Over the holiday break, I have decided that it’s time to make a number of changes in the direction and balance of my work. 

These decisions will enable me to focus more intensely on my business interests. These include the accelerated digital transformation of beaton, our 15-year-old Voice of Your Clients services to larger professional services firms and FirmChecker, our ratings and reviews startup serving medium-small accounting and law firms.   

As a result, I am closing Dialogue on Remaking Law Firms. The blog will remain available to those who choose to use it as a resource, but will no longer solicit or accept new posts.

Dialogue on Remaking Law Firms has completed four years of service since December 2015. It was founded to promote my book, co-authored with Dr Imme Kaschner, Remaking Law Firms: Why and How (American Bar Association, March 2016). 

Dialogue took on a life of its own beyond our book. From 11 countries, 61 contributors enriched its pages with just short of 400 posts. Subscribers responded, reaching just over 4,000.  

It’s a good feeling to go out on a high. Thank you all.

George 

The post New decade. Focused direction. Decisions.  appeared first on Remaking Law Firms.

The asymmetrical advantage that sellers long held over buyers is gone. Consumers have access to market information and choice that has transformed the buy-sell dynamic. Social media provides them with a reference source and a voice. The balance of power has shifted from the supply to the demand side. The customer is king in the digital age.

Leading companies across multiple industries are engaged in multi-pronged efforts to align with customers. They are upskilling their workforces; investing in technology, people, and processes; and reimagining traditional delivery constructs to improve customer service, experience, and outcome. Digitally advanced companies are mining and analyzing data to refine target markets, better understand consumer buying habits and profiles, and track competition. They are committing capital to shift risk from the buyer to the seller and updating service and product offerings to meet customer needs. They assiduously track internal performance and monitor customer satisfaction. Data, sometimes called “the new oil,” promotes a proactive mindset and advances rapid, informed decision making.

Customer alignment is the foundation upon which successful businesses are built in the digital age. It is a holistic compact between provider and customer, a melding of buyer/seller objectives and outcomes. This is the new buy/sell paradigm and the reason why it is the age of the customer.

Where is law in this process? Unsurprisingly, it lags other industries and professional services. The principal cause is the divide between the legal profession and the industry. How this tension is playing out in the marketplace provides insight into the pace and scope of legal transformation as well as the contours of law’s future.

The Profession and Business of Law

The legal sector has two parts: profession and industry. The profession is comprised exclusively of lawyers. The industry is a trinity of legal, technological, and business management expertise. There is a cultural divide between the two; the profession is precedent bound and inward-facing. It is rooted in “how things have always been done” and is generally resistant to change. The industry is driven by a growing market void for reimagined legal delivery and customer demand for delivery models with the capability and scale to provide bundled professional skillsets proactively competently, efficiently, predictably, and cost-effectively.

The profession is tenaciously clinging to legacy regulatory, structural, economic, and hierarchical models. Lawyers have relied on self-regulation to eliminate competition and to blunt the impact of megatrends that have disrupted multiple industries. This parochialism explains why most in the legal establishment—law schools, partnership model law firms, in-house legal departments, and the  press—resist material change and pay lip service to it by operating at its margins.

Professional resistance to ‘non-lawyer’ ownership and engagement in legal activities—as lawyers define it— is alive and well even as lawyers tout “partnering with clients” and “innovation.” The American Bar Association (ABA) has nixed efforts to re-regulate the industry since the turn of the millennium. The reforms sought to relax current ownership rules that fail to recognize the distinction between legal practice and the business of delivering legal services. So too has the ABA and its dues-paying lawyer membership maintained rigid control over an archaic, one-size-fits-all core curriculum for law schools even as student outcomes have been decried by the Department of Education. These are two of a legion of examples of professional resistance to industry change and its denial that law is no longer solely about lawyers.

There are many reasons for the profession’s resistance to change—financial, structural, and cultural to cite a few. Lawyers are trained to produce the best possible legal work product no matter its materiality or client value. They are taught not to make mistakes and to identify and avoid risk, not to balance risk factors, be proactive, and deliver creative solutions. Doctrinally-skewed legal training provides a sound foundation for critical thinking that can be leveraged in many ways, but few lawyers currently possess the skills and training required to engage in the business side of legal delivery. Law schools remain diploma granters, not learning centers for life. Upskilling is virtually nonexistent among lawyers.

