• By Patrick J. McKenna

Effective Strategy Often Requires Being First and Being Exceptional


The curious paradox is that most law firms go to great lengths to look like every other law firm. In fact the common response that you are most likely to elicit from the leadership of many firms when first presenting a new concept, idea, or potential market opportunity is: “Can you please give us a list of the other firms which are doing this”.

The corresponding irony is that today, most competitive efforts are invested in tit-for-tat rivalry rather than in pioneering new market spaces. In other words, firms seek to outperform each other by being better (busily pursuing cost and efficiency gains, usually at doing commodity work) – rather then by aiming to be significantly different (exploring lucrative, emerging client micro-niche needs).

This effort to be better often has the perverse and unintended consequence of (once again) only making competitors look more alike as they inexorably slide into low-cost mediocrity.

Real competitive advantage is achieved by getting out in front, by focusing on some area, some micro-niche (like any of the dozen I have identified and been writing about for the past year) in which you can be unbeatable. By definition, if you are doing what everyone else is, you are not meaningfully differentiated; you do not have an advantage!

And I’m not talking here about creating a brand new practice (e.g. Digital Transformation) is some area where you have never had any experience. What I’m advocating is for you to proactively explore and invest a modest amount of time into leveraging some novel client matter that you have already successfully worked on, where there is clear potential for other organizations facing the same problem or situation, to now benefit from your initial experience.

Growth is what we are taught to pursue. It creates marketplace recognition, higher profits-per-partner, makes it easier to attract better quality legal talent and better quality clients. And as one firm leader articulated this classic view: “There are no partnership problems that growth cannot solve.”

Observations suggest that the leading firms start with the premise that the key to competitive advantage is to set your sights on being “first to market” with exceptional ideas and exceptional service offerings. They become obsessed with: How can we be first to serve a client niche that no one else is addressing? How can we serve clients in such a way that nobody else has? What value-added can we offer that will make clients go ‘wow’? What can we do that will actually lead the market?

I strongly believe, from my decades of hands-on experience in working with professional firms to develop their strategic initiatives, that there are some distinctive (and often difficult for competitors to replicate) advantages in being first to market - - ahead of the curve, ahead of mass client demand, and ahead of the pack!

Some of those distinctive advantages to being first, include: • You can leverage your first mover position to attract other prospective clients. When you first serve a new niche area and a new client need, there is the opportunity to leverage that experience across other potential clients and prospects; thus being perceived as having specialized knowledge equipped to handle their unique and evolving business and legal matters. For many attorneys it is a matter of taking off their technicians glasses, putting on their entrepreneurial glasses and critically assessing some of the more challenging clients matters that they have already successfully handled, perhaps during the past 18 to 24 months, to specifically look for opportunities to leverage some of the more novel and challenging matters.

• You can begin to develop name recognition that becomes difficult for others to match.

Quick question: “Who was the first law firm to launch an eSports practice?” Most knowledgeable observers would immediately offer the name of Pennsylvania-based McNees Wallace and Nurick. In June 2018, a young associate practicing employment and labor law, inspired the leadership at the McNees law firm to announce the launch of their eSports practice group to serve what was already a $900m micro-niche. Esports, or competitive video gaming, is the result of a successful video gaming industry and involves professional gamers and oftentimes spectators. As esports grows, so does the number of complex legal issues that surround the industry. These issues include intellectual property protection, gambling, acquisition of sports properties, labor standards, and privacy and data security.

What is worthwhile noting is that it wasn’t until December, at least six months later that in a formal new release entitled, “Challenger Approaching: Greenberg Traurig enters eSports with new practice group.” Nevertheless, people will more often remember those that were first easier than those that came later. Sometimes the first preempts there even being a second, as no firm wants to be viewed as a direct copy-cat; devoid of any innovative thinking of their own.

Developing a memorable presence, a brand; is much easier when you don’t have to differentiate yourself from a number of other similar offerings. Cognitive psychologists tell us that as consumers we have limited memory capacity – which is to suggest that we compartmentalize information; and have very limited shelf space! If you happen to be among the first to enter the consumer’s conscience with respect to some niche area, then when some prospective client hears about some legal issue in that space, they naturally think of you and your firm. In the consumer’s mind there is no competition; you are the go-to player. You are first to occupy the market-space and first to occupy the mind-space.

• Being first-to-market can command premium pricing.

Everyone remembers the old adage that when you need brain surgery (or any highly specialized service), you always want to know that you are going to get value for your money, but fees are not the most important criteria for making your selection. You are looking for the best and most experienced specialist you can find.

• It allows you to progress up the learning curve faster than those that follow.

