Tag Archives: law firm strategy

Law firms: consider the pilot fish and the shark

pilotoceanic_whitetipFor all the well-known reasons, aggregate demand for legal services delivered by traditional law firms is flat. That has been pretty well documented. (In fact, enough already.)

So, the firms that are succeeding are the ones taking business from others (they are taking business from other law firms and taking it from alternative legal services providers, as well).

Here are three opportunities for midsize firms in this jungle:

Midsize firms can take business from big firms when clients elect to hire smaller firms where (i) the service is equivalent or better, (ii) costs are lower, and (iii) firm principals are more directly engaged in direct client service.

Midsize firms can take business from small firms where the midsize firm can bring broader and deeper capabilities.

Midsize firms can take business from anyone, anywhere, any time a midsize firm can provide experience-honed legal judgment delivered person-to-person by empathetic, seasoned professionals.

But “taking business” from others need not be all tooth-and-claw. Think instead pilot-fish-and-shark.

Artful midsize firms can build lasting, mutually beneficial relationships with other firms — large and small — law firm and alternative provider —  by networking, collaborating, complementing.

Midsize firms are uniquely apt for networking.

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Mid size law firms doomed to planning, diligence

due-diligenceGuilford College president Jane Fernandes once counseled the College’s board of trustees that there is a difference between “planning” and “hoping.” (She communicated this very diplomatically, a measure of her fitness for her job.)

In a word (well, two words) the difference is “due diligence.”

British law firm consultants Edward Drummond & Co recently advised “mid-tier” firms in England that the largest London firms are shouldering mid-tier firms out of high-margin work. Mid-tier firms, Drummond says, are in danger of losing their ability to attract new business.

But, there is hope. Drummond, itself a planning consultant, says there is

scope for mid-tier firms to improve their margins by placing greater focus on ‘rigorous strategic planning’. For their new ventures to be effective, the consultancy said, it was imperative that mid-tier firms dramatically ramp up in-depth market research and competitor analysis while also ensuring a thorough understanding of the potential opportunities and risks of the work.

Firms were warned that without carrying out detailed due diligence, they could risk seeing seemingly profitable new business ventures suffer or even fail.

Before firms commit to “new lines of business” though, a Drummond partner counseled

  • analysis of competitors,
  • identifying gaps in the market, and
  • targeting potential clients

Failure to commit to rigorous due diligence is more strategic hope than strategic planning. It risks doom.

What all this means in the context of mid-size American law firms is a horse of a somewhat different color than what British mid-tier firms face, but still a horse.

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The nature of the law firm – it’s about the client

pellicansLawyers are going now for 10 years contemplating The End of Lawyers? and how legal services organizations might be configured in the future. New taxonomies have emerged: Big Law, Mid Law, Alternative Services Providers, legal process managers, and more.

The thinking of economist Robert Coase has been rediscovered. Coase wrote The Nature of the Firm. Firms are needed, he said, only where performing functions within an enterprise costs less than outsourcing.

And so lawyers have taken Coase for guidance in how to build law firms. They ask themselves what advantages are won by taking functions in-house (specialty practices, IT, etc.) and what functions should be outsourced. “Full service law firms” are a challenged model. Is it better to be a one-stop organization, possibly with multiple offices; or a niche-oriented, highly networked shop?

But, wait.  Are law firms asking the right question?

The driving question is not so much how law firms should be configured. It is how will clients configure themselves? Can businesses obtain legal services better in-house or outside? If they go outside, are they better served by law firms or alternatives?

For law firms, the truly strategic question is not whether they need an ERISA capability, or a healthcare practice. It is what services will clients do for themselves? And, when clients choose to go outside, what can a law firm do better and cheaper than alternative providers? These are questions that are answered quite differently, depending on the size, location and practice competencies of different law firms.

The concept that legal services are best delivered from a stand-alone professional services partnership – in order to assure independence, competence and objectivity – has modest appeal for clients who have concluded that they can obtain the same services more efficiently elsewhere.

What can traditional law firms do best by these measures?

It’s about the client’s economics, not the law firm’s.

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