Law’s skills gap has led to the rise of legal service providers whose ranks are populated by licensed lawyers and allied legal professionals—technologists, project and process management experts, data analysts, risk managers, design thinkers, cybersecurity experts, and a slew of others. They engage collaboratively in multidisciplinary teams, sometimes with other providers/resources in the supply chain. Their mission is to provide solutions to business challenges that include legal as well as other risk factors. They are trained to quantify risk, the customer’s tolerance, and the risk: reward ratio before rendering a recommendation. Their decisions are data driven and they invest heavily in technology to streamline internal efficiency and to promote closer customer alignment.

A handful of tech-enabled, process-oriented, data-driven, agile providers are filling the market void created by practice-centric law firms. They are prompting legal consumers to consider whether, when, from what delivery model, and at what price point licensed attorneys are required.  This is new to law but not to other professional services. Medicine, for instance, experienced a similar metamorphosis from profession to profession-within-an industry decades ago.

Law’s Taxonomy Reflects Its Guild Hangover

Why do lawyers bristle when clients are called customers? Are legal buyers clients, customers, or both? Does it matter? Short answers: legal exceptionalism; sometimes clients and always customers; and yes. Law is locked in a culture war pitting the profession and the industry.

The client/customer distinction is more than fodder for semantical debate in a cheroot-filled drawing room. The blurring of the client/customer line results from the ongoing transformation of the legal function as well as how, by whom, from what model, and at what cost legal services are delivered. Law is undergoing a convergence of systemic changes that include: the erosion of lawyer hegemony in legal delivery, multidisciplinary practice, technology, process, data, and capital utilization, new delivery models with corporate structures and customer-centric models, and a shift in the legal buy-sell balance of power from provider to consumer.

The profession now functions in a marketplace with allied professionals, paraprofessionals, and machines. Lawyers are part of a supply chain, and law firms are no longer the only game in town. Legal expertise is one in a trinity of core delivery components that also include process and technological. This expansion of delivery elements requires new skills that include risk management, data analytics, project management, and design thinking. The practice of law—differentiated legal expertise, experience, skills, and judgment— has been subsumed by the trillion-dollar legal services industry. Practice—as it was once defined by lawyers— is shrinking. The business of law—everything else required to deliver legal services— is expanding rapidly.

The legal function and legal delivery are being reimagined and refashioned. There is a marked increase in the volume and complexity of work migrating from law firms to in-house departments, agile talent management companies like Axiom, and a handful of enterprise legal service providers that include UnitedLex and the Big Four.  A common element of each of these provider types is that their lawyers collaborate with allied professionals, paraprofessionals, and machines.

This does not mean—as many lawyers suggest—that the profession will be gutted. The unique characteristics of the attorney-client relationship, notably confidentiality, privilege, and the rules and ethics that are the cornerstones of legal practice remain intact. What’s changing are the models, skillsets, capital investment, data, and other tools and resources required to improve legal delivery.

Several large law firms have recently launched and/or expanded ancillary services to preserve revenue, protect client relationships, and offer end-to-end capability. These are legitimate reasons from the firm perspective, but that is no longer what matters—legal buyers do. Law firms are practice-centric organizations; that is their core business. Legal service providers are technology and process organizations with different organizational structures, management, expertise, workforces, DNA, agility, access to capital, and customer dynamics than law firms. This is not to say that law firms cannot succeed in their efforts to deliver legal services, but the jury is out. Sellers and buyers of legal services confront a common question: “Who should do what?” This is the seminal issue that is reshaping the legal industry.

Conclusion

Record-setting capital investment in a handful of customer-centric providers is a bellwether of legal consolidation, platform models, continued market share shift, and scalability. Providers that are differentiated, scaled, capitalized, and aligned with customers will dominate the legal marketplace. That’s who customers and clients will align with.

Author

Mark Cohen is a lawyer, law professor, legal innovator and strategist, and founder of Legal Mosaic.

Mark says of himself “I write about changes in the global legal marketplace”.

