A danger to old-style thinking
Australia is already known as the land of Slater & Gordon, the world’s first listed law firm. What’s not as well recognised is the wealth of other entrepreneurial and innovative legal service providers in a country that represents no more than 3 per cent of the global market.
Next to Slater & Gordon are two other stand out legal practices. All three are only five years old in their current forms, growing at many times the rate of the wider sector, with real equity on their balance sheets and substantial external and/or employee ownership.
Slater & Gordon, AdventBalance and M+K are not common or garden Australian law firms, and indeed, for that matter, lookalikes are few and far between anywhere in the world. For the uninitiated, Slater & Gordon is the world’s only stock exchange-listed law firm. AdventBalance has a handful of peers, including Axiom Law, and M+K, with the latter employing 300 people in seven offices in eastern Australia and successfully serving private and public small to medium-sized businesses.
Like the rest of the developed world, the Australian legal services market is growing at little more than 4 per cent, yet these firms have found ways to take market share, serve their clients and handsomely reward shareholders. Their success has several common themes.
All have created business models that deliver superior value to clients, staff and owners. All have an intense focus on readily targeted parts of the market. Lawyers who were once senior partners in traditional law firms lead each of them, and therefore know how to avoid the bear traps of old-style cultures. And each articulates a convincing story regarding their firm’s differentiation in the market.
How much of a threat are the business models espoused by these three to firms with which they compete? While their managing directors prefer -- correctly in my opinion -- to focus on client needs rather than competitors, it’s clear they pose real dangers to those firms conducting business as usual.
Slater & Gordon has the scale and capital to engage in product development and marketing that no other consumer law firm can match. Add to these advantages its access to fresh know-how from the acquisition of Russell Jones & Walker in the UK and its Australian and British competitors face a gorilla with a voracious appetite.
AdventBalance runs a variable cost business with all of its senior and experienced lawyers working in-house on fixed fee regimes. While the firm has a tiny share of the corporate and commercial market, danger lurks for competitors in the way it is teaching clients new tricks for extracting maximum value from legal services providers. These tricks are detrimental to conventional law firms and advantageous to AdventBalance.
On the surface M+K looks much like any other law firm. But the combination of its ‘shockingly clear’ focus – in the words of Adam Smith, Esq, a leading law firm economics blog site – its corporate structure and wide ownership (one in three staff is a shareholder), give M+K a comparative advantage.
Innovative business models are a phenomenon of a mature industry, one in which growth is stagnant and power rests with the clients. Law firms, like most professional service businesses, are in what is now a mature industry. Old ways hold firms back while innovators drive forwards. These dynamics result in a widening gap between winners and losers, where losing means a declining share of client spending and falling profits.