Even in the old days, that probably wasn’t true. It was just the case that big-name clients gave all of their work to big-name firms. So firms were actually getting a broader spectrum of work, across the value chain.
Not anymore. Clients, whether explicit or by accident, are redefining their legal market spend. First, they are shrinking that overall number, but more importantly they are classifying their work in to the traditional three tiers. Tier One – is the high-end work all firms think they are doing. Tier Two is the mid-level, day-to-day kinds of work that needs good lawyers but is not pushing the envelope of legal thinking. Tier Three is the ‘nuisance’ work, that can’t be ignored, doesn't hold much value for the client, but must be addressed. And clients are sending Tier Two and Three work to lower priced providers.
So with a shrinking pie, and a greatly diminished Tier One layer, where can firms grow their revenue? Whatever the answer is, it is not Tier One. The competition for Tier One work is heavy and getting more intense. Any firm that wants to expand in this layer will need to do so at another firm's expense. And displacing incumbent providers in a highly competitive market is an extreme challenge. This leaves Tier Two and Three as the only viable options. But this fact challenges a core reputation factor for lawyers, as anything off of Tier One is presumed to be commodity work. And who wants to do commodity work?
Whenever I hear a lawyer use that term, I am forced to bite my tongue. Because as an economist, I have a more precise understanding of that term.
Commodity (from About Economics):
- Usually produced and/or sold by many different companies
- Is uniform in quality between companies that produce/sell it. You cannot tell the difference between one firm's product and another.
So the real issue for lawyers when it comes to this subject is not ‘Commodity’ but is instead ‘Reputation.’
Smart lawyers will set this aspect of their ego aside and focus instead on a better question: How can I help my client?