There has never been a better time for challenger law firms to take business from the most elite law firms.
In talking to law firm leaders in the AmLaw 200, we find they often think that there is a slice of the market that does not feel competitive pressure. This slice does not exist anymore.
As we discuss below, law firm leaders systematically underestimate the opportunity that exists due to clients’ greater awareness of the interchangeability of firms and lawyers.
By understanding and responding to the pressures on the modern-day general counsel, law firms can capture work that may have been off-limits a decade ago due to clients shifting from relationship-based to data-based hiring.
This changing client awareness was best stated by GE’s general counsel Alex Dimitrief:
“I know there is an old wives’ tale in the profession. There is this legend in the profession that one of the safest things in-house lawyers can do is hire a name brand, a white-shoe Wall Street law firm, on the theory that if something goes wrong you say ‘well, what can I do, I hired Cravath, I hired Weil Gotshal. I just think the time for that excuse has gone by.”
The greater use of data, increased partner mobility, and demands on the general counsel to run a legal department in a business-sensitive way have weakened historical client-law firm relationships by introducing greater competition to their work. (We blogged about these trends in this prior post.)
Opportunity for “Challenger” Law Firms:
While these trends to have put pressure on many law firms, including the most elite ones, it also has introduced opportunities for others.
This was underscored in the recent 2017 Acritas US Law Firm Brand Index survey.
Acritas concluded that in addition to more firms being deemed credible by clients, the challenger firms are winning more and more market share because:
- Challenger brands are often more price-competitive
- Top tier brands historical halos are diminishing
Importantly, the market is becoming compressed. In 2012, according to the Acritas survey, only two firms scored within the 50 percent of the top firms for both awareness and favorability. This year, it was 10.
“The market is becoming more crowded at the top end,” Vice President of Acritas US Inc., Elizabeth Lizzy Duffy, told The Am Law Daily. “The clients have a greater choice of larger and credible firms for a wider range of their work.”
In 2012, only two firms scored within the 50 percent of the top firms for both awareness and favorability. This year, it was 10.
This study underscores the new reality for innovative law firm leaders. There is great opportunity for firms to expand their scope of business, even taking work from the top-tier firms.
We are often asked how to do that. It is important to understand the pressures on the modern day general counsel – she must demonstrate both value and a data-driven approach in her outside counsel budget. The firms that will take share are those that can help general counsels communicate the value of external counsel to internal constituencies by using their data to provide the general counsels with the business case and the certainty that she is getting the best value in the market.