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Episode 124
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Practice Management and Business Skills
Growth Spurts: Navigating the Complexities of Mature Markets
Law as stated: 12 July 2024
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This episode was published and is accurate as at this date.
Join David as he sits down with Kate Marshall, Chief Legal Officer at Law Squared, to explore the intricacies of driving growth in mature markets. With decades of experience in strategic business growth, Kate provides expert insights into overcoming the challenges posed by established competitors, powerful buyers, and intense competition. Discover practical strategies to achieve scalable growth and maintain healthy margins in today’s competitive landscape.
Practice Management and Business Skills| What area(s) of law does this episode consider? | Achieving business growth in mature markets. |
| Why is this topic relevant? | Mature industries present unique challenges, with larger, well-established incumbents, discerning buyers, and greater competition. These factors create a landscape where increasing revenue and market share becomes increasingly arduous. Navigating mature markets, such as the legal services industry, requires a nuanced approach. Established businesses often have loyal customer bases, making it difficult for new entrants to gain traction. Additionally, buyers wield significant power in mature markets, leading to downward price pressure and thinner margins for businesses. In such an environment, having a strategic plan is crucial for organisations seeking to implement measures that can lead to scalable growth and healthy margins. |
| What are the main points? |
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| What are the practical takeaways? |
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DT = David Turner; KM = Kate Marshall
| 00:00:00 | DT: | Hello and welcome to Hearsay the Legal Podcast, a CPD podcast that allows Australian lawyers to earn their CPD points on the go and at a time that suits them. I’m your host David Turner. Hearsay the Legal Podcast is proudly supported by Lext Australia. Lext’s mission is to improve user experiences in the law and legal services, and Hearsay the Legal Podcast is how we’re improving the experience of CPD. Today on Hearsay, we’re talking about the complexities of growing your business in a mature market, a really important topic for businesses navigating mature markets, like professional services and legal services specifically. Mature markets present some difficult challenges. They often feature larger, well established incumbents, more discerning buyers and greater competition, especially around price, and these factors create a landscape where increasing your revenue, your market share, and even maintaining your margin can be difficult. Navigating a mature market like the legal services market requires a nuanced approach. Established businesses often have loyal customer bases, and that makes it difficult for new entrants like new law firms to gain traction. Also, buyers like large legal services buyers with significant in-house teams often wield significant power in mature markets, leading to downward price pressure and thinner margins for businesses, and many of you listening will have felt the more for less challenge that lawyers so often speak about. And in such an environment, having a strategic plan is crucial for organisations who are trying to implement measures that can lead to sustainable growth and healthy margins. Now, our guest today knows a lot about growing a business in a mature market. We’re joined by Kate Marshall, Chief Legal Officer at Law Squared and former head of KPMG Law, who brings over 200 years of experience as a partner in leading law firms. Her extensive experience has provided her with a deeper understanding of the strategies required to navigate mature markets like the legal services market successfully, and her role as Chief Legal Officer at Law Squared allows her to apply this knowledge today in influencing strategic business growth. Kate, thank you so much for joining me today on Hearsay. |
| 00:02:16 | KM: | Thanks, David. Great to be here. |
| 00:02:18 | DT: | Now we’re going to talk about growing your business in a mature market. As I said, legal services is one such mature market. But before we do that, tell us a bit about your journey in the legal industry. I said at the top of the show, over 20 0years of experience as a partner. |
| 00:02:30 | KM: | Yes, but I never intended or desired to be a lawyer. So it’s, to me, quite ironic that I’m sitting here hearing that statistic. I always wanted to be a chef and yet I was encouraged to perhaps just get a degree qualification, happened to get into law, thought “oh well, I might as well just get my qualification, get my first year done so that’s behind me” and go back to where my passion really was. But here I am many years later, having spent about 20 years at Clayton Utz, which is where I did start my career, a few years at a mid tier global firm, and as you mentioned, then KPMG law, and finally ended up at Law Squared. So certainly wasn’t where I thought I would end up for my career at all, let alone for such a long period of time. Yet, it’s been such an interesting journey, I would say. It has never been dull, and never the same day. So, I’ve really enjoyed that diverse career, even though I’m a deep specialist who’s always worked in particular areas. I think clients, technology, innovation, people, they’re the things that keep you going in your career, and I’ve certainly had some great experiences along the way. I was lucky enough though, last year, to have a break between my KPMG role and the “what next” piece. First time I’ve ever had a chance to do that, so I really did take that, I suppose, seriously. You know, I wanted to really think about what I could offer, what I was not willing to offer, and where I wanted to spend the next stage of my career, and thought about principles like innovation, diversity, a growth business, things that would inspire me, and it led me to the current role I have at Law Squared. |
| 00:04:24 | DT: | Exciting, and I like that you’ve had that, as you described it, diverse experience as a deep specialist. I think often in large law firms, I started my own career in a large law firm. You do go on this expert path of ever greater specialisation in a niche field of practice, and some people don’t have the opportunity as you have, to develop a diverse skill set around that specialisation. So it’s wonderful to hear that, and we’re grateful to have you on the show. The other thing that I think is interesting, because I hear it so often, so many frustrated artists in the law, and I do think of a chef as an artist. We’ve had a lot of aspiring musicians, actors on the show before who have turned to the law. Do you still do a bit of cooking? Do you still enjoy it? |
