You didn’t see it coming? Bull, you weren’t looking!

August 2, 2012.

Altman Weil, Inc., a major consulting firm serving the legal industry, recently released a report which included a description of the change in the attention paid to certain market forces by the largest American law firms (“Big Law”).  The most interesting part of it shows how Big Law firms are now paying greatly increased attention to many inter-related economic/competitive issues compared with just 3 years ago. As Altman Weil put it,

“The 2012 survey reveals a striking change in how law firm leaders view the competitive environment and the appropriate organizational responses since 2009.”

“Q:     Which of the following legal market trends do you think are temporary and which will be permanent?

YES” – PERMANENT TREND

2009

Response

2012

Response

Change in %

Magnitude

Increase

More price competition

42.4%

91.6%

+49.2

2.2x

More commoditized legal work

25.5%

83.6%

+58.1

3.3x

More non-hourly billing

27.9%

80.0%

+52.1

2.9x

***

So: 2012 – Law Firms in Transition – An Altman Weil Flash Survey.   Reprinted with permission of Altman Weil, Inc.

Boy oh boy, did Big Law get religion about watching the market, competitors and the competition in the last three years. But why?

Well, they just looked around and saw the ongoing (not coming) collapse of the current law business model. The details of each failure are different, but the past decade has seen the spectacular implosion of a large number of global law firms (e.g., Erin Fuchs, The Eight Most Crushing Law Firm Implosions in The Nation’s History). And, beyond that, the entire functioning of Big Law (and all law, to be fair) is changing rapidly for those firms that (at least intend to) survive.

But the relative lack of attention paid to these issues in 2009 certainly does not reflect what a little shrewd competitive intelligence collection and analysis might’ve disclosed. For example, with respect to just one item, “commoditized legal work”, or, as it is more clinically known in general counsel legal circles, “alternative fee arrangements  (AFA)”, the handwriting has long been on the wall.  Consider just these few selected headlines from only the last 1/3rd of 2008 from the Association of Corporate Counsel’s “In The News” site:

  • Panels to Discuss Costs of Outside Counsel, Sep 17, 2008
  • Billable Hour Challenged, Sep 29, 2008
  • Take Your Nose Out Of The Trough Cuz It Ain’t About You Any More – Corporate Counsel Challenge Law Firms, Oct 1, 2008
  • Rethinking Legal Fees for Lean Times, Oct 20, 2008
  • Billable-Hour System Under Scrutiny From Client, Oct 20, 2008
  • Will Corporate Counsel Push Law Firms to Drop Hourly Billing?, Oct 20, 2008

But this was all just talk in 2008, right? No.

A survey of 370 lawyers at Fortune 1000 companies reported that their spending on AFAs was “more than $13 billion…in 2009, up from $8.6 billion in 2008.” $13 billion is a lot of lost billable hours for a lot of lawyers at Big Law. And $13 billion was a 51% increase over the previous year. Hard to miss that jump – if you were looking.

So? The cost of not using competitive intelligence may not be merely the loss of a business opportunity – it may be the loss of a business!



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