Pick up any business paper or book and the message is that organisations in all sectors need to adopt new ways of working and to get comfortable with an ever increasing pace and scale of change. In tackling this challenge client organisations are looking for ever-more relevant and integrated services from their advisors that drive process efficiency and enable change to be implemented more quickly.
From a service provider perspective, this presents an opportunity for diversification and growth. The historic experience of the accounting firms has shown that service line diversification can succeed (leading from audit and into tax, corporate finance, corporate recovery, business consulting and corporate finance).
This has worked where there are clear synergies and cross-selling opportunities between the major pillars of the business. And business consulting has, as a subset, diversified again into a wide range of service lines which, in many cases, have no close links with the other core elements of the original accounting business.
By contrast, law firms have not sought diversification on anything like a similar scale through building teams of non-lawyers to add to a broader revenues portfolio.
Is now the moment when this should change?
Just as several major consulting and accounting firms are re-establishing legal practices, there is also a growing interest among law firms in the opportunities to establish value-add consulting businesses.
What strategy different firms adopt depends on different business circumstances. However, three basic approaches seem to be emerging. Each has different strengths and weaknesses that those thinking of navigating these waters need to consider carefully as they develop their strategies.
1. Specialist consulting services
Setting up a consulting business with deep subject matter expertise that can sit alongside a specific practice group – for example, supporting IP matters or employment law matters where business advice is a valuable adjunct. This clearly works well as a close knit synergistic service offering, particularly for firms who are recognised as specialists in specific functional areas and want to further enhance that reputation.
2. Broad consulting services
Creating a broader based consulting capability that can work with a wide cohort of practice groups and that reflects the needs of a full service law firm. The benefits here lie in the value that this additional capability brings to practice groups in respect of: increasing the opportunity for value add exchanges on key business issues with senior client leadership; providing joined up legal and business services - for example in respect of corporate transactions and restructuring, and complex commercial negotiations in respect of major B2B contracts; and extending the reach of the brand beyond general counsel.
This approach has more potential to help develop a position of business partner who can help the client organisation address change implementation at pace and scale. The opportunity to expose legal professionals as part of their training to broader business insights and project work can also be a powerful way of rounding out their professional development and something that can be a significant differentiator in attracting the best graduate talent to the firm.
3. An arms length consulting business
This is where the primary aim is to extend and diversify the business into additional markets and services. The challenge here is to be clear where the value add lies. In practice, it would be difficult for such models to offer any substantive uplift in distributable profits to law firm partners. So there would need to be a compelling set of reasons for wanting to launch a quite separate business venture.
The alternative is for firms to do nothing. This may be a good choice if it is the outcome of a thorough assessment. But otherwise, firms risk falling behind the competition.
As law firms consider their options (as they all should be doing), it is critical to be clear on business objectives and desired outcome. This enables an objective assessment of the consulting service option that best meets the identified need.
Once that is done creating the right detailed operating model and governance structure for the business will be critical to success.
Ian Busby currently leads the Open Innovation practice for the SETsquared Partnership. He is an expert in designing, delivering and restructuring complex, challenging and business critical transformation programmes, across many sectors and including professional services. He can be contacted at: [email protected]