Eastman Kodak’s recent bankruptcy filing has me thinking about what impact, if any, the non-economic health of a law firm has on its long-term success.

Often described as the Google or Apple of its day, Kodak was a true titan of industry that thrived on a relatively simple formula— investment in people, investment in technology and the ability to understand the needs of its customers (“You press the button and we do the rest.”).

To be sure, there were many factors that led to Kodak’s downward spiral. So far, however, little attention has been paid to its commitment to human capital.

Kodak’s early investment in people was revolutionary. The company was able to attract top talent from around the country and bring them to Rochester, New York, the company’s global headquarters.

While other companies battled the labor unions, Kodak took a decidedly different approach by incentivizing their employees to such a degree that they had no interest in unions. Kodak built a movie theater, basketball court and even a bowling alley exclusively for its employees.

As a native of Rochester, the “Yellow Box” was an integral part of our community. I attended birthday parties at the Kodak bowling alley. Kodak was one of my first jobs — I had a high school internship that paid me $5 per hour, a fortune during a time when the minimum wage was $3.03.  And I grew up in a neighborhood full of Kodak dads, even though mine was one of the few in town that did not work there. For a long, long time, Kodak was a great source of pride the city.

Somewhere along the way, Kodak lost its rhythm. In 1975 it invented the first digital camera. Instead of paving the path for digital imaging, it refused to bring the camera to market in fear that it would cannibalize the film industry. By the 1980s foreign competition hit Kodak hard.

Around this time, Kodak’s investment in people also took a sharp turn. More than 16,000 employees were laid off. The bowling alley and movie theater closed. By the time I graduated from college in 1991, the only jobs available at Kodak were as independent contractors. No perks. No benefits.

That was more than 20 years ago, but Kodak was never fully able to recover and it’s more recent troubles have been heavily reported in recent weeks.

Shift gears back to the legal industry. In the 25 years leading up to the Great Recession, Big Law profits increased seemingly exponentially year in and year out.

When the economy crumbled, law firm managers acknowledged the need for fundamental change to its business model. The Wall Street Journal reported on the death of the billable hour. But instead of fundamental change as it related to the use of technology, legal project management and efficiency models, Big Law responded with layoffs and lots of them.

Three years later, at the first sign of clearing, are law firms looking at the long-term need for change? No. They have remained short sighted. The Big Law business model has survived and even thrived as law firms have started posting record setting profit per partner earnings.

In The American Lawyer’s recent Law Firm Managers survey, the number one challenge facing managers was failed lateral integration initiatives – and by a wide margin. Yet, according to author Steven J. Harper, (The American Lawyer, “Fed to Death,” December, 2011), “Tellingly, the non-economic well-being of their firms isn’t even on the responding managers’ screens, but it should be.”

Has Big Law proved that its business model can weather any economic storm or, like Kodak, is it merely at the beginning of long, protracted decline? I’d like to think positively, but — to borrow a line from Harper — “Unfortunately, the predicted phenomenon illustrates a persistent case of lessons not learned.”

Law firms have never been under more pressure to provide efficiency, transparency and pricing predictability to clients. Yet attempts to adopt business practices that will help lawyers better understand the way they work and inform decisions on how to better serve clients are proving extremely difficult.

In the eyes of most lawyers, you can not take the knowledge that’s been developed over years of training and practice and force it into a “process” that can be measured. Or can it?

The Harvard Business Review thinks it can. In an October article, “Lean Knowledge Work,” authors Bradley R. Staats and David M. Upton, argue that knowledge-based professions in IT, finance, engineering and law can benefit from the same principles that manufacturing companies like Toyota have employed. Their argument:

1) A substantial amount of knowledge assumed to be tacit doesn’t have to be.

2) Knowledge can be captured if the organization makes the effort to pull it out of people’s heads.

3) All knowledge work includes some activities that have nothing to do with applying judgement and can be streamlined by training employees to continually find and root out waste.

4) Systems and rules to guide interactions can be developed to improve collaboration even when knowledge is genuinely tacit.

Lawyers are trained to follow legal precedent. Although there is little precedent in applying lean principles to the legal profession, models do exist for transforming business practices in other industries. Maybe all we need is a little creative lawyering to apply those principles to the practice of law.

They say admitting you have a problem is the first sign of recovery.

For most law firms, that means acknowledging that you don’t have a business plan for practicing law.

