Change is Inevitable, Embrace it and Profit

The Clementi Review of 2004 was simply a set of recommendations which did not have the force of law, so many people did not notice it or paid it little attention. The prescient amongst us suspected it meant that legal firms would have to change—whether for the better or the worse depended on one’s point of view. Even though the implementation of the underlying regulations of The Legal Services Act of 2007 was delayed until 2010/11, and may be delayed again, changes are most definitely afoot. What are the implications of the introduction of “Tesco Law” to the UK? Can legal practices afford to ignore it? Continue reading

Pricing and Profit

I have recently come across a debate running on LinkedIn about the relationship of cost to price to profit.

In a heavily commoditised market (competing products seen by consumers as completely interchangeable) where there are lots of suppliers and lots of purchasers market economics in the long run will force profit margins to be set at a rate where the average supplier makes a modest profit. In that environment, control of the cost base is everything as you cannot move the price you charge. It is a market price. Charge more and sell nothing, charge less and increase volume.

Is the law market really such a market? Well there are lots of suppliers (around 10,000 firms in the UK). There are also lots of purchasers with millions of instructions each year. However is the legal advice offered by one firm really a perfect substitute in the mind of the client for legal advice offered by another firm? I doubt that very much.

If your firm is good at understanding what is important to the client and delivers that precisely, the conversation on rate will not be based around your cost base. It will be based around value to the customer.

Going back to that LinkedIn discussion some fellow debaters seem to have assumed that BMW charge more for their cars because they are more expensive to produce. The reality is that consumers care little for your cost of production. They care a whole lot about the perceived quality and how a BMW makes them “look”.

By all means ensure your cost base is carefully managed and is flexible but do not think it informs your charge rate.

Innovation: Do you initiate or are you dragged?

Marketers would have us believe that ever year every new product is an “innovation”. Consequently, it is an overused word, but when I talk about it I am referring to the changes in the way products and services are delivered to customers to better meet their actual needs.

In this sense of the word, every market has a degree of innovation present at all times. However, what marks some markets out is the rate of innovation. This rate is often driven by external forces rather than internal. Hoover did not start making bag-less cleaners after 70 years of a tried and trusted formula for fun, but because an inventor new to the cleaner industry, James Dyson, threatened their supremacy.

However, the greatest changes usually occur because of government intervention, a change in law or a government initiative. The success of the AT&T breakup initiated by the US Govt is controversial, but it created a very competitive market, at least initially. Ferrari (and the rest of the car industry) is very reluctantly currently working on clean technologies because of pending EU regulations, rather than some deep-seated environmental belief. The sale by the US Govt of old media airwaves will facilitate an explosion in wireless communications although it was heavily opposed by the old media.

It is inevitable that industries which have invested heavily in the status quo will not look to innovate unless pushed to do so.

So how is innovation in the legal market?

There has been change in the market in terms of attitudes and the introduction of some technology, but at the moment the rate of innovation is generally low. In a profession that places weight on precedent there seems little reason for change. However, legal precedent has little to do with law firms. The law does not belong to the firms and arguably is not the product of the firms either.

Should a new external force come into play in the legal market, innovation will result. The intended Legal Services Board deregulation, inspired by the Clementi Report, looks like that external force.

Are you ready for the resulting innovation?

BigWig will explore the likely challenges this will create and look at the potential solutions.

Liam Wall
Founder
BigWig Legal Network
www.bigwignetwork.co.uk

What is BigWig Legal Network?
The deregulation of UK legal structures will have a huge impact on how Law is practised and new legal services are offered. BigWig Legal Network is the UK’s first membership development organisation for fee earners in legal practices, priced for membership affordability, which will offer what legal professionals desire most of all: Accurate, dependable new insights and techniques for developing the legal services of the future.

Find out more at our monthly meetings.

An alternative take on “Tesco Law”

While not a new phrase for someone like me to bandy around, I wonder what you think Clementi meant by it?

Well, some suggest he meant the work of existing law firms being commoditised and sold off the shelf at Tesco, as Tesco do with banking, insurance and mobile phone services.

But what if he simply meant no change to the service itself, but a lot of change to the availability of the service?

