Signs That Your Service Has Matured

In recent years, many firms have reluctantly bitten various bullets and abandoned practice areas that can no longer support their fee structures. Long before the firms' decided to get out of those businesses, though, many lawyers practicing in those areas suffered steady diminution of their earning power, professional satisfaction and internal prestige. This unnecessary human cost could have been avoided, or at least minimized, if only firms recognized sooner that the services were maturing. If they had, they would have had much more time to prepare their lawyers and ease the inevitable transition to newer, more valuable services. So, what early signs warn alert firms that a service is aging?

One sure sign is when people begin asking about fees. I don't mean questions about fees per se; all buyers need some sense of the scale of investment, ie, whether we're talking $10,000 or $100,000. That's not a maturity concern. You should be concerned, though, when the fee discussion is a comparative one, either a direct comparison to another firm's offer, or comparing you to some perceived standard. The fact that a measuring stick exists tells you that the service has matured, at least as currently configured or packaged. It doesn't mean that you abandon the service, but it does strongly suggest that it's time to re-invent it in some meaningful way to make it more valuable.

Other signs that your product/service has matured:

• Supply exceeds demand in an evident way; sellers have little or no pricing power;
• More purchases are by cost-focused buyers functioning as “purchasing agents”;
• You see increasingly formal purchasing activity, eg, RFPs, beauty contests or other controlled, bid-oriented processes;
• Buyers prefer paper to personal contact as the medium of sales communication, and are reluctant to answer your sales investigation questions because they can't see what value they would get out of the time investment (after all, they're buying a commodity);
• The seniority level at which your service is purchased or sponsored continues dropping;
• Everyone uses familiar, accepted terminology to describe it; it's hard to differentiate something with a vanilla name, eg, litigation, employment law.

To get relief from the margin pressure of lowest-cost procurement processes, you must find an internal end-user sponsor who will acknowledge value in your differentiation. These buyers seek personal satisfaction from using your service, in the form of greater productivity or reduced pain. Their question is: can I get my boss (the company) to pay for this value form? Help them justify the funding.

Another way to recognize that your service has already seen its best days (with this client, anyway) is to observe more systemic maturation, ie, the maturation of the company itself. Even “hot” services like patent/trademark litigation and other IP-related services can be perceived as relative commodities in certain environments. Here is a description of how the five levels of “maturity” affect all products, services and concepts.

1. Getting Started. This is when the client experiences the underlying business problem for the first time (or the first few). His focus is on the business effect of your service and how quickly and well you can produce it. There is virtually no price sensitivity or shopping. Time and minimization of distraction and risk are the critical elements. As the buyer experiences solution success, he purchases the same service often from you, and begins to experiment with additional services. This heralds the beginning of …

2. Growing. The original buyer now has the confidence to entrust more matters to you, and it's now OK for others in the company to do so, too. As they buy more and more services and commit more and more funds to you, at some point someone in management says, “Whoa. We're spending $4.2 million on legal fees for [service category] every year. We've got to get this under some type of control.” Which moves them to…

3. Managing. This is when price sensitivity appears, and more formal purchasing behavior. Ironically, your solution's frequent success, and the confidence the buyers have in it as a result, lets them feel comfortable enough to buy without your guidance. Using an organized buying process, they push purchasing authority downward in the hierarchy. While they figure out their buying process, purchasing may slow (or even stop) for all but necessary services, but returns with renewed vigor once the buying process is in place, although often with a smaller “approved” list of sellers. After a period like this they realize that they have committed to a large number of service programs (from multiple firms), with leads them to …

4. Integrating. Realizing that, while individual categories of service work well, few of these programs share information or results with any of the others. The client now sets out to integrate services to eliminate both performance- and cost redundancy and the attendant inefficiency. This is a very opportune time to change your own service offerings to align them with this powerful internal force. Use technology to streamline and reduce the cost of any of your service offerings that have matured. Don't fight the inevitable price decline, instead lead it by reducing your own costs and resale prices. Introduce new service offerings that satisfy emerging needs of the same executive buyers. Never stay married to a service after it has passed its value peak. Move on to what the buyer now sees greater value in.

