The Barustors Report
COMPETITIVE INTELLIGENCE:
Avoiding Random Acts of Marketing
Legal Marketing Association (LMA) Bay Area Program
Held at the offices of Pillsbury Winthrop
San Francisco, April 10, 2002
COPYRIGHT 2002 THE COSMIDES GROUP. ALL RIGHTS RESERVED.
The legal marketplace is not very forgiving. Law firms that over-estimate the potential of a market, or merge with the wrong firm, may never recover from their mistake. Accordingly, law firms are beginning to adopt a better method for gathering, analyzing and managing external information. That method is known as Competitive Intelligence, a system that has been used successfully by the business community for many years.
Ann Lee Gibson, Ph.D., gave a 90-minute overview of this innovative process to the Bay Area Legal Marketing Association last month. Ann is president of Ann Lee Gibson Consulting, and is highly regarded within the legal marketing community for her insights and experience.
Law firms are growing larger and more competitive. Competitive Intelligence, as defined by the Society For Competitive Intelligence, is "the systematic and ethical program for gathering, analyzing, and managing external information that can affect your firm's plans, decisions, and operations."
Ann explained that there are 3 kinds of Competitive Intelligence.
Strategic Intelligence: understanding competitors' future goals, current strategies, assumptions about themselves and their industry, and their capabilities.
Tactical Intelligence: information that will enable the law firm to win today.
Counterintelligence: defending company secrets.
CI enables law firms to make important decisions about their competitors and their markets. It is important to note that other law firms are not merely competing for clients. They can compete for referrals, lateral partners, summer associates and particular types of work. CI can be used for decisions in each of those areas. In the same way, marketers must evaluate more than just clients and prospects. They must also grasp the economic and business environment, and turn that information into intelligence that can facilitate sound goals and strategies.
CI is a four-step process:
1. Planning & Direction
2. Data Collection
3. Data Analysis
4. Dissemination
Data are scattered bits and pieces of knowledge. Information is a pooling of those bits of knowledge. After analyzing the information, the implications of that analysis will provide the intelligence from which sound decisions can be made. Here is a closer look at the CI process.
STEP 1: PLANNING & DIRECTION
The typical questions a law firm asks at this stage involve growth, pricing and investment. They ask, "How should we grow and price our services?", "Which practice groups should we offer, and whom should we hire for those areas?", "What offices should we maintain, open or close, and what kind of technology investments should we make?".
CI addresses five major areas: assessment of strategies, competitor perceptions, effectiveness of current operations, competitor capabilities, and long-term market prospects. These areas are explored through seven questions: "What do we need to know?", "What do we already know?", "Why do we need to know it?", "When do we need to know it?", "What will we do with the intelligence once we have it?", "What will it cost to get it?", "What could it cost not to get it?".
STEP 2: DATA COLLECTION
A one-time snapshot, or short-term analysis will not generate good intelligence. Law firms must collect data and information over a sufficient period time, from reliable sources, in order to see clearly. Those sources include:
(FOR LAW FIRM COMPETITORS)
Primary Sources: client interviews, interviews with former employees
Secondary Sources: competitors' Web sites, business publications, published studies and surveys, syndicated studies and surveys, litigation dockets, NALP forms, legal consultants
Data: financial performance, clients, practices and matters, new lateral partners, associates, partnerto-associate ratios (leverage), offices (how many, where, rate of new ones/closures), culture and health of the law firm, their investment in technology, their brand message, associate salaries.
(FOR CLIENTS AND INDUSTRIES)
Primary Sources: client interviews, client roundtables, maven interviews.
Secondary Sources: industry portals and publications, client Web sites, legal publications, published surveys and studies, deal databases
Data: financial performance, new products and services, new decision-makers, new laws or regulations, legal needs, upcoming legal issues, current legal counsel, legal budgets, their satisfaction with existing counsel.
STEP 3: ANALYSIS
The goal of analysis is to detect patterns that reveal direction and trends. There are numerous statistical methods available for detecting these patterns, including benchmarking, intelligence mapping, patent analysis, regression analysis, time lining, trend analysis and win/loss analysis.
For example, a law firm's corporate group purchases a database that details all financing deals since 1985. It reveals that there were 8,500 deals during that time, and it offers 32 attributes per deal (272,000 pieces of data). From this enormous pool of data, a law firm can determine the market's direction and size, marketplace activity, which law firms are getting this work, which dealmakers are growing, which dealmakers are already firm clients, and which clients and/or prospects are not devoted to other law firms.
STEP 4: DISSEMINATION TO DECISION MAKERS
CI does not control decisions. Rather, it offers strong recommendations to management about the areas they are exploring. Here are some areas management may seek direction on, along with hypothetical examples of the recommendations that come from CI:
Q: TO WHOM SHOULD WE MARKET?
CI can create efficiency by zeroing in on specific targets, rather than entire markets. For example, it may reveal that three of a firm's clients show significant opportunities for growth, and should be given special attention for development. It can also reveal which prospects within a target segment offer the most potential.
Q: WITH WHICH FIRMS SHOULD WE EXPLORE A MERGER?
CI can reveal the short list of law firms whose cultures, work environments, or compensation levels most closely match their own. For example, a law firm that is looking for a merger partner may be concerned about finding itself in a minority voting position after the merger. Accordingly, they may look for a firm with a similar number of equity partners.
Or, the partners may wish to maintain their current work levels, by seeking firms with similar leverage (the ratio of associates to partners).
Finally, they may wish to improve their bottom line by merging with a firm that has a higher gross profit margin than they do.
Q: HOW SECURE IS OUR OWN INFORMATION?
CI may reveal that the firm posts sensitive information on its Web site, or that its intranet can be easily hacked.
It may suggest that temps, consultants and vendors sign non-disclosure agreements and be given specific instruction about what not to discuss.
Gibson ended the presentation with a cogent reminder that in the Information Age, once information is digitized, it can be replicated with great ease. "Be vigilant about protecting your law firm's strategic information, because once it is released into the public domain, you have no control over where it goes, who sees it, or how it is used."
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| Bay Area legal marketing consultant, John Cosmides, is principal of The Cosmides Group and director of Barustors, a State Bar-certified referral service for business and corporate clients. John can be reached at john@barustors.com or at 415-957-1330. |  |