Although I am based in Hong Kong, I have been following the conference at Georgetown Center for the Study of the Legal Profession: Law Firm Evolution: Brave new world or business as usual? with great interest. Many thanks to those who have reported on what was going on, these include Ron Friedman, Lance Godard, and Jordan Furlong.
Of course, not being privy to the discussions I cannot comment on all that occurred at the event but I do believe it is worthwhile to comment on some of the assertions and conclusions made which I have garnered from those who have reported on the conference and the papers which are available on the Georgetown web site. There are many things with which I of course wholehearted agree with but others which I am not so convinced of. The following is what people have said at the conference and my take on some of the assertions made:
David B. Wilkins, Lester Kissel Professor of Law and Director, Program on the Legal Profession, Harvard Law School
Big Structural Changes
Globalization - lawyers should look for where money changes hands and that is increasingly moving east – this may be true but mindlessly entering Asian markets will not automatically increase business. The markets are becoming increasingly competitive and firms that come here will need a coherent strategy to succeed. Following clients may work in the short term but eventually the firm will have to generate business on the ground. Research has shown that social capital is not a great indication of law firm success, intellectual capital is a better indicator when it comes to internationalization. I do strongly believe that Asian markets will be key to success for foreign law firms but what Woody Allen said is wrong: 80% of success is not just showing up.
Impact of Structural Changes on Legal Profession
Basis of competition will shift from reputation + credentials to results + value - clients want value defined on their terms, which will be data-driven – yes and no. Results and value will drive reputation as it does in any industry. The law firms which develop the strongest reputation will do so because they deliver the best value. As research from the Centre for Professional Services Management at the Said Business School (Oxford University) has suggested, a firm's ability to build a sustainable strategy revolves around four factors: reputation, services, expertise, and relationships. These create a virtuous cycle of organizational learning and innovation that lead to value delivery in the market place. Reputation will be built out of value from now on.
William J. Perlstein, Co-Managing Partner, WilmerHale
Was reported as saying that many large firms are stuck in the middle, hard to differentiate – that may be so but only according to a very narrow, and may I say US based view of strategy. This view is mainly known through the work of Michael Porter and his now widely known concepts such as the five forces analysis and generic strategies. This 'positioning' perspective of strategy suggests that firms must seek out unique and advantageous positions in the market vis a vis competitors and other industry forces. Unfortunately, this view excludes the multitude of other strategy processes that are evident in law firms but not known or articulated. For example, what Henry Mintzberg describes as part of the cultural school of strategy, the resource based view explains to us how firms that compete in the same market space perform differently. Firms that might be 'stuck in the middle'(according to Porter) can perform very well. Differentiation in law firms is not based on position nearly as much as it is based on the ability of the firm to integrate the knowledge producing and delivering processes of the firm that emanate from its strategy, marketing, KM, HR, practice management and leadership systems. In other words, what comes out of HBS is not the be all and end all!
Bernard A. BurkDirector, Howard Rice Nemerovski Canady Falk & Rabkin, A Professional Corporation, San Francisco, California
David McGowanLyle L. Jones Professor of Competition and Innovation Law University of San Diego School of Law
As technology allows small firms to enjoy scale economies, some may be able to enjoy margins that approach the margins of large firms in similar market segments – I am not sure on this one. I have seen no sound evidence that scale or scope economies exist in law firms on the whole. If small firms do enjoy margins similar to the large firms it may be increasingly based on lower over head and the flight of top tier lawyers to smaller firms being able to attract top class clients. It will also be through the continued streamlining of law firm operations as they implement project management systems and other initiatives to reduce costs.
There were a bunch of papers presented at the conference (see here) and they are very informative. Many of the issues covered are issues that have been highlighted for a number of years now such as the potential death of Big Law, alternative business models, growing power of clients, commoditization, LPO, and the rise of Asia. They are certainly worth looking into although if you are an outward looking and innovative partner, you should be familiar with much of what is presented. I guess innovation does not happen easily in the legal industry but there seems to be a growing consensus this time that change is needed and it is irreversible.