At the International Legal Technology Association annual conference last month in Nashville, I was a panelist for Future Proofing Your Law Firm. I share here an overview of the themes we prepared in advance (click here for the published slides (PDF). 

My co-panelists were Gerard Neiditsch, Executive Director Business Integration and Technology, Mallesons Stephen Jaques; Jeffrey Rovner, Managing Director for Information, O’Melveny & Myers LLP; Michael Mills, Kraft & Kennedy, Inc.; and Mary Abraham, Counsel, Debevoise & Plimpton LLP.

Last year this same panel (minus Michael) presented A New View of the Automated Law Firm, where we discussed the idea of Bet The Farm vs. Law Factory. The “law factory” idea has become a bit of a meme. We recognized, however, that few firms or even practices encompass just one business model. And some argue that there is a vast middle ground between the two (a pending blog post touches on that idea).

Whether that meme represents a dichotomy or a continuum, or is even right, we agreed that the legal market likely will not return to the halcyon days of pre-2008. So all firms need to ask how to survive and thrive for the next few years and beyond.

Planning, never easy, is even harder today because of several trends: loss of control, volatility within and across markets and economies, the proliferation of mobile devices, the ascent of social media, and the virtualization of everything (not just IT but also organizations).

Loss of control presents the most problems:

  • Pricing as we knew it – up only – may go extinct with alternative fee arrangements.
  • Lawyers have lost their monopoly on legal know-how. DC-based lawyers fretted when the Internet meant that everyone had equal access to agency publications. That was just the beginning. Today, lawyers’ roles as priests, exclusive “knowers” and interpreters of the secret sacraments, is long gone. Clients can learn deal terms and much other legal information as easily as lawyers. Buying access to West, Lexis, PLC, KIIAC and many other readily available third-party sources is equal opportunity.
  • The IT gods have lost control of IT and of data. Consumer devices rule: Android and i-Device tablets and smartphones change how, when, and where users interact with computers, data, and applications. Consumer services also rule: prohibitions notwithstanding, many use personal e-mail accounts and other web services (e.g., YouSendIt) for business. And finally, data volume has exploded. It’s not clear which is easier: preventing leaks or making effective use of it.
  • Offices belong on the endangered species list. Lawyers want to work from home, coffee shops, or clients. And with IT everywhere, why not?
  • Hierarchy has flattened. Clients don’t defer to law firms, associates question partners, and partners are often free-agents who often would rather than peel away than share. Aside from changing mores, the free flow of information via social and other tech has further flattened the hierarchy and reduced the boundaries between organizations.
  • Time is no longer our own. Fax and Fedex reduced multi-day turnaround times to hours or overnight. Digital communication now requires instant response and 24×7 availability.

Given the loss of control and an uncertain future, how can and should a firm plan for its future? We suggested five strategies a firm could follow: (1) Think about the business model; (2) Wait and see; (3) Hedge using a portfolio approach to try multiple strategies, weighing risk and potential reward; (4) Plunge into a single new strategy; and (5) Agility – adapt rapidly, by constantly trying new things, keeping those that work, tossing those that don’t.

We suggested that firms adopt elements of all five. We specifically disclaimed, however, the viability of asking “Who else is doing this” as a strategy driver. In my view, the first two are the riskiest because they mean do nothing. (Note that ‘do nothing’ is a decision that the status quo is acceptable.) The third, plunge, is a high-stakes game – a wrong guess means certain failure.

I personally favor a combination of hedging and agility. Both involve elements of biological evolution: vary — mutate or experiment; kill the failures; replicate the survivors; and repeat. Though millenia of evolution suggest this strategy works, lawyers typically avoid failure at all cost. Their personalities don’t align well with successful strategies in an uncertain time.

Yet we did note that unlike in most industries, law has been remarkably stable. Of the 51 highest-grossing law firms in 1985, 46 in AmLaw 200. Four have merged and two failed. If past is prologue, law firms have nothing to fear. Unless of course we believe the Great Recession has fundamentally changed the legal market. Firms that believe that need to find a way to overcome fear and entrenched attitudes.

What does all this mean for large law firm CIOs? We suggested that we have entered Legal Technology 3.0. LT 1.0 focused on infrastructure and applications – e-mail, document management/production and billing, all operating at 99.999% uptime. LT 2.0 embedded IT in the practice & strategy – services to win clients and talent, e.g., outsourcing and mobility. In my view, LT 3.0 means CIOs must drive strategic change, support multiple scenarios, encourage agility and adaptation, and set up mechanisms to deal with uncertainty. Easier to say than to do. (For more on LT 2.0, see my 2008 post, Legal Technology 2.0).

More specifically, Legal Tech 3.0 means CIOs must be prepared for several trends:

  • Information is dynamic, not merely static
  • Engagement – internally and externally – is networked, not hierarchical
  • All data and applications must be delivered so that they are device-agnostic
  • Working from anywhere is elegant, economic, and necessary, not merely tolerable
  • Infrastructure is simplified, consolidated and eventually moved to the cloud
  • Information access gracefully balances security and convenience
  • New technology is adopted when it’s good enough, not when it’s perfect
  • Agility is revered
  • Resilience is expected

The first managing partner with whom I worked had it right in 1989: Technology is not a destination, it’s a ride, and often a wild one. Today, the same is true for law firm strategy and operating models.

[Thanks to all my co-panelists for coming up with this framework and especially to Michael Mills, who had the laboring oar in writing the slides.]