New York. If you can make it there

If you can make it there… Why New York matters

The role of ‘successful in New York’ matters far more in terms of brand perception for top international law firms than a purely rational look at the data suggests it should.

Unlike London (the other global city that really counts) New York doesn’t have a total stranglehold on the market for premium deals and disputes. Citi Group figures show that historically only around 40% of total US premium revenues are sourced from New York. In London the figure is much closer to 100%. Yet still fortunes have been won and lost over decades by firms attempting to maintain or build a New York component to their brand.

Irrational exuberance
At one level the attraction of New York is obvious: the major investment banks call it home, it’s arguably the financial capital of the world (London again would differ on this) and alongside that it’s perceived to be the city that leads the world in terms of the quality of its professional service advisors whether management consultants, accountants or lawyers.

On the other hand the supply of this top talent is by definition limited, meaning that any firm wanting to push its way into the New York market faces the prospect of paying eye-watering amounts of money for that portion of top talent that is ‘on the market’. The very public demise of Dewey serves as a salutary lesson in what can go wrong if you make too many financial commitments to too many top earners – particularly laterals – in order to secure their loyalty.

Despite this they keep on coming. Why? Because the stakes in branding terms are so high and tough as it is today it’s going to get even tougher in the future as more firms establish credible New York angles to their historical national identities and raise the bar on price-of-entry. Firms like Latham & Watkins and Kirkland & Ellis have turned early beachheads into credible offices with deep enough benches to say that they have strong New York presence – and the flow of major deals and disputes going their way seems to suggest that it’s working.

Focus. Focus. Focus
The strategy that ‘non-New York’ premium firms should follow to build their brand presence in New York is on the one hand very straightforward but on the other very complicated. They should adopt a laser-like focus on building their New York brand around a very tightly defined set of practices, industry groups or very narrow combination of the two. And they should also choose those practices with a highly disciplined and realistic awareness of what they are already famous for nationally or internationally. Instead the strategy most firms seem to adopt is equivalent to throwing mud against the wall to see if anything sticks – a harsh critique but not that far from the truth as far as it appears from the outside.

The reason for this is that it’s incredibly hard to be disciplined in the execution of an office strategy. Law firms, even the most managed, are collectives as much as businesses which tends to lead to spreading resources around in order for the leadership team to take the consensus with them. In strategy terms this tends to manifest itself in shopping list length ‘priority practices’ and a tendency to invest ‘off-strategy’ as much as in line with it when it comes to lateral hires.

Keeping in shape
From the other end of the telescope those firms that already have a strong New York brand pedigree need to make sure that as national and international firms gain traction in the city they don’t get demoted to niche or underweight status. This is a better problem to have than trying to build a New York reputation but on the other hand given the increasing competitive pressures any firm that takes its eye off the ball is likely to find itself prey to those actively searching for top talent.

Despite all the trauma and aftermath of the financial crisis and constant client complaints about rates, ‘big in New York’ still retains massive allure in terms of law firm branding on a national and international stage and as long as that continues more firms will want to make it there.


Ian Stephens

CEO and Founder of Principia, the world's most experienced branding and innovation consultancy for professional service firms.



Big Law

Big Law – the future global elite brands

Transatlantic mega-mergers are challenging the existing international elite of law firm brands. The next decade will see a dramatic shakedown among the contenders to become the future global elite firms — many will succeed, more will fail.

Ever more global
The term global is of course a relative one when it comes to law firms. Although many have radically transformed themselves over the last decade or more from powerful national firms into substantial international brands, none can yet be said to be global in the way that say, PWC, McKinsey or Goldman Sachs are global.

The Big 4 accountancy firms, Bulge Bracket banks and top management consultancies are truly global entities with strong global brands — at or near the top in every key market around the world — attracting the top clients and top talent simultaneously in a virtuous circle of market dominance.

