Analytics can help reinvent your firm and allow you to compete—and scale—in a more informed way. Leveraging firm, customer and external data and integrating it into your business’ decision-making cycles can be transformative.
Listen to Scott Duda, Leader of Cherry Bekaert’s Professional Services Industry practice and Nita Sanger, a Director in the Firm’s Digital Advisory practice as they talk about how law firms can leverage digital transformation to innovate for growth.
Discussion includes:
- How the legal industry has done in 2021 and how that growth has been different for large and mid-tier firms.
- The actions mid-tier law firms should take to position themselves for growth.
- How the role of the General Counsel, as the buyer of legal services, has changed in recent times and what that means for mid-tier law firms.
- How alternate legal services providers are impacting mid-tier law firms.
If you haven’t already, catch up on part one and two of our series:
- Digital Transformation in Law Firms: Part I – Understand Your Customer
- Digital Transformation in Law Firms: Part II – Optimize Your Operations
- Digital Transformation in Law Firms: Part IV – Enable Your Workforce
- Digital Transformation in Law Firms: Part V – Protect Your Business
View All Professional Services Podcasts
SCOTT DUDA: Welcome to Cherry Bekaert's third in our digital series for law firms on innovating for growth. I'm Scott Duda, an audit partner and the leader of our Professional Services Group. With me today is Nita Sanger, director of our Digital Advisory practice.
NITA SANGER: Today we're going to talk about innovating for growth, specifically related to digital services and professional services for law firms.
SCOTT DUDA: We've talked a bit in the past about how the legal industry has been doing coming out of the pandemic. How has growth been for different size firms—large firms versus mid-tier firms—coming out of this pandemic?
NITA SANGER: Demand for legal advice increased significantly in 2021. Revenues in the first three quarters grew by about 14 percent.
NITA SANGER: We're starting to see a bifurcation where the firms at the top are seeing the largest growth—about 17–18 percent ahead of the market—while smaller firms are seeing much smaller percentages of growth. This is combined with rising talent costs.
NITA SANGER: Larger firms with growing revenues can afford to pay more for talent, while mid-tier law firms are getting squeezed because their revenues are not growing as much but they must pay more to attract good talent. We are in a phase where growth is uneven, which provides mid-tier firms an opportunity to think differently to compete with larger players.
SCOTT DUDA: Is consolidation part of that—firms being acquired because they weren't positioned for the pandemic?
NITA SANGER: Absolutely. There are opportunities for inorganic growth through acquisitions, but each firm must think about its individual growth strategy. Firms can grow organically, hire specialty lawyers or practices, or form strategic alliances.
NITA SANGER: For example, an M&A lawyer and an IP lawyer could form a strategic alliance instead of pursuing a costly acquisition. They can go to market together so that when a client needs both services, both firms profit. Strategic alliances are being adopted in other industries and are beginning to appear in legal.
SCOTT DUDA: What actions can mid-tier firms take to position themselves for growth?
NITA SANGER: The pandemic accelerated change and provided opportunities for mid-tier firms to think outside the box. Technology enables firms to leapfrog slower competitors.
NITA SANGER: Focus on three areas: go-to-market and customer experience, products and services, and operational efficiency. For go-to-market, provide clients a more customized experience, such as giving them insights into case stages and document status.
NITA SANGER: Use digital marketing to reach clients, which many law firms historically have not done well. Improve the customer experience by offering transparency and timely insights.
NITA SANGER: For products and services, consider what additional insights you can offer beyond legal advice. Lawyers are trusted advisers and sit on valuable information that can provide operational insights to clients.
NITA SANGER: For example, we worked with a midsize law firm focused on M&A deals. By leveraging analytics, we used their deal information to provide clients insights on time-to-close, process stages, and comparable market activity. Using that information helps clients run their businesses more efficiently.
NITA SANGER: You can also offer technology-enabled services that clients are starting to use themselves, expanding your revenue base.
NITA SANGER: For operations, identify non-core activities—such as IT, security, privacy, or month-end accounting—that could be outsourced to specialists. Evaluate processes to increase efficiency and adopt tools and technologies to reduce time spent on document work, contract drafting, redlining, and research.
NITA SANGER: About 50 to 55 percent of law firm revenues come from those document and process activities, so improving efficiency there allows lawyers to spend more time providing advice and serving more clients.
SCOTT DUDA: Corporate internal general counsel is often the decision maker on which firm to engage. How has their role changed recently, and what does that mean for mid-tier firms going to market?
NITA SANGER: Historically, legal departments were brought in at the end of a process to finalize contracts or address legal issues. Now general counsel have become proactive and need a seat at the table when corporations plan changes.
NITA SANGER: The adoption of technology and the shift to remote work means companies must consider legal risk and regulatory implications upfront. Failing to involve legal early can significantly delay product launches or initiatives.
NITA SANGER: General counsel now need to understand technologies and their legal implications, plus related risk and regulatory issues. Mid-tier firms can provide value by advising on these topics, such as legal issues related to AI or blockchain, and by explaining risk and regulatory implications to make general counsel more effective.
NITA SANGER: Becoming known as an expert in niche areas—like the legal implications of AI—can position a firm to serve general counsel across the market.
SCOTT DUDA: Many firms have expanded from their core services into alternate services, and nontraditional players are entering contract and related spaces. How are those transitions impacting law firms?
NITA SANGER: Alternate legal service providers are taking on legal services that law firms used to provide, and they are doing it more efficiently using technology. Corporations ask why pay a lawyer $300 an hour to review a contract multiple times when technology can do it cheaper.
NITA SANGER: Alternate providers are negatively impacting law firm revenue streams tied to contract work. Law firms need to address this risk.
NITA SANGER: One approach is to form strategic alliances with alternate legal service providers rather than viewing them solely as competitors. Most alternate providers are not lawyers and do not provide legal advice, so combining their efficiencies with a law firm's legal expertise can expand the market.
NITA SANGER: Large players with deep pockets are entering the space—such as the Big Four—and many alternate providers have significant private equity backing, making them powerful competitors.
SCOTT DUDA: Any final thoughts?
NITA SANGER: At Cherry Bekaert, we bring deep expertise in the legal industry, a strong understanding of the legal market and competitive landscape, and knowledge of technologies that can help law firms become more effective.
NITA SANGER: We combine industry understanding with transformation expertise and Analytics to help law firm clients serve their customers more effectively, position for growth, and optimize operations.
SCOTT DUDA: Thank you, Nita. We appreciate everyone listening today. If we can assist or answer any questions, we'd welcome the opportunity to be your guide forward.
