A European View of Brexit: Three Sources of Opportunities

Ironically, I was asked to give a European view of Brexit for an online conference this morning. I say, ironically, because it was in my role as an Irish lawyer for an Irish law firm, yet speaking from London as someone who's also qualified as an English solicitor and who left Sydney in 1994 as a 29 year old barrister. I guess that makes me one of Theresa May’s ‘citizens of nowhere’. At any rate, here's a summary of my view - which I tried to couch in terms of opportunities from a European standpoint.

How to view Brexit

I see Brexit as a set of international sanctions self-imposed by voters for emotional reasons - whether perceived 'lack of sovereignty', feeling 'left behind by globalisation', xenophobia or nostalgia. The hard facts never mattered. Trading rights to fish in UK waters to EU countries may have 'sent a shudder' through the House of Commons from a symbolic, nationalistic standpoint but fishing is the UK's smallest industry, employing 24,000 people and exporting 80% of its catch to the EU to help feed 400m people, as opposed to the UK's 65m.

And the hard reality is that the UK helped build the EU trade bloc, including advocating its expansion to 28 members; and contributing significantly to many of its rules, like EU financial services regulation and, ironically, anti-money laundering regulation. So I have little sympathy with the idea that Britain could legitimately expect the EU suddenly to change how it does deals with third countries just because Britain used to be a member state.

Opportunities?

Brexit may be a mess of the UK's own making, but every mess provides an opportunity for someone to clean up.

Looking for opportunities in this context is a bit like the final scene in "The Life of Brian". A lot of terrible things happen in that scene, including mass-suicide out of 'solidarity' with the poor unfortunates being crucified. But it's important to remember that the scene ends with everyone singing “Always look on the bright side of life”.  

To continue the idea that Brexit is a set of self-imposed sanctions, the opportunities really boil down to 'sanction-busting' – finding workarounds for the many problems Brexit creates. Aside from the potential for speculators and other 'disaster capitalists' to make money, there are three sources for these opportunities:

Any form of Brexit means ‘no deal’ for services: 

The end of Brexit transition period in December means the end of free movement of services from the UK into the EU (and the free movement of the labour needed to deliver them), as well as the end of mutual recognition of professional qualifications, licences and various types of certificates (e.g. veterinary, eIDAS identity certificates and so on).

That's a significant problem because services account for 80% of the UK economy, 80% of UK jobs and a third of UK exports, 40% of which go to EEA countries. 

This means UK firms need to set up EEA hubs, which will bring know-how, jobs and tax revenues to their new home countries. Ireland has a great opportunity here, being the only principally English speaking, common law country left in the EEA with a visa-free Common Travel Area for British and Irish workers. That's why I got my own practising certificate in Ireland and added a consultancy with an Irish law firm, since my UK practising certificate and legal qualifications won't be recognised in the EU after Brexit transition ends.

The perceived mishandling of Covid19 by the UK government compared to others (not to mention a trend toward xenophobic policy measures and right wing culture) might also feed into people’s sense of where is best to live, as could a trend toward remote-working as opposed to treating cities like London as essential hubs.

Britain is a consultant/client state:

Successive British governments have been relaxed about the sale of British businesses to foreign buyers, to the point where there aren’t really many major British-owned businesses anymore, and there seem likely be even fewer in future. 

In fact, Britain has evolved not only into an 80% service economy but also a consultant state - a sort of UK Consulting PLC. It majors in financial services, international dispute resolution, artificial intelligence, computing, construction, engineering and lots of other services (not to mention tax avoidance and money laundering) without actually owning the factories, output, buildings or in many cases even the land on which they're built. 

At the same time the British government apparently sees the job of serving its own citizens as something to be outsourced to private service providers. So the government operates like a procurement platform, paying service providers vast sums of tax money to deliver public services in remarkably autonomous fashion, while extracting taxes from the service providers' public sector income (as a kind of referral commission), as well as the taxes on the revenue from UK Consulting PLC. 

Needless to say, there are all sorts of opportunities for EU/UK service providers to import and export services using local UK/EU entities and locally qualified personnel, subject to dual qualifications and nationality/visas for those who need to move between.

Friction at the borders

There will be problems and delays at the UK borders, regardless of any deal or no deal. So Ireland, for example, is busy figuring out how to get its goods in and out by increased ferry services to and from the EU, and is planning how to open up markets beyond the UK. 

On both sides of the borders, customers who import from the EU into the UK or vice versa want to avoid 'customs risk'. That means the exporting suppliers must have a local entity/office in the EU/UK that takes on the responsibility and the liability for ensuring goods are delivered to importers. 

In each case, both European and British businesses can assist each other in embracing these challenges as opportunities, even if the ultimate result is a transfer of British business activity to the EU and a British economy that is smaller and produces less than if Britain had remained a member of the trade bloc.

You see, I told you there'd be opportunities!

 

Turn Complaints Into Fixes, Features and Products - Welcome to Web 2.0

Ever since GE required me to get my Six Sigma greenbelt, I've been convinced that complaints can have a significant positive effect on costs and revenues. But only when you're prepared to painstakingly work from identifying the critical expressions of dissatisfaction to implementing the fix, feature and maybe eventually the product, that might logically result.

