As Qualcomm cofounder Irwin Jacobs succinctly noted, “We’ll do the innovative part and let others do the manufacturing.”18. Bagley, “Winning Legally: The Value of Legal Astuteness,” Academy of Management Review 33, no. You need to understand the business to do this right. At the time, the industry was dominated by large incumbent competitors with established manufacturing and branding resources that Qualcomm lacked. Compre Finding the Right Corporate Legal Strategy - Journal Article (English Edition) de Bird, Robert C., Orozco, David na Amazon.com.br. InsideCounsel, Blickstein Group and Huron Legal, “Findings.”. 10. Unlike the avoidance and the compliance pathways, the prevention pathway calls for a proactive instead of reactive approach to the law — executives seek legal counsel rather than shy away from it. Brief content visible, double tap to read full content. IBM, for example, has routinely made technical software disclosures to protect its open-source server servicing business from the threat posed by Microsoft’s proprietary server operating system.13. That, in turn, had had a negative impact on customer relationships, retention and service, ultimately hurting the bottom line. Signs of an avoidance strategy: Conley, P.M. Bican and H. Ernst, “Value Articulation: A Framework for the Strategic Management of Intellectual Property,” California Management Review 55, no. Qualcomm’s new business model hinged on the following strategy: contribute CDMA wireless technology patents to develop an industry standard, and encourage key stakeholders, such as the wireless equipment vendors and network operators, to adopt that standard. This example of a major corporate acquisition accompanied by a creative patent licensing structure reveals a deep level of legal proficiency and its application to top-level corporate strategy. The company could want to develop a reputation for being tough against royalty demands, particularly if it wants to dissuade future lawsuits from aggressive entities such as patent trolls. J. Peppard, “Unlocking the Performance of the Chief Information Officer (CIO),” California Management Review 52, no. This research was also successfully tested and used in the classroom as a learning component in MBA and executive MBA legal studies courses at the University of Connecticut and Florida State University. Apparently, parents who were busy sampling products at those counters tended to lose track of what their children were doing, resulting in the increased rate of escalator injuries. This will require hiring a general counsel with a strong compliance background, or possibly even creating a new role for someone to serve as a chief compliance officer, reporting directly to the CEO and board of directors.21. 11. Posted on October 10, 2014 by Vicki Kossoff@ Bare Brilliance. Specifically, any legal strategy that emerges from the team members should be couched in terms of its impact on the bottom line. Confira também os eBooks mais vendidos, lançamentos e livros digitais exclusivos. Along the way, the research was refined through insights gained from collaborations and interviews with consulting firms and attorneys working in-house at major U.S. and foreign corporations. One of the most important decisions in the early stages of a new business is choosing the proper corporate structure. Finding the Right Corporate Legal Strategy by David Orozco, Robert C. Bird Get Finding the Right Corporate Legal Strategy now with O’Reilly online learning. But this limited perspective of the law does not explain how some leading companies, such as Qualcomm and the Walt Disney Co., have managed to deploy their legal departments to shape the legal environment in order to secure long-term competitive advantage.In their research, the authors have developed a framework that can help executives identify the different ways in which legal strategies can be used to achieve various corporate goals, including the identification of value-creating opportunities. Pick a law firm of the right size. The bottom line counts For example, the key licensing terms offered to equipment vendors and wireless network operators reduced their risk by offering dedicated technology support and a “try before you buy” option. J.G. The research that led to the five pathways framework emerged from two sources: industry and academia. At one large utility company, for example, such job rotations are perceived as a necessary step for in-house attorneys to advance within the organization. Support of legal strategy from senior executive leadership and the presence of an identifiable chief legal strategist, who, along with other attorneys, actively works with managers across different business units and functional areas, Signs of a transformation strategy: This can take the form of internal compliance training sessions or external professional development courses on specialized legal topics. Second, it facilitated the expansion of name and character merchandise licensing, which now accounts for a global, multibillion-dollar, high-profit-margin business. The prevailing wisdom recognizes the need to incorporate legal considerations into top-level business decision making, but all too often executives still view the law as a constraint on managerial decisions, primarily perceiving it as an issue of cost and compliance.4 This limited perspective of the law, however, does not explain how some leading companies have managed to deploy their legal departments to shape the legal environment in order to secure long-term competitive advantage. Some other factors are necessary to go with like managers’ attitudes towards the law and