As a visiting scholar at the Center on the Legal Profession, I aim to take stock of the competitive landscape of corporate law in Latin America, asking how law firms are changing their business model to account for different ways of delivering value in today’s globalized business world. Every law firm I know aims to generate profit. Like any other type of business, how that profit is generated can be explained by understanding the firm’s business model.
A business model explains how a business creates, delivers and captures value — not just profit. Though perhaps not explicitly conceived by its leaders, a firm’s business model tells the story of how the firm works and answers questions such as: Who are our clients? What are they willing to pay for? How does the firm make money? What does it take to make it all happen?
Historically, law firms in most parts of the world have adopted a business model often referred to as the Cravath System, which emphasizes selling the most amount of professional hours at the highest possible hourly rate and for the lowest possible cost.
Business Model Shocks
More recently, this business model has been under attack, especially in North America and Europe. This is in part because law firms have become more susceptible to competition from three main sources:
- New legal service providers with different business models (some enabled by new industry regulations);
- The expansion of legal departments within corporations and the sophistication of their outside counsel expectations, and;
- The general technological evolution within knowledge work.
For law firms in Latin America, a similar attack on their business model has not been well documented or may not be significant, yet.
However, as a partner at a top-tier Central American law firm, I know first-hand that the largest law firms in the region serve many global corporations with concurrent legal needs in other geographies. For their client’s purposes, these firms do not live in isolation—pressure on their current methods to create, deliver and capture value is bound to exist. In an increasingly globalized legal services industry, there is a need to better understand the threats that Latin American firms are facing and how they are adapting their business models. There is an additional challenge facing most law firms today, including those in Latin America: for the past 15 years, nearly every industry innovation has been geared towards reducing the amount of time and effort required to produce and deliver legal services — precisely the very core of the traditional law firm business model.
How Latin American Firms Are Shaping Their Future
The research project I’m leading at HLS’s Center on the Legal Profession aims to identify the main factors challenging the existing business models of the corporate law firms in Latin America. Drawing on in-depth interviews with law firm leaders and quantitative data from the largest law firms in Chile, Colombia, Mexico and Peru, the project will identify and evaluate the various courses of action being taken by firm leaders and suggest practical ways in which Latin American law firms may adapt their business models to overcome these and future threats.
A Look Back and a Path Forward
Any business—including law firms— needs a new business model when there’s either a need to respond to significant changes in competition, or an opportunity to:
- Address large groups who find existing alternatives too expensive or complicated;
- Leverage technological breakthroughs, or;
- Bring a different focus to a client segment where it doesn’t yet exist.
The recent attacks to the traditional law firm business model pose an existential threat to the long-term profitability of many law firms. However, the biggest challenge facing their leaders does not reside in the shocks, but in their willingness to recognize the changes in the landscape and their ability to adapt successfully.
Ideally, this study will not only help deliver a business-driven understanding of how Latin American law firms are perceiving and tackling threats to the status quo, but provide insight for a comparative perspective with other regions.
I hope this brief introduction serves as an invitation to learn more about this project and the Latin American legal industry. I’m grateful for the strong interest shown by the Latin American legal industry in contributing to this study.
Mariano Batalla was a visiting scholar at the Center on the Legal Profession at Harvard Law School (Spring 2022). He has over ten years of law firm management experience as a partner at Alta, one of the largest law firms in Central America and is a Visiting Professor of Service Design and Entrepreneurship at INCAE Business School, Adjunct Professor of Entrepreneurship at University of Costa Rica and a former instructor of innovation and entrepreneurship at Harvard University.
He is an active member of the Law Firm Management Committee of the International Bar Association, and he has delivered over twenty keynote presentations on law firm management issues in ten different countries. He is a contributing author of Leadership for Lawyers: Essential Leadership for Lawyers: Essential Leadership Strategies for Law Firm Success (Globe Law and Business) which explores the crucial elements of law firm leadership.
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