This is a live post from the Reinvent Law Silicon Valley conference in Mountain View, CA. Please forgive any typos or errors in conveying what speakers say. Now up, in a
six minute Ignite-style talk, is Kevin Colangelo, managing partner of Youson & Irvine on Building the Law Factory.
Prior to current law firm, was an executive at legal process outsourcing provider Pangea3. Will give insight into what it took to build a law factory.
Getting work done and efficiently can be accomplished in any location; does not have to be done in India, where Pangea3 (PS) started. In 2013, the template for efficient legal services is better known. In 2005, when P3 started, there was no model, no template for practicing law more efficiently, for leveraging process and technology.
It’s imperative to change the operating model. Law + Tech + Design + Delivery is Reinvent Law approach. P3 focused on People, Process, and Technology. The technology was the easiest part. We were able to log all calls, e-mail, attachments. So all workers could track all client matters.
Process discipline is not that hard. It requires defining, measuring, analyzing, training, testing, and continuous improvement. We shared with our clients the processes we used. Transparency is good. Helped show defensibility of work.
People is always the biggest challenge. Lawyer are similar everywhere, resistant to change. Uses analogy of Henry Ford building the first-ever assembly line. Ford needed to add culture to make the assembly line work. P3 made sure that everyone was engaged, irrespective of role in organization. Says that this culture is very much lacking in BigLaw today.
The Law Factory is a great place to be - if you maintain the culture.
A news item today explains how one large UK company has built its own “law factory”.
I periodically write about law factory as a way to handle high volume, lower value legal work. Whether it is suitable only for commoditized work or also ‘bread and butter’ legal matters remains, in my view, an open and interesting question.
On the lower end, Legal Week today reports on a fascinating development in Better out than in – how Carillion’s legal process outsourcing venture worked wonders for the company. The article explains how 30,000 employee UK construction firm Carillion developed, as the unexpected result of an acquisition, an owned-and-operated, 60-person, low-cost UK legal service center (in New Castle) that the company’s 12 panel law firms are required to use on employment matters. Furthermore, for “the in-house team, too, the move will free them up from much of the lower-level contract review work that is so prolific in a contract-driven business such as Carillion.”
The article reports that Carillion “has for the past few years had an ad hoc relationship with legal process outsourcing ["LPO"] group CPA Global.” It says that GC, Richard Tapp, believes the onshore solution “goes even further towards solving his quest to find a balance between the sheer volume of legal needs in a company the size of Carillion and the pressure to drive down costs.”
Coincidentally, last night I read, and commented on, a blog post by Steven Levy of Lexician, Offshoring and Legal: Lessons From the 787 Mess. Steve explains the difference between offshoring and outsourcing and argues that the benefits of offshoring are over rated. In my comment, I largely agreed with him though noted that I think there is still a good case to consider offshore document review for a high volume of documents in a review lasting reasonably long (probably months rather than weeks). I suggest you read his post and my comment for more details. What I should have said in my comment is that I also believe there is still a strong case generally for offshoring legal or business support for any high-volume tasks that can be clearly documented and objectively measured, especially tasks where the onshore professionals really do not need to interact directly with the workers (e.g., legal word processing or basic business research).
My take away from both items is that forward-thinking general counsels and law firms have plenty of opportunities in both the US and UK to reduce legal spend. They also have many good offshore options. Today, the question is not what options work but is there the will to act.
The College of Law Practice Management and IIT Chicago-Kent College of Law host the 3rd annual law practice legal Futures Conference later this month. It offers radical new ideas - meaningful to inside and outside counsel and to providers - to address the changes we are now experiencing in the legal market. Please consider joining me Chicago for this always-great event. (Full disclosure: I am a Trustee of COLPM.)
You can register at www.colpm.org and join the conversation in Chicago, October 28-29. Or click here to view the conference brochure (PDF).
This is a unique venue where you can engage in deep conversation. Unlike most legal conferences, we draw a great cross-section of people by area of expertise and organizational size. We have law firm executives, lawyers, marketers, technology thinkers, financial gurus, coaches, diversity experts, and more.
We will cover topics and ideas to help navigate the rapidly changing legal landscape. Our world-class speakers and Fellows make this a meeting you shouldn’t miss. Highlights of our agenda follow; and read to the end to see a description of the session I co-lead.
What is the Future of Price: Defining Value in Value Billing
The great recession and its law profession aftermath are driving more and more clients to demand fixed fee arrangements to ensure certainty and reduce legal costs. Law firms and their clients struggle to find solid principles that define that value. Hear a diverse panel of clients and firms including Toby Brown, Vinson & Elkins; Lisa Damon, Seyfarth Shaw LLP; Paul Lippe, Legal OnRamp, and Ellen Rosenthal, Pfizer on defining value. The audience will participate to identify whether universal concepts measure value across boundaries and invent the language of value for law practice.
Future View: Do You See What I See?
Where should we focus our attention? What have we already missed? How can we best prepare for “what’s next"? Sally King (SNR Denton) leads this provocative panel that includes Ross Fishman (Ross Fishman Marketing), Dave Hambourger (Seyfarth), Chris Murray (Jones Lang LaSalee Americans) and Chris Petrini-Poli (HBR Consulting). They will offer their perspectives on the law practice landscape.
Law Factories vs. “Bet the Farm” Firms
Will law firms of the future need to segment clients in new ways? Might some firms focus on “industrialized” practices: hyper-efficient work using automation and low cost resources? Might others focus on “bet the farm” cases using mainly top legal talent? Or do we need to focus on the “bread and butter legal work” middle ground? If the market segments, will it do so by practice, by firm, by matter type or along some other dimension?
Toby Brown, Vinson & Elkins; Tim Corcoran, Hubbard One; and Mark Robertson (Robertson & Williams) join me to lead a highly interactive session. Each of us will kick-off the session with a maximum 2-minute intro. We will organize and facilitate break-out discussions around a series of questions, including:
- What does it mean to industrialize law practice
- Can a single firm play both ends of the spectrum (factory and farm)?
- How big is the middle “bread and butter” segment and can this be industrialized?
- What large firm practices have industrial elements
- What consumer practices have industrial elements
- If paradigm is true, what are the implications for marketing. For professional development? For ethical compliance?
- Should law school teach lean six sigma, process mapping, or industrial engineering?
- Alternative service providers - cause or effect?
This conference never disappoints - I hope to see you there.