Mark is a member of the Program Board and Teaching Adviser for Australia’s College of Law new Master in Legal Business. Mark is Teaching Adviser with Teaching Fellow Alison Laird for two subjects related to innovation and entrepreneurship.

Mark Cohen first published Law in the Age of the Customer in Forbes on September 24, 2019. 

More on this subject

Words matter: Customers, not Clients by Patrick Lamb re-posted on Dialogue on September 24, 2019

The post Law in the age of the customer appeared first on Remaking Law Firms.

“Even in the world’s most advanced jurisdictions, most civil disputes cost too much, take too long,  processes are antiquated, and the whole business is unintelligible to those who are not lawyers. To make matters worse, legal aid has been drastically cut in most countries. In some court systems, there are staggering backlogs – 100 million cases in Brazil, 30 million in India. Worse, according to the OECD, less than 50% of people on earth live under the protection of the law. Inaccess to justice is now a global pandemic (emphasis added).

“This is not a challenge that can be met by a modest injection of funds or by streamlining a few inefficient and outmoded practices. Much more radical change is required. In his new book, Online Courts and the Future of Justice, Richard argues that the transformation can only be achieved through the use of technology. In an increasingly digital society, it now makes sense for much of the work of our public courts to be conducted online.”

Some highlights of Online Courts and the Future of Justice include:

A discussion of whether a court is a service or a place and the implications of thinking of courts as services as is occurring in sectors as disparate as banking and worship.

A call for a state-provided dispute management and resolution service delivered wholly online involving:

Online determination of cases by human judges, not in traditional courtrooms but with evidence and arguments submitted online with the judges’ decisions delivered via online platforms. While online judging is not universally appropriate, is well-suited to the disposal of the many low value disputes.

The second idea is more radical: technology that delivers more than judges’ decisions. For example, tools to help court users understand the law and the options available to them, guides to completing court forms, and self-help to formulate arguments and assemble evidence. Australia’s Immediation is an excellent example of just this. And there’s more: apps, smartphones, portals, messaging, video-calling, chatbots, livechats, webcasts to assist those who are not lawyers interact more easily with the courts.

An overview of of the online courts already operating on the UK, Canada, the US, China, Singapore and Australia. Richard reports the ‘levels of user satisfaction are remarkable, overwhelmingly regarded as more accessible, more convenient, and less costly than traditional court service’.

A vision of the future where artificial intelligence makes directions and decisions will be made by systems, not people. This is a distant prospect, but Richard argues ‘it is important that we start now to confront some of the ethical and social questions that will inevitably arise as our machines become much more capable’.

The post Remaking News of the Week: Richard Susskind’s Online Courts appeared first on Remaking Law Firms.

One of the most significant trends brought to the legal market by alternative law companies is the variety of delivery methods that make legal services less complicated and expensive, and therefore easier for clients to purchase. In response, law firms that wish to stay relevant and solvent in this increasingly competitive field need to market their services using a hybrid model. (In other words, these ‘hybrid models’ are a way of a traditional BigLaw business model firm’ remaking itself by adopting or integrating elements of the NewLaw business model. George)

While for the time being the most complex legal services may continue to be scoped, executed and billed at an hourly rate — the lifeblood of many lawyers and law firms — astute clients are increasingly expecting that more routine and easily commoditized services will be packaged as products.

Packaging a service has six features, namely: 1) defining what it is, 2) defining the expected outcome, 3) describing what the package contains, 4) describing benefits to the user, 5) offering easy access and delivery, and 6) providing a fixed cost.

Time and money

The advantages of offering legal services as products are twofold: time and money. While delivering a service takes time, there are only 24 hours in a day. As a lawyer, do you really want to spend precious hours doing low-level, mind-numbing grunt work? Is there any advantage in paying others in your firm to do routine work that often has to be written off when clients balk at the antiquated practice that enables young lawyers to learn on their dime?

And really, can you honestly stand to bill for small stuff? Should you even bother?

Your experience, professional reputation and rates all have a ceiling. The notion that the more advanced one is in one’s career the wiser one is and, therefore, justifiably more expensive, is being pushed back against ferociously by clients who have had it with big bills for little things. Besides, competing on rates is a zero-sum game; eventually you’ll lose, because there will always be good, less expensive alternatives.

