Intellectual Capital is, today, regarded as the new currency of competitive advantage in the modern business world. The term" intellectual capital" comprises business know-how, intellectual property in the form of patents, designs, copyright and trade marks (brands) as well as human capital. The growing importance of intellectual capital is best reflected by comparing the research results of an economic study undertaken amongst a few of the Fortune 500 companies in America: in the early 1970s a study concluded that between 75-85% of the participant companies' true value lay in their tangible assets. In 2005, a similar study was undertaken, but this time the companies recorded that nearly 70% of their net worth lay within the intangible assets of the business.
Law firms and auditing firms have, since time immemorial, been aware that the true value of a professional practice consists in the effective and efficient acquisition and employment of intellectual capital. Today, more than ever, the strategic value of intellectual capital as a competitive business asset is being better understood and employed to secure competitive advantage, especially by focusing on the areas of marketing and branding.
The future differentiator of competitive advantage in professional practice, just as it currently is in modern day business, will be in the ability of law firms to grow, maintain and employ their intellectual capital with a view to unlocking value. The value, once unlocked, will secure improved revenue streams to the firm, improved growth and acquisition of clients who are prepared to pay a higher premium for the services delivered and, most importantly, improve the goodwill of the practice to ensure shareholder growth.
THE MODERN LAW FIRM
The downward pressure being experienced, worldwide, by law firms due to a process of rationalisation and de-regulation of work once held to be in the sole domain of lawyers and law firms as well as the seemingly low barrier to entry into the profession is causing the once conservative practice of law to sit up and think more strategically about how to ensure its survival and profitability. Gone are the days when lawyers could sit behind their desks and wait for the work to roll in due to a few kind referrals from existing clients, friends, family and acquaintances. Intellectual capital is, today, the single biggest asset a firm has and, it would seem, that most legal practices are seeking ways to leverage such intangible assets for the betterment of the firm. The modern day law firm is fast coming to the realisation that skill, experience and expertise are simply not enough to remain competitive. Today, law firms are stealing ideas from big business and adopting aggressive marketing and branding strategies as part of their overall employment strategy of the firm's intellectual capital. Besides marketing and branding as a tactic to achieve better visibility, law firms are working feverishly to establish a focused client relationship system by, for example, the use of new technologies and, in some cases, the employment of consultants or the employment of full-time PRO staff. Intellectual property, in the form of "brand building" to grow the reputation and goodwill of the practice, has taken centre stage on management's agenda by improving visibility through media such as radio and television advertising, brochures and workshops, by attracting and training better qualified staff to be part of the firm's human capital, by improving technologies to deliver a better and more demonstrable service. All of this is undertaken in the hope of attracting (and retaining) more clients that are willing and able to pay a significantly higher fee premium for the services rendered by the practice.
THE "CONVEYANCING" BRAND
The conveyancing practice in most law firms is, perhaps, the "leader" in the pursuit of the modernisation of the law firm as a whole. Conveyancing is truly a three-dimensional form of practice necessitating not only the skill and expertise of a specialist lawyer, but also the acumen of an astute businessman and entrepreneur. The commodity-driven professional service has, for many years, been the subject of attack from other industries seeking the right to participate in a seemingly profitable and statutorily protected area of legal practice. Banks, real estate agencies and mortgage originators have been at the forefront of the lobby groups looking to de-regulate the practice of conveyancing. Added to this, there is the public perception that lawyers earn huge fees from conveyancing work, and a seemingly unwritten and unspoken expectation by the public employing the services of conveyancers to receive discounts for work referred to them.
Conveyancers worldwide have acted accordingly and, in an effort to protect and acquire market share, have adopted business principles in order to differentiate their services from those of the next conveyancing firm. A focus on improved marketing, branding, human capital, technology and a growing and cutting-edge knowledge base has been the order of the day for many. The concentrated focus of improving one's visibility amongst clients, estate agents, financial institutions and the general public has, in recent times, received much attention. Today, many conveyancing firms have in place some form of marketing or advertising drive. Those that can afford to do so and that have created a focused strategy to improve returns on investment have employed full time relationship managers to visit clients, estate agents and financial institutions in order to ensure that their firms are kept in mind as the law firm of choice when concluding deals or referring work. The proliferation of marketing material in the form of brochures, pens, rulers, desk blotters and calendars, to name but a few, from law firms is evident in most estate agencies, banks, insurance brokerages and bond originator offices. This is over and above the regular cocktail parties, luncheons, workshops or seminars put on by law firms as part of the marketing strategy to improve and retain the reputation and goodwill of the practice as the law firm of choice.
