What? – You mean I am just like everybody else?
We all know that the legal industry is changing (it’s more a case of what industry isn’t?) and this is being driven by a number of factors: technology is enabling new entrants to play at lower costs and develop new services models and legal products, clients are demanding demonstrable value and transparency around cost but that doesn’t necessarily mean narrations to support the billable hour, procurement is getting a seat at the table when assessing panel proposals and pitch responses. Basically law is starting to be treated like any other professional service - with scrutiny, commercial obligations and expectations. Yes… just like everybody else.
It’s healthy to evolve – not just healthy … it’s essential
Law firms are responding to these forces (perhaps a little begrudgingly and with varying degrees of adaptive-ness…) by re-tooling their legal teams and bringing in specialist capability such as Pricing Managers, Project Managers and Process Improvement Specialists to help firms gain not only an outside-in view of the commercial world, but supplementary skillsets that may not naturally sit with lawyers. Technology is being deployed in a more strategic light, as opposed to a strictly operational essential – progressing from “I need better remote access,” to “how can I use this cool tech I am seeing to help my clients and win more work?” or even “how can I help my client make better decisions based on predictive data analysis?” All of this is natural evolution in a competitive marketplace, and it’s healthy for us.
Building your bench strength
To play in growing economies, scale also makes sense, with a number of firms merging to build bench strength so they are poised to leverage globalization or national market trends, and others scaling down to focus more profitably on creating a distinguishing practice.
In the large firm or global market, many firms can’t help but focus on China. China, as the world’s second largest economy, is aiming to transform into a global powerhouse: its latest five year plan affecting both domestic and foreign companies in all industries is detailed in an interesting McKinsey Report http://www.mckinsey.com/global-themes/china/what-chinas-five-year-plan-means-for-business. Clearly, China will be focused on reform, reinvention and – of course – regulation. This will be an amazing opportunity for firms who have both the bench strength and are strategically aligned to seize the day.
In the “converged” market of firms, many are increasing their attention on core industries or practices areas that will allow them to improve their service efficiency, profitability, and market reputation as specialists. For some, this will mean cutting away practice groups that aren’t aligned with their core focus, lateral (experienced) hires to increase their bench strength as matter experts and their client reach, and increased exploitation of data and tech practices that will inform their ability to document wins and focus on results delivered.
Yes, there is a lot is changing in the legal industry: our point is, why shouldn’t it?
A Focus on outcomes, not activity
How can lawyers successfully pivot to not only meet these challenges, but leverage them? Answer: by changing both the way they work, and results they deliver.
Re-thinking (1.) what we do and (2.) how we do it
1. It’s time for lawyers to ask clients what they want and how they want it done. We’ve long been a profession that assumes that we not only know the law, but that we also know what’s best for our clients (so we don’t really need to ask them, poor dears, since what do they know?). But in today’s world of more sophisticated clients and more multi-disciplinary teams, the continued relevance of lawyers will hinge on our ability to understand that often lawyers are the last ones to understand that corporate clients don’t have legal problems, they have business problems. They would prefer to avoid or prevent problems, or craft better solutions that advance the business, than spend precious time, reputation and expense remedying legal problems. Lawyers focus too much of their service model on the remedial – cleaning up spilled milk, rather than helping to keep it in the glass and multiply the number and quality of glasses produced.
What does this mean for many lawyers with a remedial and solely “legal” focus? Those who continue to sell what they want to produce, without asking (or even thinking about) whether it’s what clients want to buy, are going the way of the dinosaur.
Asking clients what they want should lead to a even more sophisticated and rewarding conversations about how they want the service provided, as well as the results they want delivered. The “how” is often as important as the “what.” And that how often includes the need to integrate more “non-legal” business expertise into the solution provided. The “results” they want delivered rarely take the form of a memo, but a plan to integrate a solution into the company’s business flow or a suggestion for how to get in front of the issue before the next iteration becomes another problem.
