Large law firms recognize the importance of client focus. To relate to clients, these firms work to understand their clients’ business and industry. Yet, for practical reasons, acquiring this “client-centric” understanding can be a challenge. Generally speaking, outside counsel and their corporate clients tend to approach the client’s needs differently.
To elaborate, outside lawyers view client work through a practice area lens. Their interactions with clients are thus anchored by a “practice-centric” understanding. Corporate clients, however, view their work from an industry perspective. These clients are focused on how the organization is performing relative to industry competitors.
How might outside counsel bridge the gap in client-centric understanding? One solution is to employ analytics that place corporate clients in an industry context. A firm that knows its clients’ industries is better equipped to identify client needs and develop innovative responses. For this reason, firms that have an industry focus also have a competitive advantage.
In this article, I elaborate on how an industry perspective fosters client-centric understanding. The article is the first in a series devoted to showing how data about corporate organizations can enhance client service relationships, as well as the business of law generally.
Industry categories are the ideal organizing framework for producing client-centric insights for two reasons. First, data summaries about industries speak directly to the clients’ business performance. Second, unlike models that categorize clients by practice group (e.g., “Intellectual Property”), industry categories (e.g., “Technology”) are easily mapped to other sources of data—from information about company size to trends in capital expenditures.
Whether in today’s market or tomorrow’s, the key to success is relating to clients.
– Aric Press, The American Lawyer
To implement this approach, it is necessary to assign corporate organizations into a specific industry category. Assignment to a second, more specific subindustry category is also recommended. Consistency is key when determining industry assignments. At Lawyer Metrics, we have developed a proprietary classification scheme that uses NAICS codes. Specifically, we assign each organization to one of twelve broad industry categories and one of over 200 subindustry sectors.
After classifying organizations into industries, the next step is to locate data that helps to characterize the clients’ position in the industry. By and large, this is a matter of compiling data on basic facts about a number of similar companies. When these facts are used to benchmark clients against their broader industry, the result is a window into what clients think and know about their organization. The next section provides an example that shows how outside lawyers can use the results of a client-centric data analysis to enhance client service.
Barton & Kind (B&K) is a (hypothetical) West Coast law firm with 680 attorneys. The firm, which is headquartered in Seattle, is best known for its Intellectual Property, Capital Transactions, and Labor and Employment practices. B&K’s Intellectual Property group has a longstanding client relationship with Intermec, a company located about 30 miles north of Seattle in Everett, Washington. Intermec’s primary line of business is manufacturing computer equipment that businesses use to manage their supply chain. Accordingly, Intermec is classified as a technology company.
How can a client-centric analysis help B&K better understand Intermec’s position in the technology industry? To begin, Figure 1 maps all of the technology companies in the Seattle metro area (we restrict our focus to companies with annual revenue greater than $50 million). The map locates Intermec (solid orange dot) and the other technology companies (hollow blue dots) using geocoded data.
For B&K, the ability to see how the technology industry is distributed geographically enhances client-centric understanding. The map shows what Intermec’s leaders see when they think about “local tech companies.” It also reveals that Intermec is geographically isolated from its peers, which are headquartered close to the heart of Seattle.
The map is a useful starting point, but there is more that B&K’s lawyers can learn from a client-centric data analysis. For one thing, they can explore Intermec’s industry standing on a number of business metrics. This example considers four such metrics: total revenue, revenue growth, number of employees at the headquarters office, and number of employees in the company. Figure 2 reports Intermec’s percentile scores on each metric relative to the Seattle technology industry as a whole.
Taken together the data tells an interesting story about the company. Intermec’s annual gross revenue puts it in the Top 25% of all Seattle technology companies. Thus B&K now knows that, in the Seattle technology market, Intermec is a revenue leader. At the same time, the company’s revenue growth is average, falling near the 50th percentile. This evidence could prompt a diligent partner to dig deeper into the client’s financials, and perhaps re-visit the firm’s existing fee arrangements with the company.
Looking at the employee-based metrics, Intermec’s industry position is noteworthy. Relative to Seattle as a whole, the company has a small number of employees at its headquarters, but Intermec’s total workforce is large for a Seattle-based tech company (more than 2,300 in total). Companies with a larger workforce tend to have more labor and employment issues. After seeing the company’s headcount percentiles, B&K’s Intellectual Property partners decide to introduce their Intermec contacts to representatives from the firm’s Labor and Employment practice.
This example begins to show how an analysis focused on industries provides B&K with useful client intelligence. A number of extensions are possible. For example, B&K could assess how Intermec measures up against its industry peers located on the West Coast, or against the U.S. industry as a whole. The firm could also narrow its focus to Intermec’s subindustry, “Computer and Electrical Products.” Finally, incorporating additional facts about the industry—including data on performance versus other sectors, employment and earnings forecasts, or even regulatory pressures—would strengthen the firm’s understanding.
This article focused on selected insights that emerge from a client focus that is contextualized around industry sectors. Firms that know basic facts about a client’s industry standing are better able to see their clients’ own perspective. Crucially, such empathy is an important part of developing innovative solutions. For this reason, a client-centric data analysis offers firms a means to differentiate their products and services.
This article is the first in a series that highlights the insights that flow from a focused analysis of corporate clients. In subsequent articles, we will describe how client-centric analytics can inform the business of law in other domains—from shining new light on a firm’s internal performance and observing profit centers, to identifying business development opportunities and setting strategic priorities.
This post originally appeared on Lawyer Metrics, and is reposted here with permission.