5. Optimizing. Eventually, companies become so familiar with the problem and solution that they design it out of their products, services, operating protocols and thought processes. This is when they approach “unconscious competence” in which they are no longer aware of either the problem or the solution. Doing things in a way that avoids or eliminates the problem has become part of the their corporate DNA.

A Cautionary Tale

Most lawyers have observed this cycle in a familiar form:

1. A new business problem earns the attention of senior management, requires serious creativity and brainpower without regard to cost, and affords the lawyer who solves it unfettered access to the management team.

2. The success of the lawyer's creative solution attracts other buyers, causing the law firm to expand to meet the demand. Success also spawns imitative competitors. It's no longer necessary even to refer to the problem; instead everyone uses a form of shorthand, i.e., language that refers to this type of legal matter.

3. Companies employ the solution so frequently that soon everyone knows how to do it, and they delegate the problem and solution downward organizationally. Senior management's attention moves elsewhere, leaving the creative-lawyer-with-serious-brainpower blissfully milking his matter-based cash cow but dangerously unaware that the people whose opinions he cares about no longer care about this matter class. Because he is associated with matters they no longer care about (they have forgotten about the original problem and his then-valuable creativity), he has become excluded from discussions of newly emerging problems that require senior management attention, serious brainpower and creativity.

4. With the serious-brainpower-and-creativity requirement diluted by familiarity, less creative lawyers offer the familiar solution at a lower price. There is little reason for the internal solution buyer to pay a premium for what everyone knows how to do; “good enough” has become good enough.

5. The still-brainy and creative lawyer grows frustrated by his difficulty regaining access at senior levels, the lack of challenge in the work his firm gets, and the client's increasingly frequent requests for discounts.

Ultimately, many large corporations evolve completely to the “make” end of the make-vs.-buy spectrum in regard to any solution. It becomes economic to grow their internal legal staff to handle the now-thoroughly-understood matters that they once paid you handsomely to perform. This cycle is inescapable; the only mystery is its length. Don't fall in love with your service inventory. Change services continually to reflect buyers' evolving needs, not your partners' or your comfort zone.

In recent years, many firms have reluctantly bitten various bullets and abandoned practice areas that can no longer support their fee structures. Long before the firms' decided to get out of those businesses, though, many lawyers practicing in those areas suffered steady diminution of their earning power, professional satisfaction and internal prestige. This unnecessary human cost could have been avoided, or at least minimized, if only firms recognized sooner that the services were maturing. If they had, they would have had much more time to prepare their lawyers and ease the inevitable transition to newer, more valuable services. So, what early signs warn alert firms that a service is aging?

One sure sign is when people begin asking about fees. I don't mean questions about fees per se; all buyers need some sense of the scale of investment, ie, whether we're talking $10,000 or $100,000. That's not a maturity concern. You should be concerned, though, when the fee discussion is a comparative one, either a direct comparison to another firm's offer, or comparing you to some perceived standard. The fact that a measuring stick exists tells you that the service has matured, at least as currently configured or packaged. It doesn't mean that you abandon the service, but it does strongly suggest that it's time to re-invent it in some meaningful way to make it more valuable.

Other signs that your product/service has matured:

• Supply exceeds demand in an evident way; sellers have little or no pricing power;
• More purchases are by cost-focused buyers functioning as “purchasing agents”;
• You see increasingly formal purchasing activity, eg, RFPs, beauty contests or other controlled, bid-oriented processes;
• Buyers prefer paper to personal contact as the medium of sales communication, and are reluctant to answer your sales investigation questions because they can't see what value they would get out of the time investment (after all, they're buying a commodity);
• The seniority level at which your service is purchased or sponsored continues dropping;
• Everyone uses familiar, accepted terminology to describe it; it's hard to differentiate something with a vanilla name, eg, litigation, employment law.

To get relief from the margin pressure of lowest-cost procurement processes, you must find an internal end-user sponsor who will acknowledge value in your differentiation. These buyers seek personal satisfaction from using your service, in the form of greater productivity or reduced pain. Their question is: can I get my boss (the company) to pay for this value form? Help them justify the funding.