Nothing new

Selling legal services as products is nothing new, but will become much more prevalent as clients demand better service, faster turnaround, greater involvement during the process, full transparency on project management, and cost structures that enable concise budgeting without financial surprises.

Canadian lawyers have been providing transparency and fixed pricing for years. Jane Harvey has headed up a storefront law firm since 1980, with price lists posted in the windows for passersby to see as well as on the firm’s website. Offering legal services in real estate, family, wills and estates, litigation and business law, Jane Harvey Lawyers has grown to seven locations in the Greater Toronto Area, most of which are located in shopping malls and concourses. Prices include bottom-line totals with fees, taxes and costs of expected disbursements listed line-by-line.

Axess Law has enjoyed success since it launched in 2012, using a similar structure and service offerings with six locations in retail stores and supermarkets within the Greater Toronto Area.

The Amazon effect

Amazon entered the legal service market early last month with IP Accelerator, a venture that introduces a select network of law firms based in the U.S. to businesses worldwide needing intellectual property services. In time, Amazon expects to expand its service roster to law firms and trademark offices in other countries around the world.

Amazon says the participating U.S. IP law firms have agreed to pre-negotiated rates for standard services involved in obtaining a trademark registration. They are also capable of assisting with copyright registrations, design patents and other IP protection strategies.

These vetted firms should be able to save clients both time and money in securing IP rights as well as enable them to benefit from Amazon’s brand protection program, which identifies and removes bad online listings to help protect a brand’s credibility.

Amazon has, in effect, packaged IP legal services. Client fulfilment indeed!

Something for nothing

How does all this affect lawyers and their firms? Strong market positioning built on three pillars of niche, differentiation and brand, along with continuous caring and trusted relationships have always been and always will be critically important to securing and retaining valuable client loyalty. So will determining legal services that can be creatively commoditized, packaged and sold as a subscription, at a flat-fee rate, or even given away free of charge.

Palo Alto-based Cooley Go, a division of Cooley LLP, has catered to the Silicon Valley crowd since 2014. Cooley Go has an open store where entrepreneurs with other businesses can get non-disclosure agreements and other small legal documents and services, tips, tools and guides for free. Giving away the small stuff is a huge help to startups and creates goodwill and trust.

Cooley is smartly playing the long game and betting that a payoff will happen if and when these small ventures grow to the point where they need assistance on more complex legal issues, such as an M&A or IPO.

The upshot

On one hand, these smart firms are offering legal services and tools to clients at transparent and predictable costs, while on the other hand they are providing value through thoughtful and consistent client experience. And isn’t that what really matters to clients and those privileged to serve them?

Besides, delighting clients in this way, along with giving away the small stuff for low to no cost, beats raising their ire with ambush invoices that list a string of “0.10”s for precious little that they consider to be of value.

Author

The post Commoditizing legal services appeared first on Remaking Law Firms.

1. The last decade has seen the proliferation of NewLaw business model providers of B2B legal services. How does Lexoo interpret this growth and the diversity of types of provider?

I believe there are two trends at play. On the one hand, there now seems to be a critical mass of in-house legal teams open to different ways of solving their problems. At the same time there appears to be more finance available to fund new initiatives, with both private equity and venture capital now taking more of an interest in NewLaw than at any time in history.

The diversity of types of provider seems to be a result of the market still being relative young, It’s not settled where the biggest opportunities lie with NewLaw providers tackling different parts of the market. For example, some are going after work which was historically done by in-house lawyers, e.g. providers of interim lawyer solutions. Others are going after work historically done by traditional law firms, initially by targeting specific areas, e.g. due diligence, but still working together with a traditional firm. Increasingly these are becoming ‘full stack’.

Lexoo is an example of a full stack solution in that we take on the entire legal matter. The B2B legal services ecosystem of clients, incumbent law firms with the traditional or BigLaw business model, NewLaw providers, tech startups and vendors is complex and fast-moving.

