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Here’s a strategic angle that most businesses don’t think about: how they can use the law to secure strategic business goals.
“The processes through which corporate legal departments provide competitive advantage remain poorly understood,” write Robert C. Bird and David Orozco. “All too often executives still view the law as a constraint on managerial decisions, primarily perceiving it as an issue of cost and compliance.”
That misses some opportunities, Bird and Orozco point out, in “Finding the Right Corporate Legal Strategy” in the Fall 2014 issue of MIT Sloan Management Review.
“Some leading companies have managed to deploy their legal departments to shape the legal environment in order to secure long-term competitive advantage,” write Bird, an associate professor of business law and the Northeast Utilities Chair in Business Ethics at the University of Connecticut School of Business, and Orozco, an associate professor of legal studies and MBA program director at the Florida State University College of Business.
One of the highest profile examples is the Walt Disney Company, which has “deployed sophisticated legal strategies to capture the profits of innovation-related activities, particularly in the field of intellectual property management,” the authors write. Facing the expiration of copyrights on characters from Mickey Mouse to Snow White, the company transferred the value of that intellectual property into thousands of newly registered trademarks for various characters, names and images. That move “facilitated the expansion of name and character merchandise licensing, which now accounts for a global, multibillion-dollar, high-profit-margin business.”
But approaching legal issues in sophisticated and creative ways isn’t generally a specialty of most C-suite executives. That’s where a “chief legal strategist” comes in.
To think strategically about how to position a company for the future within the rules of the law, Bird and Orozco recommend that a company’s CEO and general counsel authorize and delegate someone to conceptualize and lead legal strategies that generate business opportunities.
This person, often referred to as a chief legal strategist, “should be empowered and provided with the support and resources necessary to champion high-level strategic efforts within the organization.” In a small or medium-sized company, this person could be the top legal officer or the general counsel. In a large company, however, Bird and Orozco recommend that this person be someone a level below the general counsel to allow him or her to focus on finding and evaluating strategic opportunities.
Bird and Orozco write that an effective chief legal strategist will have these traits:
* Both a strong legal fluency and a strong business fluency
* Deep operational business experience gained through managerial rotations
* Strong financial literacy
* Creative problem-solving capabilities
* Effective communication skills and team-building capabilities
* A track record of business leadership
* The capability to execute strategies
* A change-agent mentality
A chief legal strategist doesn’t operate in a vacuum, of course. “The CEO should be involved in setting the overall tone and vision with respect to how the law is perceived and used as a strategic resource, and he or she must ensure that other top executives share this vision,” write Bird and Orozco. That top-level involvement is necessary for a legal strategist to succeed.
The process is a considerable effort, but as many companies have found, “in-house legal departments can be more than just cost centers; they can be powerful instruments for generating value and securing a competitive advantage.”
For more on how to implement an effective legal strategy, including an overview of the five general pathways companies can take toward developing a corporate legal strategy, read the full article.