Road(s) Soon To Be Taken
In about 10 days, I will be presenting as part of a panel at the Thomson Reuters 24th Annual Marketing Partner Forum. The session I will be presenting will be focused on differentiation in a highly competitive market. Aside from being a hugely important topic at this moment in time generally as we usher in 2017, the topic is a reaction to the 2017 State of the Legal Market Georgetown/Peer Monitor Report which is now available. The report tracks firm financial and other performance metrics in the US over the course of the last decade since the “Great Recession”. Not surprisingly, the report paints a somewhat bleak picture of the current state of legal services – from an operational point of view. I will leave you to read the report, but the Coles Notes (Cliff’s Notes) version indicates that:
- demand growth is flat;
- there is declining productivity;
- firms are experiencing growth in expenses, and
- increasing cost of leverage; despite
- ability to raise rates 2 to 3 percent a year, which is countered by;
- steadily declining realization rates.
Much of which can be attributed (in whole or in part) to:
- a buyer’s market;
- death of the billable hour pricing;
- erosion of the traditional law firm franchise;
- declining effectiveness of traditional leverage; and
- growing segmentation within the market for law firm services
It’s a bleak and scary picture, one that in my mind doesn’t even take into account the effects and affects of technology on the profession, in practice and in operation.
The report, does offer a couple of rays of sunshine – the silver linings if you will for those of us not on the practicing side of the equation. The first quote that animated me was this:
“If the large firms in the middle cannot offer sufficient differentiation for their services, clients will have little incentive to change this behavior.”
Differentiation is largely the work of marketing to articulate, even if KM, Pricing, Library, and others are doing the executing. This provides huge opportunities for marketing departments and agencies who work in this space. It is getting harder and harder for firms to differentiate themselves in any meaningful way, but we know that each firm is special or unique in some way. The challenge is in figuring out how to illustrate each firm’s unique value proposition in RFP responses, pitches, branding efforts and pricing mechanisms. The crucial bit for people like me, is how do we use this statement as a catalyst to bring about the cultural and operational changes required for firms to make a discerning mark. Defining what a firm does differently is a hugely difficult and exciting task, one that requires those in firms who are not necessarily practicing law to break silos and work together to shape a new reality to law firms (see the last 3 Geeks post on libraries-marketing-money-credit). Which brings me to the second point in the report that buoyed me.
“broader reimagining of the overall model for legal service delivery, one that includes paraprofessionals, technologists, information specialists, process managers, and others – in addition to lawyers – as part of an integrated system for the delivery of legal services“
Law firms, much like many other businesses from insurance to retail, education to food services are being forced to rethink their way of earning profits. The industry is under pressure from clients, suppliers, and staff to meet technological, social, financial and other impacts head on. Law firms have been long insulated by established protocols and relationships, both of which are now vulnerable to market conditions. Its time, as the report says to lean on others in a truly collaborative partnership to boost client service and in turn, revenue/profit. There are all these fabulously smart people in firms who are limited in their ability to contribute by virtue of their non lawyerlyness. Imagine the impact a firm could have with all of its intellectual capital playing a more active role, that could (should!) be the new road to competitive differentiation.
So while growth is relatively flat, and realization rates may be low, the opportunity to find new roads, and new open spaces to drive the legal business in 2017 are endless.
Published at Wed, 18 Jan 2017 15:56:48 +0000