Law firms thinking about their business and operating models need to consider which practices and matters rise to the level of “bet the farm.” Clients willingly spend on such matters, tolerating generous staffing and high costs. Much legal work, however, is cost sensitive and might be better handled by a “law factory”. A good example of what LawFactory could look like is AmLaw 200 firm Fragomen, Del Rey, Bernsen and Loewy, LLP.
Last week a WiredGC post, The End of the Full Service Law Firm?, commented on the recent move by CMS Cameron McKenna to transfer its immigration practice to immigration specialty firm Fragomen. John Wallibach characterizes the transfer as
- “breathtaking” because CMS acknowledges it rather not do some work.
- “notable” because the move calls into question the idea of the full-service global law firm.
- “inevitable” because “[s]ome work cannot support higher fees and the fatter margins some firms covet.”
This got me curious about Fragomen. I found and read The Am Law Second Hundred-2008: Feasting on Leftovers Fragomen, Del Rey takes work that few firms want, uses a rate structure that most firms fear, and makes a fortune (The American Lawyer, 1 June 2008). Reading it, I see that Fragomen has many characteristics that I believe Law Factories need:
- Focus on a single practice: with 250 lawyers, it is much bigger than its next biggest immigration firm competitor at 35 lawyers.
- Handle high volumes: it has handled 50,000 immigration transactions annually for 3 years.
- Keep overhead low: its offices are not fancy (and until a then-recent move, the offices sounded pretty shabby).
- Leverage non-lawyer professionals: the firm has more than 500 paralegals, putting the ratio to lawyers at more than 2:1.
- Work on fixed fees: 95% of its work is charged on a flat fee basis.
- Take legal technology seriously: the firm has provided web-access to case files for more than 10 years; its paralegals have access to a digital best practices library of key flowcharts.
- Keep lawyer pay in check: new associates earn $125k, not $160k and do not come from top-tier schools.
- Be global: the factory is global with 15% of work outside the USA.
Law Factory does not mean low profits. The article reports that Fragomen shows “that a profitable business model doesn’t have to be built around high fees.” It notes that with “average partner compensation of $1.89 million and revenue per lawyer of $1.085 million, it rubs shoulders, financially speaking, with Irell & Manella; Munger, Tolles & Olson; and Williams & Connolly.”
While the article is three years old, a visit to the firm’s website suggests that, if anything, factory elements are even more so today. The lawyer directory lists about 250 lawyers and the About / Overview page reports “more than 1,000 immigration professionals” which puts the ratio of professionals to lawyers at more than 3:1.
Does Fragomen offer lessons? I certainly think so. BigLaw partners will rush to find how Fragomen differs from what they do. Of course distinguishing immigration from other practices is easy. More helpful, however, would be partners who strive to see the similarities and apply what works so well for Fragomen to their own practices.
The law factory handles high volume, relatively routine legal tasks (blog posts, presentation). Like any factory, it needs automation. Whether law firms or vendors own the automation is an interesting question.
Law firms historically have not led automation efforts. Document assembly is three+ decades old but has seen limited uptake. Automated coding - hot now in e-discovery - is vendor-driven. As additional technologies emerge, will law firms grab a piece of the action?
Consider From Building Minebots to Digging for Dirty Money in Business Week (23 June 2011), which describes Verafin software. It spots money launderers (and other financial crooks). Prior to Verafin,
“most banks used rules-based software that flags transactions if they match a pattern defined beforehand as suspicious, such as several transfers of money overseas in a short period. Verafin compares activity to an account holder’s profile and past behavior and assigns each transaction a ‘probability score’ that represents the likelihood it’s legitimate. King says that evaluating probabilities lets Verafin discern suspicious patterns that slip through conventional systems.”
I recently wrote that “BigData” might affect BigLaw. The BW article illustrates how very large data set, financial records here, can help spot wrong-doing.
I can envision similar approaches for other legal issues. For example, a large retailer with stores across the US and thousands of workers might have a central policy that prohibits employment discrimination. Let’s says it wanted to make sure each store actually hewed to its corporate policy. Perhaps data mining software like Verafin’s applied to employment records company-wide could spot patterns that signal possible illegal discrimination. That would give corporate HQ the radar it needed to enforce its policies.
Can developers of BigData systems do more than just spot possible trouble? Could they also dispense legal advice to deal with it? Not in the US. The biggest barrier is regulatory. Law firms that don’t run afoul of the unauthorized practice of law restrictions but vendors can. Another barrier is that law firms don’t like to invest and creating automated systems can require significant capital.
The UK is a different story. With the Legal Services Act taking effect late this year, alternative business structures (ABS) will be allowed. I suspect an ABS could develop such software and bundle it with legal advice. Moreover, ABS is a good vehicle to raise the capital to fund development efforts.
I hope that the UK will see outfits that bundle data analytics and other automated approaches to spot legal problems and offer legal answers to them. If that does occur, could US corporations ethically tap such systems for their US operations? A hard question but low cost solutions seem to find ways around regulatory barriers.
UK developments will, at minimum, likely illustrate how best to build automated law factories. And with luck, if not some legerdemain, those systems will find ways into the US market. Forward-thinking BigLaw firms, especially ones with sizable London offices, might even start to think about this and other automation scenarios.
Legal process outsourcing (LPO) has long meant “lower cost labor in India” to many lawyers. But LPO is fundamentally more about working smarter, not cheaper. A recent New York Times article drives home this point. And an American Lawyer op-ed explains the “news behind the news” in the Times.
Legal Outsourcing Firms Creating Jobs for American Lawyers, a June 3, 2011 front-of-the-business-section NY Times article, describes how LPOs such as Integreon and Pangea3 are creating jobs for American lawyers in low-cost US locations. It contrasts the growth of LPO, both onshore and offshore, with the challenges US law firms face, noting that “[t]op American firms have cut hiring or moved to a lower-tier pay system for many new associates.”
American Lawyer Editor-in-Chief Aric Press’ June 2011 commentary in the AmLaw Daily Blog explains both LPO growth and U.S. BigLaw challenges. In The Am Law 200: A Chasm with Consequences, he reports “a $1.1 million gap between the average profits per partner of the top 23 firms on The Am Law 200, as ranked by PPP, and the average of the next 27 firms.”
This gap, Press suggests, stems from how the market now segments legal work, with bet-the-farm matters on top and commodity work at bottom. The highly profitable 23 firms get the lion’s share of less price-sensitive premium work; the rest face increasing price pressure to win non-premium work. Addressing the question of whether this gap will continue, Press offers two “safe” observations:
- Price pressure likely will continue when the economy rebounds.
