Turbocharging Legal Industry Transformation

“COVID-19 will produce a thinning of the herd and a reimagined legal industry” – Mark Cohen

Last Thursday I watched a great online webinar run by LegalGeek entitled ‘An Uncertain Decade’. Legal sector experts Mark Cohen and Richard Susskind ran the sessions. Whilst I have read various thought leadership from each expert, it was the first time I had seen either speak. Not surprisingly, they both were very impressive in both domain expertise and thoughtfulness around their points of view.

Here are some key takeaways (along with my thoughts):

  • Disruption: COVID-19 will dramatically turbocharge legal industry transformation which has been slowly accelerating since the 2008 Financial Crisis. This may not be that surprising to many outsiders, however many lawyers – including those in Generation X – still tend to be conservative when thinking about competition, new technologies, business models, and structural market changes. Transformation and disruptive models and services will continue to come from outside traditional law firms. Whilst Disruptive Innovation theories of Professor Clayton Christensen were not referenced, his work on how established firms often are disrupted by low-end entrants who move up-market over time, will provide insight as to why and how this is happening within the legal sector (click here for his articles from Harvard Business Review).
  • Innovation: Enterprise clients and consumers will continue to drive the shift away from bundled services toward a more productised, customer-centric mode of consumption at scale which leverage new technologies, business models, and regulatory changes. This has already been happening to some extent ‘around the edges’, and facilitated by ABS models in the UK (whereby retailers (e.g. Co-Op), real estate agents, insurers and other firms can compete head-on with traditional legal practices with their own legal services ventures). DoNotPay in the US was cited as a recent example of a start-up which has over 100 use cases of dispute resolution services (e.g. fight a parking ticket). A new and current use case in the US for them has been to make it easy, cheap and convenient to file unemployment and other worker claims.
  • Unbundling: The impending depression driven by COVID-19 and resultant cost pressures for clients will accelerate the shifting of lower value, high-volume work to more flexible, alternative providers (e.g. LPOs, ABS Licensed Firms, Big4, Axiom, UnitedLex etc) and digital platforms (e.g. DoNotPay). This will continue to enable these players to move further up-scale into higher-value, more complex work and jobs. This is how the Indian IT outsourcing firms managed to make significant in-roads against Accenture, IBM and others in the 2000s, and how Toyota managed to become a US car manufacturing leader with its low-cost model US market strategy. Over the coming years, the legal industry will continue to rapidly fragment beyond traditional structural boundaries to incorporate a much bigger share for alternative providers (which will grow rapidly at the expense of incumbents), but significant new markets will be created especially for those consumers (i.e. non-consumers) who historically have never able to access low-cost, convenient legal services;
  • Business Models: A next generation of technology-enabled service providers (e.g. FisherBroyles) will gain rapid scale over the next decade in the same way as FinTechs have within Retail Banking. Continued experimentation by established law firms (e.g. non-legal services diversification, in-sourcing IT, new product development etc) and further consolidation within and amongst traditional law firms and alternative services providers, vendors and legaltechs unable to re-capitalise or scale. Large traditional law firms with the foresight and capital to invest over the coming years will likely continue to struggle to properly allocate resources and organise these innovative models efficiently and effectively within the established firm.
  • Online Dispute Resolution: COVID-19 has provided an MVP to as legal systems and courts globally have had to re-think how to deliver this. According to Mark Cohen:

The inaccessibility, cost, formality, abstruse rules, and protracted processes of courts in their present guise is misaligned with life in the digital age. The urgency of modernization is unprecedented. Courts around the world have ground to a halt when demand for accessible, efficient, and widespread administration of justice is desperately needed.

  • Education: Law Schools have not really changed their content, formats or approach to skills in over 40 years. Combined with EdTech disruption, providers will be under significant pressure to change in line with industry and client demands. Traditional JD/LLB’s offered by mid-market schools in the short-term will see massive disruption and closures, whilst the degree as it stand may become a more commoditised requirement, augmented by other specialty courses run by others or industry. Clearly, now is the time for online law ‘degree’ or course models, assuming the solicitor/lawyer regulatory boards provide approval (if they haven’t already)
  • Training: Traditional insistence of a junior being trained up or supervised by a senior lawyer/partner will be turned on its head. Assuming a longer-term shift to more remote working for a large number of the workforce and demand for more multi-skilled lawyers (e.g. project management), training for juniors (and all staff) will need to be redesigned.

In a recent Forbes article here, Mark Cohen concludes the following:

The old guard will cling to the hope these are temporary changes. They will point to the recession precipitated by the 2008 global economic crisis and suggest the current one will take a similar course. This time  is different. Technology and new delivery models are far more advanced than they were in 2008. Consumers have a different mindset and a greater urgency to solve a growing list of complex challenges. The potential of technology and its ability to support new models, processes, and paradigms is already on display. The genie is out of law’s bottle, and it will not return.

Opportunities for Law (and other) Firms

Interestingly, there wasn’t too much discussion on this during the webinar. For me, Disruptive Innovation theory might provide some guidance for any progressive law firms who wish to take on the inevitable structural and business model disruptions described above. I’ll save this analysis for another post soon.

 

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