November 4, 2015
Despite myriad factors, many law firms continue to focus on singular change agents rather than the bigger picture, preferring to address one issue at a time instead of tackling the much more daunting task of redesigning the business model. To ensure you stay in front of vs. behind such market pressures , firms should consider creating and implementing an overarching growth strategy reflecting four key strategic growth anchors;
- Client Selection,
- Pricing and Profit Model,
- Scope of Activities, and
- Winning and Keeping the Business.
In our new whitepaper, Reinventing the Law Firm Business Model, we examine each of these dimensions in turn, while also providing context to how all four dimensions fit together to provide a dynamic and profitable model for building a sustainable law firm practice for the future.
For example, let’s take a closer look at the development of alternative forms of pricing – known in the vernacular of the industry as Alternative Fee Arrangements or “AFAs.” It is true that use of AFAs has become increasingly prevalent, yet many firms remain hesitant to employ AFAs, concerned that new fee arrangements will prove to be less profitable than the traditional billable-hour model.
Many law firms that struggle with how to make AFAs profitable likely have not taken a grassroots approach to how they handle matters. They want to continue to offer the same services to the same clients, just with a fixed price tag. Perhaps unsurprisingly, this has led to less than satisfactory results.
Where, in the past, firms may have been able to absorb “cost-overruns” on a fixed-fee project because such arrangements constituted a small share of their overall book of business, those same firms now see such projects as a greater share of their total revenue. In response, firms have introduced two important new capabilities:
- Utilization of “Lean” techniques to improve the processes employed to deliver legal services
- Monitoring of execution through classical techniques of project management.
Project management and process improvement are essentially tactical approaches to controlling costs, which are absolutely critical in order to respond to innovation in pricing. However, project management and process improvement initiatives alone cannot necessarily be regarded as making a firm innovative. Such tactics have to be considered in the context of a much broader range of possible strategic choices.
In this example it is not enough to look solely at pricing through AFAs, or to apply process and project management strategies to a law firm’s current business model in a vacuum. These steps cannot be expected to lead to viability and profitability. Law firms that wish to become truly innovative must re-envision how their business is constructed, what services they offer, and which clients they want to service.
(Download White Paper: Reinventing the Law Firm Business Model)