- “[W]hat’s striking about the behavior of many law firms over the past two years is that they managed their way to profitability by shedding colleagues who did not have enough work, not by examining how the work itself is done.” (Emphasis added.)
Aric Press’ complete comments in American Lawyer magazine expand on what he means by process. He observes that calling the number of hours lawyers bill “productivity” perverts the real meaning of the term. Real productivity mean more output per unit of input. To achieve that, he looks at two “disruptive forces":
- Knowledge management (KM), as instantiated by Kingsley Martin in his KIIAC system, which Press notes will “allow lawyers to reduce their costs of production”. (See my February 2009 post Measuring the Consistency of Legal Documents for more about how KIIAC helps standardize contracts.)
- More disruptive than LPO’s lower cost labor is the process improvement. Press cites the process improvement work by Ray Bayley (of Novus Law), who has systematically decomposed the document review process. (See my 2008 posts describing the InnovAction award Novus won for this work.)
I am glad that the legal press and lawyers now are examining how they practice. Once the examination begins, that the process must improve is an inescapable conclusion. Large swaths of legal work must be run through what I call “Law Factory", that is, industrialized with standard practices, appropriate technology, and cost-effective human resources. As more and more lawyers examine the process, I agree with Press’ implicit view that KM and LPO will grow.
[I first published a similar version of this post at Integreon.com, Explaining Onshore Legal Outsourcing Growth.]
I recently spoke with Ian Nelson of the Practical Law Company (PLC) about the role of professional support lawyers (PSL) in large US law firms.
Regular readers know that PSLs play a leading role in knowledge management (KM). They generate precedents, research new law, and, in effect, help standardize law practice. PSLs are relatively rare in the US compared to the UK. With clients demanding more value from outside counsel, Ian and I wonder why more US firms do not employ PSLs.
And for those that do employ PSLs, or plan to, we wonder if US firms will structure the roles appropriately to ensure maximum value, in part by using the services of PLC. Let me explain why I wonder about this and advocate that firms consider a role for PLC. One reason I decided a few years ago to take my day job with legal outsourcing provider Integreon is that I believe in the shared services model. After two decades in or serving large law firms and law departments, I saw tremendous duplication on non-core, non-competitive work. A shared services model such as PLC’s is a great way to solve the problem.
I recently suggested that law practice will likely diverge into “law factory” on one extreme and “bet the farm firms”. Evidence for this idea continues to grow. Aric Press, in The Am Law 200: A Chasm with Consequences (1 June 2011), observes that the “best billing work goes disproportionately to the most profitable firms.” The top two dozen firms have a growing lock on high-margin work; the rest face growing price pressure. Press concludes that
“what’s striking about the behavior of many law firms over the past two years is that they managed their way to profitability by shedding colleagues who did not have enough work, not by examining how the work itself is done.”
Amen. Eight years ago, in companion posts When Clients Come Knocking and Consistency in Service Delivery I suggested that lawyers need to analyze how they practice (the process of doing the work) and then develop best practices that standardize any repeated elements. So I am glad to see that idea broadcast by someone with a bigger megaphone and delivered by a company like PLC that actually offers a way to improve how work is done and to help standardize elements of practice.
If firms were to examine carefully and rationally how they work, most would conclude that PSLs help reduce cost by standardizing and streamlining routine elements of law practice. The history of PSLs in the UK legal market supports this: Over the last decade, the UK PSL teams have become much more efficient, in part because PLC provides the core service of PSLs as a shared, outsourced service, freeing up PSLs to focus on firm-specific projects. Aside from lowering total market cost, this also tends to standardize elements of law practice by providing a single source for practices and information common across firms.
I asked Ian if he thinks that PLC could, in some way, evolve into something of a standards organization. By way of analogy, I mentioned the private, for-profit Arcom, which calls itself the “The Leader in Specification” for architects. Arcom’s specification libraries allow architects to “avoid hours spent researching changing products, technology, and reference standards.” Hmm, shouldn’t lawyers have the same?
Ian agreed that PLC could, in fact, help the US legal market establish and maintain standards across firms. In essence, that is part of what they do. Their services such as ”What’s Market,” how-to practice notes, checklists and standard forms and clauses, are meant to level the playing field to ensure a consistent and high-level of knowledge across the ranks. Ian did acknowledge however, that many firms are reluctant to embrace the “standards” label but the market pressure likely will force the “artisanal mindset” to change.
Irrespective of labels, we did agree that both law factories and bet-the-farm firms would benefit by more consistent and lower-cost approaches to handling repeatable elements of law practice.
Now back to the US market. After Ian and I spoke, he penned a post at 3 Geeks, BigLaw’s Acceptance of Practice Support Lawyers: Ready for Primetime in which he suggests that some of the lawyers working at Orrick’s Wheeling, WV facility and at WilmerHale’s Dayton, OH facility are, in essence, serving as PSLs. My understanding is that lawyers at both are more akin to staff attorneys focused on document review. I do agree, however, that the combination of low-cost location and non-partner-track lawyers does provide a new and interesting basis to hire PSLs or their equivalents.
To tie this all up, let’s focus on legal economics. If general counsels and large law firms widely adopted alternative fee arrangements (AFA) that capped fees, this whole discussion might be moot. In that scenario, GCs could focus on price and outcomes and not have to worry about process. As more work moves to an AFA-basis, firms will have to examine how the work itself is done: they will need to minimize time spent on matters to protect and grow profits. Wasting time on repeatable, wheel reinventing matters simply makes no economic sense. Consequently, GCs who seek value ought at least consider checklists that indicate their outside counsel are working efficiently. High on this list would be appropriate use of PSLs and services like PLC.
A Sunday post by Adam Smith, Esq. post provides good perspective on the theme of “law factory” versus bet the farm firms.
Who’s Signing Your Paycheck? opens with an anonymous letter from a BigLaw partner to Adam Smith, Esq. asking
“why law firms seem to be supporting the building of a “star” culture, rather than going the brand approach like the management consulting firms and the accounting firms.”
The answer is that building brands is hard:
“A brand promises a certain consistent experience, an expectation of a particular quality level, experience of service, consistency, sameness (in the best sense), an implicit guarantee. But law firm partners are anything but designed or acculturated to delivering a ‘consistent experience’ or ‘a particular quality level.’ It seems at odds with our very essence.”
Until reading this, I had thought about the idea of law factory as applying only to types of matters or tasks on matters. Bet-the-farm firms focus on high value, unusual matters and on tasks that could not easily be routinized; law factories handle the rest. The post makes me realize that even elements of how bet-the-farm firms deliver service require consistency.
