Any student of the business of law will be well acquainted with the perfect storm that is raging today: technology and new entrants are showing how to do more with less. Smart clients understand the power of their legal spend and are increasingly adept at picking the right firm for each and every matter. Even the Bar is entering the fray. Yet this year’s LexisNexis Bellwether Report 2015: The Age of the Client looks to the heavens and reports brightening skies; could the storms have blown over? While potentially true today, the uptick in legal services just places us in the eye of the storm and is a simple factor of an increased demand and a static or falling supply. The storm has not abated. So what now for the Captain of the independent law firm?
The Shipping Report
The good people at LexisNexis have this message for us: “The general synopsis on 20 April 2015 – sea state moderate, age of the client imminent.”
While opportunities exist in a recovering economy, a new breed of client has emerged, demanding a better service and fixed fees and empowered by technology and the internet, which in turn is posing a challenge for law firms and independent lawyers.
What clients want and what lawyers think they want are not in sync. 80% of lawyers believe they are delivering ‘above average’ service, but only 40% of private clients think they are actually receiving this level of service.
Lawyers and firms need to catch up with the ‘smart’ client and transform themselves into smart professionals and organisations.
The Weather Forecast
Not only does the Captain of the independent law firm need to understand what is happening today, he also needs to know what will be happening tomorrow. And the forecast does not look good: expect even tougher competition, an even greater importance placed on technology and even smarter clients.
So the independent law firm needs to be made sea worthy. She has three choices. She can batten down the hatches and wait for this to blow over, but any captain taking this decision clearly has not heard the weather forecast. She can haul the anchor and head for less choppy waters, but she’ll find that’s been a popular choice and the safe harbours are crowded and fast becoming less safe. Or she can undergo the repairs she needs to make her sea worthy for the ever worsening conditions.
There is no single answer. To date most small to mid-sized firms have opted for niche specialisation, slimming down the bottom line and getting close to clients. Make no mistake, that’s a good strategy and agility means such firms can adapt and respond to changes in the market. But is it enough? How does such a niche “light” firm distinguish itself from its competitors? How does it stay close to the client if it serves only a targeted segment of their legal needs?
One solution, and my prediction for the next big trend in law, is the coming together of niche firms and niche lawyers. This may well have been what some firms had hoped to find in Quality Solicitors and certainly is what some lawyers have found at dispersed law firms, such as, my own firm, Keystone Law. Lawyers (whether individuals or small firms) will always need to focus on excellence in their niche, staying close to clients and remaining agile. But, increasingly, lawyers want to be part of a larger progressive law firm with an investment agenda and deep pockets. The firm of the future will need to:
(i) have excellent digital infrastructure, but procured on a financially flexible basis
(ii) a full time far sighted management team looking not to the next year, but the next decade and
(iii) be full of likeminded colleagues looking to share work and to give the client a full service while retaining the benefits of a personal niche firm service delivery.
It is no surprise that two of those three drivers relate directly to technology and data. The big firms are busy building their own cutting edge tools, with the help of businesses like IBM. Indeed IBM has been spending $100m on this every year for some time. This will give big firms a significant competitive advantage. Thankfully a number of the online research providers are also producing these tools, which will be available to independent law firms in due course.
Currently the market is segmented into sole practitioners and high street firms; small to mid-sized independent firms and mid to large national and international firms. Over the next few years, you can expect the two new breeds – the dispersed law firm and the hitherto unmentioned legal corporate (law firms owned by accountants, banks, insurance companies and the likes of Slater and Gordon) – to account for at least a 25% market share between them. All three current sectors are going to be hit by this, but none harder than the small to mid-sized independent firm.
To get your full copy of Bellwether 2015: the Age of the Client report, download here.