| 00:05:03 | KM: | Yeah, I do. I do. I think it’s great to have some sort of passion outside of your day to day work, but we all know that the law is a fairly consuming profession and certainly takes up a lot of your day, so it tends to be on the weekends rather than the day to day cooking. I’m glad to say that my partner does that. |
| 00:05:22 | DT: | It certainly can be consuming. It certainly can be a high pressure environment. I wonder if a little bit of that is because of the nature of the market we find ourselves operating in. TIP: So in this episode, we’re talking about mature markets. Well, what is a mature market anyway? Well, an economist might tell you that a mature market is one that’s kind of reached a state of equilibrium, a sort of balance between the countervailing forces of supply and demand. Prices are pretty stable, maybe even stagnant and in a mature market, the overall market size doesn’t increase substantially, there aren’t a huge number of new competitors coming into the market. Most of the potential customers have already purchased the product or service, leading to slower growth compared to emerging markets. Innovation can slow down in a mature market, because the products or services offered have been developed and refined to a point where they’re being produced and delivered really efficiently and really effectively and that means that existing companies often focus on incremental improvements rather than revolutionary innovations. The market’s also typically dominated by large, established companies with significant market share – there’s a period of concentration and contraction that goes on to produce these large, established companies – and these companies have strong brand recognition, loyal customer bases, and well established distribution networks. Although growth is slow, competition remains high as companies vie for market share, and that leads to strong, competitive price competition, as well as attempts to differentiate products through branding and customer service. Does this sound like the legal services market to you? I suppose a few features sound familiar. There’s strong price competition, not a huge amount of innovation, and there are large established companies with significant market share, at least in corporate and commercial work. We’re talking about the legal services market as a mature market today and how to navigate it. Give us your diagnosis of the legal services market in Australia. As we’ve said, it’s a mature market, but what does that really mean? What are we talking about when we say that? |
| 00:07:20 | KM: | Yeah, that’s an interesting question. I think it’s both a mature market, but it’s also a highly competitive market. If you look at the number of incumbents we have in the legal profession in Australia, it’s pretty extraordinary, and of course, we often compete with law firms that are global or offshore. We’ve seen so many different entrants, more than I can even understand. I’m certainly not across every single entrant into our market in the last few years, but I think my observation would be that I’ve got a lot of respect for the traditional legal service providers, those household names that have been around since I was looking for my first graduate job, that at times I will criticise but there is a genuine role for them and I respect how they have adapted and managed to hold their place in that mature, competitive market. And Clayton Utz, where I started, is a great example of that, where they’re still going strong, many of the people I started with are still there, and there are really highly excellent, skilled lawyers in that firm. So I think there’s still a role for those traditional legal service providers and I don’t see that changing in the future. I would also just comment that I don’t underestimate the challenge of actually disrupting the legal profession. I’ve been talking about it for a very long time, waiting for clients to demand that shift away from the billable hour and greater efficiency, and aligning the outcomes to what they actually need rather than what the lawyer wants to provide. It still doesn’t really seem to be happening. I think I’m more accepting that change is slow in the profession, and my other comment would be that it is a mature market, but it is our clients who are forcing some change, and I think some of the incumbents probably don’t realise how open some of their clients are to different ways of legal services being provided. Different models, different providers, they’re the ones who are more open to change. So I think, none of us in legal practice, if we are providing legal services, should become complacent. |
| 00:09:49 | DT: | Absolutely. I’d agree with all of those observations. I think you’re bang on that often the push to alternative billing models was not being driven by client demands, but by a desire to do things differently on the part of the lawyer or the law firm. There are certainly a lot of proponents of ditching the billable hour who propose it from a wellbeing perspective, so you can see why that might be the case. But especially in large buyers of legal services in panel arrangements, there wasn’t much of an appetite for it beyond a kind of lip service to alternative arrangements because the high degree of competition for those services meant that they were compared on a like for like basis, and rates cards, love them or hate them, and we mostly hate them, tended to be an effective way of comparing price, and you’d have all the usual arguments about, well, “our rate card is more expensive, but we have less people on the matter”, and you could talk about price in these terms, whereas to really commit to that fixed fee or value based pricing model meant jumping out of the ship and putting yourself on terms that made it difficult to compete with your competitors about price. And in a competitive market, in a mature market, as we know, there is often a high degree of price competition. |
| 00:11:05 | KM: | I think it’s so much more than that, David. It’s even just the structures that we all take for granted. This is the way law is provided, that there is a leverage model with a Partner and perhaps a Special Counsel, a Senior Associate, an Associate, a couple of grads, and they are the team that will provide the services rather than really thinking, do you need that team? Who is the best person to provide the services? What’s the skillset? Do we need a lawyer for that? Or do we need a lawyer for any part of that service? Is there some technology that can support? In other businesses or other professional services, I think they are more open to those combined models. There’s still so much resistance within the law and this assumption that it can only be provided under that traditional model. |
