Domestic firms should maximise local connections to reach a wider pool of businesses, says Per Magnusson

If the 'first way' of doing legal business relates to the large international law firms with their global ambitions and the 'second way' relates to domestic law firms, then the 'third way' might refer to those players that are focused on clearly-defined regions.

How can regional thinking give us a competitive edge? The world is shrinking ever faster; however, people live and work in smaller, self-contained environments: countries, regions, cities, towns, companies and even families. As individuals we are unable to relate to, digest and process the whole world in one large chunk. We need to process it slowly, chew it piece by piece. Of all these self-contained environments, a region is large enough to leave a meaningful mark in business and small enough to handle.

Cross-border opportunities

Being part of a region allows businesses to co-operate with and capitalise on each other's work. A contact in one part of the region could serve as an introduction to another person or company in another part of the region. For example, if I know the CEO of Fishbone in Copenhagen, the CEO may introduce me to the Russian manager of Fishbone. This Russian manager may work with a US customer who has expressed an interest in investing in Sweden. And so on and so forth. One plus one no longer makes two, but rather three, four or even five.

It is natural for a pan-regional player to pitch for international companies in all the jurisdictions in which they operate. The future for independent regional law firms is that international clients will co-operate with them in all (or most) jurisdictions where they are present. Thus, cross-introductions will be increasingly important. In this respect, reasonably-sized regional independents are better prepared and more flexible than larger global firms.

A pan-regional approach stimulates changes in fee structures. An integrated law firm covering the jurisdiction of a functional trade region can offer attractive and seamless fee arrangements to multinationals. To arrange similar solutions may be more complicated for domestic firms.

Large international law firms often lack the flexibility and speedy decision-making required to cope in an ever-changing and varied market. From the client's perspective, it makes sense to use a law firm that provides services where the client does business – it is simply an appealing product at hand.

Multicultural leverage

Differences are enriching and will, no doubt, boost the potential of pan-regional business. Different views, different cultures and different perspectives will help create a dynamic environment. This in turn can only increase efficiency and work satisfaction.

Such an approach helps create a firm that is respectful, promotes diversity and highlights open-minded thinking. Ultimately, such an organisation is better positioned to handle complex cross-border projects requiring not only legal acumen, but also excellent cross-cultural communication skills and the ability to co-operate across borders.

Networking leverage

It is vital that we take advantage of each other's networks. By promoting somebody else in your regional organisation, the favour will be returned to you and others. It is a case of multiplying opportunities. Sharing our network with colleagues from other countries, practice groups and offices means creating multiple entry points for potential clients within the organisation.

This may perhaps sound like a dream, but it is most certainly viable and attainable. To this end, an organisation should be integrated as opposed to an organisation which expands using the 'eat what you kill' principle. If there is no incentive for sharing clients and contacts, lawyers will be afraid of losing their contacts.

Economic cycles

One part of a region may be flourishing while another part is experiencing a downturn. It may be worth evening out results and hedging business risks, and making use of opportunities that may arise in an economic downturn.

A good example is Poland, which managed to avoid the recession in 2009, while tremors were shaking Europe's financial markets to their foundations all across the continent. Poland's astute ability to manoeuvre away from the crisis sent out a strong message and may well be one of the reasons why foreign investors today are differentiating this country from the other 'new European Union members'. Prior to the crisis, Central and Eastern Europe was typically considered as one entity.

Hundreds of Scandinavian companies are present in Poland and many of them moved to Poland either during the crisis or after it. Their business activities have had an incredibly positive impact on Poland's overall financial outlook.

Back in 2009, with the spectre of more financial problems looming, the Baltic states were in a downward spiral. Indeed, Lithuania, Latvia and Estonia suffered during the crisis, but managed to apply austerity measures, which have most certainly paid off. Estonia could serve as an example for a number of European countries which are still struggling with public debt. The Estonian general government debt level is well below 10%: both impressive and enviable.

The position of Scandinavian business in the Baltic states is strong. The sound economies of these countries are only helping to encourage further co-operation. If a law firm wishes to fully capitalise on these contacts, it is important to build a pan-regional structure. Synergies cannot be achieved otherwise.

per-magnusson-magnussonA larger fishing net

One country on its own may be too small to catch enough fish to survive. The solution is therefore obvious. Integrating our businesses across a wide array of jurisdictions will allow us to be less vulnerable to losing market opportunities in one location, hence the idea of a larger net. By increasing the size of our net, we increase our reach, thereby giving us the chance to find new opportunities and targets.

It is not a coincidence that no major US or UK law firm is present in the Baltic states. They consider these markets too small for their business. Yet a number of international companies operate in these states. The Baltic states are of vital importance for a firm with pan-regional ambitions in Northern Europe.

For example, it may be difficult for a domestic law firm from Lithuania to acquire a major international corporation as a client. However, if this firm is an integrated part of a pan-regional structure, the potential client might be more inclined to sign on. On the other hand, for a larger firm with pan-regional ambitions, a presence in Lithuania may be an excellent competitive advantage while trying to establish relations with a new client.

Seamless service

One company that operates across the whole region can offer seamless services across an entire area, with only one point of contact in any of the client's locations.

Instead of dealing with five different law firms in five different countries, it is a great deal more convenient to work with one firm offering seamless service in each jurisdiction. It is certainly a challenge to ensure that the level of service is indeed seamless across the board and that legal know-how is equally professional and extensive in every jurisdiction. Typically, law firms are more inclined to say they deliver seamless service rather than actually do so.

At this point, it is worth mentioning the issue of integration once again. A fully integrated law firm is much better positioned to deliver seamless service than an organisation with loose connections between offices.

What is more, lawyers still do not fully understand the fact that excellent legal competence is not enough: lawyers should be responsive, understand the client's industry, and be able to solve problems quickly. Partners should always offer clients a high level of attention. It is merely a starting point taken for granted. We would hardly expect British Airways to say 'come and fly with us, because our planes actually fly'.

It is still not that common for law firms in our region to measure client satisfaction on a regular basis and act upon their findings. Sooner or later increased competition and client expectations will change this.

Beyond 2012

The real battle has already begun. It will not take place on a global battlefield but rather on a regional one. Large national leaders are attempting to expand outside their borders because there are no further growth opportunities at home. At the same time, regional independents are trying to strengthen their regional positions. They are increasingly interested in cross-border work, while smaller national law firms focus increasingly on the national slice of the legal cake. The conclusion for large multinationals is that pan-regional competitors may become much more relevant competitors than their global rivals.

The coming years will, no doubt, be challenging. If I were asked to give a piece of advice, I might quote Steve Jobs' final remark in his address to the students of Stanford, both as a battle cry and as a tribute to the outstanding innovator, entrepreneur and global business leader: "Stay hungry, stay foolish".

Per Magnusson (pictured) is senior partner at Magnusson.