COMPETITION IN the legal services market has been increasing steadily for over 20 years but the last five years have seen a rapid transition to much more mature levels of competitiveness. There is now a pattern of competitive trends running through all markets, no matter where in the world, albeit at different levels of intensity between markets. Firms at all levels and positions in the global legal market now face a common set of challenges that need to be addressed, and addressed decisively, if they wish to remain competitive. These challenges come from both the demand and the supply side of the market.
A number of sizeable firms in the US and UK have collapsed in this period and a significant number have merged to avoid that fate. Without a significant shift in strategic thinking in law firms worldwide the legal market will see more firm collapses and forced mergers. Additionally, the majority of firms that lose competitiveness and are forced out of their present market position will realise that, to survive, they will require a drastic overhaul of their business model and the strategic positioning of the firm and undergo a major restructuring.
Pro-actively addressing the issues ahead of crisis will result in a much less painful outcome than if firms wait for change to be force upon them. In this report world renowned law firm advisor, Alan Hodgart, critically examines the challenges that law firms face across different markets, developing a roadmap that will enable law firms to survive and thrive through a period of unprecedented upheaval in the legal market. It will provide a detailed analysis of the challenges facing modern law firms and identify the options available to meet and succeed in the face of these seismic threats.
The state of legal market
- Changes in law firm profitability;
- Law firm reputation analysis;
- Buying power shifts to legal counsel and… to head of finance as well.
The structure of legal market
- The Global Elite;
- Business law firms;
- International Business Law firms (IBL);
- London Business Law Firms;
- National Business Law Firms;
- Regional business law firms.
The state of Global Legal market
- Global Trends;
- Market Segmentation.
- The corporate market shows a significant shift to emerging markets – particularly Asia Pacific;
- Geographic diversity in growth rates will lead to a restructuring of the global legal market.
The Competitive Nature of the Legal Services Market: The Critical Issues
- The Demand Side;
- The Supply Side;
- Market Segmentation - the strategic challenge of market segmentation;
- Pricing and Work Efficiency;
- Legal Process Outsourcing and Contract Lawyers;
- ABSs and the return of the Big 4 accountants;
New Law - Significant changes in the traditional business model are occurring>
- What to do – look at your business model:
- Grow organically, through lateral hiring, acquiring entire specialist teams;
- Merge with another firm (could be smaller, bigger and equal) where there are clear strategic benefits to both;
- Focus the business down on several core areas, abandon below target profit and unaligned practices and provide the remaining practices as supporting the core;
- Take the most extreme direction, by specialising narrowly by type of work, client and/or industry.
- Who can do that by 2018? Welcome “the new partners".
Positioning your firm – the seven key areas
- Ensure there is clarity of strategic positioning and the related strategy – and its acceptance within the firm - along with a supporting business model;
- Achieve competitive levels of performance – financial but also across a range of other key activities;
- Implement processes to ensure work is done cost effectively while meeting profit targets;
- Develop very effective, structured and disciplined business development and client relationship programs – appropriate to the strategy;
- Develop an economic structure for each practice group given its role in the firm’s strategy;
- Articulate and manage a set of acceptable behavioural standards;
- Implement lean and effective management structures and processes that are recognised as part of the path to success.
Effective Pricing Models
- Understanding Profitability & Value;
- The key drivers of law firm profitability;
- Understanding the relationship of value to price;
- Aligning law firm economic structures to value positioning;
- Sources of profit leakage in matter management;
- Project Management;
- Improving Pricing Strategies:
- What are the different approaches to pricing?
- Evaluating the best approach?
- Complex v Commoditised legal work.
Key Trends for Future
- Lethargic growth of eurozone economies will drive more domestic consolidation as firms seek a stronger strategic position. International expansion will continue;
- More boutiques and niche firms will emerge;
- Law firms will increasingly seek to follow their clients, whether domestically or abroad;
- Clients’ business activity will be driven by emerging economies of the current and next generations, Indonesia, Mexico, Turkey, North Africa, South Africa representing the latter;
- Real profits of UK businesses (whole economy) are predicted to grow by 1.6% per year by 2015, and by 3% per year until 2025. Real net exports of UK legal services are expected to grow by 6% per year by 2015 and by 6.5% by 2025 (Law Society estimate);
- Successful firms in any position will adapt to a new business model that reflects market demand and requirements more than at present;
- ABS, public listing and private equity will drive new delivery models;
- “Firms that succeed will be bold and guided by a clear strategy”.