| 00:11:57 | DT: | Yeah, absolutely. The structures within some of these incumbent businesses really militate against a new way of pricing or a new way of delivering the service. If you’re not taking advantage of the levels of the pyramid below the partnership level, if you’re not fully utilising the staff in the leveraged model, then it’s also about the way we measure performance, isn’t it? If you’re doing some of that work more efficiently, fewer billable hours, well, you’ve got low utilisation rates and how do we think about the profitability of a project or a matter when we’re stuck in this a third, a third, a third kind of mindset of a third for the owners, a third for salaries, and a third for operational costs. We’ve got these mental models that are really baked in around the leverage model, as you described it. One other thing I’d add to your diagnosis of the features of the legal services industry is there are pretty low barriers to entry. I think we often think of the professions as having a barrier to entry, the licence to practise. But as you observed over the last 10 years, we’ve seen the entrance of many international firms into the Australian arena; Norton Rose and Norton Rose Fulbright, Allen Overy, Clifford Chance, Clyde & Co… and so from a top down perspective, we’ve seen a lot of international entrance into the market, but equally in the mid market or in the SME space, it’s never been easier with incorporated legal practices for young lawyers and small teams to establish their own boutique practice. |
| 00:13:28 | KM: | Yeah, I think you’re right. It comes back to that point, highly competitive and just increasingly so when you have so many new entrants, whether they are those overseas firms you mentioned, could be the big four, it could be a startup, or it could be somebody with a technology bent looking to disrupt the market in a different way. |
| 00:13:50 | DT: | Now, we shouldn’t talk too hopelessly about how we’re all stuck to this leverage model of billable hours, because of course, Law Squared, and we’ve had Demetria on the show before, does things quite differently. But before we talk about that, let’s talk about some of the challenges of growing in a mature market, because that might inform some of the features of Law Squared that we talk about in a minute. In what ways does this traditional model, this leverage model that we’ve described and the way we measure performance, both individual and operational and organisational performance, in what way does that traditional model hamper or make it more difficult to grow in a mature market? |
| 00:14:23 | KM: | We often focus on the wrong things where if your only measure of success is how many hours are you working? I can’t see that that drives the right outcomes. And sure, you may have to work hard to get to the success that you want in a mature market. I think that’s fairly obvious, but surely it’s about how smart you’re working and having a clear strategy. We often talk about, where are we going to win in the market? What is our point of value here? What can we be doing to support our clients? We’re not alone in that, but that is a very different mindset to just, I will be successful if I work more hours. And I don’t believe that firms are going to really have that level of engagement that we need from our teams, if that’s what they’re driving towards. It’s not very inspiring, is it? Next year, we need you to do another 0.5 chargeable hours a day so that we can all be more successful woohoo. |
| 00:15:34 | DT: | Yeah. It’s almost like in a mature market where … we might also call it a red ocean market, for example … where the value proposition for the customer is really well known. There’s a strong practice or tradition around the way that’s delivered and the way it’s priced. There’s almost a temptation to switch off the strategy part of the executive level and just focus on managing for efficiency. We know how to do the work. We know how to charge for it. Let’s squeeze the extra cent out of every dollar. Let’s push people to work hard. If you do more hours than you were meant to, then you’re eligible for a discretionary bonus. This is all known and we don’t really need to think too strategically about the value proposition. Is that kind of what we see sometimes? |
| 00:16:17 | KM: | Look, I think that’s often the case, and as a partner, you’re effectively running a small business, and that’s the common model, I think for the rest of the profession who aren’t thinking that way, it gives us many great opportunities. I certainly don’t think in the mature market we’re operating in, in Australia, that there is a lack of opportunities. I think it’s about looking at those solutions and ways of packaging up services in a way that works for the client’s value, that it’s focused on what they need rather than what we want to deliver. TIP: So I just used the term “red ocean”. This term comes from a 2005 book called Blue Ocean Strategy written by W. Chan Kim. And the red ocean, blue ocean analogy is a strategic concept that contrasts two different types of market environments and their respective competitive dynamics. The red ocean is an existing known market space where competition’s fierce, a kind of mature market, I suppose. And the term red signifies the intense competition in the market. It recalls imagery of shark infested waters and fierce competition for fish – a feeding frenzy. And in a red ocean, companies compete within established market boundaries using similar strategies to gain a larger share of existing demand. Red ocean markets are saturated or near saturation, there’s limited growth opportunities and there’s often stagnant or declining profits from strong price competition. Companies focus on beating their rivals with incremental improvements in products, lowering costs, and aggressive marketing. Essentially, in a red ocean, companies are constantly fighting for a larger piece of the same pie within existing market boundaries, resulting in zero sum competition where the gains for one company mean losses for others. It sounds a lot like our definition of a mature market from earlier in the episode. Now, the other side of the coin, a blue ocean market, represents unexplored or new market spaces where competition is either irrelevant or even non-existent. In a blue ocean market, companies can chart new paths, create market demand rather than just compete for it. In a blue ocean market, companies innovate by creating entirely new products or services that meet unrecognised or latent consumer needs. New demand is generated by offering unique value propositions that set the company apart from competitors in a red ocean and instead of competing head to head, companies in a blue ocean can focus on creating and capturing new market space, making competition less important. Blue ocean markets can expand rapidly because they’re not constrained by existing market boundaries or competitive pressures. In practice, businesses often strive to shift from red oceans, these competitive markets, to blue oceans, uncontested markets, through innovation, differentiation and creating new demand. This analogy can help us understand strategic choices in market positioning and the potential benefits of pursuing untapped opportunities rather than just focusing on competing in crowded markets. All that being said, it’s hard in a mature market like the legal services market to find that blue ocean space. |
