If you follow the automotive industry (I was in-house
counsel at a car company), you follow Toyota (usually the top selling
automaker in the world). If you study process improvement (I am a Lean Six
Sigma Black Belt), you study Toyota (the Toyota Production System is the
precursor of Lean). If you are interested in sourcing (like Toby, I wrote a
chapter in the Legal Procurement
Handbook), you are interested in Toyota (posterchild for deep
supplier relationships). I do not pretend to be an expert on The Toyota Way. But I
have been convinced that a strong-arm approach to strategic supplier
relationships is a sub-optimal strategy over the long term.
I already told the story of how experience with stellar
outside counsel changed my outlook on the inside/outside counsel relationship.
But the most influential narrative in the evolution of my scholastic
understanding of supplier relationships comes from automotive industry after
the SUV bubble popped in the late 90’s.
For the first time, the Big 3
experienced the Japanese automakers as an existential threat. In studying their
competition, the Big 3 found that the supply base was a substantial source of
the Japanese cost advantage. The Big 3 sought to mitigate this advantage by
leaning on their own suppliers for cost reductions, which they got—just not
enough. The Big 3 also had to deal with the fallout from the rapid
transformation of their supplier relationships. This fallout included inferior
quality parts and a depleted, antagonized supply base, many of whom went
bankrupt in the Great Recession.
The Big 3’s cost savings were insufficient because the
Japanese automakers responded with cost reduction targets of their own. In addition to lower
costs, the Japanese also mandated quality improvements. The Japanese automakers
achieved both reduced cost and improved quality while emerging with an engaged,
profitable supply base, which included many American suppliers. The distinguishing
feature in the Japanese approach is that the Japanese assisted their suppliers
in hitting their targets.
Consulting teams were dispatched to strategically important
suppliers with the sole purpose of helping the suppliers achieve the twin
mandates of cost reduction and quality improvement. The effort was not only
about developing better processes at the suppliers but also better
integration of the suppliers into the overall economic value chain. The objective
was more than just better performing suppliers, it was deeper
supplier relationships, which are founded on a commitment to coprosperity.
(Source)
It is hard to imagine a well-regarded law firm run by smart lawyers
going bankrupt (well, not
that
hard
to
imagine).
And not even I am arrogant enough to entertain the notion of inside counsel
telling outside counsel how to run a law firm (which has also struck me as akin
to herding drunken cats). But I have first-hand experience with how structured
dialogue, clear expectations, and collaboration can benefit both sides of the
relationship. Law firms can do better. So can clients. It is much easier to
pursue better together.
In my next post, I will discuss how, even in an environment still dominated by the billable hour, improved quality and reduced costs for clients can result in higher realizations and profits for law firms.
+++++++++++++++++++++++++++++
Casey Flaherty is a lawyer, consultant, writer, and speaker. He believes that there is a better way to deliver legal services. Better for the clients. Better for the legal professionals. Better for the bottom line. Casey is creator of the Legal Technology Assessment, an integrated Basic Technology Benchmarking and training platform. Follow Casey on LinkedIn and on Twitter @DCaseyF
In my next post, I will discuss how, even in an environment still dominated by the billable hour, improved quality and reduced costs for clients can result in higher realizations and profits for law firms.
+++++++++++++++++++++++++++++
Casey Flaherty is a lawyer, consultant, writer, and speaker. He believes that there is a better way to deliver legal services. Better for the clients. Better for the legal professionals. Better for the bottom line. Casey is creator of the Legal Technology Assessment, an integrated Basic Technology Benchmarking and training platform. Follow Casey on LinkedIn and on Twitter @DCaseyF
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