How is your firm doing? If you can answer the following 12 questions with concrete answers, you are on the right track. If not, it might be time to seek some help.

Where do you want to be in five years?

1. How much money do you want to make?

2. What types of clients do you want to work with?

3. What types of people do you want to work with?

4. How hard do you want to work?

5. What kind of business culture do you want to cultivate in your firm?

Regardless of whether you work for a global 25 firm or are a solo practitioner, these questions are important to address. They will define what success looks like.

From there, you have the foundation to answer the questions that will help you build a solid plan.

6. How much revenue do you need to generate to make the money you want to make?

7. How does your firm need to be structured to achieve your goals?

8. How do the clients you want to work with make legal purchasing decisions?

9. How do the clients you want to work with perceive you and your firm?

10. What unique value proposition do you offer your clients?

11. Who do you compete with?

12. Where do you rank against your competition?

With the typically slow month of August approaching, this is a great time to focus on the business side of your practice. Don’t be afraid to ask for help. It’s an investment that pays dividends.

I’ve been following with interest the debate prompted by so-called “scam bloggers” over the value of a legal education and the obligation of law schools to provide accurate data to students about post-graduate job placements.

I empathize with graduates entering the workforce in search of jobs that don’t exist. I appreciate the added stress on those that financed their entire education and are now facing the reality that they have to pay those loans back. But to those who feel shocked and even defrauded by these realities, I lack sympathy. They have no one to blame but themselves.

The country is recovering from the largest recession in our history. Law firms and legal services organizations have cut their staffs to the bone. The number of law school graduates entering the workforce is at an all-time high. What did you think was going to happen?

Law graduates are no different than any other graduate entering the work force. The legal profession isn’t facing anything that the medical profession, the accounting profession and countless others haven’t faced. The need for legal services is as great now as it ever has been. The difference is that the business of law has changed. .

If you want to be a lawyer, you need to change the way you think about a legal career. Law school graduates are smart people, so — right or wrong — don’t cry fowl because your law school tracks the editor of the law review as employed because she is working at Starbucks. If you want to be a lawyer, do your homework. If you are looking to graduate with a six-figure salary waiting for you, make sure you know the following:

1. The gap between the Global 25 firms and the rest of law firms is widening. That means there are going to be fewer high-paid associate positions.

2. Many legal services have been commoditized. That means lawyers can no longer command the same fees for doing the same work. That means the value of what you do as a first year lawyer has decreased. That means you get paid less.

3. The path to partnership will no longer come by grinding out long hours. If you want to make partner, you need to generate business. Equally important, you need to master relationship development.

To be sure, law schools should be held accountable for providing accurate data. To be sure, predatory lending to students should be addressed aggressively.

But, to be sure, law students and all graduates need to take ownership of their future. They need to decide what they are looking to get out of their education in the context of the overall cost of the degree.That’s called a cost-benefit analysis. That’s business. That’s what it means to be a lawyer in today’s economic climate.

Reflections on the impact of the emerging Global 25: Part 1

The American Lawyer’s “Second 200″ issue provides more evidence of the widening gap between the country’s largest firms and everyone else:  A $1.1 million gap to be exact. That is the difference in average profits per partner for the top 23 firms compared to those of the next 27 firms.

As discussed in my previous post, Time to decide what you are NOT good at, law firms outside the AmLaw 50 are losing both their top talent and their share of the most profitable work to what is emerging as the Global 25.

So where does that leave the firms outside the new elite?

According to The American Lawyer Editor-in-Chief  Aric Press, there is one consequence of the growing chasm between the law firm haves and have nots that few firms have embraced: rethinking core work processes to improve profitability and better serve clients .

This is the opportunity firms of all sizes can and must seize upon. For those outside the Global 25, it is an opportunity to control one’s destiny.

Fundamentally, this means that lawyers will need to stop equating working the hardest and the longest with productivity and profitability. They need to acknowledge that the aspects of their practices that make them feel the safest can no longer define them.

I’m talking about the “stuff” of lawyering – drafting deal documents, filling out forms, writing motions, filing court papers. In reality, this “stuff” is usually done inefficiently. It encourages lawyers to start from scratch instead of cutting and pasting, to draft a motion when an email can accomplish the same result, or to take 20 depositions when two will do.