Acquired knowledge can psychologically lock out competitors from copying some of your ideas, processes, technology, and methods. In any market with specialized know-how and a steep learning curve, being first can confer the advantage of having a head start. That head start allows you to position yourself as a primary source for media commentary, for seminar presentations, for having articles published, and other such market positioning tactics.

First movers, who also act as “smart movers” in that they exploit their early positioning (critically important tactic!), have the likelihood of being able to gain a dominant market standing and define the standard that others may be required to follow.

• Being a First Mover can help you attract and retain the top talent that yearns to be a part of something meaningful.

Interestingly, the best retention rates are most often found at firms with the highest growth. While compensation matters, it is the quality of the work assignments (challenging client projects and opportunities for professional growth) and the quality of the people that often tips the balance as to whether a professional stays or goes. The type of professionals you attract have lots of options. What buys loyalty these days? “If they ‘don’t see you at the forefront’, you can forget about the other issues.” said Patricia Milligan, former President at Mercer Talent.

That all said, one wonders why so many firms choose to seek out attorneys simply because of their book of business (irrespective of whether that book is portable or profitable) rather than attorneys with a book of knowledge – expertise that can be selectively applied to help build a dominant position in some targeted and lucrative micro-niche area.

• You can capture clients that will not then want to endure switching costs once competition arrives.

A first mover also has the opportunity to draw clients into their web, creating “switching costs” that curtail those clients from any notion of later moving their work to other fast follower firms. In some situations, key resources are scarce. So for example, the first law firm to become active in a new industry association (like Augmented 3D Manufacturing) could potentially lock out others. There is also the ability to develop primary relationships with key members of some industry clusters. Clusters are a magnet for attracting world-class talent that often then move between companies within that particular geographic locale. Thus, when a key player moves from one company to another, or to even starts a new venture, that attorney who has the personal relationship has the inside track.

• It all translates into increased client revenues and profitability. Now, many pundits will argue that “being a fast follower is a better strategy” than trying to be the leader. Those eager to avoid the hard work of strategic innovation will seize upon this diagnosis to justify their instinctive fear of novelty, risk, or entrepreneurial adventure. Suddenly, timidity is heralded as a virtue.

To be a first mover AND a smart mover you must ask yourself, what race are we running here – sprint or marathon. If you try to run a 100-yard sprint like a marathon, you'll be left behind. If you try to run a marathon like a 100-yard sprint, you'll keel over from exhaustion. So, in order to enhance your revenue and profitability, it is critically important to ask some questions as you contemplate becoming a first-mover:

  • Are there difficult technical hurdles?

  • Does market takeoff depend on the development of significant expertise skills?

  • Will it require complementary services?

  • Will a new or different infrastructure or service delivery be required?

  • Will clients need to adopt new or different behaviors?

  • Are there high switching costs for clients in order to retain our services?

  • Will competing standards confuse clients?

  • Are there powerful competitors that will seek to delay or derail us?

If the answer to any of those questions is yes, you must be careful not to pour in too many resources too soon; the race is going to be a marathon.

On the other hand, answer yes to all of these three questions, and you'll need to sprint out of the starting block:

  • Are the client benefits clear and substantial?

  • Are there potential trends taking shape that will accelerate takeoff?

  • Are there powerful competitors that will be compelled to follow?

• It allows you to meaningfully differentiate what it is that you have to offer. The larger any market, the more specialization that takes place and the more specialized a firm must become if it is going to prosper. In any market or industry, with the passage of time, that market or industry will eventually fracture, and become two or more separate and distinct categories. Each category has its own reason for existence and it’s own market leader – which is rarely the same as the leader of the original category. The initial market leader is no smarter and no dumber than the new entrant. The problem is that they are most often burdened by historical baggage - - the psychological comfort of the status quo.

A few months back I identified and wrote about the Anti-Aging and Regenerative Medicine micro-niche as one area of opportunity within a huge but highly fractured, mature HealthCare industry. As an area of interest for attorneys, some $200 billion was spent in 2018 in the anti-aging or longevity industry. It is a curious phenomena that if you ask someone you consider fairly well-informed to name all of the firms who have a practice serving the "so-and-so" industry segment, at best, most will only be able to name three or four firms – and the more narrow the market or industry segment, the fewer the names they will be able to recall. Now while there are dozens of law firms of all sizes claiming to serve HealthCare clients, I could find only one, a West Coast-based firm that specialized in focusing on micro-niches like anti-aging, biotech and nutraceutical companies, medical device companies, telemedicine ventures and emerging healthcare technologies – handling everything from medical practice business formations, mergers and dispute resolution, to e-commerce, licensing agreements and IP protection.

