Biglaw, Small Law Firms

Reinventing The Law Business: Competitive Advantages In The Law Business

Columnist Bruce Stachenfeld applies the powerful insights of Harvard Business School professor Michael E. Porter to the business of law.

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Professor Michael Porter at Harvard Business School is really smart — at least I think so. He has spent his long career analyzing strategy and competition. His analysis is exceptional and probably just about everyone in the business world knows all about him; however, strangely, I never see people applying his thinking to the legal profession. So let me try to rectify that in concordance with my goal of “reinventing” the law business by talking about what is a competitive advantage and applying it to law firms.

Let’s start out with Porter’s definition:

Competitive advantage depends on offering a unique value proposition delivered by a tailored value chain, involving trade-offs different from those of rivals, and where there is a fit among numerous activities that become mutually reinforcing.

I suggest you read this a couple of times and really think about it. This is the culmination of many years of research by a brilliant and cutting-edge thinker all gelled down to one sentence.

Consider the concepts he raises:

It is a “unique value proposition”;

It is delivered by a “tailored value chain”;

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There are “trade-offs different from those of rivals”; and

And there is a “fit among numerous activities that become mutually reinforcing.”

As you think about the firm that you work in, consider each of these in turn.

Does your firm – or your practice – have anything “unique” about it? If not, that puts you at risk of the dreaded “commoditization” of your business, which means you have no pricing power. This is an awful place to be and the opposite of a competitive advantage, which is of course why Porter puts it up front. Accordingly, if there is nothing really “unique” about your firm or your practice, it is high time you thought through a way to move in a different direction.

Is there a “tailored value chain”? This means that there are distinctive aspects of the value that you provide to clients that are special and different in nature from the normal. Is the service you provide just the usual way lawyers do their work, or have you added something special into the mix? If not, it is logical to think about how to do this.

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Have you, or has your firm, made “trade-offs different from rivals”? Or are you just providing legal services to everyone and everywhere across the board, and essentially being all things to all people? Clients invariably want the best of the best for the job at hand. It is not believable that a lawyer or a law firm will be the best at all jobs of all kinds. Accordingly, it is critical to make trade-offs to permit focus on specific aspects of a practice and thereby develop specific and marketable expertise. Our firm, Duval & Stachenfeld, did this in its focus on real estate — this was a clear “trade-off” as it makes it easier to get real estate clients and, at the same time, harder to get non-real estate clients.

And, finally, and of critical importance, is there a “fit among numerous activities that become mutually reinforcing”? This may sound like mumbo-jumbo, but it is not at all. It is of critical importance. What this means for a law firm (at least as I interpret it) is that you are not dependent on one lawyer or one practice for the success of the firm, which lawyer or practice is easily mobile.

In this regard, consider that you might think a competitive advantage is having a great lawyer (or group of lawyers) at your law firm – but what if that lawyer (or group of lawyers) leaves – where is the competitive advantage? In a business where the people are the only real assets, a fit among numerous activities that become mutually reinforcing is the glue that holds the competitive advantage together. In the law business, this glue consists of touchy-feely things like:

  • Lawyers who like each other and like being together, sort of like a family
  • A culture that inspires those who work within it to be supportive of the firm and its goals
  • Leadership that is inclusive in nature

And it also consists of more pragmatic types of glue, such as:

  • A common business purpose
  • Lawyers sharing clients across different practice areas
  • Lawyers sharing client relationships

In today’s competitive legal market, lawyers would be well-served by reading Porter’s books and considering his business concepts as they apply to individual lawyers, practice groups, and entire law firms. A well thought-out competitive advantage (or lack thereof) can easily be the difference between great success and extinction.

As a final note, my sense is that it is a lot easier to apply Porter’s principles to a small and growing firm than to a large law firm that is already set in its ways, its culture, and its brand. However, I suspect every law firm and every practice within a law firm could benefit from Professor Porter’s insights.

Bruce Stachenfeld is the managing partner of Duval & Stachenfeld LLP, which is an approximately 70-lawyer law firm based in midtown Manhattan. The firm is known as “The Pure Play in Real Estate Law” because all of its practice areas are focused around real estate. With 50 full-time real estate lawyers, the firm is one of the largest real estate law practices in New York City. You can contact Bruce by email at thehedgehoglawyer@gmail.com.

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