Thomson Reuters urge firms to adapt in latest ‘State of the legal market’ report
10th March 2017
Thomson Reuter’s latest ‘Report on the State of the Legal Market’ highlights the importance of adaptability. With rapid development of the legal market over the past decade, this is hardly surprising.
The key changes highlighted in the report include:
- value measured by cost-effectiveness and efficiency;
- clients using numerous types of lawyers for different aspects of a single matter;
- major revamping of traditional pricing models;
- erosion of the traditional law firm franchise;
- declining effectiveness of the traditional leverage model; and
- growing segmentation within the market for law firm services.
There has been a noticeable segmentation of the legal market into ‘highly successful’ firms and ‘less successful’ firms. Those firms with clear, defined practice areas and client base tend to perform better than firms whose branding is inconsistent or not dissimilar to competitors of the same size.
Long term challenges
Thomson Reuters highlight how a firm can remain competitive and relevant in the long term, and analyse long term problems that can be caused by shifts on the market.
- Need for a new focus on profitability – for firms to remain competitive, all process and systems must be brought into alignment. Any reliance on a traditional billable hours approach should be removed, as it no longer makes competitive, economic, or practical sense.
- Need for a more expansive leverage model – a large portion of legal firms are sceptical about re-organising their service delivery model. A broader re-imagining of the whole model is required for client approval and a cost-effective approach. This re-organisation should include information specialists, technologists, paraprofessionals, process managers, and more, to create a broader range of professionals who can deliver legal service.
- Need for a clear focus on core practices – highlighting which practice areas firms specialise in is crucial to success, particularly drawing attention to the areas where truly only lawyers can operate, and making sure that all systems are in place to make sure that particular service is well delivered.
- Opportunity for a new focus on supply chain management – although not essential, the opportunity for legal professionals to expand into areas not commonly explored by lawyers is becoming increasingly prevalent. In the right practice areas, and for firms of significant size, expanding in this way can be a key step in the growth of the firm.
Despite words of warning, the report does confirm that the vast majority of law firms remain stable with a small amount of growth. Adaptability is vital to this success. Law firms of all specialities need to overcome the fear to review aggressively areas where they have fallen behind and redesign from scratch.
Using a Darwinian analogy, Thomson Reuters concludes that, it isn’t the oldest, smartest, or even strongest that survive, but those with the greatest ability to adapt to a changing environment.
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