I recently saw a fabulous movie called “Bottle Shock.” The film portrays the Judgment of Paris, a 1976 blind taste competition that pitted California wines against the traditional world-beaters, the French. Chateau Montelena, a California chardonnay, won the competition and shocked the world, representing the first successful challenge to the conventional wisdom about the unassailable superiority of French wines.
Stephen Spurrier, the English-born, Paris-based wine shop owner who had organized the event, closed the movie by saying to the shocked French oenophiles, “Welcome to the future.” So, let’s just make it official: The boom in the legal industry, sustained by the boom in financial services, is over.
For those of us who’ve spent most of our careers as clients, it seemed pretty obvious that the legal business was in an unsustainable boom. Consider: In a country where most people’s incomes have been flat or declining over the last eight years, and most companies face increasing global competition and flat profits, partners in big law firms generally saw their income double every four to six years over the last 15 years. And the firms have generally grown in profits, staffing and revenues faster than most of their clients.
Many folks in law firms have come to believe that the law business operates according to a different set of economic rules than their clients’ businesses, but the truth is much simpler: When you’re inside a boom, you always think your industry has achieved immunity from the laws of gravity, because it’s the only reality you can see. I was in Silicon Valley in 1998, believe me, I know.
That’s not nuts. As noted business strategist Geoffrey Moore wrote a decade ago in his book “Inside the Tornado”, when you’re [in a boom,] the first rule is “just ship.” Translation: Respond to demand, don’t think too much. As Cadwalader Chairman Christopher White recently acknowledged, “There was a bubble, we rode that bubble, it contracted, and we adjusted. Even knowing what I know now, I wouldn’t have changed a thing.” But what happens when the boom ends?
The first order of business is to quickly get past the denial stage and move to acceptance: Be honest with yourself and your team about what’s happening. Post-boom, law firms must get back to the basics: delivering value and listening to clients.
All the other elements of “strategy” that so many firms have embraced over the last ten to 15 years — increase concentration on the financial services industry, raise prices, grow for growth’s sake, increase leverage by hiring more associates, make fewer partners, and deequitize existing partners — have been about the firm and not about the clients. They made sense only in the context of a financial services-driven boom.
My purpose in this space is to begin a conversation about what the future of law and the delivery of legal services will look like, as today’s widely held assumptions are turned on their head in our fast-changing world.
As a lawyer who has spent most of my career straddling law and other domains — and lived and managed through the tech boom and post-boom — my goal is to explore:
What’s changing in the world of clients?