This deep understanding of the client experience and the problems they need solved is increasingly referred to in business as design thinking. It is increasing in its use, as it enables thinking like a designer which can transform the way organizations develop products, services, processes, and strategy. This approach brings together what is desirable from a human point of view with what is technologically feasible and economically viable. A number of corporations and law firms are using design thinking techniques to really understand their clients.
If firms listen, and think about how to better master the “how,” they will likely find themselves in the business of generating profits for results delivered, rather than racking up revenues for hours logged for legal advice provided without regard to cost expended or whether the problem was solved or the path for future action cleared. This almost naturally leads to firms moving toward pricing for legal services is value-based, replacing firms dominant patterns of relying on hours-based fee structures: by understanding and continually improving our cost of service and the results we deliver, and by focusing attention on doing only the work that makes the highest use of legal talent (rather than trying to preserve for lawyers work that is better done by trained workers or even technology), we will find not only profitable, but sustainable work in the future. And that work will be based on what it costs to solve a client’s problems or the value of that solution to the business, not on how long it took a lawyer to do it.
2. Lawyers are often described as cats who refuse to be herded. They can be brilliant at what they do, but unless they learn to better manage the processes by which they work, re-examine and re-engineer the tasks they perform (and whether they should even be performing them at all), collaborate with other workers who are expert in other disciplines (as well as work in more cohesive teams with each other), they are likely to be replaced by other workers (or even technologies) who perform the work better, faster and cheaper.
Firms and law departments that are moving to this more efficient and effective model are those who are bringing all kinds of new talent to not only re-tool lawyers and their service models, but help firms and departments harness the knowledge and data that flow from their work to continuously improve and make their practices and services more predictive. Excellent legal skills are ever critical, but they’re table stakes: lawyers and those they partner with will need to develop valuation and pricing expertise, lean process and project management skills, sophisticated operations specializations, human resources and professional development leadership, business management prowess, technological savvy, strategic vision, higher EQ and listening talents, data and financial analysis, and myriad other “non-legal” business, executive and soft leadership skills (none of which are taught in law school or early lawyer training): all are critical to cutting new ground and finding for new ways to delight clients. There’s nothing in all of this that suggests that lawyers have to become experts in each of these disciplines, but they must recognize the critical relationship of their legal expertise to the successful delivery of their services by those with whom they partner (inside and outside of their firms and legal departments) in order to deliver the full package.
Convergence and MegaFirms
Layered on top of the seismic changes in our profession are economic and market changes that will challenge legal practices for years to come: globalization, the rise of service providers who compete to provide services formerly only offered by lawyers, and exploding information and communication technologies. The net result for law firms and law departments is the realization that law is pretty much the only business in which it is more expensive to outsource work than to insource it. And the new competition for lawyers therefore isn’t just the lawyer across the street, it’s the client who is increasingly likely to bypass hiring a professional, or to look to outsource what they used to send to lawyers to other more efficient providers. We predict continuing convergence and consolidation in the market, as a result: more corporate legal insourcing, more law firm mergers, more new tech companies swallowed by larger tech companies, more giant multidisciplinary consulting firms offering legal services to clients as part of their overall fulfillment of client needs.
Is this a threat or an opportunity for you and your practice? Perhaps it depends on where you sit currently on the spectrum of adaptability to new ways to work, and newly forged relationships with those with whom you’ll collaborate and those you serve as clients.
Parting thoughts …
Yes, there are many changes to the market, and yes, there is no way to avoid that change. If we try to build a fence around the provision of legal services, we will have created a prison that keeps us in while others serve our clients on the outside. So our future must be made by leveraging change, not bemoaning it or ignoring it.
We hope that this blog post and future posts in this series will explore the many ways that lawyers and leaders in legal service provision – in law firms, in law departments, in legal service companies, and at the bar – can make the pivot to ensure that their practices tomorrow are as valued and valuable as their practices of yesterday.
The content of this blog post was co-authored by Michelle Mahoney Executive Director Innovation at King & Wood Mallesons and Susan Hackett Chief Executive Officer at Legal Executive Leadership LLC.