Last week’s post listed ten buying trends that affect how law firms win new business. One of the most interesting to me personally is #9, the growing influence of procurement professionals. (In the interests of full disclosure, I must say that it was Steve Bell, Director of Sales at Womble Carlyle, who convinced me how important this was a few months ago.)
Over the last decade, professional buyers have substantially increased their influence at large corporations, by becoming extraordinarily successful at reducing costs throughout the supply chain. The good news for lawyers is that they were among the last to get squeezed. The bad news is that the squeezing has just begun.
“Procurement managers tend to look at legal service purchase like buying widgets,” said Leigh Dance. And the way they get the best price on widgets is by getting suppliers to compete more directly and by issuing RFPs. Anyone who works in legal marketing can attest to the radical growth in the number of RFPs, and in their importance.
Another thing that professional buyers do with widgets is reduce the number of suppliers and work more closely with a few key partners. You know, like the DuPont model has done for lawyers, and the resulting convergence trend. Dance says that in the current environment “the pressure for convergence is squared.”
You know those relationships with general counsel that old school rainmakers are so proud of? Well they are not nearly as important as they used to be. Most general counsel are no longer independent operators, who can do as they like. Norm Rubenstein points out that inside counsel are feeling their own pressures for accountability and transparency and “to measure and communicate the value that the inhouse legal department provides the rest of the company.”
But behind every threat is an opportunity for the first law firms that figure out how to win at this new game. One competitive opportunity that Rubenstein sees here is for law firms to share the techniques they are using to measure performance and client satisfaction with general counsel, so that they can use the same tactics in-house.
Similarly, when it comes to dealing with procurement professionals, Dance says that law firms can seize a competitive advantage by adjusting their marketing message to emphasize that reducing risk is more important than reducing short-term cost.
But changing the marketing message on the web page is the easy part. To win in this tougher environment, law firms must change the very way they do business and, Dance says:
o “prepare to be one step ahead: measure and prove your value proactively
o Improve transparency in budgets and estimates and allocation of resources
o Demonstrate and promote efficiencies
o Offer value added services free”
Did she say free? Yes she did. Rubenstein too talked about the competitive benefits of offering “a host of unbilled products and services dedicated to relationship development, including CLEs, intellectual property, and loaned staff.”
These are hard pills to swallow, since what is free for the client comes straight out of the partners’ profits. It is only natural for lawyers to deny that there is a need to change. Why give away something for free based on some consultant’s predictions of what will happen? The consultant could be wrong about the future. But you can be 100% certain in the present that you can increase this year’s profits per partner by avoiding free giveaways.
Over the next few years, we’ll see who’s right. My money is on the firms that adapt to the new environment most quickly, by responding to these buying trends and more. And their biggest competitive advantage will be that so many other law firms are more focused on short-term profits than they are on satisfied clients.
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