That isn't to say every business problem can't be solved without an enterprise-wide investment in Six Sigma, LEAN or some other problem-solving methodology. After all, an expression of dissatisfaction suggests a desire by the customer to improve his or her experience. And the process of capturing those expressions and resolving the issues creates the "architecture of participation" that is the very essence of successful Web 2.0 businesses.

Simply implementing a process for accurately classifying customers' initial expression of dissatisfaction from the customer's standpoint will get you going along the right path. It's then pretty much common sense to identify the most common issues, figure out their scale or value, and spend a proportionate amount in resources to find their root cause, the best fix for the money and a trigger that tells you if and when the problem resurfaces.

This is not a "customer service" issue. It's a business in itself.

Allowing all functions to see and contribute to the complaint resolution process will ensure that bad stuff doesn't get hidden, blame goes out the window (it could be you next!) and the organisation takes a holistic, realistic view of significant problems and the resources available to put them right for good.

Interestingly, the European Commission is currently consulting on a plan to harmonise the classification of complaints to third party agencies to ensure that "policy makers will be able to get a better picture of collective consumer detriment in various sectors". Ironically, that may in fact slow the pace of EU consumer regulation, as lack of transparency and consultation on the actual basis for regulating has long been a criticism leveled at the Commission.

The Evolution of Legal Services

Interesting coverage of Axiom's business model in The Lawyer this week. Flexible working infiltrates the Ivory Tower.

[See also subsequent coverage in the Wall Street Journal.]

Experienced specialist lawyers like the Axiom model because you get to earn good money consulting to some fantastic brands on big product launches, outsourcing deals, acquisition integration and so on. Great if you're looking for a new challenge but the "permanent" roles on offer don't light your fire.

In-house teams like someone with plenty of corporate experience to absorb the pain of servicing very demanding, one-off projects, rather than diverting the in-house team from business-as-usual or relying on a private practice lawyer who doesn't know the corporate processes and procedures.

Big law firms like the efficiency of dealing with a lawyer dedicated to a big transaction - especially where they have committed to fixed or capped fee arrangements. And it's an alternative career path for those who find the whole partnership thing a bit of a slog.

Of course, I should mention that I consult through Axiom.

You and Your Lawyer - Law 2.0

I'm enjoying Nick Holmes' digests of Richard Susskind's forthcoming missive on the future of legal services - a plea for innovation amidst the rising tide of super-normal law firm profits. You could be forgiven if images of King Canute wash into your mind at this point, but the nub of the IT aspect of Richard's thesis is that:

"...there is remarkable scope for greater and beneficial deployment of ... disruptive legal technologies [which] do not support or complement current legal practices. They challenge and replace them, in whole or in part... If lawyers are barely conversant with today's technologies, they have even less sense of how much progress in legal technology is likely in the coming 10 years."

Of course, Richard is wasting his time and effort when it comes to the very law firms who need to listen most. Enormous profits provide no incentive to innovate, except perhaps to cut the costs of current processes and figure out new excuses to hike hourly rates. None is really organised to innovate. The trend away from the pretence of partnership and chatter about who will list on the stock exchange reveals that their true intent, ironically, is to mirror the ethos of their best and biggest clients. Economies of scale and profits, not staff or clients, are paramount, the argument being that only huge profits allow adequate investment in staff and various hallmarks of quality. Like extra sculptures for the foyer.

True, clients do get resentful as rates soar, and the big ones bully firms into complex discount arrangements that sub-scale clients ultimately pay for. But that's merely a corporate game of cat-and-mouse, not seismic innovation.

No, the only participants in Law 2.0 are going to be relieved clients, the lawyers who solve their legal issues, and law firms that do no more than what is strictly necessary to facilitate the interaction between the two in order to solve those legal issues. In other words, lean, rather than obese, intermediaries.

I began working through Lawyers Direct two years ago to top-up my salary while working at Zopa, the person to person lending marketplace (in fairness to them, it was perhaps my stints at Reuters, DLA and GE that drove me to become a serial disruptor). Lawyers Direct offers access to more than 60 highly experienced lawyers at half what their City rates would have been. There is a fantastic but small support team in a small office in West London. The lawyers work wherever and whenever they please, linked by email and with the same sort of online tools and intranet that any self-respecting law firm should have. The reduced overhead means that even after the lower charge-out rate, the lawyers still have the opportunity to take home the same salary as some of their City counterparts (the ones who really do the work of solving legal issues).

Vaporised is the monolithic concrete tower with its vast, wasted common areas, sculptures, reception, private dining rooms, gym, library and hordes of support staff. There are neither billing targets nor the anxiety and temptation that goes with them. There are no partners, committees of partners, managing partners or senior partners.

All that's left is a compelling, lean and efficient business model for clients and lawyers alike.

List that, and I'll queue for the stock!

Your own personal economy

The red wine was flowing last night, thanks to Simon, Bill and the other fine folk at CVL, and some of the chat turned to how much of the goods and services that we buy and sell will be person-to-person in 5 or 10 years.

While I doubt that I was terribly informative last night, I'm now able to recall that, personally and professionally, I'm aware that people are already connecting economically speaking in education, complementary healthcare, event organising, lending (as a proxy for investing or saving) and borrowing, music, financing music production, stuff, accommodation, jobs and more stuff, legal services and home improvement. There must be loads more, but I'd have to start actively searching and my emails are piling up...

Could you get through the day, week, month, year only dealing with individuals?