The Single Secret to Solo Success: The Scrap Heap Strategy

Call it the twitter-ization of going solo, but these days, I’m most often asked about the one thing that guarantees success as a solo. It’s an impossible question of course, since there isn’t any silver bullet — but if I had to settle on the one strategy common to successful solos across generations, regions and practice areas it would be mining the scrap heap.

Of course, my observation is nothing new. Turning garbage into gold is something solos have done instinctively forever. Over the years, I’ve blogged about several solos or solo spirited lawyers who’ve adopted this strategy, from Joe Flom (who built an empire on rough-and-tumble M&A cases, which were a dog at the time he took them on) Mike Lee, a young Philadelphia lawyer who co-founded a non-profit clinic focusing on criminal expungements. Not to brag, but I’m the queen of the junkyard myself in my own practice area, where I started representing ocean energy developers in the early 1990s when no other law firms would give them the time of day.

But until I came across this piece, The Innovators’ Dilemma, I never fully understood why the scrap heap strategy works so well. After all, you’d think that once a solo or start-up mines a new area, its potential would either tap up – or other, larger competitors would jump into the fray and run the solos or start ups out of town.

But in reality, there’s a more complicated dynamic at play, related to the psychology of the incumbent. As Innovators’ Dilemma describes (in the context of tech start ups), typically, a new tech start up will enter a market with its sights on a small part of the incumbents’ business, “usually the one in which the margins are very low:

By targeting an area that it never wanted, an incumbent then “decides not to compete in this business anymore because they don’t want to invest in defending their least profitable business and/or are afraid of cannibalizing their main business. As a result, the new entrant is then able to capture a significant market share in that specific segment.

But that’s not the end of the story. As the article continues,

What happens next is funny. After it captures the low end of the market, the entrant moves upstream to the next part of the business. Again, the incumbent is reluctant to compete in that segment which is now its newest least profitable segment. The entrant then captures a significant market share in this second segment.

What also happens, at least with regard to law firms is that by gaining a leg up in ancillary or undesirable markets, many solos are able to gain broader market share. For example, those ocean energy companies that I started representing when no one wanted them also gave me a leg up in the broader renewables industry as well – which allows me to draw more general business. Likewise, gaining a toehold in a narrow niche also helps expand one’s influence in broader markets.
So what are some tips for taking advantage of the scrap heap strategy. I’ll just quote the takeaways from the innovator’s dilemma, which says it best:

1. Understand what is the source of your disruption. Is it a new product or a new way to distribute an existing product? This will help you understand whether you are really disrupting the market or just building an incremental product.
2. Pay attention to opportunities in new distribution channels. Zynga’s biggest innovation was taking advantage of Facebook as its distribution channel before the traditional gaming companies could say “Mark Zuckerberg”.
3. Start by marketing to the group of customers for which the incumbent in your industry has the lowest margin or the lowest interest to defend. Don’t go head to head on their most important customers. They will crush you.
4. Remember these lessons when you are at the top.