Most first mover winners are usually also the firms, that as a reflection of their commitment, are able to have a couple of partners working “full-time” on the issues while the late-comers are likely to only have enough client work to occupy a fraction of any partner’s time. Who came first can be an important issue and market visibility is the key. Timeliness distinguishes those with a long-standing interest in and commitment to some micro-niche area, versus those who may be delayed investing in the opportunity area. Your critical objective is “to be ahead of the curve”; to be able to see the issues unfolding ahead of time.

THE LESSONS

At the dawning of this new decade, today’s revenues will be a direct reflection of yesterday’s decisions, while tomorrow’s numbers will be a direct outcome of today’s decisions. Aim to be the first to market, the first to organize a new practice or industry niche offering; the first to serve a potentially new client need.

To accomplish that objective:

  • someone must perceive a potential need in the marketplace and determine whether an internal “champion” exists to spearhead the effort. Time after time I have witnessed that if there is no champion – then there is no hope.

  • your firm must determine whether there is long-term market growth potential and an existing experience base to build upon to support the investment ; and you must be able to overcome what is likely to be persistent economic doubts.

  • there needs to be a strong degree of support (“will”) amongst the firm’s leadership to invest in “test-marketing” a new niche practice. This new opportunity area is usually always partner-intensive as the emerging work at this stage requires “senior judgment.” Only after significant work comes in are associates likely to be meaningfully involved.

  • members of the pioneering group (which could be as small as two lawyers) must be protected as they spend, what might otherwise be billable time, researching and learning the field, planning and meeting with other experts both within and outside of the firm.

  • further time must be spent in developing questionnaires, tools, templates and approaches for pricing, marketing, and delivering the team’s services.

  • resources must be invested in initially providing education (articles and seminars) and counseling services to prospective clients on the issues, the ramifications, and the benefits of taking remedial action so that the group can then be in a position to actually sell its services.

  • you must decide what critical mass is required to become a “player”, whether to expand ahead of any growing client need, and whether the team should remain local or be geographically dispersed. Getting in early, but remaining relatively small may result in your losing your initial advantage.

It's called the "First Mover Advantage” – sometimes it is better to be first than it is to be better. In general, studies have shown that the first firms get the lion’s share of the market, while the latecomers divide the rest. In fact, Tom Kinnear, a professor at Michigan Business School reported that first movers gain 2.5 times as much market share as later entrants into new markets.

The essence of having a first mover strategy: “It is far easier to get into the prospective client’s mind first, than to convince someone already using a service, to try yours.”

The essence of having a first mover strategy: “It is far easier to get into the prospective client’s mind first, than to convince someone already using a service, to try yours.”

About the Author

Patrick J. McKenna is an internationally recognized thought leader, author, lecturer, strategist and seasoned advisor to the leaders of premier law firms, Patrick has had the honor of working with at least one of the largest firms in over a dozen different countries.

Patrick has lectured on professional service management and strategy for the Canadian, American and International Bar Associations; the Canadian Tax Foundation, the International Union of Lawyers, the Institute For Law Firm Management, The Institute For International Research, the Society for Marketing Professional Services, The Managing Partner’s Forum, Centaur Conferences Europe and the Financial Times Of London. He is a frequently requested speaker, having appeared in London, Geneva, Vienna, Munich, Marrakech, Istanbul, Singapore, Hong Kong, New York, Boston, Chicago, San Francisco, and Toronto for professional conferences and seminars.

Patrick did his MBA graduate work at the Canadian School of Management and is among the first alumni from Harvard’s Leadership in Professional Service Firms program.

McKenna’s decades of experience led to his being the subject of a Harvard Law School Case Study entitled: Innovations In Legal Consulting (2011). He was the first “expert” in professional service firms admitted to the Association of Corporate Executive Coaches, the #1 US group for senior-level CEO coaches; was the recipient of an Honorary Fellowship from Leaders Excellence of Harvard Square (2015); and voted by the readers of Legal Business World as one of only seven international Thought Leaders (2017).

Most recently McKenna helped launch the first International Legal Think-Tank (LIFT: Legal Institute For Forward Thinking) comprised of academics, researchers and consultants from three countries.

Read more articles from Patrick McKenna, or read online/download his latest eBooks

#PatrickJMcKenna #NeedtoRead #AllUpdates

SPONSORS LEGAL TV

BACK TO TOP

© 2017|2020 LegalBusinessWorld™

Australia | Asia | Canada |  Belgium | China | Cyprus | Czech | Denmark | Estonia | Finland | France | Germany | Greece | Hungary | Hong Kong | Iceland | India | Indonesia | Israel |Italy | Japan | Latvia | Lithuania | Luxembourg | Malta | Mexico| Norway | Poland | Portugal | Romania | Russia | Singapore | Slovakia | South America | Spain | Sweden | Switzerland | Taiwan | The Netherlands | Turkey | Ukraine |United Kingdom | United States |Middle East | Africa