The Exponential Law Firm - Part 3

The following is the 3rd part of a 4 part post expanding on my short introduction 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.

What does this mean for legal service delivery?

The examples above are not directly comparable to the legal services we provide. I deliberately did that to illustrate the 6 Ds concept before completely confusing the issue by describing how it applies to our industry. As it is, I’m sure more than a few of you have read the examples above screaming, “Yes, but that has nothing to do with us! What the hell are you talking about?”

I am more than willing to concede that I may be wrong about the legal industry passing a threshold of digitization in any way similar to the entertainment industries or physical goods manufacturers. Or, that Diamandis may be wrong about industries passing that threshold and then necessarily conforming to his exponential framework. But for the sake of argument, let’s say that Peter and I are not wrong. We are definitely passing a threshold, an industry wide digital disruption will eventually take place, and we will begin to conform to the exponential framework just as others have. That begs the question, what does a dematerialized, demonetized, and democratized legal services industry look like, and how could a law firm survive in it?

The Dematerialized Practice of Law

It’s likely that the first complaint against applying the 6 Ds framework to the practice of law will be that we are not a material industry, and that we therefore have a distinct advantage over manufacturers or sellers of things. We don’t produce material goods, unless you count mountains of documents, and even if we become entirely paperless there will be no change in our service.

That might be true, but let’s think about a service provider who has already gone through this digital threshold: travel agents. Travel agents still exist of course, although in nothing like the numbers they did 20 years ago. They provided a service, with almost no material aspect and yet they were one of the first industries to be decimated by the rise of the internet. It turns out most people were happy to book travel themselves as long as it was easy and inexpensive. How many people or companies would gladly handle their own legal services if they had access to resources and knowledge, for a low price, and they didn’t actually have to deal with a real live attorney?  If such a thing were possible, how many attorneys could the industry continue to support?

The Demonetized Practice of Law

We have seen downward pressure on legal prices since the downturn of 2007.  That has mostly come in the form of clients demanding discounts on hourly rates or fixed fee arrangements. But suppose clients, even large corporate clients, had a new option: they could pay a monthly fee for unlimited access to a firm sponsored set of expertise engines that handled much of their routine legal needs. They could pay month to month for this a la carte service, or they could sign a 2 year contract which also entitled them to steeply discounted hourly rates for legal services not covered by the engines. Setting aside for the moment, whether such a thing is possible, or more to the point, whether the bar associations would allow it, what would that do to legal service prices?

The Democratized Practice of Law

This is the good news, if the prices of legal services decline precipitously and the delivery of legal services becomes much more widely available, then the pool of potential clients will be significantly larger than today’s client pool. Smaller companies and individuals who currently choose to do without external legal counsel and instead turn to LegalZoom or other form providers, could suddenly be approaching big firms to handle their legal needs.

Some of you are thinking, “But that’s not the kind of law we practice, we do big law for big corporations.” To which I will respond, look around you. The era of the big corporation is ending. The average lifespan of a company on the S&P 500 has fallen from 60+ years in 1960 to just over 15 years today. There will probably always be some big corporations, but I don’t think they will be the norm.

Relatively small companies like AirBnb (600 employees) and Uber (~1,000 employees) are taking on much larger and more traditional service providers, and they are having success. AirBnb and Uber are valued at $10Bn and $15Bn, respectively. These are new types of companies that grow quickly, by connecting people who have services to offer to those who need them, and taking a percentage. This is relevant to us on two fronts: 1) If given the choice of monthly subscription fees for access to legal engines or more traditional legal services, which do you think these startups would choose? AND, 2) How long before the law firm equivalent of AirBnb or Uber start selling them these services?

(Tomorrow: What does an Exponential Law Firm that can survive in this type of environment look like?)

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