their level of legal knowledge… Xerox pursued that approach in the late 1990s when it created a business unit specifically devoted to increasing the licensing income from its vast — but previously dormant — patent portfolio. This attitude leads to the attainment of some legal knowledge but only enough so that the business can operate within the legal bounds. The prevailing attitude in such cases is that the law presents an obstacle to their desired business goals. All rights reserved. This was the approach taken by companies like Qualcomm and Harley-Davidson, which created business units to manage intellectual property for specific strategic reasons.24 Other companies may have to implement an extensive training program to provide key management personnel with the relevant legal skills for their field of activity. (Fair enough). Transformation is the most complex legal strategy but it’s also the one that reaps the most profit. This shift in perspective requires two major elements that are difficult to achieve and signal a radical departure in terms of legal strategy. Consider, for example, the legal department at a major U.S. software company that assembled a cross-functional team to strategically assess and benchmark its contracts against those of its competitors. Patent fencing occurs when a company establishes a patent position beyond the scope of an invention in order to limit the technology advancements of a competitor. Armed with that crucial knowledge, the legal department could then work with the department stores to relocate the perfume counters, resulting in a decrease of the manufacturer’s product liability claims.15, The second way to increase ROI in the value pathway is to generate additional revenues. To cross the divide into the highest levels of legal strategy, top executives must regard the legal capabilities of the organization as a strategic resource. But strategy may play a role when noncompliance is related to a broader corporate objective. The manufacturer’s legal department conducted a strategic assessment of those accidents and discovered that they had occurred in stores where the escalators were located near perfume counters. But a large corporation in a mature industry that is highly regulated may be better off pursuing a compliance pathway. 16. The value pathway represents a fundamental shift in mind-set, from risk management to value creation; managers use the law to craft strategies that increase ROI in ways that can be directly tied to a profit-and-loss statement. Full content visible, double tap to read brief content. Or they might gain knowledge of the law only so that they can circumvent it to achieve a desired objective. Considering of the overall business model is not enough to find a right legal pathway for a company. The Secrets of finding the right corporate legal strategy 2 case solution Exposed You only have to get your short story started. O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers. Bagley, “Winning Legally: How Managers Can Use the Law to Create Value, Marshal Resources and Manage Risk” (Boston: Harvard Business Review Press, 2005). email smr-help@mit.edu or call 617-253-7170. This starts with the right business plan. The prevention pathway marks a notable change in legal strategy and attitudes among both managers and legal counsel. First, it shifted the company’s property to a legal regime that offers an indefinite lifetime. 4. Paradoxically, the processes through which corporate legal departments provide competitive advantage remain poorly understood. First, the legal department can work with external stakeholders to reduce costs. Consequently, managers in the compliance pathway do not believe that they can use the law to further their business goals, and legal counsel acts primarily as a watchdog that polices corporate conduct for illegal activity.9. Finding the Right Corporate Legal Strategy. Moreover, the company used sophisticated patent analytics and mapping software to determine whether competitors were citing Xerox patents, and that information was used to identify potential sources of licensing revenue.17. In a large company, however, this person should be someone a level below the general counsel (for example, an associate general counsel). As will be discussed below, every company, regardless of industry, can achieve the highest risk-management pathway of prevention. 8. To accomplish that, managers need to have a strong understanding of the legal system and how it can be tailored to generate value, and the legal department must view itself as a key stakeholder in helping the company to increase its return on investment. We have found that companies tend to use one of five different legal pathways. Other key factors include managers’ attitudes toward the law and their level of legal knowledge, the sophistication of legal counsel and, in particular, the legal department’s ability to work with managers to achieve strategic business goals. Consider Qualcomm, the digital communications products and services company based in San Diego, California. Accomplishing such integration is difficult for the reasons discussed earlier (for example, a legal department that has inadequate expertise or a focus on compliance). If this eBook contains other types of non-text content (for example, some charts and math equations), that content will not currently be read by screen readers. In such companies, the role of legal counsel is typically defensive — helping to fend off investigations and lawsuits. 