competing for the Future, Hamel and Prahalad exhorted that businesses must not exist just for today but for tomorrow. Jack Welch has argued that if you are not one step ahead, you are two steps behind. Hence all entities including professional practices must keep not just abreast with, but where applicable, ahead of the changing and challenging times.

When you start a practice today, you have a choice on what aspect(s) of the legal practice you want to be in. Usually, at the start-up and initial growth phases, you will work very hard. You will maximise your energy, resources, and people to try to make your practice successful. This is a tough phase as your practice is in the “emergent” phase, where everything is usually fast-action oriented. There is a high fighting spirit and the entrepreneurial ones can mobilise the energy and motivate the staff. There may not be a well-defined system in this phase, but everyone’s effort is focused in one direction, to grow the firm, and for some, to survive.

Not all practices will succeed; some will fail due to various reasons. However, if the practice can really “take-off”, the practice may grow significantly. The more the business grows, the more satisfying one may become. You feel good about your strategy and you become more confident of your choice. The danger though is that one may become too confident and start to become complacent and conserve what you do and refuse to change.

In the “rational” high growth phase with significant expansion, the concern will become more of control. Usually, the practice will start to develop more comprehensive control systems. By doing so, one would enter into the “era of rationality”, which is very different from the “era of emergency”. Everybody now works in a system. It is not like in the emergent phase, in which the job description may not be very clear, but the direction is clear. Now, everybody has a clear job description, even though it does not guarantee that the direction is focused. Why? Because everyone is only concerned with their own job and not with the company’s focus. To be frank, this is a dangerous and crucial stage since you increasingly become a “prisoner of your own system”. You want to consume everything that has been proven “right”. However, we should also remember that “nothing is right forever!” Remember the ever-changing market?

Actually, in this stage, a business needs a good “followership” not just good “leadership.” A good follower does not mean someone passive and just taking orders from top-down. Instead, good followers must be active in giving feedback because they are in the field  – they face the clients and have an
up-to-date gut feel of the real world. The Japanese call it Gemba, a place where the real work is done. They really know what is happening in the field. They have a good sense of what kinds of changes are happening in the market. Good “followers” must want to “sense” the changing landscape, analyse it, and dare to report their assessments to the leaders.

Noel Tichy in his book, The Leadership Engine, argues that a good leader must create leadership at all levels in the business organisation. Everybody must be a leader. That is, followers must be leaders – otherwise, nobody will take care of the changing market.

There are so many examples of how successful organisations, which, even with a very good system, eventually fail and fall into a “crisis” because they do not have the ability to adapt to the “new market”. The “new market” conditions may be created not only by the changing client behaviour, but also by various reasons, such as new regulations, new competitors, new technologies regulations, new lifestyles and many others.

With reference to Diagram 1, we call the cycle from “choice” to “crisis”, the “performing cycle” – a cycle which brings a practice up, and then down. For many practices, there may not be a chance to recover from the crisis. However, one can create a “sense of crisis” before the real crisis occurs. Jack Welch with his General Electric (“GE”) example is a suitable case for this. He created “a sense of crisis” within GE, when GE was still financially strong. As the new elected CEO, Jack Welch saw that GE must only be in the business which is number one or two in the world and he was prepared to chop off parts of the business which did not have such potential, that is, he did a “creative destruction”.

Unpopular decisions are often needed in the creative destruction stage, because the leader wants to start the “transforming cycle”. The action is much harder if the entity has experienced the real crisis. Very often, the people will refuse to allow the internal leader to lead the transformation. In this case, the entity should bring in an outsider, sometimes someone who is not from the same profession, to be the transformation’s catalyst. The responsibility of a “transformation leader” is to renew the company. That’s why he or she must face the challenging situation and deal with the difficult people, if any. Why? Because the previous right strategy, culture, and people may not fit the “new environment”. It is always difficult to change. That’s why a “change movement” is put in the “transforming cycle”. In the “creative destruction” stage, you destroy the “existing-unfit” values. In the renewal stage, you create the “future-hopeful-fit” values.

According to Noel Tichy, transformations require three types of changes – technical, political and cultural changes. The leaders must have the political will to decide on the changes and words should be backed up by actions through technical changes such as changes in the assessment and rewards system. For the changes to take place and remain sustainable, behavioural changes in line with the new direction are required so that a compatible culture can be developed.

To be successful, an entity also needs a good followership. It is very hard for a leader to renew the entity without the support from good followers who will reinforce the transformation.

A good entity is one that can drive its loop continuously in order to remain sustainable in an ever-changing landscape.

