Law firms need to re-examine their traditional business models and embrace change in how legal services are delivered if they are to survive, new research has argued.
The report from Georgetown University in the US and Peer Monitor argued that the strategy of ‘growth for growth’s sake’ that has appeared to drive the law firm market in recent years is the wrong strategy for most.
Looking at the US but with obvious parallels to the UK, it said that firms should instead focus on developing new business models and service delivery models that will enable them to provide more efficient, predictable and cost effective legal services.
Optimising the management of legal talent and effective pricing strategies may be more important than achieving economies of scale, the report argued, concluding that for most firms, the answer should not be to build a bigger boat, but a better boat.
With the growth in the supply of legal services, the only way most firms can expand market share is by taking business from others, it found. In addition, the market for legal services has shifted from a sellers’ market to a buyers’ market.
“Competition in the law firm market has fundamentally changed,” said lead author James Jones, senior fellow at the Georgetown Law Centre for the Study of the Legal Profession, and previously managing partner of top US firm Arnold & Porter.
“Many factors have contributed, but in the aftermath of the recession, the pace of change has accelerated. Clients are increasingly focused on enhancing the value of the legal services they receive from firms. This has serious long-term implications for the leaders of all firms. Law firm leaders must focus their attention on re-thinking their basic organisational, pricing, and service delivery models in order to produce competitive success in the long run.
“While some firms have engaged in such reviews and launched innovative new models to better compete in the current market environment, most have not. And without widespread change, the legal market may be poised for what could be a dramatic reordering based on the same type of disruptive forces that have reordered many other businesses and industries.”
”Some of these disruptive forces are already underway,” said Mark Medice, senior director of Peer Monitor. “Clients now have more diverse options available for handling legal matters, including shifting work to smaller firms, bringing work in-house, and using non-law-firm providers such as legal process outsourcing.
“In order to stay relevant and competitive in an increasingly fragmented market, it is incumbent upon firms to reshape themselves to be more responsive to the needs of clients, to deliver services in a more efficient and predictable manner, and to develop pricing models that reflect more accurately the value of the services being delivered.”
Download the full report here.