As the legal industry diversifies beyond traditional structures, we’ve witnessed the rise of the hyperspecialised law firm. Often spinoffs from large law firms, hyperspecialised boutiques focus on a particular area of expertise, type of client, or local area. We spoke to Sue-Ella Prodonovich, a leading specialist in business development, principal of Prodonovich Advisory and business strategy and development presenter in the College’s LPMC program in NSW. We also spoke with the founders of two hyperspecialist law firms - Marianne Marchesi managing principal of Legalite and Naomi J. Saba founder of Co-Counsel, to explore this shift towards hyperspecialist ecosystems.
There are many benefits to be gained by a shift towards the ‘ecosystem mindset’ as many in the legal profession are finding out.
From hierarchical ‘tournament for partnership’ to collaborative cottage industry
First coined by Oxford University, the move from *ego to ecosystem reflects a significant redefinition of how leaders lead and influence in the current ‘fourth industrial age.’
“The ego-system is more of a command-and-control model. It’s all about a tournament for partnerships. It’s about winning at the expense of others and doing better than your colleagues,” Sue-Ella explains.
An ecosystem, by contrast, is quite a different construct.
“It’s more about having guidelines about how to play,” Sue-Ella says. “These types of leadership models let people know what they want at the end of the day. How you should behave. The culture and values of a place. The expectations and non-negotiables.”
Rather than specifying exactly what to do, an ecosystem model provides guardrails. It also recognises that people on the other side of a matter might later brief you, become your colleagues, or experts you might use.
“The whole idea of the ecosystem recognises that people move in and out of the workforce, and may not want to be partner, so they need other ways to be recognised and rewarded,” Sue-Ella elaborates. “It’s almost going back to a Cottage Industry model, where people become sought after for their expertise. This might involve dealing with a certain kind of client, based on cultural empathy or shared experiences. It shows how our legal industry is getting hyperspecialised, and super-fragmented.”
It can be an arrangement that suits clients, who often prefer a portfolio of specialists. Likewise, it suits neurodiverse lawyers, who have the freedom to enjoy what they excel at doing.
“Marketing needs to accommodate all different styles,” Sue-Ella says. “In the olden days, it provided an advantage to the extrovert, the person who loved networking and getting out. Nowadays it’s become the strength and domain of the reflector and thinker. Marketing and business development has evolved differently because the market is different. It’s all about finding your comfort zone, where you’re comfortable intellectually.”
Leveraging the benefits of scale
Where once the legal market was divided into top tier firms, mid tiers, smaller firms and sole practitioners, firms have since fragmented.
“For large firms, the upside is size. A large war chest attracts good talent and deep bench strength to do high-end work with big corporates,” Sue-Ella says. “The hyperspecialised firm, like Kingston Reid, Australia’s largest specialist workplace firm, was made up of employment partners that left a top tier firm to create a premium level firm that only does employment law.”
“The main benefit is scale. Profit is present whenever you have a homogenous process or environment. Whatever we can replicate and repeat, we can scale,” Sue-Ella says. “These boutique specialists are also very profitable, because they stay super focused.”
Morgan + English Commercial Lawyers is a boutique agribusiness legal practice that specialises in thoroughbreds.
“They do work for Middle Eastern sheiks and American billionaires, because that’s their specialisation,” Sue-Ella explains. “But the problem is the ‘mushy middle’.”
This is a situation when a firm isn’t truly large, nor is it a specialist. Without a clear competitive advantage, many firms in the ‘mushy middle’ have disappeared.
“We’re also seeing firms outside the CBD flourish, like a firm in Byron Bay that focuses on agritech and big investors,” Sue-Ella says. “Clients are no longer looking at your address, but your expertise.”
At the same time, firms can dominate a particular location creating a geographic competitive edge.
The pitfalls of a niche market
As information is more readily available, clients are no longer looking for a lawyer to merely ‘explain the law’, instead they are looking for ‘pathfinders for problems’. Someone who can interpret the law and tell them what they should do.
“As a lawyer, you’re looking for a niche but there’s got to be a market in your niche,” Sue-Ella explains. “There must be enough demand and your model needs to match it too.”
There will always be pros and cons to the path one takes, Sue-Ella cautions. “The upside is that specialists are sought after. You spend less time on marketing, because word of mouth travels fast, you can command better rates. The downside is that you’re exposed to a market that might disappear.”
There is a myriad of factors that can impact the health of a market. For example, there might be a shift in government policy, such as when personal injury payouts were capped, or the entry of a competitor ready to cut you off.
“When top tier firm launched a new product, making precedents available free of charge, it impacted boutiques who were targeted startups,” Sue-Ella explains. “If you’re not big and don’t have critical mass, you can easily be taken out of the game.”
Embracing a collaborative ecosystem
Hyperspecialist firms often form part of a portfolio for clients, clients who use a collaborative cohort because they like each other and work well together. “These collaborative cohorts usually have something in common, like an industry sector or type of client, or legal networks,” Sue-Ella says.
Regional firms frequently share precedents and ideas, while other firms might collaborate on research for a client, or to deliver CPD. Work may also come in through referrals.
“There’s a sense of referral etiquette,” Sue-Ella says. In larger firms, this might involve referral credit, such as receiving 20% of whatever work is done for a client. “The essence of referrals is about working hard and being nice to people.”
Firms can also join networks through the IBA (International Bar Association) and IPSANZ (Intellectual Property Society of Australia and New Zealand), or regional groups like LawLink in New Zealand, which even financially benchmarks its member firms.
Hearing from those who have succeeded
Marianne Marchesi, managing principal of multi-award-winning law firm Legalite, founded her hyperspecialist boutique by upending traditional operating models in her preferred market niche, franchising and property.
“There’s a secret that many traditional law firms don’t want lawyers to know: to be memorable, you need to be different,” Marianne Marchesi says. “In a legal world where we’ve been told conformity is success, in the modern world, finding your niche has never been more important.
“Legalite specialises in franchising and property. By specialising, we get to know our clients’ businesses on a deeper level, keep our finger on the pulse of market trends, even influence market and regulatory change. Clients come to us for that specialty advice because they care about best practice.”
Whilst there are other specialist franchising or property practices, Legalite is unique in the marketplace because they have crafted a competitive edge by practising the law differently to traditional firms.
“Our mission, helping businesses to thrive through simplified and forward-thinking legal services, challenges many of the traditional rules that govern the legal profession,” Marianne explains. “We’ve proven you can build a profitable practice through doing away with the billable hour, delivering maximum value to clients through strategic and proactive legal advice, and creating a supportive and flexible workplace where ambitious lawyers thrive.”
Marianne concludes, “our courage to disrupt, niche and be different has led us to winning talent and clients from big firms.”
Naomi J. Saba, a banking and finance specialist in risk and compliance, founded her firm, Co-Counsel, based on her extensive expertise advising clients in banking, credit, and financial services.
“As a banking and finance specialist, establishing Co-Counsel allowed me to advise a highly targeted client base on technical issues specific to their needs,” Naomi says. “It's this depth of expertise that attracts clients to our firm, as you can't simply walk in off the street and find a lawyer with 10-15 years of specialist experience.
“Hyperspecialist boutique firms like Co-Counsel represent a departure from the traditional large full-service law firms, and a lot of our work often comes via referral from larger firms who don't have the expertise in-house to manage certain client matters.”
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