The recently released FT report on US Innovative Lawyers 2012 points to two ways large law firms can compete for business.
Innovation in law practice is one. About this the FT observes that
“[m]ost of the top US law firms have similar strategies – to focus on retaining premium work and to avoid commoditisation. To achieve this, they need continually to prove that they are ideal for handling complex, high-value matters.”
It seems obvious that few firms can carve out the “premium” position.
Innovation in service delivery and client value is a second way, what the FT calls the ‘business of law’. In my view, this will determine who wins the vast middle ground of “bread and butter” legal work that lies between premium and commodity.
The Business of Law awards go to many familiar innovators, for example, Axiom’s Managed Service business, Littler’s CaseSmart, Crowell’s project management, and Seyfarth’s Lean. For my tech-focused readers, I have bad news: searching the PDF of all award articles for ‘technology’ and ’software’ yields nothing new or surprising.
The FT US managing director offers what I consider an explanation for limited action on the thin Business of Law front. He writes
“while the US legal profession is, moving into the 21st century in how it communicates with clients, the report suggests that, in terms of process innovation, US firms lag behind those in the UK. While there are the beginnings of change, relatively few top firms have tackled seriously their hourly fee models, despite the increasingly vociferous demands of clients.”
Firms need not choose one way over the other. To out-innovate in law practice, however, they must win the talent battle. Ensconced incumbents have the advantage here. To out-innovate on service delivery and value, in contrast, requires only imagination and will. Yet that could be a big constraint, as the closing words of the introductory article suggest:
“The question for the US legal profession is whether the financial crisis is a turning point similar to that facing Sears, the department store, in the 1980s when it failed to read the implications of discount retailing for its core business.
All the chairmen of the top firms talk about change and the need to ‘not fight the last war’. And yet at the same time they cannot, they say, see their firms being all that different in five years’ time.”
The market remains wide open for firms with imagination and the will to win a bigger share of bread and butter work. And I expect technology and software will play a big role, in spite of its conspicuous absence from this report.
This is a live blog post of an online debate between UK-based legal technology gurus Daniel Brown (TheKnowList) and Charles Christian (Orange Rag/Legalit Insider) as they square off, hosted by Burke & Company LLC and its Legal Technology Observer (LTO) blog. Christy Burke, President of Burke & Company consulting firm is the moderator/referee as “Brown and Christian make bold projections – and sometimes clash - about imminent global legal IT trends for law firms, vendors, the cloud, what’s hot (Surface) and what’s not (Blackberry), and whether eDiscovery is finally faltering as the industry’s cash cow. [Live post - forgive typos]
What are the hottest legal IT trends for 2013?
Charles: US and UK differ. UK is rather far behind on MS Office upgrades; many missed the 2007 upgrade. Not seeing much interest in Windows 8 but we all know to wait for a couple of service pack releases before migrating. Firms have 10 year old tech and most move forward. Others are same as what they’ve always said: better systems and services for clients.
Daniel: Agree on Windows - and that it is quite dull. Yes, firms have been saying same things for 25 years. But topic will have to change. Pace of change is quickening. Formerly 3-year projects are now 12 months or less. Firms will follow many different paths, unlike the follow-the-pack mentality of past. Responses to BYOD will differ.
What is the future for Microsoft Surface, RIM Blackberry, and Apple iPad?
Charles: BB is a couple of stumbles away from irrelevance - like the parrot in Monty Python skit. Android and iPhone are established and even Windows phone has traction. BlackBerry era is over. iPad is great but it is not a desktop or laptop replacement. Surface might replace it. If MSFT overcomes some initial problems, the Surface combo device of tablet and serious notebook could win. BB down; watch Surface; iPad to continue as ancillary device, laptop alternative for lightweight access.
Daniel: iPad is productivity tool but does not replace laptop. Looking at analyst reports (e.g., IDC), apps drive the market. But we should not write off Microsoft or RIM too quickly. Only device Obama uses is BB because of security. BB installed base still very strong in large corporates. As yet, now entirely dislodged. May seem unlikely but not impossible to grab market foothold. Sees developer interest in BB 10. Reviews of Surface suggest limited apps but that could change and that it may be more useful as productivity tool than iPad. RIM stumbling but has not fallen over.
Is the e-Discovery industry faltering as conference sponsor mainstay?
Charles: US still has some 600 EDD players. His sources say that consolidation is picking up and smaller players seek exit. One view is that market will consolidate to 2 or 3 big players. Separately, it is not longer purely a US industry - it has become global. But focus is shifting from litigation to regulatory and compliance. As for trade shows… all have a natural lifecycle. Legal Tech may need to re-think its role. Has heard more vendors saying they will not be at LTNY.
