By Patrick J. McKenna
This article is an excerpt from a new 17 Chapter / 200+ page e-Book entitled Industry Specialization: Making Competitors Irrelevant due to be released in December 2021
One of the results of this pandemic has been in my observing many firms realize that some of their best clients have been decimated while others managed to enjoy unexpected revenue increases. As I watched these firms looked closer, I was struck by how they began to realize that this impact was the direct result of how certain industries had been impacted. Many of these same firms began to redesign their websites, adding an industry component and touting their industry knowledge in an effort to attract new business. Their vulnerable shortcoming was that they did not really understand the industry model, nor did they come across looking credible to prospective clients.
And in stating that, I am not ruminating on what I think, but rather reporting on what a growing number of your prospective clients are observing and discussing amongst themselves.
To get specific, here are some of the more common failings that your clients are observing and discussing amongst themselves – “It would appear that your firm is . . .”
1. Using the wrong terminology.
I read an interesting article the other day that attempted to make a case for “understanding your clients.” The author begins by explaining that “as law firm leaders are deciding how best to develop closer relationships with their clients, it is key they consider adopting a sector-based strategy and reevaluate which sectors to concentrate on for future growth. Focusing on a sector where firms have particular strength allows them to develop deep, profitable relationships, attract talent, and differentiate themselves from the competition.”
Although they may seem the same, the terms industry and sector have rather different meanings. The term “Industry” refers to a much more specific group of companies or businesses, while the term “Sector” describes a large segment of the economy. There are four different sectors in our economy: Primary (the extraction and harvesting of natural resources); Secondary (comprises construction, manufacturing and processing); Tertiary (retailers, entertainment and financial); and Quaternary (deals with knowledge pursuits – R&D, consulting services, education, etc). Now one might be tempted to dismiss this as just a minor matter of terminology but then again, by claiming some expertise in an area that you have incorrectly labelled, the client could very well conclude that you do NOT know what you are talking about.
As but one simple example, the “Financial Sector” is comprised of a number of very different industries such as banks, asset management companies, life insurance companies, brokerages, and so forth. By holding yourself out as a provider of services to the Financial Sector tells me nothing. Consider if I held myself out as an expert in the “Professional Services Sector” on my website and in my various communications, most prospects would likely move on, thinking correctly that I know nothing of their particular industry.
2. Trying to convince me that you are a specialist in . . . everything!
Perhaps it flows from lawyers believing that if they tell some client that theirs is a “full service law firm” that the client might view them as differentiated or think them special in some way. These same firm then decides to launch industries groups; but rather than determining the three or four industries where the largest portion of their client revenues emanate, they decide to list every possible industry that they may have touched at some point over the past few years. This proliferation of supposed expertise only serves to damage your reputation with prospective and existing clients.
Meanwhile, in an effort to make themselves more attractive and be all things to all prospects and clients, individual lawyers have, on their individual website bios, inflated their experience in so many different and unrelated industries and disciplines, as to damage any possible credibility that they might hope to exhibit.
The clients observing this behavior tell me that they know full well that these are attorneys either incapable of saying no to doing work that is not in their wheelhouse because they are so busy chasing origination credits; or these are attorneys who are afraid to invest the required time and energy to build their skills and make themselves the ‘go-to choice’ in some highly specialized niche.
3. Not really conversant or understanding how my industry is structured.
I am always struck by some firm who decides that one of the common industries in their market footprint and one that they have had some experience with serving is the “Manufacturing” Industry – so this becomes one of the Industries they list on their website. And then they proceed to tell anyone who visits their website, all of the various legal services that they are capable of providing for Manufacturers; and the list of legal services is quite extensive.
The clients observing this behavior are now convinced that you firm has no understanding whatsoever of “industry configurations” and how “granularity is key!”
Let’s continue with the Manufacturing Industry as an example. By listing only that your firm has expertise in “Manufacturing” completely IGNORES that if one were to carefully study the composition of the Manufacturing Industry you would find some 21 different sub-industries from Apparel and Chemical to Plastics and Transportation Equipment; and obviously because of all these different sub-industries, companies that operate within the same Manufacturing industry can behave very differently. Therefore, it stands to reason that companies in the Chemical Manufacturing sub-industry are going to be looking for a law firm that specifically represents itself to know and understand their kinds of business issues.
It is highly important to focus on the relevant industry and sub-parts. If we venture deeper, comprising those 21 different sub-industries you would then find 194 market niches including everything from Golf Cart and Snowmobile makers to Space Vehicle and Missel builders; and then there is the Solar Panel developers and Wineries.
You should also have some understanding of the industry dynamics. For example, of those 194 market niches that operate within the manufacturing industry, in 2020 just 45 were performing above the national average. One was performing at the national average, while a whopping 148 were performing below the national average.
