The challenges besetting Big Law are of its own making. The industry overshot the needs of its clients and overlooked the effect of growth on the intensity of competition. The really frightening part? Recent surveys show Big Law is doing nothing to mitigate the threats to its prosperity and much to exacerbate them. A change of course is needed. It will require today's leaders to bring more younger partners into leadership roles and to lead in a very different way.

Overshooting Clients' Needs

Over the last two-plus decades, law firms developed and offered sophisticated bespoke services, at an ever-increasing price point, to a client set the bulk of which simply don't need that sophisticated an offer and doesn't get good value at the prevailing price point. As one eminent corporate practitioner told me “we're not just protecting clients against a 100-year flood; we're protecting them against a one in ten-thousand-year event.”

The men's shaving market provides a foreboding analogy. Starting in the 1970's, Gillette followed a simple and lucrative strategy: add new features and raise the price. Trac II, the world's first two-blade razor was introduced in 1971. Then came: two blades plus lubricating strips; three blades; three blades plus micro-fins; five blades on a pivoting head with before-and-after soothing strips and a trimmer. … Somewhere along the line, shavers grew frustrated and a sense of being gouged on price took hold. Dollar Shave Club launched in 2012, and Harry's in 2013. While Gillette was charging over $6 for its latest cartridge, they offered a twin-blade razor at a dollar. Gillette's market share has dropped 16 percentage points—the equivalent of a magnitude 9.0 earthquake in an established consumer goods category. Gillette has responded by cutting prices across the board, promoting its lower-priced product lines more, and introducing its own online service (The Gillette Shave Club). There are no public data on Gillette's profits but the combination of price cuts, increased promotional spending, and new product introductions must have had a toll.

The parallel in Big Law is that in response to firms overshooting the market's needs in terms of the sophistication of the services offered and their price point (akin to Gillette), clients have grown frustrated (like the shavers who feel gouged on price) and have slowly, steadily and irreparably taken legal services in house (low cost in-house service provision being the Dollar Shave Club equivalent). Recent surveys make this point emphatically: 82 percent of firms report they're losing business to in-house legal departments; in-house counsel report that they meet 73 percent of total demand internally because of cost. Akin to the shaving market, there is a segment of client demand that values Big Law's sophisticated, high-price, offering. However, this segment is considerably smaller than the available supply—i.e., the volume of such work that the industry has sized itself to deliver.