Pros and Cons of a Sector-based Approach

[yanerlim]

More and more firms are heading towards a sector-based strategy. When I was in an Osborne Clarke interview, this was something they particularly emphasised. I have observed that this is also something Burges Salmon is beginning to display in their strategy. So I think it would be helpful to discuss and share your thoughts about the pros and cons of a sector-based approach. Comment below!

 

[yanerlim]

Here are some reading materials for your research!
https://www.burges-salmon.com/caree...sed-approach-mean-for-your-training-contract/
http://www.lawpracticetoday.org/art...l-advantage-through-an-industry-sector-focus/
https://www.law360.com/articles/975504/law-firms-must-transition-to-an-industry-sector-approach
https://www.thelawyer.com/issues/7-march-2011/focus-osborne-clarke-the-joy-of-sectors/
http://thegatewayonline.com/law/commercial-awareness/pinsent-masons-inside-a-law-firmaposs-strategy

 

[Jaysen]

Definitely. Many firms see it as a way they differentiate themselves from rivals.

You can add Simmons & Simmons to the list of firms with a sector-based strategy.

 

[Hazal]

First post as part of The Corporate Law Academy and I thought I'd jump in on this discussion, seeing as I'm particularly interested in sector-based firms.

A bit of background on me: I've applied to both Osborne Clarke and Reed Smith, firms with a sector-based focus and have been relatively successful in passing their initial stages. Another firm I'm interested in for their sector-focus approach is Clyde & Co.

For Osborne Clarke, one of the application questions was what benefits I thought a sector-based approach had for the firm. After extensive research, I highlighted benefits such as:

• Law firms cannot please all potential clients - sector-based firms recognise that and can therefore target specific clients in their specific sectors.
• Reputation for work in those sectors is enhanced for the firm - possibly allowing for smoother and easier business development - particularly useful in a saturated legal market.
• Tying in to this, the reputation would likely be based on the firm's astute business knowledge for their particular sectors, not just legal knowledge. As a client in the tech industry, you are more likely to target a firm focusing on technology with extensive experience in the field, over a broader, full-service firm. You might feel you are in safer, more personal, hands.
• Possible better potential for profit: Osborne Clarke's revenue jumped by 7% from 2016 to 2017. Certain experts have identified their sector-based strategy as the reason for this.

Some cons I've thought up on the spot might include:

• Narrowing your business development potential with some clients who are diversified and therefore need legal assistance with multiple sectors. You could lose out on being their only legal provider. Conversely, the firm might be able to accommodate all their legal needs but the sector-based approach might prevent clients from considering this. Extensive marketing about what you can provide beyond your sectors, or within them, would be needed.
• Sector-based approaches don't work for everybody. Would be better for smaller law firms (not really small but those much smaller than the biggest firms globally) who have already developed experience in the sectors they wish to focus on. Bigger firms such as Baker McKenzie and Linklaters pride themselves on being good at a lot of things and having a lot of lawyers and therefore, the capability to take on more clients than the average firm. While they could become sector-focused (never say never), their current structures suggest that they value different things to sector-based firms.

 

[Yminh]

First post as part of The Corporate Law Academy and I thought I'd jump in on this discussion, seeing as I'm particularly interested in sector-based firms.

A bit of background on me: I've applied to both Osborne Clarke and Reed Smith, firms with a sector-based focus and have been relatively successful in passing their initial stages. Another firm I'm interested in for their sector-focus approach is Clyde & Co.

For Osborne Clarke, one of the application questions was what benefits I thought a sector-based approach had for the firm. After extensive research, I highlighted benefits such as:

• Law firms cannot please all potential clients - sector-based firms recognise that and can therefore target specific clients in their specific sectors.
• Reputation for work in those sectors is enhanced for the firm - possibly allowing for smoother and easier business development - particularly useful in a saturated legal market.
• Tying in to this, the reputation would likely be based on the firm's astute business knowledge for their particular sectors, not just legal knowledge. As a client in the tech industry, you are more likely to target a firm focusing on technology with extensive experience in the field, over a broader, full-service firm. You might feel you are in safer, more personal, hands.
• Possible better potential for profit: Osborne Clarke's revenue jumped by 7% from 2016 to 2017. Certain experts have identified their sector-based strategy as the reason for this.

