Define “Commodity” for me … Please

In this recent ABA Journal article, the co-CEO of Pangea3 is quoted as saying, “No law firm should be doing commoditized work.” The assumed intent of this statement is to ease concerns that Thomson Reuters (TR) / Pangea3 is competing with law firms (a.k.a. customers). On its face, this statement may provide some reassurance. But after thinking about, I’m not so assured.
At first blush you might agree with the statement above and conclude that Pangea3 services are “low-level” and not work lawyers “should be doing” anyway. However, this all spins on the definition of “commodity” as it relates to legal services. Having analyzed and modeled 100’s of AFA deals, my view is that almost all legal work includes some commodity aspects to it. Large complex matters contain within them commodity-level tasks. And there are some recently complex types of work that are becoming commoditized. For instance, class-action certifications may be heading in this direction. Is that the “commoditized work” Pangea3 means?
More likely Pangea3 is pointing to work like first document review or coding in discovery. Much of this work is moving off-shore and already labeled as commodity. But looking back just 4 or 5 years ago, this work was done by associates at law firms.
What appears to be the likely evolution of this model, is to start by taking on work that is currently accepted as commoditized work and then moving on to other, traditionally complex services over time.
My prediction: With the TR brand and deep pocket, clients will be much more willing to send work directly to Pangea3. This will give Pangea3 a seat at the client relationship table. Once these relationships are secured and become trusted, a broader range of services will be offered and work will flow in that direction … away from law firms. As any work approaches a commodity definition, it will shift away from law firms.
Economics tells us all products and services tend towards commodities over time. So my prediction is not very novel. What is different in this scenario is that clients will be sending work to a corporate entity and not a law firm. A new type of competitor has entered the market and its validation via the purchase by TR will accelerate its growth into traditional law firm delivered services.
Having worked for a mandatory Bar for 18+ years, I suggest not much will be said or done about this shift, even though one might argue this is the unauthorized practice of law. Historically, when competitors encroach on the legal market, lawyers and their bar associations label the work “commodity” and walk away. One example is residential title work, west of the Mississippi.
So instead of alleviating concern, I think the Pangea3 statement actually elevates it. I know who will be defining “commodity” in this situation and it won’t be the lawyers, law firms or bar associations.

Bookmark and Share


Jordan Furlong said...

Excellent post, Toby. These are deep waters for law firms, and I don't think they realize it yet.

Lawyers focus too much on "who gets the work," because they assume that whoever does the work also controls the overall work management process. This used to be the case when law firms ruled the legal marketplace undisputed. But with the rise of LPOs (and the coming arrival of other players), it won't be the case in future. There will be multiple providers of legal services, often on the same matter, with each provider assigned to do what it does best. What lawyers need to realize is that the really important job is the assigner. The key position isn't who does the work, it's who decides who does the work.

I think you're exactly right that that's the role Pangea3 and other LPOs are angling for -- to be the quarterback, the foreman, the one who controls the overall management of the legal solution. Who charts the process, assigns the tasks, monitors progress, enforces deadlines and standards, and reports back to the client? That's the role with the most value, the role that involves trust and judgment, the role that can't be contracted out or easily replaced. That's the position for which premiums can be charged and for which client loyalty is the most assured. It's the role lawyers should be locking up, but aren't.

I think that what Pangea3 realizes is that all legal work, to some degree, is commodity work: there's hardly any legal task that can only be carried out by exactly one lawyer or exactly one firm anywhere in the world. Are you an aggressive and extraordinarily ingenious litigator? Great, you and 1,000 others. Value tracks scarcity, and in the emerging legal marketplace, scarcity is itself becoming a rare commodity. But to sit at the client's right hand, to be the trustworthy manager of its legal solutions, start to finish -- that's rare, and that has value and not even the most talented lawyer can match.

Lawyers who focus on the work and not on the bigger role of solutions manager are like newspapers that focused on the content and ignored the platform. The winners in tomorrow's legal marketplace will have the best legal solution platforms. Thomson is building a massive one right now, and many law firms stand a good chance of winding up as simply another plank therein.

Sean Geehan said...

Are there any large legal ervice firms say in the AM 200 that are close to commodity status (templates, fairly generic)? Hyatt Leagl seems to be close, but they are part of another corp now.
I'm finishing up a book and would love a couple examples.
Sean@geehangroup.com, 937-226-1600


© 2014, All Rights Reserved.