Posted by Arlene Adams, CEO of Legal Futures Associate Peppermint Technology
Adams: fear of taking risks will be one of, if not the greatest, barrier for traditional law firms competing
The legal market is in danger of being consumed by the same doom and gloom that taunts the UK economy.
For years the media have filled our TVs and newspapers with stories of fear, uncertainty and doubt. While some of the stories may be true, many are fiction. There is a real danger we are consumed by the fiction and allow negative predictions to become a self-fulfilling prophecy, where banks stop lending and consumers stop spending. A familiar story? We end up acting out the very scenario we want to avoid.
I see the same pattern emerging in the legal world. We are surrounded by articles, social media and experts predicting the end of the world for law firms. If you follow the media hype, then alternative business structures (ABSs) will take over and traditional firms will shrink and die. There is unprecedented change in the UK legal market but that doesn’t mean the end, far from it. Where there is seismic change, there is always seismic opportunity. Winners are not defined by their history but by what they do.
Traditional law firm have as much chance of prospering as new entrants, and perhaps more, if they are willing to take some risks and turn legacy into competitive value.
I meet with managing partners of law firms on a regular basis. Yes, there are some in denial but most are acutely aware of the challenges ahead. Those who ‘get’ the new world of legal understand the need to change business models, skills and company structures. There is, however, a big difference between recognising the need for change and doing something about it. Change means taking risks, which ironically lawyers spend their life trying to avoid.
The fear of taking risks will be one of, if not the greatest, barrier for traditional law firms competing in the new world. Law firms focusing too much on the risk of change are in danger of looking down the wrong end of the telescope. They will only see problems and reasons not to change and will miss the bigger picture of the changing environment and threats and opportunities around them. If you speak to any successful growing business leader, they will always tell you they take risks along the way.
So often managing partners tell me it would be so much easier if they were a greenfield site, starting again in the legal market today. That’s the reason we are witnessing a surge of new start-ups and ABSs, funded and backed by traditional firms. This is their bet on the new world of legal services and in many instances it is a good strategy. It may also be a reaction to avoiding the need to manage the risk of change in their existing firms.
Existing firms, however, have scale, customers and reputation, the crown jewels in a business. New entrants don’t. Those firms who turn round the telescope and look at the bigger picture will quickly see they have some strong and unique value over new entrants. We are already seeing new entrants buying up law firms. Why? The new players recognise the need for scale and customers to cement their position quickly.
Speed of action is a key asset or risk (depending on your position),so new entrants are buying the problems and risks that traditional law firms claim hold them back. Perhaps the biggest difference between new entrants and traditional law firms is not so much legacy, structure and agility, but their appetite for taking risk.
Not entirely sure market commentators think the end is nigh. Most believe its just the beginning.