In the legal sector by comparison the strongest international brands currently fall into two categories: the elite ‘international but not yet global’ US or UK based firms with large international operations (Linklaters, Latham & Watkins, Skadden, etc) who have the ‘bet the farm’ credentials but not yet the reach, and the global ‘premium but not yet elite’ firms (Baker & McKenzie, DLA Piper, Dentons, etc.) who have the global reach but still in the process of earning their stripes as go-to firms for the market’s most significant matters.

A third way
Whilst these firms made all the running in terms of significant changes around the turn of the century, recently (apart from Dentons) they have been relatively quiet on the transformation stage, leaving the spotlight to the series of global mega-mergers of silver circle firms — mostly but not exclusively reaching out across the Atlantic to find their partners (Hogan Lovells, Norton Rose Fulbright, Herbert Smith Freehills, etc.). These newly internationalised firms join an interesting 3rd group to watch (already comprising firms like White & Case and Mayer Brown) which are currently further along the elite curve than the global firms and further along the global curve than the elite firms.

It would be premature and foolish to predict which strategy will ultimately win out in the race and it’s possible that firms will emerge from all groups – what’s easier to predict is that those firms that are not even in the race are not going to win it. Their future — if they want to retain their relevance to clients for ‘bet the farm’ matters — probably lies in specialism by market, industry, practice or combination (a topic covered in another post ‘Specialists in a World of Generalists’).

Game on
This sets the scene for a dramatic and potentially rapid and painful shakedown over the next decade of the brand landscape among the international firms — King & Wood, Malleson is perhaps the highest profile example so far even if there were certainly other factors involved — as they fight for position in the race to get into the breakaway pack of genuinely global elite law firms.

The prize is huge — to gain an increasingly unassailable position as one of a select group of global elite law firms, handling the bulk of the largest deals, transactions and disputes for the Fortune 500 and largest financial institutions. The $64,000-dollar question is who will make the cut as all of the contenders face significant hurdles to develop this brand positioning.


Ian Stephens

CEO and Founder of Principia, the world's most experienced branding and innovation consultancy for professional service firms.



An American law firm in London

An American law firm in London

Even after more than two decades in London no major US law firm has broken through in terms of market share and reputation; could things be about to change? An article by Jomati Consultants highlights a recent, dramatic uptick in US firm penetration of top tier M&A in the London market. Of course, one swallow doesn’t make a summer but, at the same, time swallows and summers are quite well correlated!

Holding back the tide

More broadly though, despite big investments sustained over many years, the US firms have not made the inroads they might have expected. A recent survey in The Lawyer reported the surprising findings that many associates at UK firms knew nothing much about US firms in London and had even less interest in joining them. Similar surveys among clients indicate the same thing; in the UK legal market place, the natives still dominate.

Brand awareness and reputation are, of course, very important both for recruiting the best talent and the biggest and most valuable clients.

Some US firms have done better than others. Weil Gotshal, Dechert and Quinn Emanuel have built relatively strong franchises in London by focusing very tightly on two or three key practice areas and industries (e.g. private equity, financial services and litigation respectively) and others, such as White & Case, Mayer Brown and Baker & McKenzie, have managed to build relatively large multi-practice group offices which serve local clients as well as collaborate with their US and other international offices on cross-border work. In The Lawyer survey Baker & McKenzie scored highest out of all the US firms in terms of being the one that associates would most like to join.

Ahead of the curve 

The legal market is an anomaly. In almost every other area of professional services the Americans have gone a lot further. The US brands now dominate the London market and the UK incumbents have either been gobbled up by them (remember Peat Marwick), gone bust (Barings) or have clung on as relatively diminutive boutiques (Rothschild).

So, why have the Brits managed to retain their dominance in the legal market when their former professional service peers have failed and what can the US law firms do to change things?

One reason behind the success of UK law firms is that they have been more innovative and professional in their globalising programmes. The biggest UK firms put much more time, energy and effort into marketing and business development than their competitors in the US and they are managed more like large multi-national businesses than cosy partnerships. Not to everyone’s liking it must be said. Led by the Magic Circle firms (the largest and most prestigious of the London firms), the UK firms expanded eastward, first into Europe and the old Asian colonies (Hong Kong, Singapore), then latterly into the emerging BRIC economies. They then quickly consolidated their lead and built strong marketing and business development functions to grow their presence and establish strong brands locally, often moving straight to the top of the local market with a big merger (e.g. Freshfields and Bruckhaus Deringer).

