Think of a law firm in the top fifty in the UK or US. Got one? Ok. Now think about how they go to market. I’m going to guess their market strategy. Think really hard. Visualise their website. Hold, on. I’ve nearly got. Think a bit harder……. They’re vertically focussed, right? Right!

These days pretty much every large law firm has a vertical market strategy. Ten years ago, it would have all been about the practice areas – who has the biggest and best litigation practice. Now, it’s all about the sectors.

And let’s be clear, there are great reasons for doing this. Back once again to our old friend Michael Porter and his great book Competitive Strategy (see last week’s post for more detail on this). One of the strategies set out in the book is for organisations to focus on a narrower section of the entire market, rather than address the market as a whole.

So law firms often segment the market (i.e. narrow it down) for legal services in a number of ways – for example, firstly they may make a distinction between consumers and business clients, then perhaps a particular size of organisation (for example large listed organisations or small owner managed businesses) they wish to act for, and then maybe geography (a particular country or City).

In reality, many of these decisions may be made without much conscious thought – a very small firm may not have the resources to undertake a particular type of work, or have the resources to serve clients outside its immediate “catchment area”.

However, the chances are, a firm will often still find itself with plenty of competitors, and will see the need to differentiate itself further. It can be difficult to demonstrate that its skill in a particular work type is higher than a rival firm, so thoughts frequently turn to a sector focus – “if we can show our clients and prospective clients that we know more about their industry than firm X, then that will put us in a much stronger position”.

At its most basic, I think this is sound reasoning – a vertical focus is not the only way to differentiate, but if done well it can provide the client real benefit.

Now often the initial vertical segmentation is driven by the make up of the existing client base, rather than market opportunity. Perhaps the firm already acts (because of reasons lost in the mysteries of time) for three airlines, and so decides to position itself as a travel sector specialist.

This approach certainly has benefits, particularly if the existing clients are well known brands and are referenceable. The firm will undoubtedly have to deal with conflict and competitive issues amongst clients, but once established as a genuine industry specialist, the benefits undoubtedly outweigh these type of challenges.

Another, perhaps more scientific way of approaching verticalisation is to assess the fit between the firm’s resources and the market opportunities. For example, which industries have the greatest need for the firm’s core skills (be they compliance work, complex litigation, volume property work etc.)? Of these sectors, what are market growth rates? Which are the most competitive in terms of legal service provision? What are the upcoming triggers in the industry for legal work?

However the firm gets to a vertical strategy, my challenge is to ask how deep the specialisation really is.

How much industry expertise do you have? Really?

One observation that I’d make, both from my experience in law firms and as corporate counsel, is that there are some firms whose vertical strategy only runs skin deep.

To me, if you are a firm that focuses on the technology sector, all the lawyers in that sector group should have a genuine understanding of (and even better, a real interest in!) that sector.

The reality is often a little different.

It’s often only the lawyers whose practice is most relevant to that industry that really understand the sector issues. So for example, staying with the technology example, it’s the IT lawyers who know what’s going on in the sector, and perhaps in the travel sector it’s the aviation lawyers who have their fingers on the pulse.

But what about property lawyers who are supposed to know about the media sector? Litigators in the financial services sector? I.P lawyers in the property sector?

Often the insight, the passion is just not there.

Scratch the surface, and all the expertise that’s trumpeted on the website and in the collateral dissolves. The sector focus is just pretty wrapping paper on the same old firm.

There are often plenty of reasons for this too. Perhaps rather than being recruited to work into a particular practice area, the fee earners have been shoe-horned into a sector group (“ok, you need to join a sector group, which one will it be?” or “Right, we need two property lawyers to join the financial services sector group”).

Alternatively, maybe the firm still remains structured internally around practice areas, so lawyers identify more strongly with their colleagues in those teams, than with clients in a particular sector. Financial metrics, reporting lines and performance management may also remain driven by practice areas, and so encourage behaviours which are inconsistent with the sector strategy.

Whatever the reason, a client looking for genuine sector expertise won’t be fooled for long.

But don’t get me wrong, some firms do get it right.

I try to avoid mentioning places I’d worked in the blog, but the UK firm  Olswang really did implement the sector strategy very well. And to give the article some balance, I was chatting with the Financial Services lead at Bird & Bird last week, and while he was a trained technology and outsourcing lawyer, he really impressed me with his knowledge of the F.S. industry, his contacts and what was going on in the market.

So what can firms do if they want to go beyond a skin-deep vertical focus? Investing time (yes, non-chargeable) with clients is a great place to start, because they are the ones that will really understand their industry. Actively working with/in trade associations works, trade publications should be required reading, and vertical training (even better if clients will come in and run sessions) can make a huge difference.

One big question the firm needs to answer is what they will do with clients and prospects that are not in their chosen sectors.

Will the firm continue to service and grow this mix of “miscellaneous” business, or will it begin to act only for clients in its area of sector expertise? In the current climate I suspect more firms will choose the former, although arguably the latter will give a sharper edge to the focus.

Perhaps a half-way house is to draw a distinction between reactive and proactive pursuit of business.

So, to finish, have a think about your market strategy. Are you vertically focussed? If so, how deep does the strategy run? Could it be deeper? Are the sectors the right ones? Look at your competitors websites and collateral – are they the same sectors?

And if you are vertical to the core, give yourself a pat on the back.

Related Articles

• Organizational Structure of a Law Firm (thinkup.waldenu.edu)
• The Specialist Generalist (intelligentchallenge.wordpress.com)
• ‘Tesco law’ will change legal services (guardian.co.uk)