Another way to recognize that your service has already seen its best days (with this client, anyway) is to observe more systemic maturation, ie, the maturation of the company itself. Even “hot” services like patent/trademark litigation and other IP-related services can be perceived as relative commodities in certain environments. Here is a description of how the five levels of “maturity” affect all products, services and concepts.

1. Getting Started. This is when the client experiences the underlying business problem for the first time (or the first few). His focus is on the business effect of your service and how quickly and well you can produce it. There is virtually no price sensitivity or shopping. Time and minimization of distraction and risk are the critical elements. As the buyer experiences solution success, he purchases the same service often from you, and begins to experiment with additional services. This heralds the beginning of …

2. Growing. The original buyer now has the confidence to entrust more matters to you, and it's now OK for others in the company to do so, too. As they buy more and more services and commit more and more funds to you, at some point someone in management says, “Whoa. We're spending $4.2 million on legal fees for [service category] every year. We've got to get this under some type of control.” Which moves them to…

3. Managing. This is when price sensitivity appears, and more formal purchasing behavior. Ironically, your solution's frequent success, and the confidence the buyers have in it as a result, lets them feel comfortable enough to buy without your guidance. Using an organized buying process, they push purchasing authority downward in the hierarchy. While they figure out their buying process, purchasing may slow (or even stop) for all but necessary services, but returns with renewed vigor once the buying process is in place, although often with a smaller “approved” list of sellers. After a period like this they realize that they have committed to a large number of service programs (from multiple firms), with leads them to …

4. Integrating. Realizing that, while individual categories of service work well, few of these programs share information or results with any of the others. The client now sets out to integrate services to eliminate both performance- and cost redundancy and the attendant inefficiency. This is a very opportune time to change your own service offerings to align them with this powerful internal force. Use technology to streamline and reduce the cost of any of your service offerings that have matured. Don't fight the inevitable price decline, instead lead it by reducing your own costs and resale prices. Introduce new service offerings that satisfy emerging needs of the same executive buyers. Never stay married to a service after it has passed its value peak. Move on to what the buyer now sees greater value in.

5. Optimizing. Eventually, companies become so familiar with the problem and solution that they design it out of their products, services, operating protocols and thought processes. This is when they approach “unconscious competence” in which they are no longer aware of either the problem or the solution. Doing things in a way that avoids or eliminates the problem has become part of the their corporate DNA.

A Cautionary Tale

Most lawyers have observed this cycle in a familiar form:

1. A new business problem earns the attention of senior management, requires serious creativity and brainpower without regard to cost, and affords the lawyer who solves it unfettered access to the management team.

2. The success of the lawyer's creative solution attracts other buyers, causing the law firm to expand to meet the demand. Success also spawns imitative competitors. It's no longer necessary even to refer to the problem; instead everyone uses a form of shorthand, i.e., language that refers to this type of legal matter.

3. Companies employ the solution so frequently that soon everyone knows how to do it, and they delegate the problem and solution downward organizationally. Senior management's attention moves elsewhere, leaving the creative-lawyer-with-serious-brainpower blissfully milking his matter-based cash cow but dangerously unaware that the people whose opinions he cares about no longer care about this matter class. Because he is associated with matters they no longer care about (they have forgotten about the original problem and his then-valuable creativity), he has become excluded from discussions of newly emerging problems that require senior management attention, serious brainpower and creativity.

4. With the serious-brainpower-and-creativity requirement diluted by familiarity, less creative lawyers offer the familiar solution at a lower price. There is little reason for the internal solution buyer to pay a premium for what everyone knows how to do; “good enough” has become good enough.

5. The still-brainy and creative lawyer grows frustrated by his difficulty regaining access at senior levels, the lack of challenge in the work his firm gets, and the client's increasingly frequent requests for discounts.

Ultimately, many large corporations evolve completely to the “make” end of the make-vs.-buy spectrum in regard to any solution. It becomes economic to grow their internal legal staff to handle the now-thoroughly-understood matters that they once paid you handsomely to perform. This cycle is inescapable; the only mystery is its length. Don't fall in love with your service inventory. Change services continually to reflect buyers' evolving needs, not your partners' or your comfort zone.