Brand consistency is simply a “service level agreement (SLA)", though typically implicit rather than explicit. The idea of SLAs in law firms is slowly emerging but typically for staff support functions, not what lawyers do. Firms could develop an SLA that defines what clients can expect from their lawyers. Achieving a specified SLA requires consistency, which suggests that even a bet-the-farm firm needs factory-like elements to develop a meaningful brand.
Extending this thinking, we can question the whole theory of BigLaw. The absence of BigLaw brands supports the commonly heard assertion that clients don’t hire firms, they hire lawyers. If brand does not matter or is so hard to build given lawyer attitudes, then what role does the BigLaw platform really serve?
Before answering, consider Rees Morrison’s post, also on Sunday. In Alternative Firm Arrangements surpass Alternative Fee Arrangements for cost control he suggests that “law departments need to change firms, not fees, to really move the needle” on costs.
Also consider Mark Hermann’s post today, Inside Straight: How De-Equitizing Partners Can Undermine A Business Model at Above the Law. He writes
“If you’re at risk of being de-equitized, then it’s time to hedge against the risk. That means looking out for yourself, even if your self-interest doesn’t align perfectly with the institution’s best interest. When you read in the Journal about a new case, or a client contacts you about a potential big piece of business, it’s time to grab the opportunity and run. You may or may not land the business, but at least you’ve given yourself a chance. No more reporting up through the ranks, giving away the opportunity, and then being at risk that the firm will decide you’re superfluous.”
Perhaps the future will see the rock star lawyers - strong individual brands - working in small boutiques. If Morrison is right, then clients will increasingly choose such firms. If Hermann is right, there is not much glue to hold together BigLaw anway and rain-makers / super-stars will jump at the first opportunity.
So “bet the farm” lawyers might supplant bet-the-farm firms. Individuals who are the super brand rainmakers could sub-contract work to whatever ‘platform’ is most suitable for a given matter, be it a BigLaw firm, regional firm, or alternative service provider such as an LPO. All these other providers will have to run with factory efficiency and SLAs to survive.
I am not willing to put odds on this scenario but it’s intriguing. If true, those who are not superstars or already working for highly efficient organizations may need to worry.
Three articles today give us a read on the BigLaw market
This morning AmLaw Daily (9:41 AM) reported The Am Law 100 2011: Back in Black. This afternoon (5:45 PM), they reported The Am Law 100 2011: Growth Returns. Both report growth of 4%. Take that with a grain of salt though. The morning piece notes that, excluding two big firms to adjust for methodology, growth is only 1.4% And in the afternoon we learn only “eight firms managed double-digit gross revenue growth in 2010″ and “60 percent of Am Law 100 firms increased revenue in 2010″. That means 40% shrunk.
The legal market has not returned to the high growth of a few years ago. The higher profits reported reflect headcount reductions more than a robust market. Headlines notwithstanding, we still must ask “what does the new BigLaw normal look like?”
Aptly enough, Paul Lippe addresses that question today in Who Sees ‘The New Normal’ Most Clearly? Law Firms, Law Departments or Clients? (ABA Journal). It’s a great read. My take-away is that you can’t answer the question by looking at what the skeptics say, you have to answer it by looking at what the leaders do.
The ultimate answer to the question lies not in financial results but in what BigLaw actually does. So let’s zoom in… Can Technology ‘De-Commoditize’ Document Review?, by Robert W. Trenchard (partner) and Steven Berrent (managing director) at WilmerHale, is a great e-discovery article.
One conclusion I draw is that WilmerHale is not trying to keep “LawFactory” work. In short, by using predictive coding, the authors say that associates no longer have to suffer the drudgery of endless document review. Instead, they can spend time to understand facts and tell a good story, which is, after all, what litigators should do. (See my June 2009 post, E-Discovery Goal: Win or Avoid Disaster?)
So arguably the days of charging clients for armies of associates or contract lawyers (and profiting mightily from it) have passed. This is not just technology at work, it’s a reflection of how BigLaw has to think about law practice and where it can earn high margins - and where it can’t.
With two years of shrinking revenue and one year with 40% of firms still shrinking and only a handful growing rapidly, it seems harder and harder to argue that nothing has fundamentally changed. Of course, we will not really know for sure until we return to robust economic growth. By that time, many of the skeptics that Paul Lippe writes about will have retired.
Lately I have wrestled with the question of whether large, high-end law firms ("bet-the-farm") can offer more pedestrian, lower-end services ("Law Factory"). A New York Times article yesterday, Wreckage at the Intersection of Corporate and Consumer Markets, suggests doing so may be very hard.
Reporter Sam Grobart observes that “The record of powerful companies charging into the consumer marketplace, only to retreat in humiliation later, is long and distinguished.” Prompted by the announcement last week that Cisco is shutting down the Flip video product, he looks at why business-to-business (B2B) technology companies typically fail when they enter the consumer market (B2C)?
After going through a litany of failed attempts, he cites a business professor, writing “it is important for companies to realize what they are good at and what they are not.” Further “Changing a company’s direction midstream — or adding a new direction — is a challenge of the highest order.”
This lesson likely applies to BigLaw. I read this article as supporting my conclusion in “Bet the Farm” Versus “Law Factory": Which One Works?: “law firms will struggle to manage both bet-the-farm and law factory”. Even if a blue chip firm wants to offer LawFactory services, doing so may well be as hard as it is for a B2B company to become a B2C company.
Last month Toby Brown and I co-wrote “Bet the Farm” Versus “Law Factory": Which One Works?. We explored how large law firms could segment their business. Toby discussed tiers of matters and I law firm sub-brands. Today I extend the brand analogy.
I asked whether law firms could operate multiple sub-brands, drawing an analogy to the Hilton Hotel chain, which operates both luxury and value properties. My stay this weekend at the Waldorf-Astoria, a Hilton luxury brand, made me think about “brand” experience and what BigLaw might learn from it.
The Waldorf-Astoria brand disappointed me in many ways:
- Check-in. Check in took 10+ minutes. Waiting some 10 minutes for the receptionist to see if a different room configuration was available, I inferred he had to search manually. With my legal tech and KM background, I had expected Hilton to provide faceted search to the front desk. Check-in was further delayed by printing, in real-time, several vouchers. In contrast, at recent Hilton Garden Inn and Doubletree stays, check-in took about 90 seconds, with vouchers pre-printed.
