Full text of op-ed that first appeared in The Australian Financial Review on 3 May 2019.
99% of Australia’s full-service law firms have a strategy based on seeking clear market differentiation. In my view, they’re largely wasting their time and money.

AFR Legal Affairs op-ed
Conventional strategy thinking suggests there are two sources of sustainable competitive advantage: [1] having the lowest cost, or [2] differentiating from competitors on things that matter most to customers. The former strategy allows firms to win by having greater price-setting discretion. The latter strategy allows firms to extract a price premium for added benefits.
When it comes to the legal market, this theory starts to get a bit wobbly.
Research shows that while most law firm clients can distinguish firms between groups of firms, such as Tier 1 versus Tier 2 or domestic versus global, they really struggle to clearly discriminate between specific full-service firms within a group. To clients, many of these firms look and feel the same.
One of the reasons for this is market fragmentation. Unlike most industries with three or four dominant players (think airlines, grocery retail or banking), the Australian commercial legal market has nearly 30 firms claiming in some way to be leaders in legal expertise and client focus. Australia’s largest law firm by partner number, HWL Ebsworth, has less than 5% share of the total market. Carving out and keeping a unique and relevant market position in such a crowded market is next to impossible.
Another reason for a lack differentiation is a self-inflicted one. Most full-service firms present themselves as being all things to most people. Within the partnership model it’s political suicide not to give every partner a guernsey in describing what the firm is really good at.
So, what’s the solution?
The first part of the answer is to worry less about being known for being different and focus more on just being known. Strong brand awareness still counts in opening doors and staying top-of-mind.
The second part is to encourage more differentiation at the practice, partner and/or product level. With a more micro approach, differentiation usually come from legal specialisation combined with a focus on a particular market segment or industry. So, for example, a general commercial litigation team can distinguish themselves by positioning as class action defence specialists for ASX200 companies.
The third element is to concentrate firm strategy on how the firm competes. ‘The how’ refers to the resources, skills, standards and systems used to win. These are collectively called capabilities, or as Pier D’Angelo, Allens’ Chief Strategy Officer, calls them, the organisation’s “muscles”.
Most full-service law firms need work on these five muscle groups and the inter-play between them:
1. Firm and team leadership – setting and aligning everyone around a clear direction; inspiring others to meet/exceed expectations; and providing support with accountability.
2. Talent management – recruiting, developing, engaging and retaining the right workforce for the firm to flourish, both now and in the future.
3. Winning work and capturing value – developing trusting relationships with clients and referrers; converting more of the right opportunities; and pricing profitably.
4. Collaboration – shifting the mindset from ‘my’ to ‘our’ client and combining expertise from inside and outside the firm to solve clients’ wicked problems.
5. Operating with discipline – having an efficient and effective operating platform; ensuring adherence to agreed policies; executing plans consistently; and optimising leverage and utilisation.
Spending more time at the law firm gym will, over time, create a form of cultural and operational distinctiveness. Paradoxically, this will most likely be reflected externally and create a firm that both top clients and top people will want to work with and for. They will be authentic points of difference not created by spin doctors but radiating from a firm truly fit for the future.
business, change management, client relationships, culture, governance, growth, internal collaboration, professional service firms, strategy management
Why culture really really matters
In Articles, Commentary on 20 October 2019 at 2:41 pmThe full text of my opinion piece first published in the Australian Financial Review on 18 October 2019.
‘Culture eats strategy for breakfast’, is a frequently cited quote attributed to Peter Drucker.
My recent experience with three firms suggests that Drucker, whom some call the father of management thinking, might just be right. These firms have consistently outperformed their peers and recorded double-digit profit growth. This success has come without superstar rainmakers, with undistinguished brands and with no fancy-schmancy disruptive business models.
So, what is it that has made them so successful?
Original AFR article
It appears to me that the secret lies in their organisational culture, that is, the set of shared assumptions, values and beliefs that underpin how people do their work and relate to each other.
It’s their implicit management system that creates order and provides inspiration without the need to codify each and every activity.
I posit that there are seven areas where culture really matters.
#1 Productive politics
In firms with highly politicised cultures, enormous energy is expended addressing internal matters like who takes credit, who earns what, who ‘owns’ which client and who can and can’t work for whom. Power struggles and infighting between divisions, office locations, practice team and individuals distract from time with clients and staff.
A managing partner of a leading law firm once revealed to me that he spent around 40% of his time making and justifying partner remuneration decisions. In other words, splitting the pie, not expanding it.
#2 Collaboration
Research by Harvard’s Heidi Gardner reveals there is a significant financial upside when partners work together to solve wicked client problems. She distinguishes this kind of integrative collaboration from cross-selling. The former is about drawing together a diversity of knowledge and experiences to add value to clients, the latter is merely an arms-length referral to a colleague.
#3 Consistent high standards
In a recent panel discussion, I asked three General Counsel what distinguished top firms from the rest? ‘Consistency’ was the universal response. Leading firms were characterised by extremely high technical and service standards delivered consistently by all staff at all levels.
Successful firms are those that have cultures that are intolerant of mediocrity and expect, and get, high standards from everyone.
#4 Discretionary effort
Organisation cultures that are perceived to be purpose-driven and genuinely caring, trusting and fair tend to get the best out of people. Staff are more likely to go the extra mile, to act above and beyond the call of duty, or just do that little bit more. Toxic cultures often result in lower productivity, higher absenteeism and substandard output.
#5 Continuity
Continuity builds deeper client understanding and fosters trusting relationships. In a study in a large bank, the researchers found that where a client had five different relationship managers over a two-year period only 40% of clients were satisfied. This jumped to over 80% where there had been only one relationship manager.
Positive firm cultures facilitate retention and ensure continuity. A stable workforce also reduces the direct costs associated with staff churn.
#6 Self-management
Each of the three firms mentioned in the introduction is characterised by a lean management structure. All senior people, but excluding the managing partner, still retain significant practices. Each team within the firm has an ethos of self-sufficiency. They don’t see themselves as paralysed subordinates waiting for orders.
Alignment around firm direction, trust in leadership and a strong culture provide the glue that binds the collective but at the same time encourages individual empowerment.
#7 Accountability for action
Strange as it seems but many firms struggle with simply doing what they say they will do. An accountability culture is one where there’s a bias towards keeping promises and there’s less denial and deflection in cases of inaction. Successful firms have the disciplines to implement strategy and the fortitude to overcome obstacles that might emerge.
In conclusion
It is common for law firms to describe their cultures as ‘collegiate’, ‘respectful’ and ‘friendly’. In these tough times, I don’t think just being nice is going to be enough.
It is incumbent of every professional service leader to strive towards a cohesive, productive, healthy and disciplined culture.
This type of culture will take care of breakfast, but it will also allow the firm to have strategy for lunch and glass of the finest champagne over dinner.
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