Time-wise, Tesco open from early till late, certainly 7 days a week. Some stores open 24 hours at certain times of the year. When I worked for two large, successful, entrepreneurial, corporate companies, as Head of Finance, I was on the job from early till late, 7 days a week and on certain deals nearly 24 hours at a stretch. Now, with my corporate days behind me, my life revolves around clients during usual business hours and around usual pre-school and post-school hours with my family. In both situations, f I were looking for legal advice, 9pm in the evening would be ideal.

And with regard to location, in most conurbations in the UK, you are probably never more than 15 to 20 minutes away from a Tesco store, many of which have parking and a bus service.

So maybe Clementi was not talking about the devaluing of legal advice into some low-level commodity, but simply about making the existing provision available at a time and place to suit the customer. And even if he wasn’t, why not think about it?!


Liam Wall
Founder
BigWig Legal Network
www.bigwignetwork.co.uk

What is BigWig Legal Network?
The deregulation of UK legal structures will have a huge impact on how Law is practised and new legal services are offered. BigWig Legal Network is the UK’s first membership development organisation for fee earners in legal practices, priced for membership affordability, which will offer what legal professionals desire most of all: Accurate, dependable new insights and techniques for developing the legal services of the future.

Find out more at our monthly meetings.

Rational Analytical Thought!

Professionals spend most of their time advising clients in an analytical and rational manner. Clients are not interested in your feelings on a subject but in your analysis of it. Indeed, I would venture that most professions favour and reward the analytical over the emotional.

Analysis does not always get the right answer, but it is logical and methodical. It identifies areas of risk and areas which are unknown. By this process, the quality of decision-making is generally improved and more often than not will provide a better decision.

When dealing with a client’s problem, this approach serves well in identifying the key decision drivers or unknown or unknowable areas. When a client is closely “involved” with the subject matter of this decision (say buying a house or a company), this analytical rigour allows the professional to operate and is prized by their client.

This perspective contains an interesting irony. Are professionals able to be analytical about their own careers and practices? Do they analyse the state of their own practice, the future of their practice and its strengths and weaknesses? Do they assess the success factors for growth? Do they understand from research rather than anecdote their competiveness in price or quality compared to their competition? Indeed, do they analytically track their competition or, dare I say, even identify their competition?

I think most professionals dealing with their own lives without the detachment provided by advising someone else become very human and lose the ability to be highly objective.

The outcome is that obvious challenges to or problems inherent in their practice are tolerated rather than addressed. In other words, some of the most analytical minds in the country are sleepwalking into the future.

Should the Coalition Government continue the deregulation of law firm ownership, will you have analysed the impact of the change on your practice?


Liam Wall
Founder
BigWig Legal Network
www.bigwignetwork.co.uk

What is BigWig Legal Network?
The deregulation of UK legal structures will have a huge impact on how Law is practised and new legal services are offered. BigWig Legal Network is the UK’s first membership development organisation for fee earners in legal practices, priced for membership affordability, which will offer what legal professionals desire most of all: Accurate, dependable new insights and techniques for developing the legal services of the future.

Find out more at our monthly meetings.

Who needs a Strategy?

“Strategy”, or the “S word”, is often overused and misunderstood, probably because many organisations refer to plans as strategies when they are just plans.

A proper approach to developing a strategy involves defining where you currently are, examining anticipated developments in your market and your practice, defining your destination and, while on the journey, assessing and aligning the policies, processes and resources necessary to achieve that new vision or position.

This approach is responsive to the future, aiming to take action ahead of time to protect and grow business success. It roots current action in that view of the future and brings with it a degree of change.

If your practice uses a strategic process to define business objectives, you will know. The practice will have told you how the future looks, what your part is and why operational changes are being made or are in the pipeline. In an uncertain world, a practice with a strategy is like an airplane with a pilot and co-pilot at the helm. They constantly assess new data and, within the mission of getting from A to B, make new decisions as required. This contrasts with the autopilot setting of a practice without a strategy.

Note: If the strategy was well-considered in the first place, the need for constant change is minimal, as there ought not to be many large surprises. Using the plane analogy, the pilots do their checking for every flight, but most flights go according to plan without the need for an emergency landing!

Without the forward-looking element of the strategy, a well-run organisation can make small incremental changes based on experience. In a slowly developing market this will appear effective.

But what happens when the legal market changes quickly?

If your practice involves strategic thinking, you will have been able to weather the credit crunch well. This was a sudden change, but was heralded months before the full effects were felt. With quick and decisive action based on an updated strategy, the full effects would have been minimised and opportunities spotted to ensure growth. If this is not a description of your practice, or the one you work for, we might conclude strategic thinking is not alive and well.