2. How do you assess the ways in which incumbent law firms are managing their positions and performance?

Similar to most markets, incumbent law firms are largely iterating on their trusted theme. They appear to be predominantly trying to find gains by either consolidating with other firms, or by reducing the partnership and increasing leverage to maintain profit levels. There is a bit of experimentation with new ways of working, e.g. allowing lawyers to work remotely, or using a piece of tech here and there, but there hasn’t been a complete mindset shift. My view is that traditional firms won’t feel the urgency to truly reassess the best way to deliver services whilst their PEP levels are still so high.  The risk of this approach is of course that by the time PEP drops, it’s probably too late. 

3. Some, including me, have said there will be many more losers than winners among the incumbent BigLaw firms. How do you see this playing out?

I expect there will remain room in the market for truly premium ‘bet-the-company’ type BigLaw firms. I expect they’ll reduce in size to focus exclusively on the type of bespoke work where they’ll be able to continue to justify their hourly rates. I think my former firm of De Brauw Blackstone Westbroek is an example of that strategy. They’ve reduced the partnership over the past 5 years in order to consolidate around those matters where there’s less pressure. Not everyone can be premium though. ‘Mid-market’ firms with high overheads and legacy blockers to innovation, but without brands to pursue the ‘super premium’ strategy, will come under increased pressure and I expect we’ll see a number of high profile failures in the next five years.

4. Am I and other observers over-stating the threats and/or underestimating the adaptability of the incumbents?

I believe it was Bill Gates who said we overestimate what can change in a year, but underestimate what can change in 10 years. Adapting to changing market forces is extremely difficult if you have been very profitable for decades. Innovation and rethinking how work is done is already hard for the most innovative fast-moving companies and it’s a muscle that needs to be built over time. Not just in terms of expertise on ‘how’ to innovate, but also whether the organisation will accept major changes culturally. Most traditional firms don’t score high on those measures. The heads of innovation are often deeply knowledgeable people, but without the entire partnership culturally willing to work differently and willing to invest significant capital and accept lower earnings, it’s in my view very unlikely traditional firms will adapt in time. Many firms I speak with point to their still significant revenues. However, I believe this is the result of there not being a universally accepted and credible NewLaw alternative in most markets and for most classes of work. BigLaw’s seeming comfort levels are not because their service levels and value are in line with what clients would like them to be.

In that sense, it’s comparable to the strong position Blockbuster held when Netflix was starting out. Blockbuster could have bought Netflix for $50M but felt they didn’t need to. Five years later they were out of business.

5. What role are corporate law departments playing in driving change? Is it simply the case – as in any industry – of some moving first and others following with varying degrees of urgency and speed?

Yes, there’s definitely a distribution curve that mirrors most industries of ‘early adopters, early majority, late majority and laggards’. We are able to segment most clients quite accurately in these various buckets. It’s often a combination of the corporate’s internal culture, the level of ‘pain’ experienced (how tight are legal budgets) and the mindset of the GC (are they interested in doing things differently). Another factor is how much red tape there is, for example it’s harder for in-house legal teams with formal law firm panels to fit NewLaw providers into that structure and experiment.  

6. Do think there is a ‘next big innovation’ around the corner, or is the market now operating to sort out who prospers and who fades away?

I don’t believe there is one big innovation which will change everything. I think NewLaw providers will continue to pick up speed and slowly but surely pick up more clients, and more work traditional done by BigLaw. At some point the market will tip and things will accelerate as the “late majority” will start feeling more comfortable sending their core work away from traditional firms. When it comes to the innovations themselves, a large part of the efficiency gains banked by NewLaw isn’t actually high tech, it’s applying basic process principles which are completely standard in most industries, like lean six sigma process work and project management by project management professionals using tools, versus lawyers untrained in it. When we combine that with a move away from the traditional partnership model and hourly rates, you actually get dramatically different outcomes in the efficiency, consistency and quality of legal work.

7. In a sentence, what advice would you offer BigLaw firm leaders?

I’d advise BigLaw firm leaders to become experts in ‘disruption theory’, there are loads of case studies out there on how big profitable incumbents lost to nimble new competitors, the legal market will not be isolated from that.

Daniel van Binsbergen is CEO and Co-founder of Lexoo.