Daniel: EDD has been Legal Tech show cash cow. Agrees consolidation likely. Seeing more collaboration in EDD now, meaning that law firms changing their approach and law departments building their own teams. Hearing that IBM is bringing out technology ‘far beyond predictive coding’. Events don’t have lifecycle but the organizers of them may. There is so much tech and emerging issues to showcase. Much innovative tech could be show-cased at LTNY. Organizers have to make sure to keep event new and fresh. But does agree that, as conceived, Legal Tech could face challenges. It needs imagination to re-think its role
Charles: Events continue provided that they are re-evaluated and re-invented. It is lack of imagination causes them to die. Looking at UK, huge legal tech shows have come and gone. I’m not saying LTNY is doomed without EDD. LTNY is tired - needs a fresh look. It’s a management issue more than concept issue. Example: lack of WiFi at event.
What is your opinion of cloud adoption in legal in 2013?
Charles: Has moved from worrying concept to one that people now understand. The limiting factor is need to understand exactly what you are buying, how secure it is, where the data are, what happens if provider goes away. Conceptual issues is sorted out but the practical issues are not. It will not be as big an issue in 2013. Just another way to deliver information in 2013. The mystery /mystique will have faded by end of 2013.
Daniel: Getting bascis right - e.g., SLA and data location - is critical. Germany now requires that users pinpoint where data is physically housed. As IT realizes that cloud is not a mystery, it has to manage the data. Clifford Chance saying all their data will be in cloud by 2015 is quite ambitious. New regulations are still emerging - it’s brave to build a total cloud strategy until the reg framework is clearer.
Charles: Daniel and I do agree on a lot. Does not agree on BlackBerry. Thinks Good Tech fine for mobile security - does everything BB did and more. Thinks issues is installed cost of BB. We will see more Big Data in 2013. Large firms will start mining their data. Likely to see more of that in UK because of business pressure of ABS. BYOD creates emphasis on devices on themselves but the bigger trend is the consumerization of software. No one gets training for Facebook - the most widely used software. Legal software needs to be app-ified.
Daniel: More in common that I thought. Time will tell on RIM BlackBerry. Need to spend more time looking at legal as a business. Tech has been viewed as bolted on cost to run business. We need to re-think that view. Move away from focus on “legal tech” to how can we integrate technology with business goals.
Audio recording to be available at http://www.burke-company.com/.
The New York Times reports today on big cuts at Citigroup. The article notes that the CEO called in all business unit heads and asked them “justify the costs associated with their operations”. Consider a similar scene at a law firm: the managing partner calls in all practice group leaders to justify their costs.
Having trouble? It’s hard to imagine. Few practice group leaders - or managing partners for that matter - know the costs of their operations. That might not matter in an old-fashioned, large firm with lockstep compensation, a tight culture, and few in- or out- laterals. But most firms today pay partners widely disparate amounts, lose and hire partners regularly, and find cross-selling a challenge.
Many firms seems stuck between “collegiality world” and ‘profit world’. Actions, however, speak louder than words: partner de-equitization and staff cuts suggest they live more in profit world. And with alternative fee arrangements (AFA), we see some move to profitability analysis.
So my 2013 prediction, offered early, is that more firms will realize they really do live in profit world. They will need to start measuring practice and business costs more carefully. More importantly, they will need to act on what the data say.
Two just-released surveys hint at the opportunity US law firms have to gain competitive advantage.
The Big Squeeze - Our latest Law Department Metrics Benchmarking Survey shows that legal departments are working harder, with less, in December Corporate Counsel magazine reports that
“Cost, results, and understanding of the business were the top three criteria that legal departments used to assess outside counsel performance, but 71 percent of respondents said they had no formal review policies in place” [emphasis added]
The “5th Annual Law Department Operations Survey", an insert to the December Inside Counsel magazine reports that 67% of firms have a “formalized metrics/reporting program” but only 61% “makes effective use of the information it provides”. So that means only about one-third effectively use metrics.
Nonetheless, US general counsels are under tremendous pressure to control cost. That they have not yet formalized management systems creates an opportunity for creative law firms. Outside counsel that can clearly differentiate their service delivery will gain share of wallet versus their competitors. Firms can stand out, for example, by demonstrating a deep knowledge of the client’s company or industry, providing and sticking to budgets, deploying client-facing technology that really helps inside counsel, or offering more value through creative and lower cost matter staffing.
Clients notice and appreciate service delivery whether or not they formally evaluate firms or institute rigorous metrics. And once they do, then firms will have to take these steps anyway or risk losing the business. Now is the time to start.