There are three parts in the Market-ing sub-model:
1.   Outlook;

2.   Architecture; and

3.   Scorecard.

When you want to either start a new business or renew an old business or review an existing business, you need to analyse the business landscape – that is, conduct an outlook analysis. The 4C-Diamond framework is the tool that can be used to analyse change, competition, customer, and company. Should the outlook analysis turn out to be positive enough for you to make a “Go” decision, you can design the architecture. In doing this, you will develop a landscape for exploration, engagement, and execution (“E3”).

The architecture itself has three components, which are: Strategy (“S”) to capture the Mind Share, Tactic (“T”) to capture the Market Share, and Value (“V”) to capture the Heart Share. The STV-Triangle is the “grand design” of a company.

The final part of the Market-ing sub-model is the scorecard. The business should identify, acquire, and keep the right customers, the right employees, and the right shareholders. Aligning the right main stakeholders is crucial, since customers represent the commercial market, employees represent the competency market, and shareholders represent the capital market. Each stakeholder group not only has its own needs and wants but impacts on each another. For example, in order to keep the clients satisfied, your employees must be satisfied and to keep the firm intact the partners must be happy.

The right customers will keep an on-going relationship with the people. The right people will have a sense of ownership (not only sense of belonging). In addition, the right partners will always provide superior-perceived value to the customer.

Outlook analysis using the
4C-Diamond framework

The 4C-Diamond framework helps a firm to assess:
1.   the changes in the environment;

2.   who the customers are and what their needs are;

3.   who the competitors are and what their strategies are; and

4.   where the firm stands and what its strengths and weaknesses are.

Changes in the Environment

There are five forces of change which we term “value migrators” as each force can shape and alter the way value is created in the profession.

Technology is the primary force of change. Just like Alvin Toffler argues in his classical book, The Third Wave, agricultural technology, industrial technology, and finally information technology have shifted the human being’s way of life on earth. Technological changes can be product-oriented, process-oriented technology and/or information-based technology. In this era of computer and communication, especially when e-commerce, digital technology and social media is fast developing, information-based technology will likely be the most important technology to be seriously considered. It could create more market transparency which changes the rules of operating.

The secondary force of change is the economy, which is also influenced by political/legal and social/cultural forces. A political structure with a particular legal system will generate specific policies, which in turn, will have an impact on the economic system of a country. On the other hand, cultural values with particular social conditions and lifestyles will influence the economy.

Policy is the “push” factor and lifestyle is the “pull” factor of the economy. For example, policy changes by the government and changes in lifestyle of the community will certainly create new values – value migration. For sure, economic changes such as the economic growth rate, social equity and other economic aspects, impact value migration significantly.
 
And how about the market – in other words, the profession itself? Changes within the professional landscape are the most important aspect and the ultimate value migrating force. If economic changes are macro forces, changes in the profession constitute the important micro forces.

By seriously identifying and analysing all forces of change, you will know which are those that are more important and which are those that are less important – that is, the impact. You have to concentrate on the more important ones. In addition, not every force of change is certain – that is, the likelihood of the change occurring. The future is always unclear. Thus, based on the degree of impact and likelihood, you can develop a scenario analysis.

No firm operates in a vacuum. For sure, competition is a fact of life and indeed,  healthy professional competition raises the standards of the profession. From a positive perspective, competition can be a main driver and catalyst of change that can help the profession keep in tandem with the changes in the environment

Consider professionals that are likely to be stronger, weaker (or even likely to drop out of the competition). In addition, you should also pay attention to potential entrants. All legal practices will be the value-suppliers in your profession. By considering this, you will know how tight the competition is likely to be.

Customers as value demanders will also shift due to the forces of change. There will be more committed customers, lost customers, and even new customers in the new landscape.

Finally, assess your own firm as the value-decider. Why? You also need to decide after analysing your competence, stretch possibility, and risk attitude, what value package you can offer to your client. The more capable you are, the higher the probability of offering a better professional value package. Capabilities can be enhanced through:
1.   internal capability development such as staff training;

2.   mergers and acquisitions; and

3.   strategic alliances with other parties.

The outlook analysis will enable you to complete a Threat-Opportunity-Weakness-Strength (“TOWS”) assessment to make a choice, which is: go, no go/hold, harvest/divest. If your choice is “go”, then you proceed to the next step in building the architecture. But if your choice is to “hold”, then maybe you should continue the existing architecture.

The STV (Strategy-Tactic-Value) Triangle

Strategy is the business development aspect to win the mind-share of the clients through segmentation, targeting and positioning. Recognising that not all clients’ needs are the same, but that there are segments of clients who are similar or have homogenous needs, a firm needs to map out such segments. These can be based on who the clients are; what they need and how their needs can be met. No firm should try to serve all clients. Each firm has its own particular set of capabilities and it is best to have the segment(s) that matches one’s capabilities. You can try to fit one, two or several segments. It’s up to your segment size, growth rate, and your own competitive advantage and competitive situation. In the minds of the potential clients, they should know who you are and what you are capable of, in other words, your positioning. To lend credibility or integrity to your reputation, your positioning should be backed up by the tactical differentiation. It could be in content (what to offer) and/or context (how to offer); and supported by the right infrastructure (these enablers can be technology, people, and facilities).