- Physical Plant. Multiple issues: (1) Beyond seemingly unreasonable elevator wait times, I was unhappy when a moving one stalled jerkily and then re-started for no apparent reason. (2) A room-darkening blinds was tattered, dirty, and would not stay down. (3) The water temperature changed intermittently while I showered even though I did not touch the controls. (4) In my opinion, the room felt generally run-down. I’ve never had such problems at “lesser” brands.
- Other Problems. (1) On check-in, I was promised a free newspaper. I did not find one outside my door in the morning nor did I receive instructions on how to get one. (2) I had a voucher for a free breakfast at the onsite Starbucks. At 9am there 20 people in line and I had no time to wait. In contrast, at Hilton Garden Inn, coffee is available throughout the day, for free, with no wait. (3) The bill I found under my door was for someone else. So much for accuracy and privacy.
Brands are promises of what consumers can expect in a product or service. For me, Waldorf broke its promise many times over. There are lessons here for BigLaw. A “Bet the Farm” firm offers an implicit promise. The most important is “good outcome.” I easily enumerated how Waldorf broke its promise; how do BigLaw clients know that top tier firms deliver their promises. Comparing outcomes is hard and I wonder if clients apply circular reasoning, thinking “I used this fabulous firms so the result most have been fabulous.” So lesson one for clients: be able to rate your experience, especially the outcome achieved, objectively.
With outcomes hard to measure and few firms having a lock on particular expertise, other brand attributes matter. Clients also want predictable price, timely sharing of key information, efficiency, responsiveness to inquiries, knowledge of the client’s business and industry, and friendly service. Just as a hotel stay is an amalgam of many discrete experiences, so too is a law firm’s representation of a client. I was surprised that Hilton’s “law factory” brands delivered more consistent and higher quality service along many dimensions that matter to me than did its luxury brand.
So lesson two is that industrializing repeat processes makes for good customer service. Industrializing does not mean impersonal - it means making sure it happens and happens consistently. Waldorf’s grand design and bed turn-down service did not make up for a lousy experience. Large law firms that lack systems and processes for meeting client expectations consistently are at risk relative to those that do. The prevailing mentality of Tier 1 law firms is that everything is “one off”. Even if that is true for legal work, it’s not for virtually all other aspects of the service experience. So even a “bet the farm firm” should offer the equivalent of always-refilled hot coffee and pre-printed check-in vouchers.
Lesson three that I draw is that service providers need to have systems to determine what their clients think. At minimum, that means asking questions and responding to concerns. Hilton does ask via comment cards and providing an e-mail address. As Jerry Seinfeld might say of Hilton, “you know how to ask, but you don’t know how to answer.” I sometimes wonder if law firm interview programs are not creating a similar problem.
And a fourth and final lesson is that sharing experience helps the market. I do not expect disgruntled large law firms clients to write blog posts like this. But it is not clear how widely they share their service frustrations even privately, which dooms other clients to learn for themselves. Various rating systems now developing may address this problem but clients have to be willing to complete the rating forms.
In sum, with my recent “bet the farm” brand experience, I place even greater value on routine, flawless execution of a whole series of elements that make up a service experience. Charm and grace have a place do not make up for bad service. For law firms, results matter, but so too does consistent service delivery.
Toby Brown of 3 Geeks and a Law Blog and I consider in this joint post the impact of “Law Factories” on the future of large law firms.
Introduction – by Toby Brown and Ron Friedmann
Law firms face an uncertain future: competitive markets, intense price pressure, and client demands to change. So they are beginning to ask fundamental questions about the nature of their business. These include what shape should a firm be and how will a firm approach this new market? Will firms be “Law Factories” that provide services to numerous market segments? Or will they be niche players that protect their brands in high-end markets and maybe even spin-off sub-brands for servicing mid-level and low-end markets?
We started discussing this question after an ILTA session last August where Ron was a co-panelist. The panel suggested that law firms would eventually need to choose one of two strategies: bet the farm or law factory. This oversimplifies but helps air important issues. This question is not academic - consider Howrey’s demise. Managing partner Bob Ruyak attributed the firm’s fall, in part, to more efficient e-discovery vendors and document review, which is a type of law factory.
So we decided to take up this question and in a side-by-side blog post. Both views are shared on both of our blogs. We hope this spurs dialog on how firms are structured and sell themselves to their clients. We welcome comments, input and even offer up guest posting opportunities for those who want to take on this subject with us.
LAW FACTORY LESSONS FROM HILTON HOTELS by Ron Friedmann
The Business Analogy: Hilton Hotels
As a frequent traveler who typically stays at Hilton brand hotels, it strikes me that hotels offer a useful analogy for thinking about law factory versus bet-the-farm firms.
Hilton offers multiple sub-brands to appeal to different buying segments. Conrad and Waldorf Astoria cater to the luxury crowd. At the other end of the spectrum, Hampton Inn appeals to the budget-minded. Multiple brands in the middle offer different feature-price trade-offs: Hilton Hotels, Hilton Garden Inn, Embassy Suites, Homewood Suites, and Doubletree.
Each brand operates in a discrete location; indeed location is an attribute that separates brands. Individual Hilton brands also tend to have similar architecture and design. Because location, architecture, and amenities differ significantly, brands have different cost structures. A Hampton Inn in a distant suburb without room service, doorman, or concierge costs less to operate than a downtown Hilton Hotel offering these plus other amenities.
All Hilton brands presumably benefit from centralized, shared services such as branding, marketing, purchasing, and the all-important loyalty program, which Hilton has just started promoting heavily. Though not precisely a shared service, I assume Hilton shares hospitality know-how across sub-brands. (Do they have a formal KM system!?!)
From the consumer perspective, I suspect most frequent travelers understand the difference among Hilton brands and choose the sub-brand based on trip-specific travel needs and budget.
Lessons from Hilton
The Practice Area Analogy
What can law firms learn from Hilton? One analogy is to consider practice areas (e.g., M&A and T&E) as sub-brands. Consider two practices seldom seen at top law firms: immigration or labor / employment. If bet-the-farm firms such as Cravath, Davis Polk, or Slaughter & May were Hilton or Marriott, they might also have these and other “law factory” practices. Like Hilton, they could house the lower-end practices in separate offices with cheaper real estate.
Simply paying less rent, however, does not make a non-premium practice profitable. The entire support structure for lower margin practices must change: less lawyer support (e.g., fewer secretaries), more fixed or alternative fees, and higher leverage.
Hilton and its competitors clearly know how to operate properties at different price-value points. It is not at all obvious that law firms do. I can’t think of many (any?) that run practices with dramatically different volumes, margins, and support requirements.
