There have been a couple of interesting news items over the last few days that have got me thinking about business models in the legal profession. First, an article in the Law Society Gazette about client experience with the network of solicitors called “Quality Solicitors”, an attempt by a range of smaller law firms to pre-empt new market entrants when the market more fully deregulates in the UK next year.
The article is here and the comments are perhaps more intriguing than the article itself.
The second development of note was the acquisition of Pangea3 by Thomson Reuters, of which there is an interesting discussion here:
To my mind, the second represents a far more fundamental challenge to the classic legal business model than the first, but I think the really interesting point is that it shows how no part of the profession is immune from the winds of change that are now blowing harder and harder through the market place.
For smaller firms in the High Street, there is no shortage of debate around whether “Tesco Law” will see the corporate behemoths enter the market for personal legal services, and clean up with a combination of powerful, trusted brands, efficient process, scale and automation.
Similarly, looking at the higher end, while the market for LPO services remains a relatively tiny proportion of the overall market for legal spend, few would doubt that there is a category of commercial legal work that can and will be commoditised, and that a significant chunk of this is likely to go to the LPOs.
So how to respond?
Well, there are of course many ways to approach this question, and the most appropriate will depend on a number of factors such as a firm’s size, service offerings, current market position, capitalisation and cash flow and the aims and aspirations of the partners and staff.
However, what I want to do today is get people thinking about their underlying business model. Many of the new market entrants will have a blank sheet of paper, and can design an organisation free of the history, politics, structure and financial constraints that burden many law firms.
While not disregarding those challenges, thinking afresh about a firm’s business model can open up new possibilities and avenues for competing effectively in the future.
A great, great read on this subject is a book called “Business Model Generation” by Osterwalder and Pigneur. The book gives readers a visual template for assessing and re-engineering business models.
A good place to start is key suppliers and partners. What are the key inputs into the business? These could be anything from recruitment agents who help identify and supply talent, to IT suppliers. Are these suppliers sufficient? How could the relationships be strengthened? If you were building a firm from scratch, would these be the suppliers you would select?
Next are key resources and activities. Resources covers physical, human, financial and intellectual. How does the firm stack up in these areas? Are the premises fit for purpose? Do changing working patterns change the need for space? Do you have the right people in terms of quality and numbers? If not, what can you do about it? Do you have enough working capital? Is the business financed in the most efficient way?
Looking at activities, knowledge management remains a key question for law firms, and one that I’m not sure many firms have really cracked. What about training and supervision? Quality control? How is service delivery managed? Client care? Compliance? There are so many day to day activities that just continue ad infinitum, simply because “that’s the way we’ve always done it”. The turbulent environment facing law firms can provide the perfect opportunity to revisit them.
Looking then at the outward facing parts of the business model, what are the key client segments and what is the value proposition that the firm offers to them? Do you know which are the most profitable clients? Are target clients clearly identified? Can all lawyers articulate their team’s value proposition to those clients and prospects? is the source of competitive advantage clear?
What about channels to market? Do you have any? Strategic partnerships with businesses selling complimentary services? What is the future of these in the world of Alternative Business Structures? Referral relationships? Are these working? Who are the partners you would select if you were starting afresh?
There are so many questions and also so many opportunities to do things differently and better.
Much of the debate in the UK at the moment centres around whether the deregulation offers a threat or an opportunity to the profession. Ultimately I believe that question is academic – the market “is what it is” – it is for firms to choose how they respond, and the strategic challenge is to use the market changes to your advantage.
- UK lawyers start to take TV advertising seriously (guardian.co.uk)