If you’ve traveled this far in this series, you may be wondering what I think you actually ought to do.
Recognizing that diagnosis is eaiser than prescription, the remaininig installments—starting with this one—will try to address that. One other caveat: Not all of what I’m going to suggest will be advisable, or even appliable, to all firms; this is where your judgment and knowledge ofthe particular historic path and current capabilities and limitations of your firm come into play. But if you’d like to talk about any of that, you know where to find me.
Mindset change #1: You do have competition
Countless are the times I’ve asked firms or individual partners who they perceive their competition to be, and the odds are about 9 in 10 that the response coming back is, “Well, no one, really.”
False and double-false.
And no, I do not care how high up into the stratosphere of prestige you care to go, you have competition. (Even David Boies and Ted Olson have each other, after all.)
So stop pretending otherwise and begin to figure out what you’re going to do about it.
Other firms are going after your existing clients all the time. And if you’re not going after theirs, why not? Even in the good old days, there was no entitlement to incumbency—be it in a client relationship, an AmLaw ranking, or a recruiting bakeoff. In today’s world of one great big battle for market share, there’s almost negative entitlement to incumbency. If you’re not fighting to expand your share, you’re probably sliding backward.
The Econ 101 type of competition comes from other firms who are basically doing the same thing you do: Camrys and Accords, Corn Flakes and Wheaties, Benjamin Moore and Sherwin Williams, AT&T and Verizon, AmLaw XX and AmLaw YY. You fight these types of competitors largely on the dimensions of price/value, quality/expertise, and service/responsiveness. I hope you know how to win your fair share of work from what are essentially “me too” competitors. (If you don’t, I need to be writing another column than this one.)
But you also need to understand something slightly more nuanced—and enormously more threatening—about competition. This is the concept of “substitutes.” Substitutes are an indirect, subtler form of competition, because a substitute for your services is not exactly equivalent. It’s something that, given the right tradeoff between price and quality, can be equivalent or better in the eyes of the client. Classic examples are tea and coffee, margarine and butter, or heating oil and natural gas.
You can watch this play out from home. During shortages caused by war, crop failures, or other abnormal circumstances, coffee drinkers may be driven to tea or tea drinkers to coffee. Some who switched may find they actually prefer the substitute. Similarly, if “fracking” ends up vastly increasing the recoverable reserves of natural gas in the United States, we can expect it to displace heating oil in many uses—some of which will be permanent changes. This is the reason substitutes can be more threatening in the long run than classic competitors: The client may come to prefer the substitute and never return to the original good/service even when circumstances revert to normal. The client is gone forever.
Among other potential substitutes for the expertise of AmLaw XX are technology, bulked up inhouse departments (composed of lawyers and nonlawyers such as compliance and risk management professionals), legal process outsourcers, and “doing without.” (Don’t underestimate doing without as a viable choice; does every corporation have to sue every potential patent, trademark, or copyright infringer, for example?)