So, what next?

If the US firms want to change things in their favour, they will have to become much more ambitious in their brand building, marketing and business development – both at home and abroad. Although the domestic US market remains huge – still roughly 50% of the total global market – and there’s virtually no foreign competition, there are signs of flattening. Certainly, there is realisation that the US market can no longer be relied upon for double-digit annual growth any time soon. Rapidly growing globalisation and the changing centre of economic gravity towards emerging markets is likely to persuade them that they must develop their brands globally and then they will almost certainly decide that London is the best place to do it from.


Ian Stephens

CEO and Founder of Principia, the world's most experienced branding and innovation consultancy for professional service firms.



Grown-ups for start-ups

More for less

Some of the biggest professional service firms in the world are making concerted efforts to woo some of the smallest client businesses in the world – why?

Underground travellers to London’s ironically named ‘Silicon Roundabout’ ­– anywhere else it would be called Tech City or something more dramatic – were recently confronted by a bargain offer advertised on just about every flat service in the whole of the Old Street tube station. The offer was simple – accountancy services for small businesses for only £145 a month – what was more surprising was the firm behind the offer, KPMG. Yes, KPMG the huge, global, 150,000+ strong, accountancy and professional services firm that serves its fair share of the FTSE 100 and Fortune 500; the largest corporations on the planet.

Are times tough over at KPMG HQ?
Look a little harder and you’ll find other similar surprises, Jones Lang LaSalle (JLL) have a new division – JLL London Unlimited – staffed by commercial property agents who dress in jeans and hoodies rather than navy suits and ties. International law firm Taylor Wessing has another London office in Second Home, a WeWork-type offer, in adjacent Shoreditch, that invites potential clients to ‘drop in for a chat’. And recently one of the more traditional, buttoned-up law firms Slaughter & May announced that it would be giving away £30,000 of its services for free, to 5 lucky FinTech start-ups.

STAYING OUT FRONT
All these moves are part of a bigger picture where the more enlightened of the biggest firms are seeing opportunity in the threat of the disruptive business environment. Part of the threat is obvious – if the biggest brands rest on their laurels too much and comfortably just go on serving only the biggest and best of the current clients, they risk, over time, becoming squeezed as new fast-growth companies push aside the old-guard and bring in the advisors that helped them along their journey from start-up to global Titan. But this is only a part, maybe a very small part of the real threat.

The greater threat is that the biggest firms risk becoming perceived as outmoded brands – the older generation, stuck in their ways, with capabilities and practices out of touch with the needs of the new, younger, entrepreneurial leaders of high-growth businesses. This is a brand problem as much as a commercial one and requires a brand-led approach to solve it. Brands are driven as much by narrative as by data, the two must be linked of course or the brand lacks authenticity but they’re not necessarily the same. It seems that most of the examples above are driven as much by future brand considerations as current commercial ones and that takes bold leadership in a partnership.

SYMBOLS OF INTENT
Each of these examples are in different ways brand symbols, whether consciously designed as such or not. They help craft a narrative in the minds of clients. A young entrepreneur reading about Slaughter & May’s FinTech initiative today might then have a better idea about the firm in 3 or 5 years’ time when it comes to an IPO. And potentially the start-up that chooses KPMG for £145 a month might continue to work with them for £145,000 a month if they like them and keep them on-board as they grow.

Another potential business benefit for these firms is their increased ability to offer their own employees – young and old – interesting and challenging opportunities to work with smaller, high-growth businesses, gaining more exposure to clients than they might otherwise get and enabling some to exercise their own entrepreneurial urges without leaving the firm to do so. These days accountancy firms probably face more threat of business ‘disruption’ at the employee level than at the client level, as smart graduates are tempted to join technology companies rather than the ‘professions’.

