Practice Sector Specialty: How to Distinguish Your Law Firm in a Crowded Market
Neubecker for The American Lawyer)
Originally published for Thomson Reuters Legal Executive Institute on December 15, 2016
Bill Henderson and Evan Parker wrote a brief, but important article in the December edition of The American Lawyer magazine, titled “How to Size Up Sectors and Practices for Future Growth”. As they do so effectively, Henderson, a law professor at Indiana University and co-founder and principal at Lawyer Metrics, and Parker, director of analytics at Lawyer Metrics, distilled from market data several important ideas about how law firm leaders should think about their firm’s strategies.
In this blog post, I will comment on three concepts the article develops:
The importance of understanding the firm’s market;
How to conceive the best strategy to expand market share; and
The strategic value of industry sector expertise.
Market Share
It is fundamentally important that law firms see themselves as part of a finite market for legal services. That vision provides the necessary context to allow a firm to set its objectives and measure its progress.
This is particularly true in today’s changing legal service market. Henderson and Parker’s article quantifies the total annual market, measured by fees paid to organizations in the business of providing legal services, at $289 billion. We know from research done by Peer Monitor that an additional $160 billion is spent each year by in-house departments. We also know that clients are increasingly moving work among providers, whether taking it in-house or moving it to a different firm, to achieve greater cost effectiveness.
As the article sets out, the overall market can be subdivided in to submarkets by practice area, just as it can be by region and by industry sector.
All firms should decide first and foremost the specific market defined by these three dimensions that they will pursue, and then measure their share and set objectives for reaching a sustainable share of the market going forward. Undertaking this analysis will require important and difficult study of clients, competitors, and market trends. By definition, it is a much more outward way of thinking than firms traditionally do.
The firm can then more meaningfully set objectives, construct a strategy and measure its progress.
How to Build the Desired Market Share
The article posits that the overall supply of lawyers pursuing engagements from clients at best equals the demand, so that building and maintaining market share literally requires the firm to win it from its competitors. Not only is this observation correct, it is a healthy way for law firms to think about their strategies. Again, it is an outward focus: how to we demonstrate to the market that we are a better choice than the competing firms?
Here the article takes an idea from Steve Jobs. It describes the approach Jobs took when he returned to Apple and set out to take market share back from Microsoft: i) create a handful of products that are much better than anything else in the market; and ii) do that by starting with the customer experience and working backward to the technology of the Apple device.
There is a clear parallel in law. To distinguish a firm, design legal services that are “much better” than the competitors’, defined by the way the client experiences the service. This is exactly what Margaret Hagan teaches at the Stanford Institute of Design (the d.school).
Henderson and Parker’s article goes on to discuss two important examples of how firms have done this in substantial and visible ways. One involves the employment law market and the other involves the M&A market. Each of the examples turns on its own specific facts, but the analogy holds for any market analysis.
Leveraging Industry Sector Expertise
The article also makes one very pragmatic suggestion for delivering “much better” service than competitors: leverage a firm’s industry sector experience and knowledge.
Clients want lawyers who truly understand their businesses. This takes more than a passing understanding of the facts. It requires an understanding of how things actually work within their business context. The authors suggest that firms take stock of their collective knowledge and experience in the sectors they know best and then develop a superior client service model based on that knowledge. This is a very sound idea.
I recommend that all law firm leaders read Henderson and Parker’s article.