| 00:19:15 | DT: | And I guess we’ve averted to it a couple of times now. Let’s really dive in. How’s Law Squared doing some of this differently? And how do we look at it as an example of a way to, I guess, successfully grow in a mature market that’s not just doing what everyone else is doing around the leverage model? |
| 00:19:32 | KM: | Yeah. Oh, look, I know these things sound a little trite, but it is about knowing your place in that market and what you can offer. I come back to that example of when I was thinking about, what was my next move and why Law Squared, I think being really clear about what you want to do. And one of the examples where we are finding a lot of success is we are not afraid to step away from lawyers doing everything. So, looking at how we can look after a client problem through a project based approach or methodology. So we’re doing this in a number of instances for some clients that have an ongoing need. They need to understand how the legal work is being done. So they need visibility of it. They need some data around how things are progressing. They need cost certainty and they need the confidence that the right skills are there. So in that instance, we will have the specialist lawyers, but not a whole team of them. We don’t need masses and masses, but we need a specialist lawyer when we need a specialist lawyer. And often we might just need a good commercial lawyer for the day to day stuff. So we structure the teams to be the right size for that project, we have project managers and we have technology that gives us that data, gives the client the visibility and we package it up for a monthly fee. Nothing actually too unique about that. Most businesses in the professional services area would do that, it’s just law is perhaps a bit slower to the party. |
| 00:21:13 | DT: | Tell me a bit about how you measure success in that model, because when I look at the traditional metrics for measuring success in a law firm, they really are all built on the billable hour, we talk about utilisation rates compared to a billable hours target for the day, and often when we try to replace the billable hour with something like a fixed fee model as an internal incentive scheme or performance metric, we look at fees charged, it ends up just being another way to measure the billable hour, but not as clearly. We start looking at, well, is this fixed fee appropriate based on what we would have charged for it on an hourly rate basis? Tell me how you’ve got away from those metrics when you’re looking at an engagement like the one that you’ve described that’s charged on a monthly basis. |
| 00:22:03 | KM: | Yeah, and I would acknowledge that doing somebody’s performance review, if success is based on the number of chargeable hours or the revenue that they’ve brought in or those types of metrics, it’s much simpler, but it’s a very shallow look, and the reality is, we often say in those circumstances… “and yes, of course, we take into account the other things you contribute and your behaviours”, but ultimately, if the revenue is high enough, we often look past the poor behaviour or the lack of other skills. So it’s more challenging, but I think it is way more rewarding. I love having those performance conversations with our team because we’re very clear about the behaviours we expect. We have team based goals. We have team based financial targets. So, yes, if one person is dropping the ball, is not behaving in a collaborative, respectful way as part of that team. It really has such an impact. So, they’re harder conversations and they have to be pretty open and still respectful. But yeah, we have to be able to look at each other and say, “are we doing the things that we promised we’d do? Are we meeting the standards that we’ve put forward, the behaviours that we talk about”. Yet I think it gives people the chance to shine in different ways. One thing that I’ve never really enjoyed about performance conversations in a more traditional environment is, there’s this expectation that everybody has to be reasonably good at everything. You’re supposed to be good at managing people, you’re supposed to be good at BD, you’re supposed to be good at doing the work. And we’re humans. We’re good at some things. We have to have base competency in other areas, and we probably love and are excellent in a few areas. We try to map that out and allow people to come together so that we’ve got a good functioning team with that people focus with that quality client outcomes focus with still a collective focus on the team targets, but it’s more complicated, that’s for sure. |
| 00:24:19 | DT: | It sounds like, to really have a good picture of your financial performance when you are not using the billable hour as your performance metric, you need more data on the profitability of a given project or matter. Some people might say “oh, well, you’re not getting a really clear picture of the profitability of a given matter or of a given fee earner”. But it sounds like you actually need more data because you need to be able to really accurately estimate “well, as a business at this point in time, with all of the mix of work we’re doing, are we generating the revenue and at a margin that meets our goals?” |
| 00:24:53 | KM: | Yeah, but I think data is key in that instance, and we’re very transparent with our team in sharing that data and going through it. And that includes post engagement reviews and also an understanding of all of the different parts of our business. When I look at Law Squared, like most professional services firms, we have the more mature established businesses. Our employment team is just brilliant, rock solid, just gets on with it, does a fantastic job for their clients and grows each year. Really don’t need to change that, it’s brilliant. And then we have new service offerings in the project area that I talked about, our Law Squared as a service offering is a newer service offering. We’re still iterating. adapting, developing in some of those newer areas. So not every part of the firm will necessarily generate the same margins, and again, I know a lot of firms don’t take that view. They think it should be a one size fits all, but I always like to think of a business as having a portfolio and that can protect you with some of those trickier times. If you’ve got your steady state, good quality service offering that is just gonna keep going, and you can then invest a little bit more in those new areas and accept that during that investment period, you’re certainly not going to hit the margins that you’d like, but you’re heading towards something that could be pretty special. |
