In my prior post, I described the new-model law firm Clearspire, its inspiration, target market, and technology. The story continues here.

To offer clients billing transparency and predictability at 50% of typical AmLaw 200 fees, Clearspire took several steps described below. I finish this 2-part post with some thoughts about what the future may hold for the firm.

Approaching Value and Pricing by “Chunking” Work

Recall that Clearspire was driven in part by the ACC value challenge. Several elements of it – transparency and control, budgets and fixed fees, appropriate staffing, and tracking to budgets – require what I call “chunking matters”. Most law firms and lawyers treat matters monolithically. My BigLaw friends who work on alternative fee arrangements and budgets tell me that they face constant battles persuading lawyers to create budgets and estimate resource requirements.

I can relate. In the early 1990s, I suggested to some litigators that they create simple case budgets. They looked at me like I was from Mars and gave me the litany of reasons why doing so would never work and, in any event, was a pointless exercise. Similarly, when I suggested putting a project manager on a big case, the lead partner’s response was “Oh, so that would be like having an extra secretary.” In most markets, my little war stories would be ancient history but I fear this reaction remains widespread.

Clearspire thinks differently. It breaks work into discrete phases. Doing so is a function of both a new mindset and the firm’s technology, which not only allows but requires doing so. By chunking appropriately, Clearspire can offer a fixed price for each part and then track performance. Developing this matter-centric model required 10 months of work and took $1 million of the total $5 million investment. The firm supports this approach by carefully evaluating each new matter and allocating lawyers based on closely matching lawyer competency with matter requirements. (Knowledge managers take note: an experience location system is at work here.)

Collaborating More while Reducing Real Estate Cost

Reducing the cost per “work chunk” requires many measures: knowledge management, a variety of tools, and perhaps most importantly, effective collaboration. AmLaw 200 firms seem to believe in the equation: “in the same office” = “collaboration”. In my experience, that is no equation, it is an inequality. Shared offices may support water cooler conversations and make collaboration possible but by no means guarantee effective or regular collaboration.

In contrast, Clearspire consciously designed its culture, systems, and processes to foster collaboration. This approach has the simultaneous benefit of reducing real estate costs.

Office real estate accounts for much BigLaw overhead. Long-term leases have even tipped some firms to insolvency and dissolution. The firm has a smallish downtown office for client meetings, business operations, and lawyer office hoteling. To minimize space requirements, Clearspire seeks lawyers who are comfortable working from their homes or other remotes locations. (Such arrangements are rapidly becoming the norm in many industries; for example, The Washington Business Journal reported on September 14 that Accenture’s virtual nature allows real estate downsize.)

But working virtually requires management. On the one hand, Clearspire recognizes that remote working can isolate lawyers. On the other hand, they also understand the myth that co-location means collaboration. I wrote one of the earlier articles advocating lawyers work virtually (The Future Law Office: Going Virtual, Law Practice Magazine, January 2004), so I too have thought about what it takes to really collaborate.

Clearspire invited Professor Lynda Gratton, a leading authority on organizational behavior, to join the firm as an advisor. She guided the software development team to create a virtual environment (onscreen interface) that provides the “contextual cues” and communication tools to foster collaboration. For example, a series of “hallways” and icons signal each lawyer who is available and the software allows a combination of chat, forums, and video conferencing.

The firm also schedules regular practice group and business meetings, some of which are mandatory. These meetings ensure that lawyers communicate with each other. Furthermore, when onboarding new lawyers – a more substantial process at Clearspire than at BigLaw – the firm provides significant training to make sure lawyers are “re-oriented” to the virtual environment and a more conscious approach to collaborating.

Competition and “Crossing the Chasm”

I asked Bryce both about the competition and if the firm faces a “crossing the chasm challenge”. Bryce sees the legal market as a spectrum of providers, with Blue Chip firms and alternative service providers at opposite ends. The alternatives include legal process outsourcers (LPO) and companies like Axiom, which Bryce characterizes as “high end staffing”. (Axiom’s website sounds like a law firm’s but its disclaimer states “Axiom attorneys are independent and do not constitute a law firm among themselves.”)

In the vast middle ground, Bryce sees most of the AmLaw 200, regional firms, and the emerging class of boutiques “spun out” of larger firms. With Clearspire’s seasoned AmLaw 200 lawyers, Bryce places his firm above the regional players and boutiques and below the Blue Chip.

While he suggests that Clearspire has carved out its own niche, in my view, it will compete with mid-tier AmLaw firms, many boutiques, and Axiom and similar high-end staffing companies. I do agree that Clearspire has a business model that distinguishes it from competitors. The question is how the larger market will respond to the model.

A unique business model cuts two ways. Crossing the Chasm author Geoffrey Moore explained that most markets have a few “visionaries / innovators” who buy new ideas because they are new. Once the visionaries have bought, the provider must persuade “early adopters”, those who do not embrace change for its own sake but have pressing business problems to solve and see no other solution. That can be hard, but not as hard as selling to the “mainstream” buyers (“early majority” and “late majority”).

In most markets, unless mainstream buyers are persuaded, the provider remains a niche player. Bryce does not think Clearspire faces a “chasm” challenge. He thinks that mainstream general counsels will quickly understand the value and buy the firm’s services.

I am excited about the Clearspire model. I also remain astounded that general counsels continue to whine far more about legal fees than they exercise their market power to change how and from whom they buy. Fortunately, in the legal market, law firms can prosper even if they do not penetrate mainstream customers. My hope is that Clearspire will do well with early adopters and that mainstream buyers will come around as they face relentless control cost pressure from boards of directors and CEOs.

What’s Next?

It seems too early to say if Clearspire will successfully cross the chasm. If it does, then what? I can see multiple ramifications. Especially as other firms try to imitate the model, much of BigLaw could be at risk. I suspect at least 50 firms think they will survive as top 20 Blue Chip players. We can guess who some of the survivors will be, for example, Wachtell, Cravath, Davis Polk, Sullivan & Cromwell, Wilson Sonsini, and WilmerHale. But firms without secure and already-stellar market positions should worry about their futures.

What happens to the many firms excluded from the exalted few? I recently read the website of an AmLaw 100 firm that is probably on no one’s list of the exalted. Its lack of differentiation, boring content, and outright grammatical errors in “About Us” shocked me. I just do not see how such firms will survive if general counsels get over the notion that buying AmLaw 200 is always safe and smart.

I am not predicting demise or disaster, just suggesting that with some change in buyer attitude, Clearspire and other non-traditional providers that offer better value and clearer differentiation likely will gain substantial market share from incumbents.

A problem Clearspire should want to have is that market forces do result in the the “AmLaw 20” replacing the AmLaw 200. Ah, but if the AmLaw 200 disappears, from where would Clearspire recruit experienced, high quality lawyers. In this scenario, I suspect Clearspire will have grown substantially and be well positioned to develop an engine that actually trains new lawyers in an economically sustainable way.

Personally, I find the Clearspire model very exciting. I started in the legal market over two decades ago focused on legal technology and practice support. My goal then and now has been to find ways to make law practice and legal business more effective and efficient. Over the last decade, I broadened my focus to include legal outsourcing because I see its ability to help fix the system. And today, I see the potential the Clearspire, Axiom, and other alternative models have. In fact, I see so much promise in these approaches that I could see eventually broadening my focus once again.