Another change on the horizon since 2006 has been the deregulation of the legal market proposed by the Clementi Review, the first reforms of which should be implemented in the summer of 2011, according to the Legal Services Board.

If you do not yet have a strategy for dealing with what would be a fundamental shift in the shape of the legal market, now is the moment!


Liam Wall
Founder
BigWig Legal Network
www.bigwignetwork.co.uk

What is BigWig Legal Network?
The deregulation of UK legal structures will have a huge impact on how Law is practised and new legal services are offered. BigWig Legal Network is the UK’s first membership development organisation for fee earners in legal practices, priced for membership affordability, which will offer what legal professionals desire most of all: Accurate, dependable new insights and techniques for developing the legal services of the future.

Find out more at our Last Wednesday meetings.

Partnerships and Strategic Thought

In a recent blog I urged you to consider your strategy for the future. I believe that, whatever your position in a practice, you can to a greater or lesser degree implement a strategy for the future. Of course, the scale of that opportunity would differ if you were the senior or managing partner rather than a new trainee…….or would it?

A well-rounded strategy deals with the world as it is and not as we would like it to be. To design and implement a strategy is to sign up to new challenges and to changing your way of working. If successful, the strategy will improve profit and enable growth.

In most markets, the products and services required will change over time. If your organisation, via a strategy, is aiming to track those changes, it is inevitable that your business will change over time. In a practice this will mean people must re-train or leave the firm.

In a partnership world where years of experience are usually rewarded with the security of long-term tenure on the basis that this accumulated experience has a future value, the idea that change is inevitable is not widely accepted. To embrace it would be to suggest that the longest-serving members of a firm are not necessarily the most valuable. And yet the longest-serving are usually the partners, otherwise known as the business owners.

Depending on the future direction of the strategy, some senior members of the firm might be surplus to requirements. In my first hand experience, some of the larger and more successful partnerships do attend to this. It is not easy and as a business model partnerships do not lend themselves to these decisions.

So, in answer to my own question, partners may not be willing to design or implement strategies as they may fear that any changes may be their personal undoing. However, if partners are encouraged to wear the “business owner” hat while thinking about the business, they can take good business decisions that benefit both themselves and their business. If it is not appropriate or desirable for some partners to retrain, they could change the nature of their participation in the company by stepping aside from the hourly billing and reshaping their roles, e.g. to act as directors or even as silent partners in exchange for capital.


Liam Wall
Founder
BigWig Legal Network
www.bigwignetwork.co.uk

What is BigWig Legal Network?
The deregulation of UK legal structures will have a huge impact on how Law is practised and new legal services are offered. BigWig Legal Network is the UK’s first membership development organisation for fee earners in legal practices, priced for membership affordability, which will offer what legal professionals desire most of all: Accurate, dependable new insights and techniques for developing the legal services of the future.

Find out more at our Last Wednesday meetings.

The DEA: good for lawyers, bad for everyone else?

Did you know that the Digital Economy Act 2010 was enacted last month? If so, do you know how it affects you? The title makes it sound like a very dry topic, but in fact anyone who lives in the UK should be interested because it affects any UK creator, distributor or consumer of content on the web. On Wednesday 1st June, John Stobart of Harvey Ingram LLP gave an overview of the Act in an excellent presentation, “Legal Aspects of Online Business and the Digital Economy Act 2010”. The talk was hosted by Amplified Leicester at the Phoenix Square Digital Media Centre, Leicester.

Following the noble aims of the Digital Britain report, which mapped our existing use of the Internet as well as ways of enabling more Britons to access online content, it has of course become necessary to legislate how we do this. Most people are aware of the struggle of the film, music and publishing industries to maintain profitability when so much content is available for free or at very low cost on the web. It seems that fewer people are also aware that much of what is available is offered without the permission or sanction of the copyright owners. The ease and speed with which one can download content leads people to think that it must always be okay to do so.

But the scary thing is that even those who scrupulously avoid piracy may fall foul of the new Act. It could affect you negatively, even if you personally have not done anything illegal. This is because of draconian provisions requiring ISPs (Internet Service Providers) to write threatening letters to the owners of connections being used for illegal downloading, to provide to copyright holders the contact details of those people, and ultimately to limit bandwidth or cut internet connection completely if the copyright infringement is proven to have occurred. Continue reading