Why are there no obvious examples? Perhaps clients would not buy multiple services from “law firm chains”. That seems a weak hypothesis to me. The better explanation is that law firms lack the management talent and capital. Regulatory constraints may also play a role.
Absent these constraints, we might see the emergence of law firm holding companies that can take advantage of shared services and be the equivalent of Hilton. Watch the UK, where outside ownership will be allowed soon, and Australia, where it is already allowed.
Matter Tasks as an Analogy
Another analogy is to view unbundled (disaggregated) tasks within a single practice as akin to sub-brands. For example, in M&A, the core merger agreement is like the Conrad or Waldorf but many lesser agreements are more like Hampton Inns.
The market seems to be moving in just this direction today. The proliferation of service providers - for example, boutique law firms, high-volume staffing companies, high-end staffing companies (e.g., Axiom), and legal process outsourcers (LPO) - suggest the market is already disaggregating tasks.
A key question is one law firm can unbundle sub-tasks. We do have some examples. In the UK, Berwin Leighton Paisner has its Managed Legal Services and Lawyers on Demand and Herbert Smith its Northern Ireland document review center. In the US, WilmerHale and Orrick have low cost centers (Dayton, OH and Wheeling, WV respectively) where staff attorneys support law practice.
In my recent Integreon blog post US Legal Market Trends Favor Law Firms Working with LPO I suggested, based in part on a recent Citi / Hildebrandt report, that large law firms can benefit by partnering with LPOs to support high-volume legal work. Of course, working for an LPO I might be biased. That said, large law firms have little experience running high volume legal support operations with industrial discipline. Of course firms can “industrialize” – the examples cited are instructive – but as a practical matter, mindset, management, and capital constraints make it difficult .
My current conclusion is that law firms will struggle to manage both bet-the-farm and law factory. Law firms today develop deep but rather narrow capability. Beyond management, capital, and regulations constraints, I would add lack of courage and imagination. A more neutral way of phrasing this is by reference to The Innovator’s Dilemma (Clayton M. Christensen), which explains why successful organizations rarely change their business model and why upstarts often eventually eat their lunch. We may yet see a bet-the-farm law firm operate an industrial-strength law factory but I suspect it will not be at an AmLaw 100 firm.
Suiting up for the Law Factory - by Toby Brown
The Banking Analogy
“Commodity” is a dirty word at most law firms. It implies a ‘less-than’ level of expertise and is not the sort of brand any thoughtful lawyer would want for their firm.
But should they?
The opposite of ‘commodity’ in this context is “Bet the Farm” work - high-end, high-value niche services; the kind clients gladly pay full hourly rates for. In even the recent past, a lot of firms have been able to get away with pricing all of their services at bet the farm rates, since they held the market power and could designate a greater portion of their services as high-end, high rate work. But that’s not the case anymore, as evidence in the market by expanding buyers’ market power, and the rise of discounts and AFAs. I have argued elsewhere that lawyers, via their monopoly position, were able to artificially hold off the commoditization of their services. The bottom-line: most firms services are no longer in the high-end niche portion of the market. Pretending to be there, doesn’t make it so.
So where does that leave law firms? I see they have two options. First – stay very focused on the high-end, high margin niche segment of the market and then develop lower brands as noted in Ron’s post. Or firms admit they can’t play exclusively in that space and embrace the commodity concept a.k.a. as a Law Factory play. I believe the latter approach makes sense for most law firms, merely based on the fact that there is room for only a very few firms in that high-end segment. But … will embracing commodity services tarnish a firm’s brand, excluding it from high-end opportunities?
Banks present a feasible model for law firms to consider. They serve a very broad piece of the market, yet maintain a high-value brand. They sell basic banking services to the mass market and sell specialized services to high net-worth individuals and companies.
A Law Firm Scenario: The Three Tiers of the Patent Litigation Market. From a Case Study I am preparing, I will paint a picture of a new patent litigation market. I suggest this is a relatively accurate picture, but know some variations and modifications of the exact numbers should be in order. In any event, this concept demonstrates the Law Factory approach from an economic / market perspective.
Tier 1 – High stakes matters. This is the classic “Bet the Farm’ work. I would put it at 15-20% of the market, and declining.
Tier 2 – Mid-level stakes. These matters will have valid legal claims involving enough money they require a reasonable legal response, but not at the level of Tier 1. This segment of the market has seen increasing price sensitivity. Two to three years ago the work may have commanded fees near Tier 1 level. Put this segment at 50-60% of the market and growing.
Tier 3 – Nuisance matters. This tier covers questionably valid legal claims and thus low financial exposure. This segment has high price sensitivity and clients benefit from quick, low cost resolutions. Put this segment at 20-25% of the market, relatively stable but with occasional spikes.
Given this market dynamic and utilizing the banking industry concept above, how might a law firm approach this market?
What this segmentation tells us is that the mass of market spending is occurring in Tier 2. And since prices are dropping that this work is begging for some innovations to moderate the costs. So although Tier 1 may have had good margins, it’s a shrinking market with a large pool of competitors. Unless your firm is willing to invest significant dollars in securing this market segment, which will cut into those margins, you will be wasting your time. This doesn’t mean you will ignore this segment, but only that you approach it smartly. Tier 2, in contrast, presents much greater opportunity for market growth and reasonable, sustainable margins. To do well in this segment, a firm will need to “commoditize” some of its work.
In contrast, Tier 3, may well fall off the radar of larger firms. To be profitable here requires serious changes in the personnel and compensation structure of a firm.
The hard questions for law firms are - Can they actually make these changes and then maintain their brand across market segments?
I would suggest a relatively simple and easy to accomplish approach would be to target Tier 2 work and watch for Tier 1 opportunities within your client base. A given client can have work in all three tiers. So, by holding the client relationship strong via Tier 2 service, you create the opportunity for getting Tier 1 work from them without having to overspend on market protection. The internal challenges will come with making practice management adjustments in order to be profitable in Tier 2. I suspect a number of firms have slipped into this approach by accident. However without making changes, their margins in Tier 2 are disappearing and they will struggle to maintain quality service. Absent a proactive approach here, Tier 2 work will move away from a firm to the more innovative firms, leading to a dissolution of Tier 1 opportunities.
As an aside, let’s assume for a moment a firm adjusts internally to serve all three segments of this market. Should they then go after smaller businesses or other “low end” clients? This is not a brand risk. JP Morgan Chase servicing low-end markets will not hurt its brand, but may in fact enhance it as it demonstrates depth and strength.
