Law Practice Management Asked and Answered Blog

Category: Competitive Business Models

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Jan 12, 2011

Changes and Challenges Ahead For Law Firms and Lawyers

Question:

Our firm is conducting a planning retreat next month. We have had retreats in past years that have focused on “touchy feely” programs for the attending partners. This year we really want to focus on a strategy and plan for the future. What do you see as primary changes and challenges ahead for law firms and lawyers?

Response:

The internet as well as advances in information technology has and will continue to be the key driver forcing change in the legal marketplace as well as other segments and our daily lives as well. Being the king of the hill or the biggest is not the strategic advantage that it once was. The internet is leveling the playing field in many industries as well as law firms.  There are new opportunities and new competitors. Consider the following:

  1. Everything is being commoditized. More practice areas are moving down the value curve and prices are becoming more price sensitive.
  2. Disintermediation of traditional delivery channels. The internet provides new access to information and is eliminating the middleman. It is impacting how we shop, bank, conduct business, and pay our credit cards and taxes. It is also impacting how clients locate and select lawyers and how legal services are delivered.
  3. Our society is becoming – more and more – a DIY (Do it Yourself) nation.
  4. Lawyers competitors are just a click away whether they be legal process outsourcing providers (LPO) in India, other lawyers in your state – but further away and servicing clients remotely, legal publishers, or online form providers.
  5. New client opportunities for your may also be just a click away.

Challenges and Questions to Think About

  1. How do you deal with commoditized transactions?
  2. How do you tie yourself to your client in an online world?
  3. How do you compete with new models and approaches to the delivery of legal services?
  4. How do you compete with virtual law firms?
  5. Would you consider adding a online delivery component to your traditional brick and mortar practice?
  6. Should you embrace legal process outsourcing and begin forming alliances and relationships or should you wait until your clients take the initiative themselves?

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John W. Olmstead, MBA, Ph.D, CMC

Dec 22, 2009

Is Your Firm Ready For the New Competitive Landscape

Question:

At a recent partner meeting we discussed the current economy and what changes we need to be thinking about both now and when we come out of the recession. What are your thoughts?

Response:

As law firms emerge from the current recession many will face many new business realities and be forced to consider whether existing business models are still appropriate for the future. Legal process outsourcing (LPO), off-shoring, virtual offices,  alternative billing, etc. We believe that the recession may accelerate the pace by which firms reevaluate existing processes and consider new business models.

Ten years ago (1999) the ABA hosted the "Seize the Future" conference in Phoenix, Arizona.

The conference predicted massive change fueled by the internet. Many of these changes we have already witnessed and experienced – others are yet to come – possibly in the near future. Richard Susskind's popular book "The End of Lawyers: Rethinking the Nature of Legal Services paints an interesting future. As we emerge from the recession pressures will exist that may excelerate some of the other changes that have been predicted.

Here are some changes that some firms are already implementing:

Here are a few examples:

Direct Law

Lawyers on Demand

FSB Legal Counsel

Virtual Law Partners

Fronterion

Talwar and Talwar

The key ingredent is to not get stuck in the past. Incumbancy and pass success has never been worth less. Ask General Motors.

John W. Olmstead, MBA, Ph.D, CMC

Dec 16, 2009

Off-shore Outsourcing Tips

Question:

Our firm is beginning to consider off-shore outsourcing. Our clients are asking about this as a service delivery option. Do you have suggestions?

Response:

Off-shore outsourcing is the new frontier. While there are opportunites and benefits that can result there are also pitfalls. Here are our thoughts:

  1. Do your homework. Proceed with caution and do extensive due dilligence.
  2. What are reasons, objectives, for such an arrangement? 
  3. Do a search for potential vendors? Ask other law firms who they are using and what their experience has been?
  4. Obtain a certified photo of the vendor's premises.
  5. Insure that the vendor has appropriate data security in place at their premises.
  6. Insure that the vendor has third party audits conducted.
  7. Obtain vendor references.
  8. Verify vendors past history with clients.
  9. Review vendor contracts.
  10. Determine how money will be transferred.
  11. Check into liability issues and coverage with your malpractice insurance carrier and insure that the vendor has professional liability insurance.
  12. Check ethic rules.
  13. Look into client privilege issues.
  14. Research export control issues.
  15. Obtain client consent in writing.
  16. Start with a small pilot project and then initially on small projects at are not subject to export control rules.

Start slow with a small project and monitor results. Build up your initial experience.

