We’ll have one more installment in our “Growth is Dead” series but let’s focus today on trying to synthesize a few themes that have been pervasive topics here on Adam Smith, Esq., since at least September 15, 2008, and even before, and look at their implications for “Now What?,” on the assumption that the thesis of this series has any truth to it.

Here at Adam Smith, Esq., the recurrent themes include:

• Relentless pricing pressures, which every firm wants to escape from, but only a chosen few will be able to do.
• New, varied, and multiple career paths, with many alternatives to the bimodal partner-track associate or equity partner model.
• Ever accelerating rates of lateral partner mobility.
• And new and/or growing entrants on the landscape, including LPOs, bulked-up inhouse departments, and law firms’ own “onshoring” operations.

How do these coalesce in how you should address the “growth is dead” environment?

Well, in the above order, if you want to embrace and turn these trends to your advantage, to “put yourself on the right side of history,” as opposed to futile and brittle resistance, rarely a winning game plan, then:

• Discover a way to escape from the vise of pricing pressures by changing the terms of the conversation.
• Prepare to entirely reconceive the demographics of your firm.
• Decide whether the accelerating lateral partner bandwagon can provide enduring value for your firm, or how to do it carefully if it could work, or whether to eschew it, or something else altogether (and remember that this game includes playing defense as well as offense).
• Rather than dismissing, or fearing, the new entrants, steal what they do best and jettison what you now do worst.

Got that?

OK, here ends the series.

Just kidding.

Here’s another way of thinking about what’s happening (although, fair warning, it’s offers up no more optimistic prognosis).

If we want to trot out Harvard Professor Michael Porter’s “Five Forces” Analysis, the fundamental landscape facing BigLaw has become far more challenging in the last few years.  Here, in a nutshell, are the five forces that Porter believes shape industry competition and how they’ve changed in our world recently—every one of the five for the worse, from the perspective of BigLaw:

So much for theory; here’s some data (all courtesy of the Altman Weil 2012 “Law Firms in Transition” Survey). From 2009 to 2012, the percentage of managing partners believing that these trends are permanent and not cyclical rose as follows:

Note that while the first is explicitly about price (aren’t you getting sick of hearing about pricing pressure by now?), the other five are actually all in response to pricing pressure.  This is what happens to firms when markets shift from the suppliers (that would be us) being price-makers to being price-takers.

Of course, we’re not truly “price takers” just yet; we have more than a  modicum of control over what we charge. But the tilt of the landscape has indisputably shifted in favor of clients.  Let’s assume heightened price competition is a given: More than 9 out of 10 managing partners evidently take it as such.

So if the remaining five trends are responses to pricing pressures, how exactly do they constitute a response and what do they have in common?

I suggest that all five are ways firms are trying to reconfigure their offerings (read: themselves) to more closely  match up with clients’ willingness to pay. At the top of the food chain, clients are apparently as willing as ever (more willing?) to pay top dollar for partners who are truly superb, while at the other end of the food chain clients want to pay as little as they can to get their unavoidable commodity-ish work done competently and effectively.

And where does that leave the middle?

Actually, if you have an hypothesis about what happens to the middle, let me know. I’m serious.

Does the client demand function I’ve been describing remind anyone else of the airline or car industry?—because it does me. Think of partners as Cathay Pacific or Singapore and contract lawyers and outsourcing as Southwest or JetBlue. Or else partners as Audi and BMW and contract lawyers and outsourcing as Toyota and Chevy.  The good news is those industries seem to have reached stable equilibria where clients’ preferences across a range of quality and service levels and price points are satisfied.  The bad news, for traditionalists, is that they bear no resemblance to how we perceive of our profession.

But let’s take this thought experiment a step further.

Demographics and Pricing

Do you believe the composition of professionals in your firm, and what you can charge for them, are related? That is to say, that clients more highly value and are willing to pay more for the more highly skilled, experienced partners with quicker and sounder judgment—higher prices than they would pay for anyone else in the firm?

And do you believe that client resentment at paying for all but the most assiduously monitored and metered junior associate time is here to stay?

If you believe those things, which shouldn’t require heroic assumptions, then you have to believe that:

• Delivering maximum value to clients, as they perceive it, requires you to change the mix of professionals you deliver;
• Changing the  mix of professionals you “deliver” to clients means reconfiguring your firm’s own internal mix of professionals, or demographics, as it were;
• And the firm of the future will consist of a much higher ratio of highly valued partners to lower valued associates.

This is not a radical concept, certainly not if you step outside Law Land.  (Nor is it by the furthest stretch of the imagination to be taken as critical of associates; they are left virtually defenseless in this economic shift, and if you think I’m callous or indifferent to their fate you haven’t heard about my other company.)

Companies reconfigure their product and service offerings all the time, to more closely hew to client demand. It will take us a bit longer, since our “service offerings” consist of professionally trained and highly skilled human beings, but there can be no serious question what the market is calling for.  And no one at the level we’re talking about wants to work in an organization where their contribution has clearly been marginalized.

So what does this putative firm of the future look like?

For as long as I’ve been in and around this industry, I have heard ad nauseum infinitum that firm ABC or XYZ, whether or not they had any remotely plausible aspiration to these leagues, only wants to act on the “highest value,” “price-insensitive,” “bet the company,” “make or break,” “premium work.”

Your day has arrived. You may wish it hadn’t.

Because what is the model I’ve sketched above? It’s a model, as a partner at an AmLaw 10 told me last week, with “clients who are happy to pay $1,100/hour for me but not $400/hour for even a qualified midlevel associate.”  What is that model?

Wachtell.

We’re all Wachtell now, if we can pull it off.

But I put this squarely in the category of “be careful what you wish for,” since “being Wachtell” is far more challenging than being a typical AmLaw 50-ish firm—no offense to those of you in that category.

Let’s back up: I have a confession. I used “We’re all Wachtell now” calculatedly. The phrase—the very mention of the firm’s name—can inspire envy in the ranks of those who subscribe to the notion that their firm needs to be in that top right quadrant of the 2 x 2 matrix, the “highest value,” “premium work,” etc., engagements. And of course, who can object to Wachtell staking out its own party-of-one place in the PEP stratosphere?

But that’s not all the Wachtell model is about. There are two other critical elements more challenging to embrace: (1) that 1:1 partner:associate leverage, and (2) their intense focus on highly specialized and narrow lines of business, without deviation.

Achieving (1) is going to require wrenching changes in almost every firm that chooses to go down that path, and it can risk introducing centrifigual forces that can tear the place apart before you can achieve the goal.

And as for (2), it requires saying No relentlessly, and many more times than you’ll ever get to say Yes.

Are you game?

And if not, what’s your plan?

We’ll have some final thoughts on that.