Although you do reach a point when banks will not service a segment. But it’s not a brand issue that stops them. Instead it’s the “cost of customer acquisition and maintenance” that stops them. When no other organizational structures are available and it becomes impossible to make money on a customer segment, the banks leave the segment. Currently this is shown in the growth of “payday loan” check cashing services, an alternative provider serving this segment.
This shows that concerns about brand reputation issues can be addressed when law firms chose to embrace commodity type services.
So the elephant left in the room is: Can law firms restructure in this way? I would argue that structures for servicing Tier 1 and 2 markets are definitely possible. However, I question how many law firms will have the institutional will to implement them. Suggesting that certain partners’ comp should be adjusted to reflect their real contribution to the bottom line will be a difficult conversation. This means the less radical the adjustment, the more likely it is feasible. I would argue that shifting to a Tier 2 provider fits this approach. Process innovation combined with Legal Project Management (LPM) should suffice for this.
In contrast, firms that chose the “Bet the Farm” approach will need to dramatically increase their investment in expertise, marketing and client relationships. This approach seems much more challenging for a firm, since their willingness and ability to make large investments in their firm is quite limited.
The Law Factory is not only possible, it may be the only viable option for a large number of firms. Absent this type of approach, firms will see a shrinking market and declining margins. In a market that is driving the commoditization of services, failure to embrace that change will result in many failed firms.
With Legal Tech New York ending today and the monster storm, don’t miss two interesting, and seemingly unrelated news items from today slip by. One is that Allen & Overy is opening a low cost, onshore service center. The other is that Cisco has launched a privacy and security compliance website.
Legal Week reported today in A&O to launch 300-strong support centre in Belfast that Allen & Overy will move some middle office and legal support services to relatively low-cost Belfast, N. Ireland. “The City giant expects to have as many as 300 staff based in Belfast by 2014 and is to begin consulting on proposals to transfer 180 roles from London by the autumn.” The new center will deliver “core internal business support processes, as well as… some routine elements of legal work.” This appears conceptually similar to WilmerHale’s recently opened Dayton, OH business services center (which, by the way, plans to have about 40 lawyers reviewing documents).
Separately, the Hogan Lovells Chronicle of Data Privacy blog wrote today that Cisco Privacy Site Features Hogan Lovells Cloud Compliance Primer. Cisco’s site at http://www.cisco.com/web/about/doing_business/legal/privacy_compliance/index.html wants to “share with our customers, colleagues in other legal departments and other interested parties our privacy and security compliance journey - and it is a journey since the legal framework and regulations in this area are still evolving.” After three days at LTNY, a closer read of the site will have to wait. My quick look, however, suggests it is rich source of useful information. I hope that other law departments share information to feed what I view as ‘open source law’ (not to be confused with the law of open source code).
In my view, these two disparate news items are indeed related. Both suggest the continued move to what I call “law factory”. The days when lawyers can claim that every legal question requires highly customized work performed in the most expensive cities are passing. Today, support - both legal and middle office - can be provided from many low cost centers. And both clients and lawyers can increasingly use self-service tools in place of expensive lawyering. Both initiatives bring costs down, albeit in very different ways. Both point the way to alternative ways to deliver legal support and service.
Recently I have been exploring ”Law Factory” – the concept that the legal market will offer low cost, industrialized processes for routine work that are separate from “bet the farm” operations for high-stakes matters. An open question is whether the two can co-exist under one roof. Recent news points to one way for the two to co-exist.
Herbert Smith to open Belfast office to handle disputes document review in Legal Week (24 Nov 2010) reports that UK law firm, Herbert Smith will open a wholly-owned document review center in Belfast, Northern Ireland. Belfast is a relatively low cost, onshore location in the UK.
Herbert Smith is prominent for its strong and large litigation practice, definitely a ‘bet the farm’ firm. So what motivated opening a separate law factory? Sonya Leydecker, the partner responsible for the Belfast center explains that the Belfast Center
“will enable us to offer clients a combination of quality, efficiency and value for money. Clients are increasingly looking to their lawyers for more imaginative approaches to the management of disputes. In particular, complex projects such as disclosure are important but can increasingly be systematised and managed in new ways. The Belfast office will make a new range of resourcing options available to clients.” [See the Herbert Smith press release.]
A few large firms have low-cost, captive centers to support their middle offices or law practices: Orrick (Wheeling, WV), Wilmer Hale (Dayton, OH), White & Case (Manila), Baker McKenzie (Manila), and Clifford Chance (Delhi). Other firms work with legal process outsourcing companies to achieve a similar effect. (I work for Integreon, an LPO that offers such services.)
These examples illustrate how large firms can move some of their support needs to lower cost centers with economics more like LawFactory than Bet the Farm. An open question is whether the same is true for entire practice areas. Consider that only a few large US firms have immigration law practices. Or that large US law firms with big employment law practices tend to have lower cost structures and margins their BigLaw brethren.
Over time, additional law practices may be subject to the same cost pressures as immigration and employment law. If so, it will be interesting to see whether BigLaw finds a way to run them as Law Factories or if they spin off into separate firms. As for the factory elements integral to BigLaw-Bet-the-Farm cases, the pressure will increase to find lower cost ways of managing them.
I think quite a bit is happening in the legal market to develop the LawFactory concept but The Lawyer takes a seemingly different view. Authority figures add up (today, 13 Dec 2010) is rather critical of UK law firms response to the Legal Services Act. “No firm, as yet, has come up with a coherent vision of disaggregated legal services and applied it forensically across the business, with all the HR shake-up that implies.”
I welcome reader comments on or examples of the Law Factory idea.
The Lawyer published a great article on Monday, Colt resolver… Robin Saphra, group GC at Colt Technology Services, uses a combination of legal models to boost service levels. It explains how Saphra has unbundled the legal services Colt buys.
Colt took a “hard look at the spectrum of legal services” and decided to use “a combination of models that takes in internal advice from a 45-stong team; panel firms; an offshore captive operation; contract attorneys; and a deal with an external firm [Berwin Leighton Paisner’s (BLP)], which is Colt’s preferred interface for a string of overseas relationships.”
BLP’s relatively new managed legal services division handles Colt’s international employment work. Colt realized that it did not have the scale to hire its own employment lawyer everywhere. While it could have retained multiple national counsel, Colt recognized this could lead to inconsistency and inefficiency. In the GC’s word, BLP offers a “joined up” approach.
Colt was also attracted to cost-effective offshore lawyers. Rather than work with a legal process outsourcer (LPO), however, Colt chose to set up its own 6-lawyer captive in Bangalore. That team will work on medium-volume, reasonably complex work.