2 (January 2014): 413-480; and D. Somaya, I.O. Read reviews from world’s largest community for readers. The oversight weakness of decentralization is exacerbated when compliance officers are assigned to executives who manage overseas business units, because this further removes the arm’s-length relationship necessary to maintain objectivity and integrity. How to Develop Your Small Firm Strategic Plan. Conley, “Patents Come and Go: Trademarks Are Forever,” Executive Counsel 2, no. (As discussed earlier, avoidance can be a useful pathway in certain cases, but it is not generally an effective long-term strategy.) The effect of IBM’s patent factory was a dramatic jump in licensing revenues from less than $20 million before 1991 to $1.1 billion in 1998, as well as greater cross-licensing opportunities that provided access to valuable technologies. Choosing and implementing an effective legal strategy is a process that takes time, requiring careful consideration of the various internal and external variables needed to align the necessary resources. As one researcher has stated, IT can be a strategic activity and yet it is often underexploited, because top executives frequently lack IT savvy and fail to recognize how IT can affect performance, both operationally and strategically.22 Similarly, for advanced legal strategy to gain a foothold, the company’s CEO and other top executives must possess legal astuteness23 and regard the law as a key enabler of value creation. A business might, for example, decide against complying with a patent owner’s valid and reasonable royalty demands because of strategic reasons. A relatively high number of class-action lawsuits, punitive damage verdicts, regulatory actions, criminal inquiries, gross negligence claims, fraud claims, restraining orders or preliminary injunctions and federally mandated compliance programs; also, a culture that is hostile toward law, regulators and lawyers and that discourages managers from raising legal issues, Signs of a compliance strategy: These terms were exchanged for ongoing royalties and up-front fees that locked in those customers and provided Qualcomm with much-needed cash for additional research and development.19 Licensing income continues to be an important source of revenue for Qualcomm; licensing generated about 30% of the company’s revenue in fiscal 2013.20. The framework consists of five different legal pathways, which the authors describe using examples such as Qualcomm, Microsoft, United Parcel Service and Xerox. This level of responsibility can divert from the general counsel engaging in strategic legal planning at the operational level. Bird, “Law, Strategy, and Competitive Advantage,” Connecticut Law Review 44, no. Companies that are conducting an audit to determine their particular legal strategy (see “Five Different Legal Strategies”) should be on the lookout for the following signs. 2 (March/April 2005): 23-24. http://www.ssmic.com/UploadedFiles/file/Executive_Counsel_6_page_pdf_of_pdf.pdf. Other key factors include managers’ attitudes toward the law and their level of legal knowledge, the sophistication of legal counsel and, in particular, the legal department’s ability to work with managers to achieve strategic business goals. In addition to a centralized structure of in-house counsel, companies should consider implementing management training of basic legal issues concerning liability. UConn’s Robert Bird: Finding the Right Corporate Legal Strategy. Magazine Fall 2014 Research Feature Finding the Right Corporate Legal Strategy Some companies move beyond viewing the law just in terms of compliance — and instead use their legal environment to secure a competitive advantage. (See “How to Conduct a Legal Strategy Audit.”) For companies that find themselves in the avoidance pathway, managers should consider taking quick and assertive actions to move toward compliance. In contrast, CEOs who lead their organizations into the transformation pathway will ultimately support legal strategies that complement their enterprise’s business model and core competencies, and they will ensure that the entire organization supports that viewpoint. Companies have increasingly recognized that legal capabilities are crucial for ongoing corporate success, and they understand the importance of working with legal counsel. An analogy is the way in which different businesses view information technology. Indeed, as companies like IBM have discovered, in-house legal departments can be more than just cost centers; they can be powerful instruments for generating value and securing a competitive advantage. To be effective in that capacity, an individual should possess the following traits and characteristics: Once a company has established those two fundamental elements, it is in a position to advance from the prevention to the value pathway. Litigation generally involves a lot more legal research and writing whereas most of the everyday work in a corporate practice does not involve arguing the law. Legal counselors, in turn, assume a more entrepreneurial role and have enough business proficiency to discuss various issues fluently with managers. 4 (winter 2010): 687-726; D. Orozco and J. Conley, “Shape of Things to Come,” Wall Street Journal, May 12, 2008; C.E. A key aspect of a transformative legal strategy is that it is not only integrated within the company’s various value-chain activities; it is also linked with the value chains of important external partners as part of a larger business ecosystem. K.G. A key differentiating attribute of the value pathway is that managers and attorneys work together to devise legal strategies and techniques that increase ROI in ways that can be directly tied to a profit-and-loss statement. 