Some cons I've thought up on the spot might include:

• Narrowing your business development potential with some clients who are diversified and therefore need legal assistance with multiple sectors. You could lose out on being their only legal provider. Conversely, the firm might be able to accommodate all their legal needs but the sector-based approach might prevent clients from considering this. Extensive marketing about what you can provide beyond your sectors, or within them, would be needed.
• Sector-based approaches don't work for everybody. Would be better for smaller law firms (not really small but those much smaller than the biggest firms globally) who have already developed experience in the sectors they wish to focus on. Bigger firms such as Baker McKenzie and Linklaters pride themselves on being good at a lot of things and having a lot of lawyers and therefore, the capability to take on more clients than the average firm. While they could become sector-focused (never say never), their current structures suggest that they value different things to sector-based firms.

This is so insightful and well thought-out thanks!

I can't think of anything else to add to pros.

In terms of cons, here are my thoughts:
- sector-focused firms would have harder time finding appropriate markets when it comes to international expansion. They are limitted to countries with strong industries and large client base that align with their sector specialism. (But I guess the pros would be that having a shared goal across the international network help to streamline internal management, facilitate decision-making and boost staff morale that is neccessary to retain partners at managerial levels)
- there are higher risk of conflict of interest as they act for clients in the same industries, who may find, or will find themselves on opposite ends of a case/deal. They might be forced to give up clients in the even such conflict arises (I'm not quite sure on this point, please correct me if I'm wrong...)

To build on the point you made about large firms who are good at a lot of things, the reason to not go sector-based is probably because they don't want to limit their flexibility to move into different markets. When large firm expand overseas, they often structure practice strengths and priorities accordingly to the geographical demands, rather than letting their specialisms dictate their strategy. For instance, while Herbert Smith Freehills reputation lies particularly at its dispute resolution expertise, there is relatively little use of this in Malaysia where international law firms is precluded from giving advice on Malaysian law. Rather, the firm must demonstrate its experience and thought leadership in Islamic finance, which is neccessary to acquire license to establish office in Malaysia.

 

[Hazal]

This is so insightful and well thought-out thanks!

I can't think of anything else to add to pros.

In terms of cons, here are my thoughts:
- sector-focused firms would have harder time finding appropriate markets when it comes to international expansion. They are limitted to countries with strong industries and large client base that align with their sector specialism. (But I guess the pros would be that having a shared goal across the international network help to streamline internal management, facilitate decision-making and boost staff morale that is neccessary to retain partners at managerial levels)
- there are higher risk of conflict of interest as they act for clients in the same industries, who may find, or will find themselves on opposite ends of a case/deal. They might be forced to give up clients in the even such conflict arises (I'm not quite sure on this point, please correct me if I'm wrong...)

To build on the point you made about large firms who are good at a lot of things, the reason to not go sector-based is probably because they don't want to limit their flexibility to move into different markets. When large firm expand overseas, they often structure practice strengths and priorities accordingly to the geographical demands, rather than letting their specialisms dictate their strategy. For instance, while Herbert Smith Freehills reputation lies particularly at its dispute resolution expertise, there is relatively little use of this in Malaysia where international law firms is precluded from giving advice on Malaysian law. Rather, the firm must demonstrate its experience and thought leadership in Islamic finance, which is neccessary to acquire license to establish office in Malaysia.

So true! I especially appreciated your point on HSF and Malaysia as I was not aware of that before.

Just to back you up on the point about conflicts of interest, I think you're absolutely right. I've had a chat with a Jones Day partner about this issue and he has said that sometimes, key clients oppose each other and they can't (of course) represent both sides. In terms of 'giving up' a client, you're on the right track but not in terms of having to lose that client altogether. If you mean, give up that particular piece of work for that client, then yeah! It's just a case of, we have a really good relationship with you but unfortunately, at this moment in time, you'll have to find other lawyers. At least, that's the impression I got!

 

[Yminh]

So true! I especially appreciated your point on HSF and Malaysia as I was not aware of that before.

Just to back you up on the point about conflicts of interest, I think you're absolutely right. I've had a chat with a Jones Day partner about this issue and he has said that sometimes, key clients oppose each other and they can't (of course) represent both sides. In terms of 'giving up' a client, you're on the right track but not in terms of having to lose that client altogether. If you mean, give up that particular piece of work for that client, then yeah! It's just a case of, we have a really good relationship with you but unfortunately, at this moment in time, you'll have to find other lawyers. At least, that's the impression I got!

oooh I see! that makes a lot of sense, thanks so much!

 

[Abstruser]

Nice article in The American Lawyer about the growing popularity of specialist lawyers / sector-focused law firms. This is of course a US-centric piece, but I think many of the points raised are also relevant to law firms across the pond! - https://www.law.com/americanlawyer/2018/11/30/the-age-of-the-specialist-is-upon-us/