He references my previous article on ‘The Strength of Small Law Firms’ and advocates for a move away from the “small equals struggling” narrative.
“To my knowledge”, he says, “there isn't a skerrick of systematic evidence that all/most clients of these mid-market firms are saying “It's desirable that your services are delivered by you in a firm with a bigger/international footprint/greater scale/wider range of services”.
Beaton argues that the “small-equals-struggling” narrative attributes certain challenges to the mid-market, which are, in fact, challenges faced by all law firms.
In this scenario, he argues, it’s not the size of the firm that matters but the way it delivers its services.
This got me thinking. Is size really immaterial to client satisfaction and client delight? Or could it be that it is the very fact of their size that enables small firms to meet client needs better than their large counterparts?
As I was asking myself this question, I spotted an article in MIT’s recent Spring newsletter entitled ‘The End of Scale’. Rather than “economies of scale”, this article argues that competitive advantage is now achieved through "economies of unscale".
Due to the emergence of two factors — platforms and technologies that can be rented — the authors argue that “now, small, unscaled companies can pursue niche markets and successfully challenge companies that are weighed down by decades of investment in scale”.
It cites several examples of major corporations deliberately un-scaling to fend-off competition from nimbler competitors: Proctor & Gamble, GE and Walmart to name a few.
Most strikingly, the article explores the unscaling strategy of Amazon: the poster-child for the modern large corporation.
In an open letter to shareholders, its CEO Jeff Bezos explained Amazon’s strategy of acting like a start-up every day.
“I’ve been reminding people that it’s Day 1 for a couple of decades” he says, outlining four ways in which Amazon will remain competitive in this era of unscale:
1) True customer obsession
2) Resistance to proxies
3) Embracing external trends
4) High velocity decision-making
Only by operating as a start-up every day, Bezos believes, will Amazon achieve the unscaled aim of making every customer feel like a market of one.
Assuming readers have, like me, long since settled the debate about the legal sector being "different" to everything else, there is a great deal here for law firms to learn from.
Reading ‘The End of Scale’ reinforces my view that lack of scale is now not a disadvantage for law firms — rather it can be an advantage.
Let me be specific by taking two examples: client understanding and responsiveness.
In 2017, Thompson Reuters released a report entitled Standing Out from the Crowd, which summarised the results of a survey of 200 general counsel. The report stated: “The survey reveals that two factors far outweigh others when it comes to determining which firms are instructed. They are responsiveness and the extent to which firms have an understanding of their clients’ business and the sector they operate in”.
Let’s take the second factor first.
My clients tell me that this is all about being able to consider their instructions in the context of a broad understanding of their business, not just their immediate legal needs.
It’s challenging to do this as a large law firm associate, working in a narrow, specialist team that touches the customer’s organisation in only one or two places. Contrast this with a lawyer from a smaller firm who is often the “go to” person for their clients. They intimately understand their client’s business and the sector it operates in and are able to provide their advice within this context.
The challenge for the "generalist" is to be able to provide the same high quality specialist advice the large firms pride themselves on providing. I’ll talk about the rise of the generalist in a future article.
What about the first factor — the need for responsiveness?
In the survey, this is the most highly rated factor influencing the instruction of external law firms, with a score of 8.8 out of 10. Deep specialist expertise and price scored much lower at 7.6 and 7.5 respectively.
Helpfully, the survey provides more detail on what constitutes responsiveness. Respondents pointed to being acknowledged, having their expectations managed, getting just the advice they need and no more and, importantly, having the right person respond at the right time.
No doubt, many small firms perform as badly as large firms against these measures, but they shouldn’t. Their size and set-up positions them perfectly to deliver a more responsive service. I speak from experience.
Being part of a small team at CIE Legal, I know that it’s much harder to over-engineer our work, simply because our resources are leaner, so we focus on the essentials which are, so often, all our clients need. And our lawyers’ generalist commerciality comes into play when clients phone for a quick view, as we’re often able to provide it there and then.
Of course, small firms don’t get it right all the time, but they have a far better chance of meeting these service delivery needs than their large wieldy competitors.
With clients’ requirements moving away from scale and footprint as ends in themselves, small firms are very well positioned to deliver the commerciality, responsiveness and value the market is asking for.
So what started as a simple enquiry in response to ‘Mid-market law firm brouhaha’, has become a rallying cry to small firms: take your size and own it.
See the strength in being small. Embrace “economies of unscale”.
Make your size work for you and your clients.
Peter George is managing partner of CIE Legal, a six-partner commercial law firm based in Melbourne that focuses on advising companies in the consumer goods sector. He joined the firm in 2015. Prior to that, he was a partner at one of Australia’s largest law firms.