Published in Chambers Client Report, Summer 2008
Lawyers nowadays claim to specialise in particular industries almost as often as in particular practice areas. But are firms really taking this strategy seriously? And what are the risks – and rewards – of industry specialisms?
A wag once said that a specialist is “someone who knows more and more about less and less.” The law firms who responded to our Sector Specialisation Survey would beg to differ. All but two of the 55 responding firms claim to have implemented a strategy of industry specialisation, bringing lawyers together across practice areas to focus on
particular client industries.
It’s a recent occurrence. As table 2 shows, most firms have introduced formalised industry sectors only in the last five years. “A fair few firms tried this approach in the 1990s, but didn’t get much traction, because often the investment wasn’t there,” comments consultant David Temporal, of Temporal Tanja Consulting. “But gradually, people have begun to realise this is a way for firms to differentiate themselves in an increasingly crowded marketplace.” The downturn of the early 2000s, which forced many firms to think about their place in the market, surely helped spur the spread of the practice.
So with the majority of the UK’s leading law firms pursuing this approach, who is taking it seriously and who is just, as one observer puts it, “paying lip service to the idea?” And with the market rushing to implement this strategy, are there any risks firms should be aware of?
‘Clients see the world through an industry perspective’
The most common reason cited by firms for pursuing a sector approach is that modern clients demand detailed industry knowledge. “Clients see the world through an industry, rather than a practice area perspective,” points out Michael Frawley, UK managing partner of Taylor Wessing. “We need to see the legal landscape through our clients’ eyes.” Firms mentioned a host of areas where industry knowledge can be of use, from identifying potential future opportunities to understanding clients’ reasons for engaging in a transaction.
Of course, not all clients want their lawyers to be all-round business advisers. But deep sector knowledge can help a firm deal with purely legal instructions, too. “Some clients do say, I’m the businessman, you’re the lawyer, just stick to the law, and leave the commercial decisions to me,” admits Howard Morris, chief executive of Denton Wilde Sapte. “But those same clients may run out of patience very quickly if their lawyers don’t understand the reasons why they want to do a deal or handle a case a certain way.” As a result, clients have become more and more expectant of deep industry expertise from their law firms: one firm estimated that 80% of their clients prefer this approach.
Of course, with knowledge comes opportunity. A proper understanding of a client’s industry can help firms identify potential work to pitch for. The aim, as one firm neatly put it, is to know “what are the six things that keep CEOs in this industry awake at night? And how can we help them sleep better?”
In addition, several firms noted, detailed industry knowledge provides a useful opportunity for differentiation in a crowded marketplace. It’s a particularly attractive proposition for the large City firms that have struggled in recent years to carve out a space in the market between the magic circle and the often-cheaper nationals.