But that's not all! Encompassing these market niches are all kinds of, what I’ve come to call micro-niches – many of which are in an emerging state will huge growth potential for some law firm to gain a “first-mover advantage” and eventually build a dominant position. Among those many micro-niches are areas like Additive or 3D Printing (with organizations like MIT building a one-stop-shop for 3D- printing Robots), and Synthetic Biology (where we have California-based Wineries making wine without grapes).
4. Clueless about my business and industries operating dynamics.
Experience in doing transactions for or handling intellectual property issues involving a specific industry is valuable. But clients are usually looking for so much more. They want an advisor that has at least a basic knowledge of the economics and competitive structure of their businesses. The industry is a company’s “all-encompassing environment” and it is imperative that you understand the structural nuances of the clients you serve.
For example, you must be knowledgeable on:
your client’s financial health, positioning and market share, and level of consolidation within their industry;
your client’s operating environment including changes in government regulations, labor and service costs; and the performance of their various product and service offerings;
your client’s competitors, their principal suppliers, their key customers and how they actually make money;
any barriers to entry, their industry life cycle and where they are positioned currently on that cycle; and
any trends and developments, positive and negative, that may impact their operations in the coming years and the probability of any of those trends actually unfolding.
The takeaway should be that no company, nor industry, operates in isolation and you need to be monitoring and conversant with credible data and analysis to help your client connect the dots.
5. Not displaying or sharing any industry focused thought leadership.
How do you compete when you don’t even know you’re under consideration? For example, in today’s age of digital marketing your prospect gets 57% of the way through the buying process before making contact.
According to Gartner’s research, buyers of sophisticated professional services are more than halfway through a buying decision before inviting a service provider into the conversation. This demonstrates that clients — who have access to more information than ever — are firmly in control of the buying process from start to finish.
As a lawyer, you are often unaware they you may be under consideration for a new engagement because more of the vetting of your services, relevant experience and specialized expertise is happening online. Assessments are being made well before you ever get the opportunity to “win it in person – virtually or physically.” So, to get up to bat in the first place, you must make a really strong impression in the digital domain, where clients are doing their due diligence.
The most effective way to make that strong impression is by sharing more ideas in the public domain to attract ideal clients. Obviously, what I’ve been saying here is that any firm can put a paragraph about some particular industry on its website and pretend to be an expert. However, you actively conducting primary industry research, surveys and writing articles or engaging in speaking at industry seminars on cutting-edge topics builds credibility and name recognition.
Your thought leadership will remain omnipresent in the realm of ideas, even if you can’t always be there in the room with an unknown prospect to demonstrate your expertise yourself.
6. Not being visible or active in any of my industry organizations.
One of the common concerns and criticisms I hear from your clients is how “my lawyer/law firm is not active in any way within my industry and trade association.”
For the typical mid-sized and smaller companies, various kinds of industry groups, trade associations or informal industry gatherings represent an important lifeline. Active participation can provide you with an effective conduit through which to keep up with emerging developments and build your expertise, as well as network and meet prospective clients and learn about what their specific market challenges and issues might be.
7. Slow to react to industry developments.
Clients choose to work with a specific industry group fully expecting that their advisors will behave as though they are an industry insiders – always showing how they are on top of and sometimes in advance of the latest unfolding developments. The best way to do that is to be the first to advise clients on breaking industry news. A proactive client call or email, within 24 hours of an important technology trend or regulatory change affecting an industry, screams industry knowledge much more than a well-crafted formal newsletter a month later.
Unfortunately, all too often firms tend to view industry groups as a marketing platform rather than as a means of understanding the client’s business problems and providing them with the kind of knowledgeable services they need. Don’t let these seven factors be how your client’s describe your industry initiatives.
About the Author
Patrick is an internationally recognized author, lecturer, strategist and seasoned advisor to the leaders of premier law firms; having had the honor of working with at least one of the largest firms in over a dozen different countries.
He is the author/co-author of 11 books most notably his international business best seller, First Among Equals (co-authored with David Maister), currently in its sixth printing and translated into nine languages. His two newest e-books, The Art of Leadership Succession and Strategy Innovation: Getting to The Future First (Legal Business World Publishing) were released in 2019.
He proudly serves as a non-executive director (NED) or advisory board member with a variety of professional service firms and incorporated companies. His aim is to instigate innovation, provide independent strategic insight drawn from his years of experience, and support effective governance.
His three decades of experience led to his being the subject of a Harvard Law School Case Study entitled: "Innovations in Legal Consulting" and he is the recipient of an honorary fellowship from Leaders Excellence of Harvard Square.