Law is not that different from other business services, so get in shape for the tough new world
For so long, as lawyers, we thought we were different. The number of solicitors in private practice grew by some 400 per cent between 1968 (20,500) and 2011 (87,973), but now change seems to be coming at once: macroeconomics, buying patterns, computerisation, commoditisation, disaggregation, globalisation, third-party capital, market segmentation, you name it - all changing what clients want. Now we know we are not so different from other business services after all.
For a sector that accounts for around 3 per cent of GDP there is surprisingly little analysis of business legal services. This is changing as we head into a period of structural transformation and firms look for sustainable competitive advantage in a crowded post-growth UK market.
Sustainable differentiation means holding on to something others do not have in the market you are in. It could be top-tier global coverage (think magic circle), managed legal (Berwin Leighton Paisner/Thames Water) or a virtual firm (Axiom). For us, it’s a focus on technology and digital media. Our specialist area does not have the technical barriers to entry of pensions (it’s no accident that Sackers is the specialist firms’ poster-child) or the structural barriers of the class action firms that are taking on the big institutions. In fact, it’s characterised by low barriers to entry, as evidenced by the number of tech law start-ups. For us, it’s all about relevance, engagement and pricing.
Relevance is key. In a faster moving world our market and sector knowledge must be such that we ‘get it’ at the start of the call giving the instruction. Corporate counsel don’t have 15 minutes to explain the background. These days, they take as read first-class legal expertise and, increasingly, client service and commerciality.
For us, staying relevant also means meeting all the technological and digital media needs of our buyer, supplier and finance provider clients. Market engagement is also critical. This gives us one of our two sustainable edges. We’re putting a lot of effort into business development (BD), with direct costs and marketing spend at around 5 per cent of fee income.
This is for a number of reasons: first, the work is out there, but you have to work harder and smarter for it; second, we want to showcase our lawyers’ thought leadership in the areas we cover; and third, developing our partners’ skills as effective rainmakers gives us a head start in growing the practice. We believe the barriers to staying and growing in IT law are higher than the barriers to entry, largely because of the resource and investment needed in BD and the people and platforms that support it. Meanwhile, pricing is as much about ‘we’re all project managers now’ as the size of the bill. It’s about the relationship with and knowledge of the client: judging where ‘the best is the enemy of the good’ - where the client wants a Mini rather than a Bentley; how many lawyers to assign to the project, their seniority and how the project should be managed. We’re seeing key issues of client engagement around fixed fees, capped estimates, assumption reduction and success uplifts. Getting this right gives us a sustainable advantage.