15. In negotiating those licenses, Qualcomm offered specific terms to speed up the adoption of its technology and reduce the risks of an unproven technology. 1 (fall 2008): 1-41; D. Orozco, “Legal Knowledge as an Intellectual Property Management Resource,” American Business Law Journal 47, no. The companies that are run under transformation pathway, executives have integrated their legal strategy not only with the value chains of important external partners but also within the organization’s various value-chain activities. Finding the Right Legal Strategy to Compete The prevailing wisdom recognizes that companies need to incorporate legal considerations into top-level decision-making, but are most companies doing this? In the transformation pathway, a company has incorporated its corporate legal strategy into its business model. R.L. It looks like WhatsApp is not installed on your phone. For businesses in the prevention pathway, managers take a more proactive approach, using the law to preempt future business-related risks. Moving from the prevention to the value pathway requires a fundamental change from managing risk to creating business opportunities. 1 (fall 1995): 73-85. All rights reserved. Executives who want to identify their current pathway can conduct a legal strategy audit. Businesses have increasingly understood that legal abilities are critical for on-going corporate success, and they comprehend the value of working with legal counsel. These initial case studies provided a foundation for the framework’s conceptual development. But, with a legal strategy aligned to your business goals you know that in 2016 you plan to expand to those other industries. MIT Sloan Management Review articles, permissions, and back issues can be purchased on our website: shop.sloanreview.mit.edu, or you may order through our Business Service Center (9 a.m.-5 p.m. This may occur as a result of a settlement with regulators, or if the company wants to elevate compliance issues to the highest levels within the organization. ET) at the phone number listed below. But moving into the opportunity-generation paradigm might not be practical for some organizations. Please try again. Knopf, “The Value of the Chief Legal Officer to the Firm,” working paper, Storrs, Connecticut, January 2014, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2379612; L.P. Litov, S.M. Without a governing framework aligned to the corporate business strategy, legal departments can under-invest in areas highly critical to the business. 8 (2006): 1122-1130; and J.G. 2 (April 2008): 378-390; G. Siedel and H. Haapio, “Proactive Law for Managers: A Hidden Source of Competitive Advantage” (Farnham, United Kingdom: Ashgate Publishing, 2010); and G.R. Not only strong legal fluency but also strong business fluency, conversant in the language of business and strategy; Deep operational business experience gained through managerial rotations; A team-player attitude and strong team-building capabilities. For more than 10 years, the authors observed examples of companies that managed their internal legal function with varying degrees of skill. Corporate practice Under the general heading of “corporate” there are several major areas of practice such as mergers and acquisitions, real estate, corporate finance, and insolvency and banking. 5. So the cross-functional team performed an analysis of the legal complexity of various contracts and found ways to decrease their length, making them more readable and easier to negotiate. For companies in the transformation pathway, executives have integrated their legal strategy not only within the organization’s various value-chain activities but also with the value chains of important external partners.Finding the right legal pathway for a particular company requires more than just a consideration of the overall business model. Key elements in the framework include managers’ attitudes towards the law and their level of legal knowledge. Companies have increasingly recognized that legal capabilities are crucial for ongoing corporate success, and they understand the importance of working with legal counsel. R.C. The acquisition has been viewed as part of Microsoft’s strategy to compete against Google in terms of that company’s mobile phone and Android operating system business. In order of least to greatest strategic impact, the five legal pathways are (1) avoidance, (2) compliance, (3) prevention, (4) value and (5) transformation. 21. Important factors like personnel, reporting structures, company culture and the competitive landscape need to be assessed to develop a viable action plan. The following discussion presents details of each pathway with company examples to illustrate their different applications. Finding the Right Corporate Legal Strategy (2020) Aaron Kelly Attorney Lawyer, The Kelly Law Firm; Link Abstract. There are pros and cons to working with big firms, small firms, and … Copyright © Massachusetts Institute of Technology, 2014. top level corporate strategy * Legal strategy is a compeve advantage & fully integrated into the company’s value chain *Based on the ar6cle “Finding the Right Corporate Legal Strategy” by Robert C. Bird and David Orozco, MIT Sloan Management Review, September 16, 2014 12. C.E. Other essential components comprise managers'attitudes toward the sophistication of legal counsel as well as their level of legal knowledge, the law and, in particular, the ability to work with supervisors to attain strategic business aims of the legal department. Finding the Right Corporate Legal Strategy - Journal Article book.

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