These things take time and result in billable hours. But at the end of the day, it’s just “stuff.” The real value lawyers provide is what comes with that stuff. Opening doors for clients. Making a vilified client look sympathetic before a jury. Creative deal terms that make both sides feel like they won. Strategic advice on how to use the law to solve a problem or leverage an opportunity.

These skills are far more valuable that filling out forms but impossible to price in six minute increments.

Yes this means rethinking fee arrangements. Yes it means embracing so-called “disruptive” technology. Yes this will require consideration of concepts like project management and outsourcing – terms many believe to be “anti-lawyer.” Yes it means changing the definition of partnership and how you utilize associates.

It won’t be easy. It won’t happen overnight. But the chasm is already exists. How wide do you want it to get?

I launched Law Firm Transitions a year ago this week. My goal for starting a blog was to join and help drive the conversation about changes law firms need to make to better serve clients. From my perspective, the business model needs to change.

So it seems apropos that I chose this week to report on a presentation Peter Zeughauser gave last month at the ALM Law Firm Marketing and Business Development Leadership Forum. Arguably the best legal strategist in the business, he caused me pause with his rosy forecast for the legal services market.

“The law firm business model is not broken. The reset button has not been pushed. It’s been a tough two years but there is a lot to look forward to,” Zeughauser told a crowd of about a 100 CMOs gathered at the Harvard Business Club in New York City.

In the context of the broader economy, the legal profession survived the financial crisis unscathed. Yes, we lost a few firms, but there were no bailouts. In the end, the larger firms proved fairly nimble, he said.

Yet his positive outlook came with some fairly dire undertones. Law firm consolidation, shifting global economic centers, and the disproportionate role multinational companies are playing in the economy — the trends Zeughauser says will have the greatest impact on law firm strategy — will make it an uphill climb for all but a chosen few.

Market Consolidation

According to Zeughauser, the AmLaw 100 is vanishing, giving rise to the Global 25. In 2010, the AmLaw 25 held 47 percent of the market share of legal services. These top firms will be able to cherry pick the clients and the top talent from all the other firms. They will simply not be able to keep up.

Shifting Economic Centers

The IMF has predicted that China would take over the US as the largest economy in the world by 2015. Capital markets are losing their dominance as private money plays a larger role. New York and London were once the dominant financial centers. That’s changing. Lawyers are a “follow the money” business, so this will have a huge impact on strategy. Firms may not need a global footprint to take advantage of the shifting financial centers, but they will need a global brand, Zeughauser said.

The Role of Multinationals

Multinationals make up less than one percent of the companies in the world but they account for 31 percent of growth in the U.S. gross domestic product. Relative to their size, they play a disproportionate role in the economy.

According to Zeughauser, if one believes the world’s economy is going to continue to grow, the future is bright.

The question I have is, “What will be left after the AmLaw 20 or 25 take their cut?”

This is where most firms find themselves. Zeughauser’s advice? Figure out what your NOT going to be good at. Saying you “do it all” is no longer credible. Firms need to have a clear vision and identify what it is they are best at. That often requires choosing what you are NOT going to be the best at.

That’s not to say that making such a choice does not come with its challenges. Firms need to assess what clients are most profitable, how to take advantage of global economic trends, and how they define what makes a successful partner.

For the chosen few, I agree with Zeughauser that the law firm business model may not be broken. For the rest, however, there is more work to do. I look forward to another year of the discussion.

I attended Legal Tech West in Los Angeles this week and tweeted for the first time during a CLE session.

Shortly after I did, I got a direct message from Kevin O’Keefe of LexBlog, Inc. He was attending the same session as me and suggested we meet. It was a great opportunity for me to get a perspective on social media from someone who has pioneered its use in the legal community.

Later, as I was walking into another session I saw a face that looked vaguely familiar. I realized it was Scott Preston, CIO of Fulbright & Jaworski. I recognized him from his Twitter photo. Because we “follow” each other and frequently retweet each other’s comments, it made it easy to walk up and introduce myself.

When I created my Twitter account a year ago, I didn’t “get it.” Everyone was talking about it, but I didn’t really see its impact in the world of law firm business development. I wasn’t convinced it would be applicable to lawyers who are still grappling with the basics of lead generation and branding.

A year later, I see Twitter as one of the most valuable business development tools available to me and to every lawyer out there.

There is no magic to it. Twitter is about good old fashioned networking.