John W. Olmstead, MBA, Ph.D, CMC

Nov 24, 2009

Competitive Business Models: Competitive Strategies and Ideas For A Personal Injury Plaintiff Firm

Question: We are a five attorney personal injury plaintiff firm in the midwest. In the last few years we have gone through tort reform, increase competition from other law firms doing extensive advertising, and now trying to weather the recession. From a profitability standpoint – we are holding our own. However, we are concerned about the future. While we do not want to be a high volume PI advertising factory – we believe we need to be doing something different. Do you have any suggestions on how we should plan our future?

Response: The majority of our PI law firm clients are advising that they are having to work much harder at getting clients and investing more heavily in marketing – both time and money. PI firms were feeling the most of these challenges before the recession. However, the recession may accelerate the pace with which law firms reevaluate existing processes and consider new business models. PI firms may want to begin by:

  1. Develop a firm strategic plan and individual attorney marketing plans which include aggressive network/contact plans for past clients, attorney referral sources (non PI attorneys), attorney referral sources (other PI attorneys), and other referral sources.
  2. Evaluate the feasibility of adding an additional practice segment to reduce the level of risk in the case portfolio and reduce cash flow variability.
  3. Reduce case portfolio risk and improve case profitability by implementing a case intake system whereby all new cases over a specified level of projected case value are reviewed and approved by the partnership (or a client intake committee) in order for the case to be accepted by the firm. In other words – don't let one attorney expose the entire firm to either excessive levels of case risk or case investment (time and client cost advances) without other partners having a say on the matter.
  4. Analyze the profitability and return on each case and ascertain what can be done differently on future cases. Metrics might include effective rate, return on LOADSTAR, dollar case profit after allocation of all appropriate firm overhead, etc.
  5. Review and measure present marketing investments (time and money) and determine what is working and what is not. Reallocate resources if appropriate.
  6. Insure that you are using an appropriate mix of marketing tools in your program.
  7. Consider increasing marketing investments (time and money). Suggest a marketing budget be developed in the range of 8-12 percent of fee revenue. Also suggest that non case production (non-billable) time be budgeted for business development and marketing activities as well.
  8. Look into defensive advertising.
  9. Insure that you have a first-class website that goes deep and demonstrates expertise.
  10. Maintain a yellow page presence – but gradually reduce investment and shift into website and other online vehicles.
  11. Find ways to enhance the client's experience and deliver exceptional client service.
  12. Use exceptional client service and bedside manner as a primary means of differentiating you from your competitors. Under Promise – Over Deliver in everything you do for the client.
  13. Make your office client friendly.
  14. Use end-of-case satisfaction surveys to measure the client's experience with the firm and to improve future service.

John W. Olmstead, MBA, Ph.D, CMC

Nov 17, 2009

What Can We Do To Be Different

Question: During a recent firm meeting one of our partners asked what the firm could do to be different than every other law firm. What are your thoughts?

Response:

Creating a competitive advantage that is sustainable over time is difficult at best. It is so easy for your competitors to copycat your recent innovations. Clients of law firms advise us that they hire the lawyer – not the firm. However, this only partly true. The firm – its image – its brand – provides a backdrop for the individual attorneys marketing efforts as well – makes marketing easier – and provides backup and bench strength that many clients require before retaining a lawyer.

In general the law firm is faced with the dual challenge of developing a reputation (brand) at both the firm and the individual lawyer level. In general – client delivery practices and behaviors that are part of the firm's core values and have been burned into the firm's cultural fabric are the hardest to copycat.

Areas in which you can consider differentiation strategies:

John W. Olmstead, MBA, Ph.D, CMC

Oct 01, 2009

Are These Good Times to Innovate and Dare to Be Different

Question:

We have had recent discussions in our partner meetings as to whether in these challenging economic times we should play it safe or to step out and innovate.

Response:

As far as the economy – several legal industry sources are advising that the economy may be turning the corner for law firms.  According to a PricewaterhouseCoopers Survey – the Worst of the Recession is Over for Law Firms. http://bit.ly/VUEbM. Hildebrandt also recently announced an improvement in the Peer Monitor Index. http://www.hildebrandt.com/Pages/default.aspx.

While all of us need to be cautious concerning playing games of chance and gambling with our professional practices – this is an excellent time to re-examine business models and approaches of the past. Many large and small firms alike are doing just that. Clients are looking for more value for their fee dollars and better client service. Firms that are daring to be different are experimenting and exploring:

This recession may have been more that just another recession – it may have been a management lesson for us all – resulting in permanant structural changes to how legal services are produced, delivered, and consumed.

John W. Olmstead, MBA, Ph.D, CMC

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