For execution, your differentiation concept can be “translated” into the Marketing Mix (Product, Price, Place, and Promotion). If differentiation is the core tactic, then Marketing Mix is the creation tactic. Finally, Selling (or transactions) is the only element which enable the firm to capture the value back from the market.

The brand could be developed as the value-indicator, and the value of the brand should be enhanced continuously through the service-elements. Last but not in the least, is the process as the value-enabler. No matter how good your other elements are, it will be useless unless you have a good process.

In the nine core elements, there is a special relationship amongst Brand-Positioning-Differentiation. A brand should be clearly positioned in the customer’s mind in order to have a clear identity; the positioning should be supported by the strong differentiation in order to have a brand-integrity. And finally, a strong differentiation will create a proper brand image to the brand.

PCS – Circle

Once you decide on your architecture, you should also balance the needs of your clients, employees and partners. Philip Kotler argues in his definition of marketing, that the value-offers happen in both ways. The company offers “value-packages” in order to get the right customers, the right people, and the right shareholders. In reverse, they also have choices in the companies where they also do the offer-value. With the right value packages, buyers become customers, workers become people, and investors becomes shareholders. Entities should endeavour to retain them.

The Enterprise Sub-model

To have a solid system, an enterprise must have three components, which are: Inspiration, Culture, and Institution. Inspiration is about the dream. Culture is about personality. And Institution is about activities.

The Inspiration

Collins & Porras in their book Built to Last argued that an entity must have an ideology which reflects its philosophy and profit objectives. Konosuke Matsushita, the founder of Matsushita Company has a rather similar opinion. His philosophy is “we will devote ourselves to the progress and development of society and the well-being of people through our business activities, thereby enhancing the quality of life throughout the world.”

Any meaningful entity should have these four basic elements – Mission, Vision, Business scope and Goals. The Mission and Vision of an entity is the qualitative expression of its philosophy. On the other hand, Business scope and Goal are the quantitative interpretations. With limited resources, the four elements in the “Inspiration” framework, help to ensure a good resource allocation in order to minimise the risk. The hour-glass illustration reflects that the time will come for a “reckoning”.

The Corporate Culture

John Kotter argues that there are two components in corporate culture which are: shared values (cognitive) and common behavior (psychomotor). An entity equipped with beautifully written shared values is nothing without a fitting common behavior of the people. In reverse, even though it is better to have a right behavior, it will be dangerous for the continuity if there is no “basic inspiration” for the behavior. So, just like the yin-yang philosophy, again, used by Collin and Porras, these two should be in “harmony”.

The Institution

In the institution side, we borrow a “pair” of management and measurement concepts from Kaplan and Norton’s “Balanced Scorecard”.2 “Organization” as the “vehicle” to carry out the entity’s mission. The entity should be well structured and have a clear target for each milestone. In addition, the entity must have a good feedback system to check the balance of the result for the three main stakeholders – the clients, people, and shareholders. Effective work co-ordination is critical to efficient tasks execution and therefore, the structure and system should be properly established to facilitate work-coordination so as to maximise the return.

Putting It All Together

The three sub-models of Sustainability, Marketing and Enteprise can be combined into one comprehensive model. If you drive your business through the infinity-sustainability loop you must always re-do the outlook, architecture and scorecard, while at the same time you must review the inspiration, culture and institution. Are they still relevant with the ever changing market as the dynamic business environment changes? What modifications, adjustments, or even transformations will you need in driving the loop?

Conclusion

According to Jack Welch, when the rate of external change exceeds the rate of internal change, the end is near. Nothing can be further from this truth. The world does not stand still, literally or otherwise. Unless we adapt and change, we will be irrelevant. This applies to any industry or for that matter, any profession. Any sound business development strategy must take cognisance that what works today may not work tomorrow. The Sustainable Market-ing Enterprise can be a framework to help any entity collate its strategic and tactical thinking.

Hermawan Kartjaya
President
World Marketing Association

Hooi Den Huan
Director
Nanyang Technopreneurship Center, NTU

Wan Chew Yoong
Senior Teaching Fellow
Nanyang Business School, NTU
E-mail: ADHHOOI@ntu.edu.sg

Notes

1   Details of the Sustainable Market-ing Enterprise model can be found in the publications, Think ASEAN! by Kotler, Kartajaya and Hooi and published by McGraw Hill in 2007 and Rethinking Marketing by Kotler, Kartajaya, Hooi and Liu and published by Prentice Hall in 2008.

2   The Balanced Score card is a strategic management and planning tool. A good explanation of this can be found in the publications by Kaplan and Norton.