Before we leap into the final category of firms in our taxonomy—”synergistic super-boutiques”—let’s recur to first principles and re-state what we’re trying to solve for.
The issue is what do firms do to (in Darwinian order):
- (a) avoid extinction;
- (b) eke out a marginal existence;
- (c) remain relevant;
- (d) continue to perform about as well as before;
- (e) take market share from competitors; and, at the top of the food chain:
- (f) significantly reinvent themselves so as to deliver value to clients heretofore not available.
We may be witnessing this dynamic playing out more quickly in the City of London than we do in the US (at least for now….), with the availability of outside capital in England and Wales accelerating the market’s winnowing genius. Just this past week I had breakfast with the former managing partner of an AmLaw 50, who spent a large portion of his time building his US firm’s London office, and who observes that the UK market has seen “a decade’s worth of change compressed into three years—and not all of those firms may know how to respond.”
Back to: What are we trying to solve for?
I submit that, in this Post Great Reset market, we’re trying to create or evolve or reaffirm the essence of each of our firms such that they have a distinctive and recognizable place in clients’ eyes which is:
- credible—in the fundamental and essential sense that everyone believes your firm can stake a claim to what you’re purporting to stake a claim to;
- distinctive—meaning not every Susan, Dick, and Harry firm can claim that same position; and
- beneficial to clients—meaning it’s something they care about and will value, select you for, and pay for.
In Corporate Land, this is often called the brand’s “Unique Selling Proposition.”
Now, I’m not going to rehearse the taxonomy I’ve created to date—the Cliffs Notes version is here—but I hope it’s clear to moderately attentive readers that I’m skeptical about the half-life of firms in some of the categories. And it’s not because firms in the threatened categories are doing things wrong. It’s both subtler and more menacing than that.
The signal reality of our post-reset world is that clients are increasingly calling the shots. Firms that continue to operate on one or more of the assumptions that
- (a) clients are price-takers;
- (b) cost-plus (the billable hour) has gotten us this far so what’s not to like;
- (c) in recruiting associates, pedigree trumps everything else (actually we think we don’t even need to know anything else);
- (d) the rich rewards we’ve been able to deliver to our equity partners heretofore speak for themselves; and/or
- (e) nothing needs to change because you can’t argue with decades of success
are going to find the marketplace hostile.
The way this works out—don’t take my word for it—is as devastatingly described and critiqued in Harvard Business School Professor Clayton Christensen’s classic The Innovator’s Dilemma. To wit, incumbents challenged by disruptive upstarts redouble their focus on doing what they know how to do best (meaning serving the same clients the same way only more so) while the upstarts slowly at first but inexorably over sometimes shockingly short timeframe’s move upmarket until the incumbents’ best clients realize they have a clearly superior alternative. Game over.
Let’s go back to where we came in here: What are the themes of the law firm taxonomy series?
- The days of one-size-fits-all law firms, if they ever existed, are receding farther and farther into the past. Targeted specialization and deep expertise is more and more the order of the day.
- Clients are increasingly discriminating about what legal services they buy and under what terms, but you’d be mistaken to think it’s all about the uni-dimensional element of price. It’s about perceived value, which is entirely different. We won’t here digress into the n-dimensional space of what constitutes value in a client’s eyes, but suffice to say there’s a lot more to it than price.
- The composition, structure, and (it’s not too much to say) essence of most firms is not the result of logic or purpose or intention, but of history, circumstance, and opportunism. Yes, luck may have (and has) shined brightly on many firms, but counting on that to continue as a business strategy going forward is not odds-on a winning hand to play.
So I’ve found myself asking what a law firm purpose-built to meet specific client needs, and which can simultaneously duck the relentless pricing pressure associated with disruptive innovators and market-empowered clients, would look like.
Not to disappoint you anticlimactically, but the reality of dynamism in markets is that we don’t really know. But I have a nominee for a strong potential category type, and yes, it’s the “synergistic super-boutique.”
This type of firm does a few highly complementary things very well—and doesn’t do anything else.
- Imagine a firm that excels in securities broker-dealer regulation, white collar and governmental investigations, and financial services compliance;
- Or a firm that’s a go-to name brand for all things healthcare-related: IP, regulations, insurance, etc.
- Or a firm that does worldwide high-stakes litigation, arbitration, and asset tracing and recovery.
You get the idea.
Are there lots of these firms? No. A better answer might be: Not yet.
Think about this model. What it has going for it:
- A clear branding/client benefit message
- High intrinsic profitability
- Limited capability (by definition); down cycles can hurt
- Have to choose the right clients/industries/specialties
- Partners hoarding clients kneecap the model
- Distributing the spoils (compensation) can be a challenge.
What I like most about “synergistic super-boutiques” is that they seem to me a new species to have emerged recently on the ecological landscape of law firms. Here at Adam Smith, Esq., we celebrate innovation.
Will they have staying power? Who knows, but if they were stocks I’d rate them a buy.
Will other business models emerge? I devoutly hope so. We need the equivalent of a Cambrian Explosion in Law Land.
Finally, what will the industry look like in the future?
For that, Dear Reader, I turn to you to answer.
Yes, you guessed it: We have an Adam Smith, Esq. survey about the taxonomy.
The usual ground rules apply:
- All responses are anonymous (unless you prefer otherwise, and you’ll have the chance to provide contact info at the end)
- The results will be reported right here on Adam Smith, Esq.
- We urge you to take the poll and circulate it to your friends and colleagues—the more people who take the poll the more interesting the results will be.