Finally, the article that scholars of the legal profession have no doubt been waiting for, here it is! I’ve been thinking about writing it for a while. This is an analysis of the famous “five forcesapplied to the legal profession.
This will be a series of two articles due to its length.
I start with the work of Michael Porter. In case you missed my experiment on him in a previous post, I will say that Professor Porter is a (brilliant) professor at Harvard Business School. He has spent his long career analyzing strategy and competition. His analysis is exceptional and probably just about everyone in the business world knows everything about him; however, strangely, I never see anyone applying their thinking to the legal profession.
Porter is best known for developing the concept of the five forces, a framework that inexorably defines competitive position within a “Industry.” In other words, one could analyze an industry as highly competitive, or not so competitive, based on an analysis of these five forces. The stronger the five forces, the more competitive an industry becomes and, inevitably, the more difficult it is to achieve high profits in that industry.
Why should you care as a lawyer? Well, you would care a lot if, for example:
You got out of law school and you chose where to go in your legal career;
You manage a law firm and decide to enter or support a practice area, or even end the practice;
You are a lawyer with a practice and you are evaluating whether to continue what you are doing, improve what you are doing, or possibly retire; Where
You are considering merging with another law firm and are assessing the likelihood of the merger being successful.
Being a bit provocative, in my opinion, the managing partner of a law firm or the head of a law practice group should be well acquainted with Porter’s five forces if he wants to do an effective management job.
So let’s go here. I will start with a short recitation of the five forces and see if, by the end of this article, you are as captivated as I am by the usefulness of this analysis. The Five Forces, as defined by Michael Porter, are:
The degree of Competitive Rivalry
The threat of new entrants
The threat of substitutes
The bargaining power of buyers
The bargaining power of suppliers
These are the five strengths, but before you can really use them effectively, you need to define the industry you are in. This industry analysis is very tricky and can easily become selfish or unnecessary, or just lead you in the wrong direction. For example, you cannot simply say that the legal profession is the industry. Indeed, it’s clear that an independent attorney in, say, Des Moines has little to do with the corporate law firm of Skadden Arps in New York.
So for analytics to be useful, you need to define more narrowly what you’re doing. I will work here with bankruptcy law as a proposed industry in the law, as an example. For this reason, I have relied for advice on my longtime veteran bankruptcy law partner, Kirk Bretwho shares credit for this article.
So I start by asking myself: is the industry made up of all bankruptcy lawyers? As I think of it, the answer is “no”. There are geographic constraints as a local attorney is admitted to practice in the applicable state where bankruptcy could be filed, furthermore a local attorney is one who will know the judges, know the other attorneys and be much more efficient. The industry is therefore likely the bankruptcy bar operating in the state in question. Since I am in New York, I will choose New York.
So, I might first conclude that my industry is bankruptcy attorneys in the state of New York. However, if I wanted to peel the onion further, I would also start to wonder if the fact that some bankruptcy attorneys seem to specialize in the creditor side and others in the debtor side might further subdivide the industry. Also, in the same vein, there are practices devoted to individuals, practices devoted to corporate reorganizations, practices devoted to cross-border insolvencies, and a host of others that I do not think of by heart.
This analysis is further complicated by the fact that even if the debtor is in New York, the company may decide to file in another state, which is often Delaware. And sometimes New York lawyers, because of the perceived expertise of a big law firm, get legal work in other parts of the country, so that work becomes part of the lawyer industry. specializing in bankruptcy in New York State.
Finally, to possibly make matters even more complicated, many bankruptcy attorneys include corporate reorganizations as part of their expertise in so-called pre-packaged bankruptcies, which are often undertaken by businesses to avoid expense, l uncertainty and the time-consuming nature of the bankruptcy process.
Are all these separate industries?
I’m not sure of the answer to the above, and there’s obviously a lot of subjectivity – and even planning – that would go into defining the industry to be analyzed – what if I was doing this “for real” ( i.e., if I was considering embarking on the acquisition of a bankruptcy attorney or expanding my firm’s bankruptcy practice group), I would certainly expend a lot of smarts to understand all this, because it is essential to the overall analysis; however, since this article is merely illustrative, there is no reason to elaborate on this.
For now, and because my business focuses on sophisticated and important issues, I’ll limit this to say that the industry in question is:
Bankruptcy attorneys in New York State who focus on sophisticated and large bankruptcy cases.
As I am running out of space here, I will end the article at this point with the definition of the industry in question. In my next article, I’ll apply Porter’s Five Forces to this industry. You might also be surprised at the results.
PS By the way, I’m lucky to have had Kirk Brett as my bankruptcy partner for the past 15 years (click here for a link to his bio). He is extremely intelligent, creative, aggressive and strategic. He has been practicing bankruptcy law (both contentious and transactional) for nearly 25 years. His practice includes corporate reorganizations and is closely tied to our real estate pure play – since we have so much real estate work here, reorganization and insolvency work fit in perfectly. Finally, as distressed real estate has become less pervasive in recent years, Kirk has transformed his practice into being the “guy we call when there’s trouble.” His informal internal nickname is “The Wolf” (for those Pulp Fiction fans) – when we’re in trouble, Kirk comes in and takes us out.
Bruce Stachenfeld is the managing partner of Duval & Stachenfeld LLP, which is a midtown Manhattan-based firm of approximately 70 attorneys. The firm is known as “The Pure Play in Real Estate Law” because all of its practice areas focus on real estate. With 50 full-time real estate attorneys, the firm is one of the largest real estate law firms in New York. You can contact Bruce by email at [email protected].