The recession winds have hit the economy at gale force levels in the last few weeks. Many people spent a nervous day watching the stock market today.
The natural reaction to news of a slowing economy is to cut back on spending. Recession often goes hand in hand with retrenchment, and there’s little doubt that the legal profession is already casting a nervous eye toward technology budgets.
Today, I took a look back at an article I wrote in 2001 called “A Prudent Approach to Legal Technology Spending in a Slowing Economy.” It’s been one of my most popular articles. I wondered how relevant it felt today.
The article actually holds up well, despite the outdated examples and reference to Y2K efforts.
It also reflects some of my common themes, including my stubborn insistence that the concepts of modern portfolio theory (diversity of investments, et al.) should play a role in legal technology strategy and planning.
Here are the key points in the article, which are worth thinking about in the coming days and weeks.
The key: being willing to think of technology in terms of investment.
I like to think of technology investing as a form of portfolio investing. Much as we rebalance our investment portfolios in changing economic conditions, the same principles apply to technology investment. . . . The interesting conclusion in modern portfolio theory is that the most prudent approach, over the long term, includes a reasonable proportion of high-risk, high-return investments, regardless of the investment climate. In a slow economy, sticking with a diversified approach is mandatory.
Investing in technology requires a similar portfolio approach.
The article identifies six areas to consider carefully when developing your technology portfolio:
1. Technology That Cuts Costs
2. Technology That Makes You Indispensable to Your Clients
3. Technology That Helps You Get New Clients
4. Technology That Helps You Move into New Practice Areas (or Creates Profitable Niche Practices)
5. Technology That Helps You Recruit and Retain Great People
6. Technology That Makes You Saner
The article concluded with these thoughts:
In a slow economy, you need to make smart choices about technology. Focusing hard on return on investment is important, but not if you are using that as an excuse to shut down technology investment. A better approach is to get a lot of options on the table and consider their likely risk and potential return. Then prudently pick a diverse portfolio of technology investment projects and step boldly forward. Not all of them may work, but the diversification will, and you’ll find yourself well positioned for the changes to come, both in the economy and the practice of law.
I really like the ideas in this article and find them quite appropriate for today. What do you think? Do you have other ideas and strategies? Is it time to focus on recession strategies?
[Originally posted on DennisKennedy.Blog (https://www.denniskennedy.com/blog/)]
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