What do you want to be famous for? For nearly 25 years, I have posed this challenging question to both lawyers and law firms. It is not a new question – gurus like David Maister and Marvin Bower of McKinsey & Co have been asking it for several decades. The question usually helps to persuade people and firms to specialise, to focus and to find some point of differentiation that helps them to stand out from the crowd. In other words, it helps them to find and develop a niche and to direct their expected focus into either a sector/industry approach or a technical specialist approach.
A concentrated portfolio of sectors and industries seems to have become the predominant area for planning and development in many law firms. A growing number are, however, finding that a sector focus is not the only one-size-fits-all answer. Clients often prefer to see a sophisticated combination of specialist technical expertise and industry knowledge in their search for solutions that are better, faster and cheaper.
There are four intersecting approaches to the sector/services equation (see below).
1. One-trick ponies
In this approach, a firm will operate in one sector or industry and offer only one service. For example, some firms offer just commercial contracts expertise in the music or media sectors. These firms know their industries inside out and have a wealth of know-how and precedents to help them negotiate or draft the right types of documents and contracts. Because of their deep knowledge, they have often developed systematic process improvements and are able to resist reinventing the wheel on every transaction. Combined with their knowledge of industry pricing sensitivities, they are often able to provide cost-effective services to their clients.
But, because the firms are essentially ‘one-trick ponies’, they are usually quite modestly sized and are also at risk both of sector decline and service redundancy over time. Single services/sector firms do however have a cross-disciplinary appeal which can balance at least part of the risk. Triton Legal, for example, an alternative business structure specialising in the defence of insured entities, is part of a multi-disciplinary commercial claims organisation working with insurers to manage their claims across the UK and globally.
2. Sector specialists
Niche employment or IP firms are two examples of firms which offer highly specialised services to many sectors. Lewis Silkin in London is, for example, is known as one of the leading employment practices in the UK but works across many sectors. Bird & Bird has the same reputation in IP law.
Such firms often compete with global and magic circle firms for their work but, like the one-trick ponies, are at risk from a downturn in trading conditions in their area of law. Employment law, for example, has become increasingly commoditised and is therefore not as profitable as it used to be.
3. Service specialists
Capsticks is an example of a niche firm that offers a broad range of legal services predominantly to a single sector – in its case, the health sector. Similarly, Sharpe Pritchard offers a wide portfolio of services to local authorities and central government bodies, whilst Thomas Cooper focuses on the shipping and maritime areas.
It seems that many firms whose historical successes used to derive from a single sector at some stage often diversify into other sectors to avoid having all their eggs in one sector basket. Clyde & Co is one such example.
The danger of offering a range of services to a wide variety of sectors is that firms run the risk of attracting a ‘jack or all trades and master of none’ reputation. This risk is avoided by global and big city firms which drill very deep into the services they offer and the sectors in which they specialise. In their case, the global or magic-circle brand trumps any danger of a generalist label.
The brutal truth is that a multi services/sector approach can really only be offered well by very large firms that are capable of fielding deep and credible teams across the board. Hence, this can be a dangerous category to fall into, but it happens to be the space occupied by a substantial number of national, regional and second-tier London firms.
As with all planning, it is necessary to first pin down what the firm, its practice groups and individuals are really good at and what inspires their interest and passion. An honest examination of resources will help to keep aspirations rooted in reality. Smaller firms or practice groups can probably only gain excellence in one or two things and consequently may be limited in their choices, whilst bigger firms should resist too broad an approach.
This article first appeared in Managing Partner Volume 18 Issue 3 for November 2015, and is reproduced with their permission