See past the hype

By Michael Shaw, Managing Partner, Cobbetts

Is it me or is our sector particularly susceptible to being excited by hyperbole? It’s as if rational thought and analysis instilled by years of training and practice is jettisoned when it comes to press coverage of our sector.

The ability to take external funding under the Legal Services Act is a prime example of what I’m talking about. Admittedly it was before the banking crisis, but grown up colleagues were convinced that there was a possibility of trousering loads of cash from a float. Others believed that unsuspecting private equity houses would be desperate to invest in any law firm regardless of its lack of strategy or quality of management and systems. Even back then I didn’t think that it really added up from either viewpoint.

I know one senior partner who went public on his firm’s ambition to float their business in the first wave, only for him to do an equally public about-turn just a few months later. I could speculate as to the reason for the change of heart, but maybe we can just assume that one or two responsible partners told him to calm down and stop being giddy!

There was much speculation that there would be a flood of mergers. Surveys indicated that a huge proportion of the Top 100 were seriously looking at this as a result of consolidation forces thrown up from an economy in crisis and a cottage industry sector running out of steam.

Latterly, we’ve been getting into a frenzy as a result of the ability to achieve cost reduction and therefore competitive advantage by business process outsourcing and, indeed, legal process outsourcing, except even that is now beginning to be questioned.

We’ve had massive change over the past 20 years and that rate of change has kept accelerating. Increased competition and market maturity has driven improvement and those who have responded positively have benefitted hugely.

We can expect that clients will become even more sophisticated consumers of our services with a radical change in their perception of value and expectations in terms of delivery.

Competition will increase merely as a result of less market activity, let alone the arrival of new entrants into any particular segment of the sector. There is and will continue to be huge pressures on pricing.

There is massive scope to respond, and the ability to innovate will probably determine who will seize the competitive advantage.

So let’s concentrate on identifying and exploiting the opportunities which are being presented to us from the unique combination of factors in the legal market today.