“Why does a law firm exist?” Peter Drucker and the 21st Century Law Firm Part 5: Marketing & Innovation in a Law Firm
Entrepreneurship is not a term used frequently in the context of a lawyer or a law firm, nor is the phrase “entrepreneurial lawyer”. In fact the latter phrase to most in the profession has connotations of low or questionable legal ethics (not to be confused with business ethics as they are entirely separate) or has a whiff of cordite about it.
However, are not most, if not all, owners of a law firm actually entrepreneurs? They are. But most do not see themselves as such rather partners or shareholders of a law firm. If they did consider themselves more as entrepreneurs might law firms be different?
What are the two basic functions of a (law firm) business?
Drucker gets straight the the point: “Because it is its purpose to create customer (a client), any business enterprise (law firm) has two – and only these two – basic functions: marketing and innovation. They are the entrepreneurial functions.” How many times do you hear partners, directors, or law firm managers discuss these two concepts openly and with an actual interest? Unfortunately, probably not too often.
He states “Marketing is the distinguishing, the unique function of the business. The business is set apart from all other human organisations by the fact that it markets a product or service. Neither church nor army nor school nor state does that. Any organisation that fulfilled itself through marketing the product or service, is a business. Any organisation in which marketing is either absent or incidental is not a business and never should be run as if it were one.” We all know of law firms who meet the last criteria.
Drucker continues with a further endorsement of the value of marketing. Marketing “is so basic that is not just enough to have a strong sales department and adjust marketing to it. Marketing is not only much broader than selling, it is not a special activity at all. It encompasses the entire business. It is the whole business seen from the point of view of its final result, that is, from the customer’s point of view. Concern and responsibility for marketing must therefore permeate all areas of the enterprise.” In other words, marketing should be everywhere. From the marketing of the individual lawyer to that of the firm. Some lawyers and law firm managers understand this fundamental concept but too many get distracted from it which ultimately does their firm a disservice, especially if they are the owners.
“But marketing alone does not make a business enterprise….The business enterprise can only exist in an expanding economy, at least in one which considers change both natural and desirable. And business is specific organ of growth, expansion and change.” As law firms are part of the national and global economy they are not immune.
Drucker is of the opinion that the “second function of the (law firm) business is therefore innovation, that is, provision of better and more economic goods and (legal) services. It is not enough for the business to provide just any economic goods and services; it must provide better and more economic ones. Is not necessary for a business to grow bigger; but it is necessary that it constantly grow better.”
Innovation can be defined as a new idea, design, or method. Drucker suggests “Innovation may take the form of the lower price – form with which the Economist has been most concerned, for the simple reason that it is the only one that can be handled by his quantitative tools. But it may also be a newer and better product “even at a higher price”, and you convenience or the creation of a new one. It may be finding new uses for all products.”
There is no doubt that lawyers are the masters of innovation, unfortunately that innovation is generally client / matter centric rather than in how law firms operate or are managed. With clients wanting “more for less” is it not the time for lawyers to be more innovative in delivery of legal services? Not just paying lip service to new business models or stating that they have appointed an innovation partner for the sake of the marketing materials. On the subject of the latter, a consulting colleague recently met a partner at a firm who as designed the “partner for innovation” but charged by the hour. Hardly innovation at its finest.
How many law firm mangers can state that “innovation goes right through all phases of (their law firm) business. It may be innovation in design, product, in marketing techniques. It may be innovation in price or in service to the customer. In every innovation management organisation management methods.” Not many I hazard a guess.
“In the organisation of business enterprise (law firm) innovation can therefore no more be considered as separate functions and marketing. Is not confined to engineering research, but extends across all parts of the business, all functions, all activities.” If you are considering re-designing a law firm to face the challenges ahead put innovation at the core of your strategy. Hire a non lawyer with innovation and legal technology skills but don’t make stifle their creativity.
Every law firm department “should be responsible for its contribution to innovation the company’s (firm’s) product or service; and it should in addition strive consciously and with direction towards advancement of the art in a particular area in which it is engaged: selling or accounting, quality control personnel management” or the provision of legal services or the solving of client problems with legal solutions.
So, for all of you in a law firm ownership or managerial positions: go out and market, and allow innovation to flourish. You will reap the rewards.
In the next instalment I will discuss Drucker’s views on profit.
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Lexcel is a boutique consulting firm focussed on adding value to law firm management and in-house counsel across strategy, pricing, and management.