These are exciting times for professional service firms in terms of brand strategy. In most sectors the expectation (real or imagined) of market consolidation means that firms must work harder to differentiate themselves from near-identical competitors to maintain their momentum. These initiatives by some of the most prestigious firms in their fields shows that their leaders are not taking anything for granted.


Ian Stephens

CEO and Founder of Principia, the world's most experienced branding and innovation consultancy for professional service firms.



Our Vision

Branding's 'Big Bang'

5 years ago there were only about 4 or 5 international branding consultancies with any notable experience worldwide.

Now there seem to be about 4 or 500 in London and New York alone.

The sector has blossomed and expanded as individuals and teams have spun off from the big 4/5, design companies have morphed into branding consultants and many others have come into the space from digital and marketing backgrounds.

Yet, what’s striking is that despite this proliferation there has been little or no specialisation. Back when there were 4 or 5, specialisation would have meant marginalisation so founders continued to target ‘everything’ for fear of turning away potential clients and because their generalist backgrounds encouraged them to have a go at anything.

Some consultancies inevitably gain a reputation for sector experience and smart new business people know how to exploit that but still none of the international firms explicitly position themselves as specialists.

 

WE DECIDED THE TIME WAS RIGHT FOR CHANGE.

The world doesn’t really need a 501st generalist branding consultancy; but there is a big need for expertise and experience as brand consultancy matures, from being a cottage industry into a substantial sector, at the same time as the domain of brand consulting has shifted from packaged goods to just about every walk of life imaginable.

So we decided to specialise on the sector we know best and enjoy most – professional branding services.

It’s a sector that has come later to branding than others but because, in professional services, tangible product differentiation is nigh on impossible to come by, it’s a sector where branding in terms of reputation has long been valued and nurtured.

Initially by accident and latterly by design the founders of Principia became immersed in the world of brand consulting for international professional service firms and discovered that although the context is very different from traditional branding, the modern principles of brands being about narrative, reputation and projecting a coherent story applied even more to the sector than others because of the importance of people in delivering the brand.

From Virgin and Nike in the 90s, through to Apple and Google today, successful brands are as much about ideas and stories as they are about products. Products have to be excellent, yes, but combined with a strong brand story great products become ‘insanely great’ and valuable brands.

The same applies to professional service firms – the firms who can organise themselves most effectively to project a strong brand to surround their excellent product are gaining traction on the competition and are thriving. When we started out in this sector we pointed to brands like McKinsey and Goldman Sachs as examples of superlative professional service firm brands and when we dug deeper into their histories we discovered that along the way their leaders had made efforts to galvanise the firm around a big idea and consistently project a culture, image, reputation, call it what you will to the market – whatever they called it at the time, it’s what we call branding now.

At Principia, our team has more experience dealing with premium international professional service firms on branding and identity issues than any other branding consultancy in the world and so we decided to bring all that experience together in one place and create a firm that specialises in the sector.

By specialising we can have more impact, innovate and create a value proposition for clients that we aim to turn into a leadership position by putting clear blue water between us and the generalist competitors. To do this we’re focused on three things:

 

QUALITY OF BRAND THINKING

Professional service firms are stacked full of super-smart people and that demands and rewards excellence. Our branding pedigree (Wolff Olins and Saffron) is world class and our consultants need similarly excellent backgrounds to be able to meet the demands of the clients we work with. Our work must be incredibly insightful – IQ + EQ – and our branding credentials must be second to none

SPECIALISATION

Over 15 years we’ve learned a lot about what works and occasionally what doesn’t and just as we all benefit from a specialist surgeon who’s ‘done this many times before’, some situations are more challenging than others but nothing is totally new. We apply the combination of our continuous learning and the newest thinking on top to cut through. Professional service firms are not like shampoo. They’re not even much like companies. Partnerships are very different institutions from command and control public companies and to be effective brand consultants need to know the ropes and know how to navigate the complexity.

