I recently received a strategy presentation from a very sophisticated law firm, which can be summarized in one, MBA-ish slide. The client is in the center planet, surrounded by “law firm” on top, and then other planets in an ecosystem representing what we have called the “unbundled” service providers like contract lawyers, managed services and online services. Then, in a build, technology connects all the pieces, aligning the orbits around the client.
I don’t even bother to show this slide to general counsels, because to them it’s boring and old hat. But I think I’ve met with the majority of the 10 biggest law firms over the last month, and they all, after some reflection, get the four salient points:
• Client is in the middle, not the firm;
• There are alternate providers to firms who are growing much faster than firms;
• Technology connects it all; and, most importantly
• The slide was made not by a consultant, or a competing vendor, but by a peer, well-respected law firm.
My estimate is that the unbundled segment of the market is growing around 40 percent year over year, whereas the traditional firm sector is flat, or growing at very most 4 percent per year. Obviously firms are in the aggregate much bigger, but trends matter too, such as the recent claim by Axiom of winning a $73M order from a bank (generally thought to be Credit Suisse) for derivatives work.
As last week’s layoff announcement from Goodwin Proctor illustrates, litigation has become so expensive that it is not a realistic way to resolve disputes, so that aspect of legal business is in sharp decline.
Historically, firms would have drawn the chart with themselves in the middle, or perhaps more thoughtfully, with courts at the top and themselves as “gatekeeper” or even “priestly intermediary” between clients and courts and regulators. It reminds me of an excellent panel I saw in London last month, moderated by the estimable Richard Susskind, in which one panelist described McDonald’s experience in opening in Moscow following the collapse of the Soviet Union. After hiring a former Soviet apparatchik and giving him extensive training on the basics of customer service, the Russian employee exasperatedly challenged his American boss, “Why do we have to be nice? We’re the ones with the meat!”
Many firm lawyers continue to deny these trends, simply asserting the ineluctability of their role, assuming that they and only they “are the ones with the meat”. For them, I suggest they take a look at the latest update on IBM, a superbly well-managed and resourced and long-standing firm, but still challenged by the need to transition from a world they dominated to one they don’t.
“IBM is a top ten IaaS player in terms of revenue now,” analyst William Fellows of 415 Research told TechWeekEurope recently. “The problem is, it’s losing wallet share despite its IT spending growth—ie, it’s being disrupted.”
Or as the equally estimable Bruce MacEwan and Janet Stanton of Adam Smith, Esq., LLC said to me in an email, “We will never again see a reputable slide placing the law firm in the middle. Welcome to the new and more complex competitive ecosystem where clients have genuine choice in deciding what type of firm will provide the legal services they purchase. Law firms will have to dramatically sharpen their game to retain client loyalty, ‘preferred provider’ status, and their share of wallet. This is nothing that firms in other industries haven’t been dealing with for essentially their entire lifespan, and for any lawyer who feels put upon by it, we recommend reading more business history.
“Most importantly, we view this as great news for the quality of law-firm sourced legal services in future.”
Lawyers tend to oscillate between debunking entirely the potential of technology and attributing magical powers to it. So any time you see “technology” or any variant of it in a discussion of law, just globally replace it with “intimacy.” All the emerging technologies give lawyers a chance for greater client intimacy, to reduce the space between the firm “planet” and the client, so there’s less need for substitute providers.
Whichever firms figure out how to engage more deeply with clients, jointly innovating to improve value, will gain an increased share of those clients’ business and be prepared to lead the next generation of law.
Paul Lippe is the CEO of the Legal OnRamp, a Silicon Valley-based initiative founded in cooperation with Cisco Systems to improve legal quality and efficiency through collaboration, automation and process re-engineering.
Editor’s note: The New Normal is an ongoing discussion between Paul Lippe, the CEO of Legal OnRamp, Patrick Lamb, founding member of Valorem Law Group and their guests. New Normal contributors spend a lot of time thinking, writing and speaking about the changes occurring in the delivery of legal services. You’re invited to join their discussion.