Hello, and welcome to another edition of The Law Firm Disrupted. I'm Law.com reporter Roy Strom, and this weekly email briefing attempts to make sense of the biggest challenges and opportunities facing law firms today. Let me know what you think at [email protected].

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A Big Change for 2018?

 

As a reporter who works from home and spends the majority of his time in front of a computer screen, I've often joked that I'm a “rugged indoorsman.”

And yet, improbably, I found myself on the top of a mountain in West Virginia to ring in the New Year. Starting your day sawing firewood in 15 degree weather was a big leap from walking five minutes to Starbucks. But here I am, back at the computer. I made it. Better yet, I warmed up to the outdoors.

All of which is to say: Change can be a good thing.

That's the theme I've reported on over the past year as Big Law slowly adapts to a marketplace that, in fits and starts, rewards efficiency over labor. And 2018 will be another year of law firms working to re-engineer their business models to that new reality. How they will do that is hard to predict.

But to gain insight I enjoyed reading recent posts by legal software company Aderant that had more than 20 predictions on how the business of law will change in 2018. The whole thing is worth a read.

One prediction in particular caught my eye, because it is one that I had briefly discussed with an executive at an Am Law 100 firm late last year. The prediction was from Bruce MacEwen and Janet Stanton of Adam Smith Esq., who succinctly wrote: “A U.S.-based law firm will form a joint venture with a New Law entity.”

The executive I spoke with was enthusiastic about the possibilities of such a combination, saying they had internally made the argument for such a move.

Still, it would be quite the change in thinking from how the two camps now view each other. So I called up MacEwen to inquire more about how an alliance would work and how it would benefit all three sides to the equation: the law firms, New Law entities like Axiom or UnitedLex and, of course, their clients.

MacEwen said the prediction fits into a broader category of his interest in the law firm world and business history more generally: the competition between incumbent firms and new market entrants. He devotes a chapter to the idea in his book, “Tomorrowland: Scenarios for law firms beyond the horizon.”

MacEwen's take is that, throughout history, incumbents usually lose the battle despite holding most of the advantages (such as talent and relationships). He recounted Nokia's loss in the smartphone wars. BlackBerry comes to mind. And, more recently, he had read about how Monster.com, the early winner of the online job search market, ceded ground to LinkedIn—despite executives at Monster understanding the role social networks would play in finding jobs.

“It's a classic business conundrum: What do you do about disruptive new entrants?” MacEwen said. “All too often, the de facto reaction is wait it out and hope for the best, which never really works out too well.”

MacEwen has been mulling how to answer that question for law firms with respect to their latest competitors.

Most law firm market observers by now understand the role alternative legal service providers can play. They offer a combination of labor-price arbitrage with a consultancy style view of implementing technology and processes to more smoothly solve client problems.

Pressure to keep profits high has traditionally constrained law firms from winning on price—something they usually are loathe to admit they try to do. And while some firms have found success with technology and process, it remains a relatively small portion of even those firms' business.

Teaming up with a New Law entity would help law firms introduce both these services more smoothly to existing client relationships.

Meanwhile, New Law types often struggle against a perception that their services can be low-quality (think outsourcers) and only make economic sense for repetitive problems. So, what's in it for them?

“Credentials,” MacEwen said. “And people who do have things like client relationships.”

MacEwen added that the alternative service providers he has spoken with often say they have stopped marketing to law firms and have instead been going straight to clients themselves. An introduction from a trusted law firm lawyer would go a long way toward winning that sales pitch, he said.

But perhaps in moments of change, the question should be framed differently. Rather than law firms thinking, “What's in it for us?,” perhaps they should be asking, “What's in it for our clients?”

If the clients are going to utilize New Law providers, law firms would be better off playing some kind of role in that. After all, change can be a good thing. And you might unexpectedly enjoy the view atop a new mountain.

 

Roy's Reading Corner

 

On Migrating Delivery Models: Mark Cohen writes in Forbes about how change in the legal marketplace will only accelerate once law firms no longer control the “buy-sell process.” In a post worth reading, Cohen concludes that the distinctions between law firms, legal departments and alternative service providers is becoming “functionally meaningless.”

From Cohen: “What is important is that the appropriate resources—human and/or machine—and expertise are integrated to produce results that achieve consumer objectives efficiently, risk-appropriately and cost-effectively. Providers that can consistently deliver legal services this way—whether utilizing internal resources or collaborating with others in the supply chain—will be dominant players in the new legal mosaic.”

On Hesitation to Change: My colleague Brenda Jeffreys recently reported on ALM Legal Intelligence data that shows law firms seem woefully unprepared for changes utterly in their own control: Their leaders.

“In a recent ALM Intelligence survey of almost 120 large law firms, a third of respondents noted that they do not have a succession plan for either firm leadership or client teams,” wrote Jeffreys. “Nearly 40 percent of those without a succession plan for firm leadership said that the lack was 'not an immediate concern,' and about one in six said it was 'too sensitive an issue to discuss with firm leaders.' More than 40 percent of respondents said their firm planned ahead for leadership succession only a year or two in advance, or less.”

On Predictions: Ron Friedmann expands on the prediction he provided Aderant in this Prism Legal blog titled: “Lawyers Must Change How They Work.”

Noting that flat demand will continue to lead to robust competition and increased pricing pressure, Friedmann wrote: “To succeed, large firms must battle for market share while taking steps to protect profits. The best way to do both is by improving value and service. More value and better service means lawyers and firms must change how they work. Anything else is just window dressing.”

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