Colt’s move represents the future of legal services. I was on an ILTA 2010 conference panel where we discussed the future of law firms, positing that practices if not entire firms would segment into “Law Factory” or “Bet the Farm” firms. (See A New View of the Automated Law Firm.) Colt’s move can be viewed as separating the two.
As GCs unbundle and dis-aggregate legal work, more will move some to offshore lawyers. Working for an LPO, I may be biased, but Colt’s decision starts shifting the question from “LPO or not” to “what’s the best way to tap offshore lawyers as part of the resource mix.” Some companies will choose a captive, others an LPO.
On the law firm side, BLP clearly understands the LawFatory v Bet the Farm models. Beyond its MLS factory, it also offers Lawyers on Demand, which I think of as “Axiom-like.”
The moral here is “unbundle - now”. The message for outside counsel is that they better have a sharp focus on their value proposition and figure out whether they are working in a Law Factory or a Bet the Farm practice.
[I first wrote a similar post at the Integreon blog, Learning from a General Counsel Who Has Unbundled Legal Service (10 November 2010).]
Can a “law factory” and “bet the farm” approach to law practice co-exist under one roof? As law firms adapt to falling demand and price pressure, that question is increasingly important. A recent survey provides some data that co-existence may be hard.
For background on the idea of law factory see my prior blog post Law Factory versus Bet the Farm Firm - learning from business ("We postulated that firms would gravitate toward poles on a spectrum:’bet the farm’ firms focusing on high-stakes matters versus ‘law factory’ firms focusing on run of the mill cases.") and our ILTA presentation (A New View of the Automated Law Firm.)
Document review is a high volume and critical task in litigation and other matters. It has long been apparent that efficient and effective document review requires an industrial mindset and factory controls. It’s never been clear to me, however, that leading law firms share this view. Over the years, I have had many a conversation with lawyers and other professionals at BigLaw about how they run doc reviews and most, in private, admit that it is not a smooth process.
So I was not overly surprised to read the Cowen Group’s recent study The Current State: eDiscovery Practice Groups at AmLaw 200 Firms. Of the 87 of the AmLaw 200 that “have an area or practice group dedicated to handling eDiscovery matters,” only 21 “have an area or practice group dedicated to handling document review” and two-thirds do not have “attorneys [who] provide exclusive document review services at each firm.”
The legal profession is 20+ years into high volume discovery and document review and 10 years into e-discovery. If the AmLaw 200 have not industrialized a core process by now, it’s not clear they want to, can, or will. Observing the AmLaw 200 deal with document review these last two decades has felt a bit like watching the US automotive industry - at least until the recent bankruptcies.
Unless a firm has lawyers whose full-time focus is document review, I doubt it can efficiently run a review factory. So I read this finding as one data point that it is hard for “law factory” and the “bet the farm” to co-exist.
Another example - though I don’t have a study to point to - is immigration law. My sense is that this practice, with its high volumes, complex regulations, and detailed technical requirements inherently requires a factory like approach. I don’t think it’s a coincidence that many large law firms don’t have an immigration practice and those that do have found ways to automate it heavily.
Comments welcome on other examples of where law factory and bet-the-farm can co-exist or not.
[Disclosure and meta-comment: My day job is with an LPO (legal process outsourcer) that has a big and highly routinized document review offering. Any “bias” I have toward the factory view is long-held. Already in 1990 I worked on a law firm team to industrialize document reviews. From the macro (box level reviews) to the micro (the way to apply Bates labels to paper) to the technology (scanning, OCR, full-text, and structured databases), we re-engineered the process and put in place metrics and controls.]
[For those who Tweet and want to write about this subject, I encourage the use of hash tag #LawFactory]
At the 2010 International Legal Technology Conference session “A New View of the Automated Law Firm", my co-panelists and I discussed how changing market dynamics and technology might force firms to become either a “Law Factory” or a “Bet the Farm” firm. With this post, I inaugurate a new blog category to continue that exploration..
Gerard Neiditsch, Executive Director Business Integration and Technology, Mallesons Stephen Jaques; Jeffrey Rovner, Managing Director for Information, O’Melveny & Myers LLP; and Mary Abraham, Counsel, Debevoise & Plimpton LLP, and I presented at ILTA in Las Vegas on Aug 25, 2010 (INFO11, #INFO11 hashtag).
We postulated that firms would gravitate toward poles on a spectrum: “bet the farm” firms focusing on high-stakes matters versus “law factory” firms focusing on run of the mill cases. Think “hand crafted” versus “industrial processes.” For more information, see our slides A New View of the Automated Law Firm or read the blog posts summarizing the session: Legal Current post by Andrew McLennan-Murray, Applications Integrator, Thomson Reuters, Legal and Hubbard One post by Charlie Vanek.
Two recent Business Week articles (Sept 6-12) prompted thinking about this theme. Ryanair’s O’Leary: The Duke of Discomfort explains how the CEO of Ryanair, Michael O’Leary, “is remaking commercial flights in his image: shabby, crabby, and cheap, cheap, cheap.” At one time, all airlines thought of themselves of high end and exclusive, charging high prices and offering comfort. Ryanair reverses the model, doing whatever it can to bring price down, eliminating comfort as a byproduct of doing so.
O’Leary illustrates that re-thinking an established product or service changes the game. The moral is not that prestigious BigLaw firms should cheap down service. Rather, it’s that the accepted wisdom about what clients want may be wrong. What looks like a single market may have many segments. Bet-the-farm BigLaw firms may find that some of their practices need to be more like Ryanair. In our preparation and during the panel, we struggled with the question whether these law-factory practices could survive in bet-the-farm firms. For whatever it’s worth, in the airline industry, high-end and discount cannot seem to co-exist in the same company.
P&G Looks to Franchise Tide Dry Cleaning offers a seemingly opposite lesson. It explains that Procter & Gamble will franchise the Tide detergent brand to local dry cleaners. Here, a widely-recognized and trusted brand will try to bring order and consistency to “a fragmented market where consumer expectations aren’t high.” (Personally, I’ve never seen a dry cleaner I liked.) A potential lesson here for BigLaw is that their brand names may bring value to some law factory work that has, to date, left clients unsatisfied. But just as P&G faces risk in extending its brand, so too would BigLaw. And note that P&G is not going directly into the dry cleaning business; franchising off-loads the operations. That model is likely not easily available for law practice.
The business world offers many models and experiments. Whether we really see a dichotomy of firms is an open question but it would be shocking if we did not see more variation in the future than we have in the past.