9/29/14

The Exponential Law Firm - Part 2

The following is the second part of a 4 part post that expands upon a short introduction I gave to an ILTA session entitled, Do Robot Lawyers Dream of Billable Seconds? If you have not yet listened to the full session (and you have nothing better to do for the next 90 minutes), you should go listen to it now. If you would like to download and read the entire 4-part post you can get it here.



The 6 Ds: An Exponential Framework

Image from Peter Diamandis' presentation to ILTA.
On the first day of this year’s ILTA conference, I attended the keynote session presented by Peter Diamandis. Diamandis is the founder of the X-Prize and Singularity University. In corporate-speak, Diamandis is not just an “outside the box” thinker, he tore the box apart, set the pieces on fire, and urinated on the flames. I watched his speech in rapt attention, increasingly fired up by what he was saying. I imagined the headlines that would appear in the news the following day, “Angry Nerds burn down Gaylord Opryland Hotel!” or, “Diamandis Sparks Legal Geek Riot”. But strangely, at the end of his talk he received polite smattering of applause and the assembled nerds quietly stood and shuffled out of the ballroom toward the first coffee break of the day.

It was clear that not everyone heard what I heard. Because I heard Diamandis say, “Most of your firms will not exist in a few years. Much of this conference is a waste of time. You should all go find new jobs.” Of course, he didn’t put it that bluntly, but if you pull his remarks together and add up all the pieces, I think that was the underlying message.

One slide in particular had a profound effect on me. So much so that I scrapped the introduction I had written for my session later in the week and instead talked about this one concept: The 6 Ds.

Diamandis calls the 6 Ds an Exponential Framework. I struggled with that name for a long time, but I couldn’t come up with a better one either. It’s not a process; the Ds don’t necessary happen sequentially. It’s not a workflow, or an organizing principle. Model, pattern, and path don’t quite fit either. It’s just a framework that industries begin to take on once they cross the threshold of the first D.

Digitization

Perhaps you can begin to see why I needed such a lengthy preamble to this post. We have already crossed, or we are at the very least currently crossing, the digitization threshold in the practice of law. Diamandis’ framework suggests that crossing that threshold has entirely foreseeable consequences and that if we want our firms to survive, we must prepare them to exist in a completely different industry than the analog one we have lived in to this point.

The premise is that digitizing a product or a service throws an entire industry onto the Moore’s law bandwagon. Change within that industry immediately becomes exponential as processing power doubles and prices halve every 18 months.

I will cover each of these in turn, but the remaining 5 Ds that follow from this initial act of Digitization are:
  • Deceptive (initial change)
  • Disruption
  • Dematerialization
  • Demonetization
  • Democratization

Deceptive

This D is tough because it is the only one that describes a state of being rather than an action or direct change. The idea is that even though change immediately begins to happen exponentially, it still appears to be slow or even non-existent. This mis-perception is a product of our human inability to intuit exponential change. In real terms, even exponential growth appears static at very small levels. For example, without a high powered microscope, you would have a difficult time recognizing the initial exponential growth of bacteria in a petri dish. One cell becomes two, two become four, eight, sixteen, thirty-two, and so on.  For a long period of time, you would swear nothing is happening at all, and then BAM! an obvious explosion of growth. The rate of growth in that example is constant, but our perception of it is that it happened all at once; out of the blue.

Arguably, this is where we currently are in the legal industry. We are digitizing our practice and we have begun the process of exponential change, but that change is still small and very hard to see.

Disruption

Disruption is the elbow in the graph; the point at which change goes from near horizontal to near vertical over a very short period of time. That’s the point at which it becomes impossible for anyone to seriously argue that a significant and industry altering change has not occurred. The horizontal underline that turns into the letter L in the word “exponential” on the image above was created in Excel. It is an actual graph of steady exponential growth. You can see conceptually how deceptively small change can sneak up on an industry and give way to massively large disruption.

Diamandis argues that we have seen many industries crossing the digital threshold and that they all begin to follow this same framework. The last 3 Ds represent the post-disruption world.  They don’t necessarily happen in any particular order; they are more like directions that a digitally disrupted industry begins to head.

Dematerialization

Once a product or service is digitized, the materials (physical goods and associated services) begin to disappear. Kodak learned this the hard way when most people decided that the crappy digital camera attached to their phone was good enough. They stopped carrying dedicated cameras, and buying and processing film. Sales of physical books are down since the Kindle debuted. Who buys CDs or DVDs anymore? Physical media is wasteful, and expensive, and unnecessary. Just enumerating the physical goods that have been supplanted by the “phone” in your pocket would take pages.

Demonetization


Disrupted industries have seen the total amount of money that customers are willing to spend for non-material goods decrease significantly post-disruption. That is not to say that there is no money to be made, simply that the players who survive are often fighting over a smaller pool of available revenue or they have to grow significantly in volume to make up for the decrease in per unit cost. For example, digital music and movie downloads can no longer command the same premium prices that CDs and DVDs once did. Entire secondary industries based on distribution of physical media have dried up. Virgin Mega Stores and Blockbuster Video, once multibillion dollar juggernauts have disappeared and been replaced by digital distributors, like Spotify and Netflix, selling monthly unlimited access to entire libraries of media for the former price of a bargain bin album.

Democratization

Finally, the 6th D follows naturally from the 4th and 5th. If a good or service is now digitized and available online, and its price is now affordable to most people, then it is democratized.  Everyone can have access to it. This is the digital publishing revolution of which we at 3 Geeks have taken terrific advantage. Fifteen or 20 years ago, we could have published a newsletter that might have reached a couple of hundred people within a small region of the US. We would have had publishing and distribution costs. We would have probably charged a subscription fee. We would have needed someone to manage all of that for us, because frankly, we’re too lazy to do those things ourselves. Today, however, we have readers all over the world who read our non-sense daily and it costs us nothing but our time.

(Tomorrow: What does this mean for legal service delivery?)

Bookmark and Share

0 comments:

 

© 2014, All Rights Reserved.