Google’s restructuring leads the business news this week. The company created a parent company, Alphabet, under which Google Inc. will be the biggest operating unit. Other units will house Nest, life sciences, robotics, and other Google businesses.
As the New York Times suggests, this lets Google focus – on everything. The point is, Google remains diversified but now can treat diverse operations differently. Big Law can learn a lesson here.
I periodically write about law factory. In my first post, I argued that firms could view their business like Hilton Hotels, with high-, medium-, and low-end brands that appeal to different segments. Each brand has its own cost structure and management requirements.
The Google or Hilton approach does not exist in Big Law so far as I know. Some firms don’t need it. The value players (e.g., labor and employment firms) serve mainly price sensitive clients. They invest heavily in technology and process improvement. The super-rich(e.g., the top NYCfirms) serve primarily price-insensitive clients. They focus on paying for top talent and doing deep dives into difficult issues.
Many (most?) Am Law 200 firms, however, have no apparent value position. They try to serve all manner of work – routine to the point of commodity, run the company, high stakes, and bet the company – with the same approach and cost structure. No wonder many struggle, whether to keep big rainmakers or satisfy clients.
So why isn’t the Google approach right for firms trying to serve multiple market segments? Partnerships need not form separate legal entities. Instead, they can form separate P&L units, each focusing on a different market segment, each with a different mix of labor, technology, and process.