| 00:26:30 | DT: | That’s such a great point that this model of financial performance for law firms is often so rusted on that we actually try to make the square peg fit the round hole. I’m thinking not so much of new service lines where you might have to invest a bit of time when that service isn’t profitable at all, or isn’t profitable in the way that you want it to be. I’m thinking of things like insurance practices that in large firms have often had commoditized rates. they’ve been charged out at lower rates. But because everything has to make this 33% margin in the firm, well, how do we fix that? We just make the lawyers in those practices do more hours in a day, and I’ve seen that in multiple places where the lawyers in those parts of the practice have longer days. They have worse work-life balance. There’s no solution there other than to make them work longer hours so that that practice also produces a 30% margin. |
| 00:27:25 | KM: | Yeah, and I disagree with that approach. I think it’s about accepting that that is the business you’re in. If you’re choosing to be in that type of area, there are certainly opportunities to reshape the way you deliver that service so that you are getting the margins that you want, but just asking people to work harder or making them feel like they’re the poor cousins of the business… they’re never going to get a bonus, they know that from the start of the financial year, because they won’t hit the revenue targets that everybody else can. When they’ve got a couple of great M&A transactions and actually haven’t been out hustling on the street, looking for new opportunities, they’ve just happened to have some fantastic transactions. I don’t think it’s reasonable to compare those two examples and say one is brilliant and one is, yeah, not performing. You may choose not to have that insurance practice. That’s a choice. But if you’re choosing to have it, then accepting that there are different business models. |
| 00:28:28 | DT: | Yes, and to that point, I think we often see the opposite of the, well, this has to make a 33% margin, so we have to work harder to get it at the lower prices. You often see that, well, the margin is 30%, so it’s okay if the operational costs associated with this practice are also 30% and it’s okay if the salaries are also 30%. We’re really stuck to this cost model as well, and as you said, you can have great margins on low prices with a very efficient process. So, maybe tell me a little bit about how Law Squared looks at its cost model and how that feeds into kind of a profitable, strong margin business in a mature market. |
| 00:29:08 | KM: | Well, look, I think like most firms, our cost model is pretty simple. It’s about our people and we invest in those people as we need to, of course, to have the right level of engagement, the right kind of quality that we need for a successful business. So when I think about the costs, we’re careful about all of the usual kind of overheads, but we invest very heavily in technology and we invest heavily in our people. We work with our teams individually to set their own financial goals, rather than telling them what they should earn. We ask the question about what would you like to earn for the next 12 months and what value can you create for the business to help us together achieve that financial goal? So we try to put some ownership on them around what they think is reasonable from a financial goal perspective, and on the technology side, which as I said, is the other key part of our investment, I think that’s just essential to being a modern law firm and I think we’re lucky here at Law Squared that that was recognised from day one. So instead of building a law firm and then realising you needed some technology and processes to support it, we’ve come from the reverse, starting with technology, building more than we otherwise need, and then allowing the firm to grow into it. |
| 00:30:38 | DT: | Let’s talk about technology now. It’s an important piece of the puzzle, both on the revenue side and on the cost side, really. I think we often think about it as driving efficiencies in the cost model, but it can help you scale the service delivery and grow revenue as well. It exactly demonstrates your point, but I was working with a team in a large, relatively traditional law firm recently. Who were working in one of these areas where the charge out rates, the prices tend to be fairly low, comparative to some other areas, but they had developed such an efficient process using all of the operational innovations that we’ve seen in legal services over the last 15 years, legal process outsourcing, adoption of specialist tools that were really well suited to their practice area. And they had a fantastic margin, better than the margins you’d see in corporate advisory practices despite these low rates, because of how much they had invested in technology. What role at Law Squared does technology play in giving you a competitive edge in the markets in which you play, but also how it contributes to growth? |
| 00:31:42 | KM: | Really interesting example you just gave, David, and something I think many people in the law are probably unaware of, that you can have great margins if you’ve got the right processes and the right technology. I think it’s central to who Law Squared is as a business and how we provide our services, and will only increase over time. I think clients expect it, and we expect it, that we should always be using technology to provide us services in a smarter way. And as a human centred law firm, if we are trying to avoid just asking our people to work harder, we absolutely have to embrace technology. So, from our perspective, we’ve invested in having a digital and innovation team. Yes, it provides consulting services to other clients, but it’s also servicing us. And I see technology, yes, as helping from an efficiency perspective, using your example there, how can we improve our processes? How can we become more efficient? That’s the fairly obvious, kind of easy side of things, but I also see it from a people perspective. When I think back just even a few years ago, when we started using Teams, when we started being able to collaborate on a document, when we weren’t in the same space, what a game changer that was. We now take it for granted, but technology can help us become closer. It can help us work more effectively together, and because we offer a team or cluster based model where we work in these small groups, those types of tools and technologies are really important just purely from a people perspective. I’d also say from an enjoyment perspective, technology is everything. I look back to when I started as a graduate lawyer and those bloody hours in front of a photocopier doing conformed copies and all sorts of hideous jobs that we had to do because we didn’t have access to the same level of technology. Those paginators, I think they were called where you punched the page number in a court document. |
