Corporate Strategy for
Corporate Counsel
Hugh Courtney
WMACCA Mini-Executive MBA Program
September 18, 2008
© 2008 Robert H. Smith School of Business
University of Maryland
Corporate Strategy for Corporate
Counsel
• Determining organization
scope and scale choices
• Implications for corporate
counsel
• Developing a strategy for
the corporate counsel office
© 2008 Robert H. Smith School of Business, University of Maryland
Diversification and Performance
Performance
Low
(dominant business)
High
(unrelated)
Diversification
© 2008 Robert H. Smith School of Business, University of Maryland
Resource Relatedness
“Some genius invented
the Oreo. We’re just
living off the
inheritance.”
- F. Ross Johnson,
Former CEO,
RJR Nabisco
© 2008 Robert H. Smith School of Business, University of Maryland
The Purpose of Strategy
Create value
Capture value
Willingness to pay
Suppliers
Value
Customers
Company
Complementors
Cost
! Innovate
• Increase willingness to
pay
• Lower cost
• Create new markets
! Leverage bargaining
power/market position
! Leverage resources, relationships
and other assets
! Out-execute others
© 2008 Robert H. Smith School of Business, University of Maryland
The “Better Off” Test
• Create value
– Lower costs
– Increased willingness to pay
• Capture value
– Improved industry structure
© 2008 Robert H. Smith School of Business, University of Maryland
The Best Alternative or
“Ownership” Test
• Contracts
• Joint ventures or alliances
• Ownership
© 2008 Robert H. Smith School of Business, University of Maryland
Why Historically Have Some Countries
Had More “Conglomerates?”
© 2008 Robert H. Smith School of Business, University of Maryland
The Context for Today’s Corporate
Strategy Choices
•
•
•
•
•
Globalization
Privatization
Deregulation
Standardization
Information technology
© 2008 Robert H. Smith School of Business, University of Maryland
Horizontal Aggregation
© 2008 Robert H. Smith School of Business, University of Maryland
Vertical Disaggregation
© 2008 Robert H. Smith School of Business, University of Maryland
Organizing To Capture Corporate
Advantage
General
Nature of Resources
Broad
Scope of Businesses
Narrow
Transfer
Coordination Mechanisms
Share
Financial
Control Systems
Operating
Small
Corporate Office Size
Large
© 2008 Robert H. Smith School of Business, University of Maryland
Specialized
Corporate Strategy Under
Uncertainty: Beyond Synergy
•
Corporation manages
uncertainty by maintaining a
“portfolio of options”
•
As a result, businesses in
your corporation may
represent competing bets on
different technologies,
regulations, etc., and serve
merely to manage risk rather
than to capture near-term
synergies
© 2008 Robert H. Smith School of Business, University of Maryland
Corporate Strategy for Corporate
Counsel
• Determining organization
scope and scale choices
• Implications for corporate
counsel
• Developing a strategy for the
corporate counsel office
© 2008 Robert H. Smith School of Business, University of Maryland
Corporate Counsel and the Better
Off Test
• Create value?
– Lower costs (ability to
capture)?
– Increased willingness to pay
(regulatory constraints;
unintended consequences)?
• Capture value?
– Improved industry structure
(antitrust issues)?
© 2008 Robert H. Smith School of Business, University of Maryland
Corporate Counsel and the
Ownership Test
• Can you write a
contract that properly
aligns incentives?
• Probability of “hold
up” and possible
remedies?
• Can you account for
market dynamism?
© 2008 Robert H. Smith School of Business, University of Maryland
Sound Corporate Strategy
Decisions Require Your Expertise
© 2008 Robert H. Smith School of Business, University of Maryland
Corporate Counsel Role
• Proactive: what and if, not just how
• Creative idea generator and evaluator rather
than merely problem-solver
• Don’t leave synergy and risk estimates to the
finance team alone
• It pays to know economics, finance and other
business functions
• The Board wants to hear from you
• Team players can be effective skeptics, too!
© 2008 Robert H. Smith School of Business, University of Maryland
Corporate Strategy for Corporate
Counsel
• Determining organization
scope and scale choices
• Implications for corporate
counsel
• Developing a strategy for
the corporate counsel office
© 2008 Robert H. Smith School of Business, University of Maryland
How Does What You Do Make Your
Organization “Better Off?”
• Create value
– Lower costs
– Increased willingness to pay
• Capture value
– Improved industry structure
Every organization of any size or complexity passes this test!
© 2008 Robert H. Smith School of Business, University of Maryland
What Legal Activities Should Your
Organization “Own?”
• Contracts
• Joint ventures or alliances
• Ownership
“The” legal strategy choice for many organizations is scope
of internal operations and external partnerships
© 2008 Robert H. Smith School of Business, University of Maryland
Shaping the Regulatory,
Legislative and Legal Environment
The other key strategy question for some
organizations is how to shape the rules of the game
© 2008 Robert H. Smith School of Business, University of Maryland
Strategy Implementation
•Scope of internal and external
activities (“better off” and
“ownership” tests)
•Plan for shaping legal, regulatory and
legislative environment
•Required org. skills
Shared
Values
•Why the organization exists (mission)
•Fundamental beliefs and attributes
Systems
Structure
•Budgeting, planning
•Work processes
•Rewards
•Reporting
relationships
•Responsibilities and
accountabilities
Strategy & Skills
Style
•Leadership style and
approaches
Staff
•People and their capabilities
© 2008 Robert H. Smith School of Business, University of Maryland
Strategy Implementation:
Common Issues
•Making the right outsourcing
decisions
•Updating those decisions over time
based on relative trajectory of
expertise within and outside
organization
Shared
Values
•Alignment with organization’s values
•Maintaining professional values
Systems
Structure
•Partner management
•Ensuring proactive
input on business
decisions
•Reward structures
that work
•Lack of transparency
on accountability,
especially in small
shops
Strategy & Skills
Style
•Time to coach and mentor in
a “small shop”
Staff
•Career paths for corporate counsel staff
•Attracting and retaining best and
brightest
•Diversity of opportunities for staff
© 2008 Robert H. Smith School of Business, University of Maryland
Further Discussion?
© 2008 Robert H. Smith School of Business, University of Maryland
Thank You
Hugh Courtney
Associate Dean of Executive Programs
Professor of the Practice of Strategy
hcourtney@rhsmith.umd.edu
© 2008 Robert H. Smith School of Business, University of Maryland