 

INNOVATION

Because we’re specialists we can focus tightly on what’s next and realistically be a global pioneer in our sector when it comes to brand consulting. We’re at the cutting edge in terms of emerging digital projections of professional service firm brands, we’re in tune with the trends in business development and practice management that can help brand strategies be more effective. And we’re highly innovative when it comes to engaging people – from partners to associates and professional support staff – in developing and implementing the branding recommendations.

Our vision is to build the most admired consulting firm in the market – admired for its work, its people and its influence.

We aim to build a firm that the best professional service firms want to hire and want to include on every pitch list

We aim to build a firm to be proud of.


Ian Stephens

CEO and Founder of Principia, the world's most experienced branding and innovation consultancy for professional service firms.



Brand & Culture

How professional service firms build strong external brands on strong internal cultures.

In professional service firms, a strong external brand and a strong internal culture are two sides of the same coin – they are different things but so interdependent and fundamentally linked to each other that one cannot exist without the other.

Corporate zeitgeist

The interdependence of culture and brand has been rising up the corporate branding agenda rapidly for a decade or more – the meteoric rise of tech brands like Apple, Google and Facebook and the more sedate but nevertheless relentless rise of corporate brands like Unilever, Zara and Nike has demonstrated, to even the most cynical investor, that businesses with strong, authentic internal cultures produce external brands with sustainable long-term advantage, even in categories where customers and employees don’t even interact that much.

Recent research from EY and Harvard Business Review found that organisations with strong cultures and purpose performed far better across a range of performance measures than those without. In professional services the interdependence between internal culture and external brand is arguably even more intrinsic and important because the client experience is delivered directly and exclusively by people who work for the firm – with no 3rd party retailers, car showroom staff or franchised store owners to get in the way.

Culture has always been taken seriously by leaders of professional service firms – at least those with their eyes open. What’s new is that culture is being taken today to mean more than how the people in the firm ‘rub along together’ – for better or for worse – but rather, how they collaborate in the service of the firm’s clients and how they project the image of the firm to prospects.

First among equals

Two iconic professional service firms stand as shining examples of strong external brands that are fundamentally intertwined with strong internal cultures: Goldman Sachs and McKinsey & Co.

Anyone who’s worked with or for Goldman Sachs will know that the firm has an extremely strong and distinctive culture. There are enough anecdotes about it to fill a book (and they have) but Hank Paulson (Former GS Chair and Secretary of the US Treasury) captured it well in an Economist interview when he said, “It’s a hard place to be hired, a hard place to be promoted and a hard place to stay”. In a word the internal culture and the external brand of Goldman Sachs are connected by being totally ‘uncompromising’ in the pursuit of excellence. Not a place for everyone – but that’s not the ambition, the goal is simply to do whatever it takes be the best and only the best.

McKinsey has an equally powerful culture but one that although also dedicated to excellence has a slightly less aggressive and more cerebral approach to their goal – one of ‘rigour’. Legend has it that in the guise that led to the current McKinsey the partners sat down sometime around 1932 and produced a paper – some might have called it a brochure! ­– that laid out the principles of the firm that they intended to build. One that would bring a culture of rigour (borrowed from the legal training some of the partners had experienced at law firm Jones Day) to the then more anecdotal business of ‘management efficiency’ as it was called then. 1932 is a very long time ago but those who’ve worked at or worked with McKinsey in the intervening years will testify to the rigorous attitude towards everything from hiring, promoting and firing through to the focus on evidence and facts to support their recommendations on strategy to clients. It’s no accident that the McKinsey internal research lab is called the McKinsey Global Institute. Everything about it, including the name, screams academic rigour.

Stand for to stand out

So, what does all this history mean for leaders of today’s professional service firms looking for sustainable competitive advantage? Simply that a strong and authentic external brand is built on a strong internal culture – one which includes the important but more hygiene-level components of being ‘nice to each other’ and ‘striving to serve clients’ etc. but also elevates things to a level of focus and distinctiveness that not all firms could, or even would, sign up to. That level of differentiation, at the core of what a firm stands for, begins to become a source of external brand differentiation in the market place if carefully nurtured and appropriately channelled into the day-to-day work done at the coal-face for the firm’s clients.

