The legal sector is on the brink of an industrial revolution

By David Pester, Managing Partner, TLT

The UK legal sector is currently undergoing a radical transformation. Some may come to regard the next few years as the legal market’s equivalent of the industrial revolution. Changes in how law firms operate and are regulated, the Legal Services Act opening up the market to increased competition, outsourcing and the onset of alternative business structures (ABS) are just a few of the key factors which will change the face of legal services in the UK forever. These are truly both challenging and fascinating times.

The difficult economic conditions of the past few years have added impetus to change. For some, there is a need to adapt to survive, while for others there is a real opportunity to gain competitive advantage.

But it’s certainly not all doom and gloom for the more conventional law firm model. On the contrary, for the strategic-thinking, forward-planning, innovative and fast-acting law firms in the market, the challenges presented by these changing market conditions can be turned into genuine opportunities.

To thrive in these uncertain times, firms will need to be very clear about what they want to be famous for. They will need a well considered and planned strategy which clearly articulates which clients in which markets will be serviced, and with what services. That strategy needs to be grounded in reality. Market research and an honest appraisal of what can truly be achieved from the firm’s current position are essential.

Once a strategy is agreed upon, the firm’s entire business operations need to be adapted and aligned to delivering on that strategy – that’s everything from how you finance, manage and resource client work and how you train your staff to what IT systems are used, what panel work you pitch for and how you share knowledge within the firm. No area is immune from review or reappraisal.

As the market segments into different types of providers, a variety of business models will emerge. Some firms are already adopting outsourced models, while others are going down the advisory route. And there will of course be hybrids of both. Different models will require different HR, risk and business development strategies. All will need an investment strategy and to be well run and managed effectively.

Regardless of which market segment a firm targets, what will be critical to achieving that strategy is efficiency and the effective allocation and direction of the firm’s resources. Collaboration and joint ventures between firms in different segments of the market may grow over the next few years but, in the longer term, other entrants, for example legal process outsourcing providers, may redefine the competitor base for some and drive other forms of association and business models.

The key to all of the above will be the reaction of clients and changes in buying behaviour, or their approach to resourcing services both internally and externally.

Whatever the drivers, change and transformation will remain important themes for the years ahead.