We continue our blog series, presented by Patrick J. McKenna and Michael Rynowecer, on the value to your law firm of having an Industry Focus and how it can enhance your firm’s strategy.
As we discussed previously, there are several reasons why an industry focus can improve your firm’s performance and greatly enhance its relationships with clients. Now, however, we need to outline some specific steps your firm can take to ensure its industry focus efforts are worthwhile and ultimately effective:
1. Determine your firm’s current industry experience
This is an easy step to take because every client has a Standard Industrial Classification (SIC), North American Industry Classification System (NAICS), or International Standard Industrial Classification (ISIC) code that is determined by the company’s primary line of business. That said, it will be inevitable that some of your clients may be players in multiple different industries; Amazon, for example, is a major player in more than a dozen different industries. Also, clients that make silicone chips have nothing in common with companies that make cars, but law firms keep creating Manufacturing industry groups to serve all these companies. The key is finding industry definitions that reflect the firm’s actual client base and experience.
2. Decide which specific industries to target
This requires examining the various industries your firm is currently serving and the revenues realized, together with your firm’s ability to deliver qualified service expertise to clients in those industries. Expertise is the largest requirement to creating an industry group because the members of the team must have hands-on experience working within the particular sector. Also, having group members who are active participants in trade associations provides you with the advantage of having your people networking in the same circles where potential clients circulate.
3. Compare the strength of your firm’s capabilities to your major competitors’ capabilities
Critically and objectively assess your firm’s existing capabilities to solve clients’ most pressing problems in each targeted industry. Will clients view your firm as credible? Does your partner group have solid client references and relationships that will help you compete effectively? Do you have (or can you quickly develop) insightful points of view and usable intellectual property (checklists, templates, tools, etc.) that will pique your clients and targets’ interest? If not, it will be difficult to compete effectively and might not be the best industry sector to focus on — unless your firm is willing to invest in building the missing capabilities and credentials.
It is not unheard of to see some firms enter markets where they had few existing clients and were up against well-positioned competitors that dominated the landscape. We are not saying that you should never move into totally new industry markets, but you do want to carefully evaluate whether the competitive battle is your firm’s best investment of time, energy, and focus compared to other industries where your firm is starting from a more established position.
4. Analyze the current size and projected growth rate of each targeted industry
You should ensure that the current size and the projected growth rates for each target industry under consideration will result in a sufficiently large market in which to compete. Sufficient will naturally vary by firm, but the target market should always be substantial enough that it can support a critical mass of partners and professionals as it evolves.
That said, there are some industries that may be in their early developmental stages (e.g., vertical farming) or they could be a mature industry that is currently going through a fracturing process where multiple sub-industries are emerging (e.g., DNA-based medicine within healthcare). In these instances, being a first-mover could secure a competitive advantage… over a certain period of time. You need to feel comfortable that your firm can achieve that first-mover advantage — and that the targeted industry has enough traction and is not going to become simply a fading fad.
5. Coordinate practice breadth within each targeted industry
Clients that come to a law firm because of its industry knowledge expect that firm’s industry experience to extend over a range of necessary legal specialties. Successful industry groups are narrow in their industry focus but broad in their practice capabilities.
Clients coming to an industry group also expect their law firm to be an industry insider. The best way to do that is to be the first to advise clients on breaking industry news. A simple client email within 24 hours of an important regulatory change affecting an industry more deftly demonstrates your firm’s industry knowledge rather than a well-crafted formal newsletter a month later. Don’t be one of those firms or attorneys who simply rely on sharing industry news, as it too often fails to give clients anything of value.
6. Ensure geographic alignment between the targeted industry and your locations
Be sure to evaluate the level of geographic fit between your target industries and your office locations, given the geographic clustering that is prevalent in many industries. For example, it will be challenging to service oil and gas clients in the Houston area if your firm only has offices in the Northeastern US. Similarly, a firm with a presence in Silicon Valley is likely to be well-placed to serve clients in some aspect of high tech or legal assistance for start-ups.
7. Try to match culture between partners and each targeted industry
The reality is that some law firms and their partners are better suited to some industries than others. For example, media businesses and their executives are quite different from oil & gas executives, who in turn are very different from those running hedge funds. Because clients generally tend to retain people that they “like” and also are like them, it is hard to understate the importance of this criteria.
This match between cultural and personality (or lack thereof) should be discussed openly (and without fear of retribution) to help guide your firm and it’s individual partners towards the right industry-focused decisions.
To be sure, understanding your client’s business is one of the most potent law firm differentiators. Every minute your firm waits to strategically invest in industry groups gives another firm a chance to build its own brand and offer that value to clients.