The Future of the Legal Profession
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Are You Ready to Disrupt?

26/3/2013

4 Comments

 
Picture
A Law Firm "Merger" Yesterday!
Let’s be honest about this, most people will want to


try and avoid lawyers. They are in the same


category as the police; you don’t want one until you


need one.  Which is probably why a lot of their 


marketing comes to nothing.  It’s very much a “distressed” purchase for most people


unless of course you are in business.  


In that case, you will need lawyers at some stage.

Through my connection with Angels Den, I deal with a lot of new businesses and start-ups and there’s plenty of anecdotal evidence and articles written about how lawyers ruin deals at the due diligence stage or even how they can stall innovation.

But while individual lawyers might be seen as obstacles, the legal profession and the legal industry in general still represent great opportunity. This sector, which historically has been ignored by entrepreneurs and investors, is starting to experience a start-up invasion.

In his book The End of Lawyers? Richard Susskind suggested disruptive technologies would be the key to massive change in the legal sector.


Here are six key facts that make the legal industry ripe for disruption and innovation.

1. The UK Legal Services Market is worth £26 billion a year.  The Business to Business (B2B) section of that is worth 89% or £23 Billion. The largest 3% of firms, that’s under 900 firms, generate 55%  or nearly £13 Billion of that.

That means that there are almost 29,000 “firms” chasing the remainder. And since 2006 there has only been a  compound annual growth rate of 2%

You can get the full UK Legal Services Sector report here: http://tinyurl.com/cvnwkt4

2. Technology is Still in its Infancy. New tools and platforms that have reached many other sectors are only now beginning to enter the legal marketplace. For example, data analytics – while massive in other commercial markets – is barely existent in the legal sector. Data is abundant in the legal profession – everything from a company’s entire email archive to the information that exists in all the filings and briefs that lawyers create. Lawyers work with and create data every day. Currently, the vast majority of this data sits idle, untapped and unused. What resides in this data is the potential for creating products that predict outcomes in cases, quantify and qualify lawyer performance, and create transparency within the legal process itself. For some examples, see LexMachina,( https://lexmachina.com/)  a company putting analytics to work in the IP realm. Also www.Trademarken.co.uk and UK & Ireland companies House information for free at www.duedil.com

There is an abundance of technology available, but it’s the reluctance of the sector to use it.

3. There is a definite supply and talent problem. Whilst roughly 15,000-20,000 students  will graduate with a law degree every year (this may be declining in coming years), in England and Wales approximately 6,000 will go on to seek a training contract with a firm, in Scotland there will be approximately 600 doing the same.  A law degree is only the starting point to becoming a lawyer. Graduates still need to gain a one-year Diploma place and then a traineeship.

Those lucky enough to gain employment with a law firm must rely on the firm to train them to actually be of any use in a commercial environment; a practice that yields anything but consistent and comprehensive training.  Outside of firms, these new graduates will need to find alternate paths to becoming competent , and their choices are severely limited. This creates a unique over-supply, limited-talent phenomenon where the available lawyers are not adequately trained to actually be lawyers. Start-up opportunity here lies within edtech and scalable instruction. Is there a Khan Academy or Udemy model for new lawyers?

4. Access to lawyers is historically a problematic and costly effort. UK individuals who actually need lawyers still tend to try and avoid lawyers because they don’t want to pay high fees, nor do they really know how to find a reputable and trustworthy lawyer. Many legal needs are going unmet due to this phenomenon. By lowering cost structures, lawyers would be able to serve this immense market. Through a combination of technology, tools, and processes, platforms are being built to do just that. But the market is in its infancy. Even though http://www.wigster.com/  or http://www.justanswer.co.uk/ or https://www.rocketlawyer.co.uk/   and  in the US http://www.legalzoom.com/ have a head start, they have only scratched the surface.

5. Lawyers used to be the gateways to protected information and knowledge. They were the conduit through which clients accessed legal information and guidance. With the advent of technology, this information is now more accessible than ever before. The general public is able to locate relevant and helpful information without the assistance of lawyers (or at least without paying fees to lawyers). There are still many resources that lawyers do have control over, but these are diminishing greatly. PlainSite and LawGives are two recent plays in this space.

6. Finally, and most importantly, the world is getting more complex, not simpler. Corporations are burdened with greater oversight and compliance obligations. Some companies even use the legal process (and all its costs and distractions) as a way to punish or hurt competitors (see patent trolls).

Consumers and the public are also more aware of their legal rights and obligations. In our “lawsuit happy” nation, neighbours and friends will sue each other in an effort to gain – rightfully or not. Creating alternate paths to litigation, or avoiding problems altogether, are huge opportunities. There are ways to bypass lawyers and the court system entirely. For example, a former executive at eBay has built Modria as a platform for dispute resolution that involves no lawyers at all.

There are many other facts and reasons why the legal industry represents real and significant opportunity for start-ups.  For a profession and industry that literally impacts every single person in dozens of ways, it would seem that the need and urge to innovate would be palpable. Start-ups need to stop looking at lawyers as a pain, and see them as an opportunity. If you cannot avoid them, disrupt them.





This article was in turn inspired by a great article at: http://tech.co/legal-industry-startup-invasion-2013-03
Mostly about the US legal market. This has been updated and changed to reflect the UK legal market


Great book to read: Mitch Kowalski ; Avoiding Extinction; Re-imagining Legal Services for the 21st Century














4 Comments

Confirmation bias

20/1/2012

0 Comments

 
Richard is the managing partner of a medium sized law firm.  He’s also the largest equity partner and when the accounts are published and they show the largest pay out, it’s Richard who gets that money.

