One of the most difficult questions that a law firm should ask itself is ‘why should clients choose us?’ In a competitive marketplace featuring a bewildering choice of potential law firms, it is sometimes difficult to spot the differences between firms that occupy or aspire to the same commercial segment.
In trying to establish a compelling area of demand for their services, many law firms stress their outstanding client service, commercial practicality and value for money, but it is hard to see these factors as game winners or anything more than obvious features that all firms ought to evidence in order to play the game.
Just as regular skiers on holiday find it hard to rise above what is known as the ‘intermediate plateau’ to become advanced in their proficiency, law firms have trouble becoming more than merely average. In truth, there is a host of somewhat mediocre firms in most countries and jurisdictions occupying the intermediate plateau.
There are three initial steps that firms can take to start the difficult climb off the intermediate plateau and join the rewarding higher slopes of advanced law firms.
1. Be honest and critical
An honest assessment of the firm’s skills, experience and competitive capabilities can be an excruciatingly embarrassing exercise, as it often forces the admission that most of the firm’s lawyers are pretty average – perhaps no better nor worse than the firm’s main rivals, whose skills and experience are neither compelling nor unique.
Being nice people is, sadly, not enough. Hopefully, however, a fifth or more of the firm will have some special legal skills, sector expertise or marketing appeal that can be cultivated, leveraged and exploited to assist the firm in developing an improved competitive position.
2. Determine your niches
After conducting an honest appraisal of the firm’s capabilities, it ought to be possible to work out the firm’s best and most competitive niches. It is a mistake to regard niche firms as small tight-knit firms supplying a narrow market segment or offering a single array of specialised services – ‘niche’ is not the same as ‘boutique’.
Niches should be regarded as those parts of the firm that have created a special area of demand in the services they offer. Hence, a firm may have a portfolio of different niches that help it to achieve a competitive position. Such niches often provide what John Kotter refers to as a “big opportunity – a window into a winning future that is realistic, emotionally compelling and memorable” ( John P Kotter, Accelerate, HBR Press, 2014)
Your firm should agree and define its high-level strategic intent – the identity that differentiates it from others, its overall driving purpose and the sum of your partners’ aspirations and vision. What is your firm’s ‘big opportunity’? What change to your firm’s environment could you make and rapidly exploit to capitalise on that opportunity?
3. Fund your growth
Law firm funding is a notoriously difficult area, as many law firms remain externally uninvestable and there is a limit to the depth of their partners’ pockets. However, unless a firm is resigned to remaining on the intermediate plateau and gradually trying to improve itself as time goes by, radical change is needed; this always comes at a price.
I have known several firms which have taken key partners off the production line (thus hitting short-term profits) to focus on developing an emerging niche or gaining industry experience. Other firms have made significant investments in team building ahead of demand.
The cost of such investments is usually met within the firm’s resources, but this can be deeply unpopular with older partners (who may retire before a return on investment is seen) or in firms with average or low profitability (where any profit diminution may be unappealing to all).
Opening new offices, acquiring teams and hiring lateral partners requires funding with cash that is often difficult to find. Divesting non-core or underperforming areas may help, as might renewed efficiency measures. If, however, partners are excited and compelled by the firm’s strategic intent and the options and opportunities that have been identified, they may have to find ways to ‘put their money where their mouths are’ and invest further capital in the firm.
All of these steps are painful but, if your firm is determined and committed to pulling itself off the intermediate plateau, urgent and radical action is necessary to provide funds to exploit its options. The danger of failing to do so is that your firm will drift along in a comfort zone and will inevitably risk losing ground, partners, market share and profitability as it sinks into mediocre obscurity.
This article first appeared in Managing Partner in March 2015 (Volume 17 Issue 8) and is reproduced with their permission