The business law, corporate law, business transactions, or contracts advice you receive will affect the business and legal risks to your company. Most lawyers tend to focus on minimizing legal risks. As a leader and entrepreneur, you emphasize balancing and optimizing legal and business risks.
You understand that your company’s legal strategy and legal moves affect your ability to achieve your business goals. The more complex the transaction or legal issue, the more important it is for your lawyer to fully comprehend how legal moves affect your business. Whether you are an emerging startup or a large international business, your lawyer must understand the business impact of her advice.
Because of this connection between legal strategy and business strategy, you should ask your lawyer these three questions:
1. What is my company’s strategy?
This is the fundamental question. Can your lawyer identify the competitive position you are trying to achieve? Your company’s competitive advantages? Can your lawyer distinguish between strategy and tactics?
2. How does my company’s strategy affect the legal advice you give me?
Consider two apparel companies with two generic strategies: (1) high price and high quality, and (2) low price and low quality. The legal issues and business issues differ across these two strategies. Intellectual property and counterfeiting issues are more important for the high price, high quality strategy. Because the economics of the two strategies differ, the firms’ legal structures and contracts should differ as well. For example, the firm with the low price, low quality strategy needs to achieve economies of scale and economies of scope. The types of transactions and contractual provisions that promote that strategy are not the same as those that promote a high quality, high price strategy.
3. How does that legal move affect my company’s strategy?
Strategy is not static. Over time, you may revise your strategy. At the same time, your legal moves can affect the effectiveness of your strategy.
Consider again the two generic strategies in the apparel industry. To maintain its competitive position, the high quality, high price firm should negotiate contractual provisions that give it the ability to carefully monitor the quality of its outsourcing partners. How does initiating intellectual property infringement litigation affect the low quality, low price firm’s pursuit of its strategy?
Discussion
These are a few reasons why your lawyer must understand your business strategy. Advice that advances your strategy, and is savvy about legal risks and issues, epitomizes Legally Informed Strategy. For your business lawyer to give Legally Informed Strategy, she must first understand your strategy. Moreover, she must understand how legal strategy and business strategy interact. Ask your lawyer the three questions above, and see how well her advice squares with your strategy.
Douglas Y. Park
Twitter: @DougYPark
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