Daniel describes Lexoo as ‘revolutionising legal by connecting forward-thinking businesses with specialist external counsel’. Lexoo offers services related to complex projects, international legal work, flexible ongoing support and on & off-site interim lawyers. Lexoo started in February 2014, two months after NewLaw New Rules was published..

He has law degrees from universities of Leiden and Oxford.

More posts like this 

Talking with Lachlan McKnight, founder of LegalVision 

The post Talking with Daniel van Binsbergen, CEO and Co-founder of Lexoo appeared first on Remaking Law Firms.

The Conference Board recently published The Future-Ready Organization reporting how CEOs and C-suite executives are thinking about the next few years and their vision for how their organisations will thrive in 2025 and beyond.

What’s your view about BigLaw?

In brief, here’s what the Conference Board has to say.

Food for thought, to say the least!

The post Do BigLaw managing partners see their worlds differently? appeared first on Remaking Law Firms.

For many years BCLP has leveraged data in its data-driven approach to decision- making for the internal management of the firm, optimizing the delivery of legal work to clients and understanding the content and risks in clients’ legal portfolios.

Authors Chris Emerson, BCLP’s Chief of Legal Operations Solutions and Bruce Braude, newly appointed Chief Technology Officer at Deloitte Legal, say this comprehensive data-driven approach has been enabled by professionals in data analysis, financial analysis and planning, process engineering and software engineering working closely with the lawyers. They describe a range of BCLP’s applications of data to enhance its legal service delivery.

Rate setting. They created an algorithm using 24 metrics that explained 94% of the variability in the final decided rate for each fee-earner. The aim was to reduce the time taken to complete the annual rate-setting process

Rosetta narratives. The firm’s metrics-only lawyer performance reports often created more questions than they answered. The solution was a narrative version of the performance reports “to identify trends, root causes and relationships that would explain the themes to the lawyers in action-oriented language”. This technology is used annually for partner practice health reports and throughout the year on outstanding invoices, helping partners prioritize their collection efforts.

Clients’ litigation portfolios. An example stemming from the 2008 financial crisis cites a financial institution with a significant body of mortgage litigation. BCLP sought to estimate accurately the remaining life in the litigation portfolio and use the information to reduce costs and select the optimal attorney team. “The optimized staffing suggested by the model allowed clients to realize significant cost savings over traditional approaches and, in the end, the portfolio’s remaining life closely mirrored the model’s predictions.”

Quantifying Legal Process Improvement. An insurance company with significant litigation portfolio spend could not understand why its spend was so high compared to other similar portfolios. BCLPs’ legal operations group’s analysis showed how 30% of the spend could be avoided by changes to operational processes such as eliminating manual reporting processes that had since been replaced with conference calls.

These examples should inspire all who are wondering why there’s so much noise about data analytics in legal services. 

The post Remaking News of the Week: Case study in analytics appeared first on Remaking Law Firms.

1. Lachlan, the last decade has seen the proliferation of NewLaw business model providers of B2B and  B2C legal services. How does LegalVision interpret this growth and the diversity in types of provider?

The first point I would make is that many so-called ‘NewLaw’ firms are simply boutique breakaways. They are managed in the same way as a traditional law firm, with one or more principal lawyers owning the business (i.e. no external shareholders), charge hourly rates (and are therefore not seeking to disrupt the time/value paradigm), and make limited use of technology (beyond mentioning technology in press releases!).

The second point I’d make is that most genuine ‘NewLaw’ businesses are tiny. I regularly speak to NewLaw founders and am constantly surprised at just how little revenue most of their businesses are actually getting through. Many of these businesses are doing interesting things, but (at least in my view) the revolution in CX and productisation that the legal industry needs to go through can only be driven by businesses operating at significant scale. Industries are not transformed by cottage, lifestyle businesses; they’re transformed by category killers.

So in summary, I still think there’s more noise than action in the NewLaw space. When the first genuine Australian NewLaw business hits $100m of productised revenue we’ll be able to say the industry is really changing.

2. The B2B legal services ecosystem of clients, incumbent (traditional or BigLaw business model) law firms, NewLaw providers, tech startups and vendors is complex and fast moving. How do you assess the ways in which incumbent law firms in general are managing their positions and performance?

