I’ve complained that too many commentators predict Big Law disruption. With Big Law surviving the 2008-10 economic crisis largely intact and profits continuing to grow, it’s hard to see the disruption. What’s hard to miss though is the pressure Big Law faces from several directions.
I am struck by four news items this week and last that reflect the pressure building on large law firms:
- Growing sophistication of clients as buyers. Last week I reported on early results of Advance Law’s GC Thought Leader Experiment. In brief, multiple GC are pooling data on how to improve law firm relationships and gain more value from them. This is excellent news for firms that provide real value. It’s bad news for firms that cannot up their game.
- Few levers left to pull to juice profits. When Will Disruption Hit the Legal Industry? in American Lawyer (11 Sep 2017) presents terrific financial analysis of Big Law, pointing out that when the next shock hits, firms will have few ways left to protect profits. My Tweet of this report was very popular – a sign that some in the market are paying attention:
— ronfriedmann (@ronfriedmann) September 12, 2017
- Big Four remain a competitive threat. I was a on a panel one year ago that asked Will All Lawyers Work for the Big 4 by 2026?. My answer was no but that over time, they will take share of market and share of lawyers. Today, ALM Intelligence released a report Elephants in the Room: The Big Four’s Expansion in the Legal Services Market. The threat may not be immediate but its survey shows law firm management is concerned, as illustrated in my Tweet:
— ronfriedmann (@ronfriedmann) September 14, 2017
- New entrants remain a threat (though how big is open). Competition is no longer restricted to just the large law firms. Other are nibbling – or more – at the edges. Numerous studies have looked at the impact of Alternative Legal Service Providers (also known as LPOs). Today, Bob Ambrogi reports on new law firm going after the start-up market with a new approach. Revealed: Justin Kan’s Secretive Legal Startup Debuts Today As A Different Kind of Law Firm reports on a new firm, Atrium, offering legal services for start-ups. It has significant outside funding (using a model that, to me, sounds very similar to what Clearspire did some years ago.)
What does all of this mean for large law firms? They must up their game. Deliver more value to clients. Respond and communicate better. Reduce delivery cost. Improve service delivery. Go from innovation talk to actual innovation. Some firms will suffer because they will not change fast enough. Others will prosper. Change management will be key – we are moving to an era where lawyers must actually change how they work and how they manage matters.