Leadership Spotlight

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And despite widespread perceptions to the contrary, Shell argues that this legal maneuvering is not rocket science and is not just for large and resource-rich organizations. Business leaders overestimate the difficulty of making legal strategy a competitive tool, giving those who gain this knowledge a genuine competitive edge. "Lawyers, litigation, regulatory agencies, lobbying, and legislative reforms are powerful opportunities, and threats, in the right hands," Shell says. "I don't think anybody – including the Supreme Court justices – fully understands the law. I think most lawyers and judges take each case and try to do the best they can. In just this way, executives can grasp a great deal about the legal dynamics of certain situations when the success of their business is at stake."

What are some key legal insights Shell believes businesses can't afford to ignore?

• First, the merits of a legal claim or public policy argument are only one aspect of a successful legal strategy. "You can have a great case and still lose in the marketplace if you fail to properly understand the strategic environment you are in and the strategic goal you're trying to accomplish," he says. New companies with an innovative product entering the market space of a very powerful incumbent, for instance, often find themselves on the receiving end of lawsuits. The litigation may have little merit, but young firms often lack the resources to mount a defense. "So they end up having to settle the case, or just drop out because their funding dries up," Shell says.

• It's also critical to understand that most legal strategy decisions are really business decisions in disguise. Whether and when to settle a case, for instance, is driven more by strategic considerations, Shell says, than legal ones. A business might have a great legal case, but it chooses not to litigate because the entity that has wronged it is its biggest customer. "Or you may be involved in litigation in which you have a legitimate legal claim, but you've only got so much money, and if you continue with the litigation, you'll have to drop your marketing program. So you settle the case," Shell says.

• Similarly, firms with deep pockets and good market positions are formidable legal opponents, even when they have a weak legal case. "When you've got a strong strategic position, you are able to bring other pressures to bear to win a favorable outcome in a legal dispute. Many of these pressures go beyond financial resources, such as leverage with suppliers or customers, that enable you to really lean on your opponent."

• Access to sympathetic legal decision makers – particularly regulators and legislators – is "worth its weight in gold," Shell says. "Smart businesses invest in this long before they need it. Microsoft did not, and look what happened to it. Before the government brought its antitrust case, Bill Gates had one lonely lobbyist based in a Washington, DC suburb. It made political contributions of a little over $100,000 per year. Now Microsoft has a 15-person Washington staff and is one of the largest political contributors in the high-tech industry." Even small businesses, says Shell, can cultivate clout on a local level with city councils and chambers of commerce.

• In legal disputes, the public's perception of who is right and who is wrong can be pivotal. Winning in the court of public opinion, Shell says, can be just as important as winning in the courthouse. Henry Ford, for example, founded Ford Motor Co. in 1903 and was sued within six weeks by an association of car manufacturers that had, to date, quickly put new market entrants out of business based on a patent it held on the automobile. The group was particularly vehement in its opposition to Ford, who wanted to make an affordable automobile for the masses. Ford took on the group in a very public fight, defeating its initial attempt to win an injunction against him. For eight more years, he litigated to defeat the patent, casting himself as a Robin Hood of the car business. "By the end of that lawsuit, he was a national figure and a hero," Shell says. "Millions of Americans favored the little guy fighting the big guy, and in the early 1900s, this was a big political issue not just with the automobile, but with steel and banking and oil. Ford won hearts, minds, and market share and became an enormously powerful icon of the American spirit."