| 00:33:56 | DT: | Oh, yeah. |
| 00:33:57 | KM: | And you had to number them. |
| 00:33:58 | DT: | I had, I blocked that out in my mind… |
| 00:34:00 | KM: | Oh, yeah. |
| 00:34:02 | DT: | I’m being retraumatised as we speak. |
| 00:34:04 | KM: | Yep, ghastly tasks that technology has taken care of. So when I think of technology, I often still think of enjoyment, and we’re really keen on trying to take away some of those awful pain points that exist for our team. Automatically filing emails to the matter that you’re working on… those are the little things, they take a lot of pain out of a day. So anything we can do there. I’ve touched on data, I think that’s going to be a real game changer in the law, and the more that we can use data, the more it will give us a competitive advantage. We are doing a lot of that with our clients. We’re providing information about the services we’re providing to them through really quite sophisticated dashboards. It never ceases to amaze me how surprised they are that we collect that data and can then show it to them, and then they can use it to show the broader business the value that legal team is bringing to the business. So data, I think, is a bit of a game changer in terms of the use of technology and something that the law hasn’t been doing terribly well. And then I mentioned before, our clients just expect this. So I think we are always just trying to be that little step ahead, but it’s a quickly moving area, isn’t it? And one that it genuinely is quite a challenge to stay on top of all of the new shiny pieces of technology service offerings that come about or come into your inbox almost on a daily basis. |
| 00:35:35 | DT: | Absolutely. And I think two things I wanted to add. One, you know, I think that enjoyment piece, it’s not irrelevant to growth, is it? Our topic today is growth in mature markets. Those quality of life, technological improvements, they allow us to spend more time on more remunerative work. That’s one aspect, but also the cost of poor retention in a professional services business can be deadly to growth, to have that constant stage of onboarding and ramping up as new people come in and old people go out because they’re not enjoying their work. I think we can’t underestimate the value of freeing our graduates from standing in front of the photocopier all day long, although hopefully these days they’re not doing that too much. |
| 00:36:21 | KM: | Freeing any of us, let’s face it, David, doing jobs that we don’t want to do is a good thing. All of us in professional services, we’re a people business. And so if we can have stronger engagement, you’re right, it is an absolute key to a growing business. |
| 00:36:38 | DT: | Absolutely. You mentioned that you use technology to gather the data that you need to understand Law Squared’s performance in a model that you’re not using this traditional leverage model and its indicators of performance in order to manage Law Squared. Tell us a bit about the technology that you use to gather data. |
| 00:36:58 | KM: | Oh, look, we use a range of different technologies, it depends what the particular use case is. And we’re starting to explore this more and more because it has surprised me for a number of years, that we often in the law base our decisions or base our recommendations and advice on our own personal experience. So if I’m negotiating a technology outsourcing agreement and I can rabbit on about what I think the market is for a particular clause and what’s acceptable and what’s not going to be acceptable. But it is somewhat skewed based on my own personal experience. If I’ve only worked with IBM really, not worked with other key vendors, I’ll have one skewed view. We don’t seem to be using data to help our clients make decisions around their risk appetite, around even their template contracts. If every time they use a particular template, the other side pushes back on one clause, is it time to look at changing that clause? If they insist on these mandatory provisions but actually have never really had problems that justify that, is that the right decision to keep pushing for those clauses? I think the more that we can use objective data to inform our advice and decisions, and not just my experience or my gut, I think all the better, but we use technology across our business to certainly identify the type of work we’re doing and inform our clients around that, the level of complexity, all of those fairly obvious things. But I think there’s a really exciting next phase around using data more effectively. |
| 00:38:50 | DT: | Yeah, I feel like whenever we talk about in practice, what’s on market, I wonder where we’re getting that from. It’s not like there’s a repository in Paris, like there is for the kilogram weight and we go and we have a look at what’s on market. It’s just whatever you think it is, really. It’s often what you saw on the last deal. It’s what works for you at the time. It’s what you drafted because you like it. So it’s one of these games we play and the data is there, but I suppose often it’s unstructured, it’s difficult to interrogate. And there is the promise, I suppose, on the horizon as large language models make it easier for us to unlock unstructured data, that we’ll start to see some of these insights about where we’re adding value with drafting and departures tables and things like that. |
| 00:39:39 | KM: | And I think we’re starting to see clients think that way when they have contract management systems that can look at, “well, what clauses have they agreed to in the past, which are the ones that have been problematic during the term of that agreement? What should they insist on when they’re renewing that agreement based on how the contract’s actually been operating?” So starting to use data to inform some of those decisions. Fairly obvious, right? It’s just we haven’t been doing it in the law. |
