Introduction to law firm competitive advantages

When considering how a law firm develops and maintains a competitive advantage, you have to look at the firm holistically. Different types of firm will have different competitive advantages, with some relying more on their expertise, scale and track record, and others focusing more on cost.

Note that there will inevitably be overlap between answers to “how does this firm maintain a competitive advantage?”, “why do clients choose this firm?” and “why do you want to work at this firm?”. Why clients choose the firm is relevant, as attracting and retaining clients is key to maintaining a competitive advantage. And why employees choose the firm is relevant, as recruiting and retaining the talent needed to carry out the work also contributes towards a firm’s competitive advantage. 

However, you would certainly need to tweak your approach depending on which question you are asked. For example, when answering “why do clients choose this firm?” the focus should be on what clients look for, whereas an answer to “how do law firms develop and maintain a competitive advantage?” should focus on what firms do (or should do).

Now, it’s important to remember that the vast majority of law firms are businesses, which rely on generating revenue by carrying out legal work for clients. A firm’s success therefore ultimately depends on its ability to continue to attract and retain clients, and win work from those clients. To achieve this, firms must have some kind of competitive advantage, as it’s a saturated market. So what strategies can and do firms employ to maintain a competitive advantage?

Note that the strategies will differ depending on the nature of the law firm. For example, firms that charge high fees, such as your classic large City law firms, will often need to secure mandates on large, potentially pioneering legal matters where the legal expertise (and sheer number of lawyers across multiple jurisdictions) required might justify higher fees. 

On that note, ex-Fried Frank partner Laura Brunnen reiterates that it’s often not just about the “complexity”; it’s the size of the matter too. Buying a global corporate may not be overly complex in itself, but if the target company has many corporate entities and assets scattered across the world, it becomes a huge undertaking from a project management perspective – one that perhaps only a small selection of law firms are able to handle.

In contrast, law firms that charge lower fees might instead need to attract a significant volume of work to generate sufficient revenue to turn a profit (whilst also keeping costs down). It really depends. With this in mind, we’re now going to look at the ways in which firms can ensure that they’re able to continue winning work.

When working on the following insights, I drew on my extensive experience advising law firms on a range of strategic matters, whilst also seeking guidance and feedback from a number of partners (and ex-partners) from leading law firms who have often contributed to law firm strategies in practice. 

On that note, I would like to sincerely thank the following legends for their incredibly helpful advice and reflections:

• Ben Staveley (ex-partner at Freshfields): check out his brilliant book designed to help lawyers improve their professional writing and drafting.
• Laura Brunnen (ex-partner at Fried Frank, Reed Smith and KWM): check out Laura's fantastic community for women in M&A.
• Alex McPherson (Ignition Law founder and partner): check out Ignition Law for more information on the great work carried out by the firm for the start-up and scale-up community.
• Christopher Stoakes (ex-Head of Knowledge and Learning at Hogan Lovells): check out his fantastic books focused on commercial awareness and legal careers.