In the fall issue of “International Review” there is a thought-provoking article by Patrick J. McKenna on law firm strategies, providing some new perspective and interesting analysis on how to develop a strategy to outperform rival law firms.
In the article the fundamental distinction between developing a strategy and focusing on internal effectiveness is emphasized. In a recent survey, Patrick J. McKenna found that most law firm strategies seem to be either fixing problems or emulating best practices:
“[A]ll time spent in looking backwards rather than focusing on the future, exploiting opportunities and building on strengths. Meanwhile the more benchmarking that you do and the more you seek to copy some other firm, the more indistinguishable you are from your competitors. /…/ If you are trying to do essentially the same thing as competitive firms, then it is unlikely that you will be very successful. /…/ Your firm can outperform rivals only if you can establish a difference that clients actually value.”
As noted by Patrick J. McKenna, strategic wisdom has it that you need to identify what you can do really well if you’re going to best the competition. But for law firms this is often not enough, since the core competency – the legal skills offering – is the same as the competitors’. At the same time as there is rapid knowledge growth, making it increasingly difficult for law firms to keep on top of everything, there is also a decreasing half-life of knowledge. Many of the legal skills offerings are becoming commoditized at an ever-increasing rate. Instead, law firms need to find a unique value to deliver to the clients:
“It’s not about building size. It’s about dominating selective practice niches.”
Thus, law firms need to focus their strategy around developing a differentiated position in the marketplace. A problem for many law firms however is that so many new ideas, suggestions for new practices or other initiatives with the potential to generate new revenues, are never encouraged or commercialized. The critical culture is one explanation, another is that most law firms do not have any formal systems to nurture new ideas. In today’s marketplace firms need to be better at capturing new ideas and encouraging enthusiasm, entrepreneurial spirit and innovation. Clients need and want you to identify what adds value to them, deliver that value, and demonstrate that you have done so. Clients may know what they want or what they think they want, but they do not always know what they need. Unfortunately, many attorneys never try to discern the client’s real need, but merely deliver what the client asks for. If you are able to identify a true need, moving away from merely the “want”, the more valuable you are and the more you can charge, because the client’s return on investment is so dramatically higher.
“Satisfying a “want” is non-differentiated; satisfying a “need” is rain making triumph!”
Developing a successful law firm strategy is about finding the difference that clients actually value. It is also about making choices, about deliberately choosing to be different. A great strategy should communicate that “We’re not just another law firm. We’re claiming a territory in which we can be unique and contribute something important to the profession.” Patrick J. McKenna provides the following key steps to marketplace uniqueness:
Focus – Resources are limited and clients are discriminating. Be distinct and focus on dominating your selected practice niche.
Innovate – Embrace profound innovation. If your clients are asking for it, it’s not uncharted territory anymore. You’re already too late.
Streamline – Restructure your processes; be lean and simplified.
Lead – Smart firms aren’t just responding to new trends, they are leading them. There is no such thing as a ‘fast follower’.
Developing a successful law firm strategy is about finding the difference that clients actually value. It is also about making choices, about deliberately choosing to be different. A great strategy should communicate that “We’re not just another law firm. We’re claiming a territory in which we can be unique and contribute something important to the profession.”
Another recent article, in Forbes, “Dr. George Beaton On The Future Of Law”, also points to the importance of innovation and to find the client’s need, all in line with Patrick J. McKenna’s analysis. The Forbes article provides a recap of the legal market development from 1978, and how Dr. George Beaton, now three decades later thinks he is seeing “the first barbarians at the legal industry’s gate” and how they are “armed with disruptive technologies and more innovative business models”. When asked whether the growth of NewLaw business models will threatening the traditional model, George Beaton absolutely think they will in strategic-time. The challenge for BigLaw goes back to the fundamental difference between NewLaw and BigLaw business models:
“BigLaw firms are structured as, and/or behave like, partnerships. Large partnerships, by their very nature, are slow to make decisions and lack a balance sheet suited to taking risks. And in a fast-moving world, that’s a problem. /…/ NewLaw firms are small but potentially very dangerous, because they are teaching clients about new ways of buying. /…/ We see the traditional legal procurement model being substantially disrupted. The big corporate clients will have created captive suppliers, like the outsourcers which we now find everywhere: Mumbai, Los Angeles, Belfast, Cape Town, and Toronto. The corporates will be shareholders in them, so you’ll get a much more integrated supply chain. They’ll also be using NewLaw business model providers of different varieties, managed legal services, and temporary hire firms, to a much greater extent.
George Beaton is certain however, that BigLaw partners will start acting. That they “are not going to watch their million dollars a year evaporate. They are incredibly smart people whose entire business stake is wrapped up in their firms. There can be no doubt that they are going to do something-some have already started.” Some of the firms will be winners on the new legal marketplace. The firms that have made and will continue to make the right strategic decisions. These winning firms will remake themselves sufficiently fast to keep up with, and continue serving, their clients. The biggest danger is that the average partner thinks that a tweak here, or a nip and tuck there, is remaking-that they won’t understand how profoundly their work practices have to change.
Or, as Patrick J. McKenna sums up his article above:
“Copy or break the mold. That’s the choice we face every day.”
Read the complete articles here:
- International Review Fall 2014 article “Perspective On Firm Strategies” »
- Forbes Magazine article “Dr. George Beaton of Beaton Capital, On The Future Of Law” »