Goldman and McKinsey may be genuinely iconic brands in their fields and tough to replicate but they can be studied and best practices disseminated that can be applied to firms today facing the challenge of differentiating themselves in the global professional services market. The start point is to look at what you’ve got already ­– any firm that is even alive today let alone thriving is without doubt doing something right already. The challenge is to identify what’s ‘useful’ and what’s just ‘there’ and then to ensure that the external brand is driven from the elements of the firm’s culture that have teeth in the market place and can be globally applied. No mean feat.


Ian Stephens

CEO and Founder of Principia, the world's most experienced branding and innovation consultancy for professional service firms.



Specialists in a world of generalists

The rise of the specialist premium law firm

As the legal market becomes increasingly global and increasingly crowded law firms are finding strategic success with more focused strategies: international elite, global giant, national powerhouse, etc. More recently a few firms have begun to overtly specialise on a super-focused area of law with some signs of breakthrough success.

Focus, focus, focus

It’s not a new strategy; firms like Wachtell Lipton in New York, Quinn Emanuel in LA, Wilson Sonsini in Palo Alto and Williams & Connolly in DC and have been super-focused ’boutiques’ for decades and there are the one-market specialists like Hengeler Mueller and Slaughter & May who have found themselves positioned as specialists in their markets by ‘doing nothing’ whilst all around them competitors raced to build international networks.

But recently, most visibly in litigation, brand new firms have sprung up from nowhere – startups even – and have begun to punch well above their weight on a national and even international stage. Stewarts, 3 Crowns and Signature in London for example, all litigation specialists.

Research with senior buyers of legal services shows many trends, among them an increasing demand for genuine market leading expertise for those lawyers and firms wanting to command premium rates – or looking at it from the other end of the telescope, if your lawyers are perceived to have genuine specialist expertise then you may be in a better negotiating position when procurement comes calling than those that aren’t.

Fun-fact, until very recently Bar rules in many jurisdictions banned law firms from even referring to themselves as ‘specialists’ but that appears to have been relaxed somewhat.

Zig while others zag

The logic of this strategy from a branding and market positioning perspective is obvious but nevertheless it’s rare. By specialising, a relatively small or even brand new firm can quickly and credibly compete with much bigger firms for premium work. Clients buy into the idea that their specialisation brings increased knowledge and experience, even if in a narrow area. Some of the litigation specialists have taken challenger positions; pitching themselves as ‘conflict-free’ firms, willing and able to take on (i.e. sue) the establishment corporations and financial institutions whilst other big firms shy away, for fear of biting the hand that feeds them.

Specialists can credibly and relatively quickly position themselves as having deep proprietary know-how and expertise in their core area even when they are smaller and perhaps newer to the market than some of the traditional competition.

More to come

But it feels as if the dam is only just breaking and that over the next decade the market opportunity is immense for premium law firms that can focus on discrete areas of practice, particularly on an international stage. Tax, IP, Employment and Real Estate, among others, feel like potential areas where a discrete offer can thrive, it might also be possible to specialise with a broader range of practices on a super-focused client group, energy perhaps, or tech companies, or life sciences. This so far appears a path less trodden, perhaps because some firms are already closer to achieving this implicit market focus rather than adopting and embracing it consciously.

Firms that have a deep and powerful – but narrow – area of expertise and specialism tend to want to broaden beyond it as much as possible rather than double down on it. This is understandable, especially if they already have many partners focused on practices beyond the specialism, and of course wise leaders know that the vagaries of the economic cycle tend to mean that when some boats are in the doldrums others are in full sail. This may always be true but needs to be held against the view that as the market becomes increasingly global and as clients become increasingly demanding of efficient and focused service the ‘all things to all people’ approach to strategy may become harder to maintain and thrive with.

Look out for more super-focused firms emerging as challengers to the incumbent firms in all areas over the next 10 years.


Ian Stephens

CEO and Founder of Principia, the world's most experienced branding and innovation consultancy for professional service firms.