Small but nimble
Can a small but focussed firm compete effectively against a mega-firm? Of course.
In "The Innovator's Dilemma" Strikes Again? Bruce McEwen discusses Clayton Christensen's book in the context of law firms: how a small firm with excellent customer service and good use of technology and non-traditional approaches can excel.
What sort of things are firms doing? Well, virtuality seems to be popular, ranging from the virtual law firm to virtual paralegals.And then there's the issue of billing (that's a topic for another time).