| 00:40:14 | DT: | Absolutely. As you say, I think sometimes we’re a little bit behind in the legal profession compared to some of our cousins in other professional services in using some of this data. Although in fairness to us, it is a little harder to unlock the insights when so little of your work output is quantitative. But I wanted to ask you now about I guess a difficult tension because we talked at the top of the episode about how, especially when it comes to things like alternative pricing models, there wasn’t always an impetus coming from the client for these models, and sometimes in really large organisations, the way panel arrangements had worked for a long time, actually strongly incentivized people not drifting too far off the well beaten path. Let’s just get the rate cards, let’s compare the rate cards. Let’s push down the firms on price and get on with it. We don’t need to think too hard about how we get our services or how we pay for them. That is productive of the more for less challenge that commentators like Richard Susskind and his son have been commenting on for decades, but it feels a little bit like to provide services to those large buyers, you do need to play the game a bit and operate in this traditional way. Has the innovative approach that you’ve taken to delivering the services and charging for them excluded you from any opportunities? Has it made it more difficult to operate in particular parts of the market? |
| 00:41:42 | KM: | I think there’s no doubt, if you are innovative, it can be challenging in a traditional market. I found that at KPMG when we were trying to push legal services plus something else that surely clients would see the value in that, I did. And similarly with some of the service offerings or the way that we deliver our services at Law Squared, surely people will see the value in that and that we’re more aligned with what they’re wanting to achieve because we have no incentive to keep things going, to drag it out, to put a huge leveraged team in. And I don’t think that’s the case. I don’t think everybody always sees that the way I’ve just described. So of course. That is a challenge, but I come back to some comments I made earlier about, I suppose, really understanding where you sit in the market, where you can win and what the value is that you are going to provide, and that belief helps you get through those times. Yes, we’ve had recently, we’ll look at a panel opportunity and say, not for us. Now that can feel a little heartbreaking. I never like to knock back an opportunity, but it’s the right outcome. We will say no to great people if we don’t think that they’re going to fit within our culture, or that they can’t adapt to our structure, a non hierarchical approach, our unwillingness to measure time in any way across the business. That means that sometimes we lose out, but we believe that there’s big enough opportunities and that the market is starting to see those opportunities as real and valuable. So it takes self belief, I think, and persistence and a bit of courage. No great surprise, and we’re not alone, I think that’s with any innovator, that you’re always going to be pushing against it a little bit, and you’ve got to keep pushing. I think the exciting thing is that clients are starting to see it. That point I made earlier, they’re not always talking about it, but they are genuinely more and more interested in people who are offering something different and innovative. |
| 00:44:06 | DT: | Yeah, it’s a bit like what we were talking about earlier, when you’re in a highly competitive mature market, you sometimes switch off the strategy part of your organisational brain, you focus on managing for efficiency, and you don’t think in the way an innovative business in a blue ocean market does about what is the value proposition, which part of the market are we supposed to be operating in? Who’s our customer? And more importantly, who isn’t? And it sounds like to move away from that model that Law Squared has decided not to adopt has meant that you need to be a bit more alive to what is our value proposition, who is our customer, who isn’t, and where are we going to play and where are we going to choose not to. |
| 00:44:50 | KM: | And in that traditional, if I can quote the Big Four, that customer centric approach, that I think many lawyers think that they are customer centric, but can then exhibit behaviours that perhaps cut across that pretty quickly. You know, the surprise bill at the end of the month, the “let me tell you what the answer is because I’m the expert” type behaviour, the arrogance that can come with some people who are no doubt deeply intelligent and brilliant at what they do, but can put off the client. So yeah, I think in a competitive environment, putting the customer first and thinking about how we can better service the customer, it’s pretty obvious, but it’s not always that easy to do either. |
| 00:45:38 | DT: | Yeah. I think that client focus is one of those things that Often sits on a list of poorly articulated or described values for a firm. It’s always there and if you scratch the surface of it, but in what way, right? It’s like “we do a great job. We’re ethical.” Yeah, there’s not a lot of specificity to it. |
| 00:46:02 | KM: | Yep. And they are just, to get to the starting line, really those kind of qualities, isn’t it? |
| 00:46:08 | DT: | Yeah. |
| 00:46:08 | KM: | Nothing there that is special. That’s just the minimum expectation a client should have. |
| 00:46:15 | DT: | Absolutely, yeah. I’ve always worried about firms whose core value is that they comply with their ethical rules. We should probably all be doing that. I wanted to ask you next about partnerships and alliances in a competitive market. It’s one of these topics, it sounds a little counterintuitive, I suppose, if we’re talking about a hyper competitive market, you can’t trust anyone, it’s bayonets fixed and there’s little opportunity for collaboration, but have you found that to be the case or has Law Squared been able to forge some strategic partnerships that have helped you to grow in this market? |
| 00:46:46 | KM: | Yeah, we are constantly doing that. I think it comes back to being clear around where you can add value and what you can bring to a client and what you shouldn’t. As much as we will say what we can do, we will also be clear about what we don’t do. And I think that is part of a respectful relationship with the client. So, that means at times we will work with other firms, law firms. We’ll say, great, we’ll do this work on a project basis and we’ll take you from here to the end of the project in three years. We’ll manage all of that transparently with you. But in terms of that critical regulatory advice that underpins that project, of course you’re going to go to one of your top tier providers. That is absolutely appropriate and we’ll work with them so that what we’re doing on this project will be aligned to that advice. Really common scenario. So it’s about understanding your place and we’re completely comfortable in working with other law firms and I think it’s just part of what our clients now expect. They have a range of providers on their panels and they don’t want to see a law firm kind of undermining the other law firm. So I think that’s part of it, but there’s also so much opportunity and perhaps it’s also with my KPMG background to work with other service providers, to put law together with somebody else. And in the space that I am often involved in, the cyber space, you can’t effectively advise on a complex data breach without understanding the forensic side; What’s actually happened? Where are the risks? Do you need to notify? What kind of data has been accessed? Who is the threat actor? All of this information informs my ability to provide good quality legal advice. So I have to work with other service providers in a really collaborative way for me to be able to do my job, and I think that just makes it more interesting. It means you can be more effective in what you do. So surely it’s just going to increase, and we love doing that at Law Squared and find those types of partnerships and alliances really satisfying where we can help each other and ultimately help the client. |