The focus of marketing and brand management is all part of a drive to improve competitive advantage through a more effective and efficient employment of the intellectual capital of the firm, more specifically the conveyancing department. Firms that have been early adopters of this strategy have enjoyed huge success and have seen the value of improved reputation and goodwill when such is translated into improved earnings and a higher net profit margin than in previous years.
THE DILUTION OF THE "CONVEYANCING" BRAND
The strategic employment of intellectual capital ensures an improved competitive advantage while at the same time growing its goodwill and attracting clients who are willing and able to pay a premium for the services delivered. It is a strategy that must be carefully managed if the practice wants to ensure that it does not create a sales maximising model with short term peaks and troughs, but rather a steady and progressive approach to long-term shareholder value.
This approach is not new to most conveyancers or law firms and to state it here may seem to be stating the obvious. However, it puzzles me why, then, a growing number of law firms seem to be shooting themselves in the foot by undoing all the hard work of effectively employing their strategic intellectual capital and then, by some moment of madness, fear or greed, resorting to strategies of fee discounting and, in some cases, "incentives" to secure work. The proliferation over the years of fee reductions and "incentives" to estate agents and mortgage originators, to mention but a few, has resulted in the creation of a very hungry monster without an appetite suppressant. Every day I hear how clients no longer ask but rather demand a fee discount. I have, as an example, personally been asked by a bank representative to agree to a 50% discount in my bond costs in order for the bond to be referred to me !!!! (despite the fact that most firms work on a cost structure of between 80-85%). There are certain estate agents and real estate agencies that have become so used to the proverbial brown bag of money under the table "deal" to secure work that they, now, unashamedly ask for payment of media advertising, weekends away, office equipment and, my all-time favourite……a new smart car completely branded in the agencies' get-up !!!!!!!!
The ever-increasing loss of "legal work" to other industry sectors does not help either. Added to this, the ever-growing competition amongst law firms in the field of conveyancing due to seemingly low barriers to entry as well as the continued "threat" of the de-regulation of conveyancing work to the likes of the hungry pack of wolves in sheeps' clothing and taking the form of financial institutions, real estate agencies, mortgage originators and others. Conveyancers have acted predictably to ensure their survival and milk the cow while the going is still good. The problem with this short-sighted and often poor strategic approach is that it has negative long-term consequences for all of us as legal practitioners. The dilution of the conveyancing brand through tactics such as fee reductions, incentives and the buying of work all leads to a negative effect of the value contribution of the marketing and branding initiative to the firm's intellectual capital employment effort and, more acutely, the real value of the practice of conveyancing. Clients and the public no longer care about things such as the skill and expertise employed in a conveyancing matter; there is very little sign of the regard held for the technology bought and implemented to deliver a demonstrable service and little if no thought is given to the high running costs to employ and train dedicated and, often over-worked, paralegals and professional staff.
As lawyers, we are our own worst enemy as we have allowed the rot to set in. The move from revered practitioner to lawyers with begging bowls is upon us and is directly attributed to the dilution of the conveyancing brand. I am sure there will be those who will continue to dilute the conveyancing brand further, long after this article has been read and archived. It takes guts and conviction to swim upstream and to fight for what we know is right. A failure to do so when every signal is telling us to act decisively will lead to the inevitable, and that is a loss of reputation and goodwill, a loss of respect and a loss of our livelihood.
Reputation and goodwill are not achieved by giving away a lucky packet of goodies to someone, but rather through a long-term and dedicated process of delivering a demonstrable and professional service at the cutting edge of law, business and technology. In doing this, clients develop a sense of trust with the firm and respect for our service and are willing, at the end of the day, to part with their hard-earned money without requiring you or me to do anything more than say "thank you".
Think about it.
Sean Bosse is an admitted attorney and non-practising conveyancer in Cape Town. As a member of the South African Institute of Intellectual Property Lawyers (SAIIPL) and the author of numerous articles on strategic marketing and branding, Sean is recognised as a leading authority on professional service firm management and strategic marketing. Feel free to contact him on firstname.lastname@example.org. email@example.com