Now I know Richard reasonably well, we never walk past each other in the street without stopping to chat and we’ve had a few coffees together and a discussion about the whole legal services situation.  

I always ask how he is getting on and how his firm is getting on and he always exudes positivity.  Things are great, they have merged ( err...taken over) a few other firms and are “well placed to meet the challenges that the coming changes might bring”.  Or so he says.

The firm Richard manages is a Limited Liability Partnership (an LLP) so the accounts are available online. I’ve looked. In fact the last few years accounts are available online. I have them.

From what I can see, Richard is taking home nearly 40% less now than he was 5 years ago.  Turnover is £2m down on what it was and I know for a fact that his staff have taken pay cuts, some have left and as a firm they’re not hiring.  I’ve also done a bit of secret customer work on them (as on  a few other firms) and called up posing as a customer looking for legal services.  They never called me back.  But then again, neither did 7 of the 12 firms I called, so nothing unusual there.

But what’s odd is not only does Richard say everything is alright, I think he actually believes it’s alright.  There is even a psychological term for this called confirmation bias.  It’s where we look for evidence that we are right; or that things are the way we believe they should be.  Bias is stronger for emotionally charged issues and deeply entrenched beliefs and I know from my conversations with Richard that the issue of Alternative Business Structures is an emotionally charged issue for him.

The unfortunate thing is that although this makes Richard feel better it means that his behaviour is worse.

Like a rabbit caught in the headlamps, he is looking at the wrong thing and worse still, he’s not moving out of the way because he’s only focussing on evidence that confirms his position.

He tells me that social media is a fad, twitter is a waste of time ( “I don’t want to know what you had for breakfast!”) blogging is ridiculous, online documents will never work, we don’t need to spend money on marketing, we don’t need to take credit cards and so on.

He looks around his office and sees busy employees, the court department is buzzing (it has to its holding up the rest of the firm!) and all the clients they inherited from the “mergers” has boosted their list of customers, WIP remains strong. What’s the problem?

I asked Richard how he could sustain a 40% drop in income.  He denied any such thing despite my logging in to Companies House to show him how I knew. Then he went on to tell me that he no longer had any school fees to pay, so his disposable income had actually gone up.

Well, that’s ok then.

0 Comments

Perceived Indifference - John's not happy

18/1/2012

3 Comments

 
I met John an old friend of mine early last month and we went for a coffee and got chatting about a variety of things.

It turned out that he was buying into an established business and was “looking for a lawyer” or as he put it to me “…do you know any decent lawyers I could use who won’t charge the earth?”

He wanted to do a number of things, he needed a shareholders agreement as a starter and a bit of advice on a lease and ultimately a share purchase agreement.

What you should know about John is that he is a seasoned business man.  He’s involved in a lot of activity buying and selling into and out of a variety of businesses. 

He’s used many lawyers in the past and he’s also not short of money…but as he said to me “I just don’t feel as if any of the lawyers I deal with really care about what I’m doing…and all they’re interested in is their bloody hourly rate”.  He went on to say that he never involves lawyers until the very last minute because he’s “…fed up getting charged thousands…” for deals that never take place.

Now I also happen to know some of the lawyers that John has used and I heard from one of them that John can be a real pain to deal with, he’s difficult to get hold of and despite his wealth, he’s not the quickest at paying his bills!  

But whose fault is that.  Is it John or is it the way legal firms deal with the Johns of this world?

The thing about this tale is that it’s not unusual.

There are lots of “Johns” out there who feel this way. I read that the main reason why people leave one law firm to join another is “perceived indifference” by the firm towards their customers.

Now the things about this short encounter with John is that it highlights the state of the legal industry nicely summed up in the attitude of just one customer.

Is a straw poll of one man enough to pour scorn on an entire industry?  Well yes, actually, it is.

Richard Branson has built an entire mega-industry on the straw poll of one.

He reckons that if one person wants it, or feels a particular way about something, then others do too and if no one is delivering the solution, the he will create a company to do exactly that.

Now you might go on to reason that there are lots of people who are very happy thank you very much, with their lawyer.  There are.  But like the buyers of music albums and CD’s they are getting rarer every day.

But here’s the thing, if 68% of people would leave through perceived indifference then to me that means that almost 70% of the legal market is ripe, low hanging fruit ready to pick off buy either new businesses (ABS anyone?) or by law firms that “get it” and are ready to deliver what customers want.

Of the top 200 law firms in the UK only about a dozen or so “get it”.

But what’s happening to the scores of smaller firms made up of sole practitioner or small partnerships of lawyers?

Lawyers by definition are wise, knowledgeable of the law and are regarded as trustworthy professionals. However they suffer from poor business skills, bad man-management, they have a  disproportionate aversion to risk, they have overly exaggerated revenue expectations and a business model that’s now about 15 years out of date.

Small and medium sized Law firms are decentralised partnerships that charge hourly rates, they retain no earnings from year to year, and hope that their intellectual assets will walk back through the same doors they exited the previous night. Essentially a recipe for disaster and not a model you would replicate today.

The new legal market will demand systematisation, collaboration, transparency, alignment, efficiency and cost-effectiveness within and among its providers.

Only a few law firms have already adapted these qualities, and no doubt some more will follow. Some law firms are so dominant and influential that they won’t have to change. The rest are in grave danger.

And it’s all because John is not happy.

3 Comments

    Author

    After many years paying lawyers,I became one in 2005 Just in time for the largest upheaval in the law since records began. Brilliant. Exiting times ahead.

    Disclaimer.  The thoughts, ideas and comments on this Blawg ("Blawg - a legal Blog) are my own and not to be confused (unless otherwise stated) with anyone else and certainly not of anyone in the Firm where I used to work and they are not the views of the firm where I used to work.

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