Any good lawyer knows the secret to business development is relationships. Lawyers build relationships in a variety of ways. They participate in bar events. They join industry organizations. They attend trade shows and conferences. Their goal is to meet people they like and to build relationships that will turn into referral sources or new clients. The good ones choose their networking options strategically. They identify who they want to meet and find out where they hang out.

Twitter is no different.

You find people to follow on Twitter with whom you share interests. I follow people who do similar things in business that I do. I follow my clients. I follow people I would like to have for clients. I follow people who talk about things I am interested in outside of work — be it politics, or sports or other special interests.

In exchange I try to share things that I think my followers might find interesting. I retweet things they say to help them get their message out to a larger audience.

Some of these conversations turn into direct messages. Some turn into coffee or lunch.

Twitter has helped me expand my professional network. It has helped me understand my clients better. It has helped me stay abreast of industry trends. And it has even led to new friends who I count on as referral sources.

Aha… I finally get it.

What do you get when you cross a firm unaccustomed to pursuing business strategically with the internal announcement of a major business development initiative?

Answer: Confusion.

Many firm leaders coming out of the economic downturn realize that “random acts of marketing” are not going to see them into the future. They are adopting disciplined marketing and business development plans to grow their businesses.

For lawyers who were trained that business development is a way of life, a firm focus on driving revenues with a disciplined and strategic plan is common sense.

But there is a whole generation of lawyers — associates and young partners — who have spent the bulk of their career billing hours rather than building books of business.

This same group of lawyers has witnessed three years of law firm closures, layoffs and a decline in demand for legal services. It’s understandable that many live in fear of what their future holds.

As a result, an unintended consequence of a new strategic initiative may be that some attorneys actually perceive it as a sign of an underlying problem at the firm.

This shouldn’t deter firm leaders. Rather, it reinforces the need to craft clear messages that don’t assume everyone in the firm immediately understands why change is taking place.

Communication should happen globally and be reinforced in one-to-one communications with individual attorneys on an as needed basis.

An effective communication plan can take time as not everyone embraces change at the same pace. Ultimately, solid communication can clarify understanding and avoid otherwise unintended consequences.

BTI Consulting Group hosted a webinar last week detailing findings from its 2011 Litigation Trends survey. My favorite slide of the presentation was titled “Clients Blind to Law Firm Changes.”

The slide depicts a two-bar graph. One bar reflects the percentage of litigators who believe they are delivering more value to clients. The other depicts the percentage of clients who say they are getting more value. The findings are revealing: More than a third of litigators believe they provide more value to clients, yet less than 12% of clients say they are getting more.

What’s more, it is client service and satisfaction — not depth of experience, reputation and legal skills — that are driving litigation hiring decisions by a margin of 2-1, according to BTI.

Where does your firm stand? Here are a couple ways to find out:

1) Ask your clients. If you don’t have a formal client service plan in place, get one. If your current program has fallen off the priority list, move it back up to the top.

2) Talk to each other. Identify specific ways in which you and your colleagues have solved a problem that is unique or different. Define areas outside of your legal expertise that your firm offers clients that others don’t.

3) Create a plan with specific goals around value and execute on it. Once that is done, ask clients to validate your efforts.

It is time for law firms to do a gut check. Are your lawyers truly bringing more value to clients or do they just think they are?

Happy New Year everyone! My hiatus from posting was brought to my attention earlier this week when a client mentioned she hadn’t received any blog updates in awhile. Well, I’m back and hope to stay on track throughout the year.

I’ve spent the last day or so catching up on commentary about what the future holds for law firms. Richard Susskind has predicted greater acceptance of cloud technology and greater influence of the iPad. Larry Bodine opines “innovate or die” will be the new law firm watchword. Jerome Kowalski predicts the current system of legal education and training of lawyers will undergo revolutionary changes.

These observations clearly hold merit. So for my 2011 forecast, I add merely a corollary: If, to paraphrase Jonathon Livingston Seagull, “every problem is an opportunity in disguise,” then I predict great opportunities for law firms in the coming year.

Even with an increased demand for services, law firms will continue to face rough waters in the year ahead.

The underlying problems — illuminated, not caused, by the economic crisis — of failing to adopt new technology, to shore up billing and compensation plans, and to respond better to the needs of a more sophisticated legal market is in fact an opportunity.

The firms that do leverage new technology such as cloud computing, that do innovate, that do undergo revolutionary change in the way they train lawyers who will be the ones who ultimately survive and create a new model for practicing law.

I hope your firm is one of them. Have a great year!