Law is a Buyer’s Market: Adapting your Law Firm to a Client-First World (Live #Lexpo17)
This is a live blog post of Law is a Buyer’s Market: Adapting your Law Firm to a Client-First World. Jordan Furlong is the presenter.
I am posting live from Lexpo 2017, a legal innovation event in Amsterdam on May 8-9, 2017. I post as a session ends, so please forgive any typos or errors in my understanding. The session description appears at the end.
Jordan explain the origin of his title, Law is a Buyer’s Market. For a very long time, until recently, the market was a seller’s market. Lawyers had the knowledge, the insight, and the “keys to the kingdom”. And no one other than lawyers, because. of regulatory system (overseen by lawyers) prevents anyone else from practicing.
That is not true today. The market has changed. Buyers today have access to information, to each other to share information about the law and firms. Information has given them new power. Furthermore, they now have access to people and platforms (tech) that can deliver legal services. This is a brand new world. Clients are not going back. Why would they, they like having choice and competition among providers.
Jordan will explain the changes in the market and what can law firms do to respond to the changes…. Three market trends: (1) law firm substitutes, (2) legal work transformed, snd (3) Legal Demand 3.0). Then three law firm responses: (1) Identity crisis, (2) Tripartite strategy, and (3) Operational re-engineering.
Substitutes for Lawyers and Law Firms (The Supply Side)
Lawyer substitutes include AI, contract tech, exeprt apps, and online dispute resolution (ODR). Substitutes, in economic terms, means competing alternatives that are equally acceptable. While there may not be perfect substitutes for lawyers, there are substitutes for tasks that lawyers do. The substitute will, over time, chip away at the hours that lawyers now work. The analogy: mechanical mice… a series of small changes that eat away at the work. “Innovation destroys hours” quoting Michael Mills.
AI is an example of a technology that eats away at lawyer hours. Machine learning for due diligence, for example, reduces hours for that task.
Law firm substitutes include LPO, flex-time lawyers, Big 4, and NewLaw. New platforms offer superior service for elements of what law firms now do. LPOs are good at routine and repeatable work. They apply more process, tech, and delegation that law firms do. Flex time lawyers are another platform: such companies provide a good substitute for law firm associates (at lower cost).
The Big 4 are a big threat. Whereas law firms focus on bet the company work, the Big 4 like run the company work. There is much run the company work than bet the company law.
NewLaw, meaning law firms that operate differently than traditional firms, are a growing substitute for long established law firms. They may operate at different price points and in narrower ways, but they are still substitutes.
Legal Work Transformed
Several trends allow for doing legal work more efficiently. Examples include legal project management (LPM), process mapping, waste reduction, and user experience design (UX).
A great question for law firms to ask is “If we weren’t doing it this way already, would we start today”. Jordan says probably not for most tasks. This goes to law firm productivity. Productivity in the sense of output per hour or value contributed, not hours billed. Jordan does not see technology replacing lawyers; rather it makes them more productive.
The transformation of legal work is about shrinking, streamlining, and standardizing legal work. As an example, Jordan cites Ray Bayley of Novus Law, who notes that for each dollar of work Novus gets, law firms lose four dollars.
Legal Demand 3.0
Demand 1.0 was companies shipping work to law firms. Demand 2.0 was insourcing and multi-sourcing. This is where we are now – and we’ve been here less than five years. Firms have brought a lot of legal work in-house. They also multi-source: they give work to LPOs, to flex time platforms, and to machines.
We are starting on Demand 3.0. It is no longer just the law department. In this phase, it won’t just be the corporate law department focused on legal spend. Increasingly, corporate procurement professionals influence legal spend. The other big player is legal operations. To frame importance, look at CLOC (meeting now), the Corporate Legal Operations Consortium. Jordan believes “consortium” is the operative and most important word. It means working together to change the market entities, especially as a buying entity. Legal ops are causing the amount of legal work to go down.
Law Firm Response: Have an Identity Crisis
Ask firms deeply uncomfortable questions. Why are you here? Firms will say “excellent service”. But if you ask how much time lawyers, in management meetings, talk about client service, it’s almost always zero. The focus of firms is mainly on profits per person. But the meaning of “profession” is to serve. It’s hard to find this idea in law firms today.
If the purpose is the serve, who is it firms are serving? Firms must ask themselves this question. Once a firm does this, look carefully at the markets and clients they serve. They need to ask if this is really the group we want to serve. Jordan suggests the choices here were made by lawyers early in the firm’s history and the evolution moved from there, without conscious decision. And without much thought about how long the business will continue.
“We practice door law” – if business comes in, we work on it. That’s how it is now but much better is to ask who serve and why and move toward that.
Law Firm Response: Tripartite Strategy
Too many law firms have strategies they don’t follow. Instead, they should focus on three elements:
Client service. Make your law firm client centered, not just in work but in deed. Firms must know as much about their client as possible. If you don’t know a lot about your client, you can’t really serve them. Firms should set service protocols for how all lawyers deal with and serve lawyers. Law firms need to understand what their clients really want (not what lawyers imagine they want). [RF: reminds of 198os quality definition: conformance to client requirements). Firms must also measure client outcomes. At outset, they should track what they promise, specify it in detail, and then at end, determine if they delivered as promised. Then find out if clients were satisfied with the service.
Competitiveness. Once law firms choose a market (consciously), they should be a dominant player. Studies show that in many sub-markets, the top 3 players get 70% of the market. If you can’t be in top 3 to 5, does it pay? Firms must be in the top to get revenue and sustainability. To get there, firms must understand their clients purchasing criteria. Knowing that, firms can tailor their offerings. And finally, firms must price services in ways that meet clients’ needs.
Culture. It’s what lawyers and staff do. What do people at law firms feel compelled to do; allowed to do; and what is tolerated. A good culture serves clients, respect for colleagues, service to the community, and care for individual lawyers.
Law Firm Response: Re-Engineer Your Operations
Firms must adopt process improvements and install productivity engines. Clients don’t care about effort (hours). Firms must deliver at the right price. To get there, firms must re-think how they work
Where We are Going
Law firms will become “lawyer proof”. That is, they will become institutions, not a collection of individual lawyers. Getting there will involve investments in technology, process, and systems. Make firms less dependent on individual lawyers. Create services that don’t depend on individual lawyers.
Tech-powered legal services can address the access to justice (A2J) problem. Lawyers have failed to deliver A2J. It’s time to give a tech the chance.Invest in tools that add value. Make operational improvements. Upgrade the user experience of clients dealing with your law firm.
Talk to your clients – and listen, then act on what they tell you. Listen carefully – let clients talk and listen, don’t interrupt. Then act on what they tell you.
“Global changes in the legal services marketplace are shifting power irreversibly from sellers to buyers. World-renowned legal analyst Jordan Furlong will forecast extraordinary changes coming to the legal profession and will outline the strategic, technological, and operational adjustments that law firms must make in order to survive in, and come to dominate, the future legal market. ”
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