Inside, outside, upside down: Competitive trends in the legal marketplace
This post was written by Dan O’Day, vice president of Operations, Elite
Today is the third day of Vantage Worldwide 2013. For the record, Vantage is the reincarnation of the Thomson Reuters Elite User Conference with a focus on Enterprise Business Solutions. The keynote address, delivered by the upbeat trio of Cary Burch, Elisabet Hardy and Eric Sugden set the tone for the first day as they described current trends in the legal industry as well exciting new developments coming from Thomson Reuters Elite. These trends include the fundamental change from a seller’s to a buyer’s market for legal services, the increasing shift from the billable hour to alternative fee arrangements, the inevitable move to cloud-based computing, the growing demand for mobile solutions, and the desire of users to access all their critical applications from a single point of reference or workspace.
Others are already blogging about the keynote and the leadership role that Elite has established in this thing that pundits call “the new normal,” so I’ll take the space remaining to consider the implications of a somewhat overlooked trend in the increasingly competitive landscape – competition from inside counsel.
Law firms are accustomed to competing with one another. Over the years, we’ve watched as firms have gone to great lengths to attract laterals, lure away entire practice groups and raise the starting pay of first-year associates. It wasn’t that many years ago that a firm with 100 lawyers was considered large, and one with 500 attorneys was unimaginably huge. Today, the smallest firm on the National Law Journal 350 list has 112 attorneys, and the largest nearly 4,000. And while the last several years have seen massive consolidation in the marketplace, clients are actually spending less on outside counsel per in-house counsel today than they were ten years ago (see image).
The implications of this trend are profound, and should serve as a wake-up call to all law firms. You aren’t just competing with each other for high value work, you are competing with in-house counsel as well. In a very real sense you are in competition with your own clients.
How then is a law firm to successfully compete with its own clients? Here are four suggested strategies:
-Build and maintain relationships. The teachers in my pre-school taught us a little song that went as follows: Make new friends, but keep the old. One is silver and the other gold. Always a good lesson in personal life, it is equally important for law firms to maintain close relationships with clients, seek cross-selling opportunities and anticipate client needs that may cover many geographies and industries. In today’s rapidly evolving and interconnected world, one must adopt equally fast and adaptive technology to stay ahead or at least abreast of client demand. Use this information and technology to stay in near-constant contact, or as any good sales person will tell you, “If you are waiting for the business to call you, you’ve already lost it.”
-Collaborate and be more efficient. It’s a fact that most inside counsel want to deliver high-quality work product. They didn’t go to law school so they can spend their days reviewing invoices from outside counsel. One key to winning work is to demonstrate your willingness to put some skin into the game – to be more of a partner and less a vendor of legal services. To do this, you will have to be willing to share your planning and budgeting processes as well as demonstrate that you can manage matters over time in accordance with previously agreed budgets and plans.
-Eliminate risk. Entire firms have been brought down by poor conflicts management or other mistakes such disclosure of confidential material or improper handling of client data. Despite my earlier exhortation to put some skin in the game, no firm should expose itself unnecessarily when simple and proven technologies and processes are both available and affordable.
-Analyze – evaluate – repeat. None of the above is of any import unless you can bring in each matter within an acceptable profitability margin. Use the data captured by your financial system, and rely on your CFO and other financial professionals to ensure that you are managing matters profitably. This is especially critical in these days of fixed fee and alternative fee arrangements. It’s too easy to say that we brought this matter in on budget or that we always do this type of matter for this many dollars. At the end of the day, you have to know if you’re really making any money.
If you’re the observant type, you’ll notice that the four strategies outlined above are in close alignment to the four elements of the Thomson Reuters Elite Enterprise Business Solution: financial management, risk management, client and matter management and business development. Which means that while I didn’t blog about the keynote, I did.