For the second installment in our series on Law Firm Business Models, we turn to boutiques.
Boutiques, as a player on the landscape of industrial structure, are a familiar character. Boutiques, in fact, exist in countless industries, and seem capable of thriving in a variety of competitive environments. Consider:
- In retail, perhaps the most familiar environment for boutiques and whence the word “boutique” itself was historically derived, we have the familiar local clothing, shoe, or stationery store co-existing alongside department stores, Zappos.com, Staples, and Office Depot.
- In jewelry, it’s Zales and all the other big boxes vs. Cartier, Tiffany.
- In beer, it’s Budweiser and Miller vs. Sam Adams and all the other micro-breweries.
- The same for wine and hard liquor: The Gallo Empire and the Diageo’s of the world vs. mailing-list-only Napa cabernets and single malt Scotches.
- The same for apparel (Gap, Lands End, J. Crew, Brooks Brothers–you name it, vs. designers–you name it)
- Even in autos, we have “boutiques” in the incarnation of Ferrari, Lamborghini, Tesla, and Maybach, among others.
The point is simply that boutiques can coexist with supposedly dominant players in many industries for a long long time, with no apparent mortal threat to their existence or profitability.
So is the same true for our industry?
I believe it is.
What, then, exactly, is a “boutique” in our industry?
As I define it, it’s a firm that specializes in a single practice area virtually to the exclusion of all else, and that also has only one office (maybe a headquarters and an inconsequential branch or two).
The key characteristic is the focus on a single practice area, but the concentration in one office also part of the definitional package. Littler Mendelsohn focuses on employment law (a practice area), but because it’s nationwide I wouldn’t classify it as a boutique.
And just to clarify things: Wachtell, Cravath, Slaughters are all firms that have only one office that counts, but that doesn’t make them boutiques. (So, for example, do the hundreds of thousands of solo and small law firms across the country: Same point.)
So what are examples of what I have in mind? Just to name a few, Bartlit Beck, Boies Schiller, Quinn Emanuel.
All of those are litigation boutiques, and I named them not by accident. That seems to be the dominant form of boutique, and IP boutiques, which used to be a classic category of boutique, have seen the sun set on them. Why did the IP boutiques fade? Because, I suspect–this is only my theory–IP used to be a valuable expertise, and it migrated in the past decade or so to a commodity. Erego firms could not sustain the high price margins they needed to continue on that one leg of the stool. Game over.
(Before I receive an avalanche of email from proud IP practitioners, let me hasten to clarify that there’s IP work and then there’s IP work. Â Run of the mill patent and trademark applications are the commodity side of things, but certainly high-stakes litigation against patent trolls and other wannabe bloodsuckers is anything but a commodity. Â Perhaps the real flaw in the IP-boutique business model’s concentration was that clients failed to see the need to procure their high-stakes work from the same firm that did their routine filings.)
Litigators are facing no such risks.
At the top end of the litigation market–white colllar defense, securities and corporate governance investigations, other major regulatory inquiries (often involving “piling on” with multiple state and federal proceedings moving forward on parallel or at least tangentially approximate paths), money is no object. As far as the eye can see, it will always be thus.
So is there a fundamental threat to the boutique model?
If you’re a non-litigation boutique, there could always be.
- Some practice areas (cf. IP) may move downstream.
- By hypothesis, if you’re a practice-area boutique you’ve concentrated all your chips on one expertise. If demand for that expertise is cyclical, be prepared for the downturns. As in, really prepared. See: Â Thacher Proffitt. Â Be ready to cut back to lifeboat size in very short order. That’s actually easier than when the curve bends up again and all of a sudden you need to recruit people who are suddenly, fashionably, in demand. Live by the sword,….
- For all boutiques, what happens when the charistmatic founder (show me a boutique that doesn’t have one) retires? That’s usually the inflection point at which a boutique survives as an institution or reveals itself as the court attendants at Versailles to the Sun King.
Thomas Hobbes famously described life in “the state of nature” (that is to say, without government) as “solitary, poor, nasty, brutish, and short,” the only remedy for which was to accede to a social contract and establish a civil society.
Boutiques may all face a similar transition point upon the fading of the founder, although hopefully it’s not from a plane that is “solitary, poor, nasty, and brutish”–but it probably is “short.”
The challenge for boutiques, then, may not be becoming one; it may be remaining one.
