The UK legal market continues to undergo a profound change that began with the recession and is now continuing as the impact of new entrants begins to be felt. Bill Gates observed in relation to technology that “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.” He could have been speaking about the UK legal market.
It is 3 years since the first ABS licences were granted yet it doesn’t always feel that the hype which preceded liberalisation has lived up to expectation. But have we been missing what is slowly happening around us to such an extent that it will be too late to do anything about it when we realise the gradually warming water is too hot to handle?
Slater + Gordon, quoted on the Australian stock exchange, entered the UK market in April 2012 and in three years have gone from zero revenue to an annualised turnover of £125 million, with ambitions to become the leading consumer brand. Who would bet against that? Maybe Irwin Mitchell whose turnover is around £200 million and are rumoured to be considering an IPO to raise capital - no doubt to fund rapid expansion in the quest for dominance of the B2C market.
In the Business to Business space the disruptors have been doing rather well too. Axiom, which is Private Equity backed, didn't exist in 1999 but last year declared global revenues of $200 million. The UK business has already reached £30 million which puts it firmly into the Top 100 law firms and it is reputedly hiring lawyers at the rate of 100 a year. Riverview Law has only been going three years but has already seen exponential growth and has just opened its second office in Manchester.
New entrants look at the world differently than traditional law firms and use external capital to scale fast. They also understand the importance of dominating their chosen segment of the market, and that a clearly differentiated offering gives them the best opportunity to do that and grow quickly - providing a fast return for their investors. This approach is unlike that of most traditional law firms who continue to promote a full service offering to a wide variety of clients, a strategy that will look increasingly outdated in a mature market with more sophisticated buyers.
Of course, some existing firms have seen the writing on the wall and are trying to reinvent themselves. Some are going for size, like Dentons whose recent merger with Dacheng makes it the world’s largest law firm by headcount - hoping that this dominance will make it an essential choice for the Fortune 500. Others have moved into the corporate venturing space with their own disruptive offerings like Lawyers on Demand and Peerpoint, which will most probably be spun off in future allowing their founding law firms to focus on their core market.
However you look at it, though, all law firms, whichever part of the market they are in, would benefit from revisiting their strategy to create a business that is more easily differentiated from competitors with a compelling proposition totally aligned to their target market.