legal market research 2016

This legal market research report was published in January and is a cracking example of comprehensive SLEPT (or PEST) and market attractiveness analyses that will be valuable to any law firm strategic planning process. It’s a whopping 64 pages and it’s worth its weight in gold.

It identifies five clusters of interacting key drivers of change:

  • Global and national economic environments
  • How clients (in-house lawyers, small and medium sized businesses and consumers) buy legal services
  • Technological and process innovation
  • New entrants and new types of competition
  • Wider political agenda around funding, regulation and the principles of access to justice

It was also good to see the adoption of the terms B2B (Business-to-business) and B2C (Business-to-consumer) used throughout reflecting the commercial and consumer markets served by large and small law firms and how the impact of the change drivers affects them.

Importance of innovation

What I found particularly interesting was its wholesale support of fixed fee pricing and the call to the sector to innovate – “Innovation in services and service delivery will become a key differentiating factor”. Yet, apart from the largest firms, innovation (as opposed to efficiency) is rarely on the agenda of most law firm management teams.

But it warns of the risk here from ABS: “All else being equal ABS are 13-15 per cent more likely to introduce new legal services. They are also more likely to engage in strategic and organisational innovation” (Roper et al). Later in the report it suggests that new entrants to the legal market are more marketing-savvy and start with the buyer whereas traditional small and medium sized firms start with legal knowledge.

Quoting Tharmaraj the report directs in-house lawyers to consider five areas for innovation: data analytics, use of an intranet, social media, project management and collaboration but suggests these are relevant for all lawyers.

Surprisingly it reports that “the push towards automation of routine work will be levelling off by 2020” although it continues “and instead we might expect to see technology fuelling innovative models of delivery or service solutions”.

I liked the roadmap to the future diagram that suggests that after efficiency, niches and early stage involvement, blue-sky thinking was required to rethink the approaches of 2015. There’s an interesting scenario analysis for the future of consumer services lawyers.

New skills needed

It was also good to see confirmation of the need for training and development beyond technical legal skills. “The need for all types of lawyer to expand their skills base beyond technical legal knowledge, to encompass business and project management skills and a better understanding of complex risk, places corporate and in-house lawyers ahead of the game”.

In terms of the employment market for lawyers, it predicts a continuation of the trend to see more solicitors working in-house and more in B2B. This continuing shift to commercial legal services follows the various assaults on the consumer legal markets. And that shift continues, quoting the Legal Services Consumer Panel 2020 which says there will be “less involvement by lawyers in many of the tasks that until now have made up their staple diet”.

Other points of interest

The report indicates that the implications of the Big 4 accountancy firms offering legal services should not be underestimated. However, I suspect the bigger risk will be legal services offered by a large number of medium sized accountancy practices which are currently flying under the radar in the legal market.

The successful strategy of segmentation is recognised with facts about the growth of niche firms.

There’s surprisingly little coverage of the potential impact on Brexit. And it reports that global/City firms are confident about their ability to adapt. I’m surprised that the potential impact on the various client markets is not considered as that is more likely to impact the legal sector.

Fixed-fee services are now commonplace and the traditional model of a solicitor charging fees based on an hourly rate is gradually disappearing”.

Interestingly, it suggests that an opportunity exists in risk which it argues is underserved by current market suppliers.

Key statistics

This legal market research report is stuffed with useful statistics. But there were a few that caught my eye:

  • The profession, overall, has grown by 34.8% between 2004 and 2014. At July 2014, 130,382 solicitors held practising certificates. On the gender balance, the number of women increased from 40.5% to 48.2%.
  • Only the number of firms undertaking predominantly retail market work (e.g. wills, probate, conveyancing, family, personal injury) has fallen since 2010/11.
  • The Warwick Institute of Employment says an additional 58,000 workers will be needed in the legal activities areas between 2015 and 2020.
  • Between 2000 and 2012, the in-house solicitor population doubled reaching 25,600 and 18% of the total solicitor population.
  • The number of firms doing corporate/commercial work – from 2,618 in 2012 to 2,830 in 2015 whereas the number of firms doing Intellectual Property (IP) work – from 496 in 2012 to 470 in 2015
  • The number of firms doing family/children work – from 3,985 in 2012 to 4,408 in 2015. Wills and trust from 4,014 in 2012 to 4,398 in 2015 and probate from 3,514 in 2012 to 3,782 in 2015.

The report can be downloaded here