If I were running an incumbent law firm my strategy would be to (i) invest in understanding the ecosystem, which you rightly point out is complex and fast moving and (ii) resources permitting, make an investment or two in promising startups. The top tier of traditional firms in Australia are currently doing very well, so it makes little sense to radically transform their current business models. The key is to be positioned to transform when it becomes clear that an alternative model to the partner led hourly rate pyramid structure is going to become dominant.

Many traditional law firms are doing nothing, which actually is economically rational when you look at the boards/ managing partners of these firms. Most of these individuals all due to retire in 3 to 7 years. Why invest in the future when they can take a higher draw now – a disrupted market in 8 years isn’t something they’ll need to deal with!

A few smart leaders are choosing to make strategic investments, which I think broadly makes sense. Of course the challenge is choosing what to invest in. A NewLaw provider like LegalVision or a legal tech startup? It’s not easy.

3. Without peering into your business secrets, how does your Gilbert + Tobin (G+T) relationship benefit that firm and Legal Vision?

We’ve had a very strong relationship with G+T for many years. In the enterprise space, our offerings are complementary  – we focus on Managed Services (aimed at assisting in-house teams with BAU style legal work) and G+T obviously focus on “bet the farm/one-off” style projects. Many enterprise clients clearly have a need for both services, so there are often opportunities for both entities to cross-refer work.

We also just spend a lot of time speaking about the industry. In particular, I speak to Sam Nickless, G+T’s COO about every other day. We’re constantly discussing new innovations, what’s happening overseas, where the market’s heading. It’s super helpful to get “big law” insights on a regular basis, and I guess Sam and G+T find some of our insights helpful.

Finally, of course, G+T is the biggest external shareholder in the fastest growing, and by far the biggest, genuinely NewLaw provider in Australia. They’ll probably do quite well out of the investment!

4. Some, including me, have said there will be many more losers than winners among the incumbent BigLaw firms. How do you see this playing out? Do I and other observers over-state the threats and/or underestimating the adaptability of the incumbents?

This is a really interesting question. I think the way to look at this is at a workforce level. By far the biggest transformational movement in the legal service industry over the next 10 years will be the continuing influence of capital. Traditionally the law firms have been owned and controlled by labour (partners). Output has always been based around labour (hence the hourly rate). Across the industry, from NewLaw providers to legal tech players, to litigation funders, capital is now seizing an ownership stake in the industry.

The net effect of this is that partners in traditional law firms (particularly mid-tier firms and below) will see their income reduced. If NewLaw providers, assisted by capital injections which mean they can invest in systems, processes and technology, take a chunk of the ‘BAU’ work from traditional providers, those providers will have to seek capital injections themselves to enable them to invest on a longer time horizon. This will lead to corporatised law firms with profits being split between employees and shareholders (as in a normal business). I read with great interest an earlier post related to capital on Dialogue by Mark Cohen, Big Money Is Betting On Legal Industry Transformation. Mark and I are definitely on the same page!

This doesn’t mean that traditional providers will disappear, but perhaps that they will slowly evolve into very different types of businesses.

5. What role are corporate law departments playing in driving change?  Is it simply the case – as in any industry – of some moving first and others following with varying degrees of urgency and speed?

I think it’s correct to say that some are moving first and others are following, but the role of the corporate law department is absolutely critical to industry transformation occurring sooner rather than later. It really is super hard for a non-lawyer to make a call about changing the way a business is running a legal function, both internally and through external providers. It does happen, but it’s unusual. So corporate law departments really do have a huge impact on industry transformation.

Luckily in Australia we’ve got leaders such as Catriona McGregor, Anna Lozynski and Rachel Launders running some pretty forward thinking in-house teams.

6. Do you think there is a ‘next big innovation’ around the corner, or is the market now operating to sort out who prospers and who fades away?

It would be very unwise to assume a new disruptor isn’t going to pop up and start eating everyone’s lunch, so it’s vital to remain paranoid. Having said that, I think the biggest disruptive movement in the industry right now is the move of towards a capital + labour model, so my view is that’s going to be the biggest driver of change over the next 5 or so years. In the NewLaw space at least, most businesses are cottage lifestyle businesses. This is no bad thing, but structural change isn’t going to come from that direction.