| 00:49:09 | DT: | Yeah, I couldn’t agree more. Maybe it’s because some of us come from the large full service law firm early in our career and we think that, “well, if there’s something the client needs, it must be done within these four walls. Surely the best person to do it is somewhere in the building. And then, well, you know, since the firm is going to be doing it anyway, and I need to make my hours this month, maybe I can do it actually.” Maybe that informs some of it, but I guess it comes back to, as we were saying, understanding your value proposition, what you do uniquely better than anyone else. And speaking from managing a practice in a boutique firm, absolutely. It’s important to say, “well, I’m the right person to do the structuring for this client, for this new business. I’m the right person to give them the corporate governance advice, but I’m not the right person to talk about the franchising code of conduct. So I’m going to get someone in who really knows how to do that”, and that builds a lasting relationship going back to our discussion about customer centricity. It gives the customer the best experience, but it gives you a long lasting source of referrals. It pays dividends in a whole range of ways to say, “I’ll go of that particular piece of this work today.” |
| 00:50:17 | KM: | Yeah, I agree. I think it builds that really trusted relationship. And if I look back at two of my core clients, one had a very strong relationship with an employment law partner at another firm, and I would just end up picking up the phone to her saying, “this is what I’m seeing on this contract, how do you feel about it?” So it was almost as if we were part of the same firm. And that was incredibly important to the client that I had that close relationship and could discuss the things with her. And similarly with another client who had quite significant competition law issues and had a team that they trusted. And it didn’t matter what firm I was at. I knew that the competition team wouldn’t be able to offer the same history, knowledge, trusted aspects that that other team did. So I never chose to put a competition law team in front of that client and just said, “yep, I’ll, of course I’ll talk to that team about those issues.” |
| 00:51:19 | DT: | Kate, we’re nearly out of time, but before I let you go, it might be a mature market, but no market is immune from external pressures, the market forces that shape our entire economy. What are some of the trends, developments, emerging issues that you see are going to shape the services market and the growth trajectory of players in it over the next little while? |
| 00:51:40 | KM: | That’s a big question, David. I would make two comments. Firstly, we are a business about people. We know, and as I said a few times throughout this podcast, so finding ways to engage, have happier lawyers, have people connected. We see that all of the time with the people that we either have in our team or we’re recruiting, they’re looking for some sort of meaningful engagement and connection. Also looking for flexibility, but they want some connection there and some purpose. So I think the people aspect is going to just become increasingly important in the days of being able to treat people almost like a commodity. It’s not going to set you up for success. Second comment… I come back to the data point. I think it’s really exciting, and technology more broadly, that we’ve got a really fun road ahead. Yes, it’s a little scary at times when we look at some of the AI use cases, but we’ve got some really exciting opportunities to do law in a different way and law in a more informed way and to be able to show the value that we bring if we’re an in-house team or we’re in business. Why do we need more lawyers? What is it that we’re doing that is actually contributing to that organisation? So the data side, I think, is a really exciting opportunity that will help drive some of those growth opportunities. |
| 00:53:09 | DT: | Absolutely. I think it’s a fascinating area to keep watch over. There’s a lot of data we can already be using about the performance of our firms that I think we’re missing out on when we’re not thinking about other ways to measure performance. But also, there’s so much data, as you described in our work product, and in the events that transpire over the course of a matter that we’re so close to being able to unlock with large language models and advances in natural language processing. So that’s a really exciting space to watch. Kate, thank you so much for the conversation today and thank you for joining me on Hearsay. |
| 00:53:42 | KM: | Pleasure. Thanks for having me, David. |
| 00:53:54 | DT: | As always, you’ve been listening to Hearsay the Legal Podcast. I’d like to thank my guest today, Kate Marshall, for coming on the show. Now, if you found this episode interesting and you want to learn more about Law Squared’s model of doing business, we actually had the founder of Law Squared, Demetrio Zema, on the show on episode 65. That one’s called ‘The Future of the Profession, Building Law Firms for the 21st Century.’ Now, if you’re an Australian legal practitioner, you can claim one continuing professional development point for listening to this episode. Whether an activity entitles you to claim a CPD unit is self assessed, as you know, but we suggest this episode entitles you to claim a practice management and business skills point. More information on claiming and tracking your points on here say, It can be found on our website. Hearsay the Legal Podcast is brought to you by Lext Australia, a legal innovation company that makes the law easier to access and easier to practise, and that includes your CPD. Before you go, I’d like to ask you a favour. If you like Hearsay the Legal Podcast, please leave us a Google review or share the show with your friends. It helps other listeners to find us and that keeps us in business. Thanks for listening and I’ll see you on the next episode of Hearsay. |
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