I do think that as we see capital with longer time horizons invest more and more heavily in the industry we’ll start seeing weaker players collapse due to huge downward pressure on prices.

Lachlan McKnight

Lachlan co-founded LegalVision in late 2012 following a career in corporate law and investment banking.

LegalVision assists both SME and Enterprise clients in areas of law where its systems, processes and technology can deliver industry-leading outcomes.

The post Talking with Lachlan McKnight, founder of LegalVision appeared first on Remaking Law Firms.

“Seventy-six per cent of Chief Legal Officers expect there will be a recession in the US within the next two years, a belief that may be fueling caution on law department hiring and spending levelst the long-running 2019 Chief Legal Officer Survey.

“Many law departments pulled back on in-house and law firm expenditures in 2019, and fewer plan increases to lawyer staff in 2020. While the changes are moderate, there’s a contraction across all key indicators.

“Upcoming Recession. 76% of Chief Legal Officers expect there will be a recession in the US within the next 24 months. 

“Outside counsel spend. Only 27% of departments increased their spending on law firms in 2019, down sharply from 42% of departments that did so last year. 

“Legal Operations Managers.  The number of law departments with operations managers jumped from 39% in 2018 to 46% this year. Because adding operations professionals is the most effective means of improving law department efficiency according to CLOs, these additions are in keeping with emerging economic caution in law departments.

“Since the last recession, law departments have added operational management specialists, invested in new technology, restructured in-house resources, and have become more sophisticated consumers of legal services,” says Wilber.  “We believe Chief Legal Officers and their teams will be well equipped for a downturn if or when it comes.”

The full survey is available to download at www.altmanweil.com/CLO2019.

The post Remaking News of the Week: Majority of US GCs expect a recession appeared first on Remaking Law Firms.

The interview reported the use of what some might call melodramatic language, like ‘inertia’, ‘still stacking meetings with lawyers’, ‘unless BigLaw adapts to the way agile providers are doing things, they’re on their death bed’ and ‘they need to change their (business) model’.

The GCs head the legal functions in Monzo, Transferwise and Revolut– all tech companies. They are exposed on a daily basis to tech- and business model-based innovation in the early stages of the life cycle. As such, their voices are portents for BigLaw.

The GCs were speaking at a roundtable in London organised by global lawyer-matching service Lexoo, so chances are they are favourably disposed to new ways of sourcing and operating legal services. In my opinion, this doesn’t diminish their message for BigLaw leaders.

A view was expressed ‘that it would take 10-15 years for old school law to die’; I agree. In 2016 with Ross Dawson, I published the first, and still only to my knowledge, Delphi forecast on traditional BigLaw business law firms share of the legal services supply chain out beyond 2025. The data suggested this share would would shrink from 70% to 30% after 2025 in England & Wales. The full analysis and conclusioms is published here.

Ross and I based our conclusion the Delphi data and the megatrends in the industry:

• “Hyper-competition. Hyper-competition will cause changes in industry structure, including clearer delineation of strategic groups and proliferation in the number and type of legal services providers, and intensifying supply-side competitive dynamics.
• De-regulation. De-regulation will progressively reduce, even remove, restrictions on almost all aspects of the ownership of providers and the ways in which legal services are delivered.
• Client transformation. The speed and intensity with which clients transform the ways in which they meet their legal needs will occur more rapidly than most anticipate.
• Exponential technology. The impact of technology as a substitute, not just a complement, for lawyers’ services will be more dramatic than most predict.
• BigLaw firm inertia. In the main BigLaw firms will be slow to develop the capabilities in change management and innovation that are needed to remain profitable in the conditions expected after 2025.”

All this said, our data also suggested that after 2025, 25% of services would be supplied by ‘Remade’ BigLaw business model firms. In the few years since we published our report, evidence has been accumulating that, at least, in regions like England & Wales, this forecast is roughly correct.

I look forward to welcoming Daniel van Binsbergen, chief executive of Lexoo, to the Dialogue as a Q&A discussant in the not-too-distant future.

The post Remaking News of the Week: Traditional law firms must adapt or die appeared first on Remaking Law Firms.