Image source: UnitedLex

Legal Geek’s now prolific series on The Uncertain Decade had its second event on 28 May 2020. It brought together the two well-known legal tech experts – Messrs. Mark Cohen and Richard Susskind -, as well as some surprise guests from all across the legal industry.

Reunited once more on the Legal Geek’s virtual stage, Mark Cohen and Richard Susskind covered two main issues:

• “What clients want and need” and
• “Alternative legal suppliers – hope or hype?”

The Blog’s team diligently attended this second event. We were once again glued to our laptop screens, following the fecund discussion. And we were in for a treat. As an online, live, one-time event, no recordings are available. So, if you missed it or want to refresh your memory or notes, continue reading! I’ll walk you through the main ideas and takeaways.

Given that our chronicle on the first edition of this series comprehensively covers the background information, I’ll jump directly to addressing:

• The topics tackled throughout the webinar, namely:
  • “What clients want and need” and
  • “Alternative legal suppliers – hope or hype?”
• My stand on the matters covered during this online talk.

Please note that the text below is based on notes taken during the live event. It does not represent a full transcript of the meeting. I, therefore, apologise for missing out on any important detail. As a rule, I respected the order in which the speakers and their guests put forth their ideas. Occasionally, I grouped the topics and marked this accordingly to preserve the discussion’s coherence.

 

1. What clients want and need (Richard Susskind)

Prof. Susskind discussed the implications of the “more for less challenge,” a term he introduced in the legal lexicon in 2004. Requiring more efficiency with fewer costs, this dilemma was felt even more acutely by the time the 2008 financial crisis spread across the globe. Twenty-five different general counsels (GCs) synthesised it as follows” we are under pressure to spend less on our external legal services, we are under pressure to reduce our headcount. Yet, we have more legal and compliance work to do than ever before.” Far from attenuated, the research cited by Mr. Susskind suggests that this pressure will be intensified in the forthcoming future. In fact, this strain is expected to define the next decade.

There are two ways to tackle this dilemma:

• to cut the costs;
• to share the costs between different legal departments or between legal departments and external legal providers.

On a subsequent stage of the discussion, Mark Cohen came back to this topic and pointed out that cutting costs is an incremental process and probably insufficient to alleviate the problem. As for the second solution proposed by Prof. Susskind, Mr.Cohen contends that realistically speaking, sharing costs will be time consuming and late to materialise. Consequently, Mr. Cohen suggests a third option for solving the dilemma: reimagining the art of possible and reconsidering traditional paradigms that promote law firms as being the ultimate repositories of legal expertise when things go badly. Instead, the industry should acknowledge that ALSPs have greater capabilities in terms of technology, and have a better understanding of the C-suite requirements. Mainly, Mr. Cohen recommends that the legal services deck be reshuffled.

Prof. Susskind picks up this idea by restating the efficiency strategy: using less expensive people or using technology. It is still under experiment how, and to what extent human labour can be replaced entirely by technology. This strategy is not exhausted quite yet because we still haven’t made the most of technology. But he sees ALSPs as a version of the efficiency strategy.

Prof. Susskind then went on to discuss legal operations and how this new arm of legal tech contains the solution for addressing the legal implications triggered by a company’s activity, as well as for running the business through task delegation and legal team management. It is the legal ops people that conceptualise and design innovation within the company by finding new efficiencies, possible collaborations and, necessary procurements. At this point, Richard Susskind put forth the idea that the legal market is shifting from a sellers’ market to a buyers’ market. And Corporate Legal Operations Consortium (CLOC) stands as proof of this change.

On his part, Mark Cohen admitted that the clients are now controlling the seller-buyer dynamic. That is why legal expertise must now be coupled with technology, process management skills, and business prowess. The legal profession is becoming more inter-disciplinary.

These ideas led to a very provocative discussion revolving around the following questions:

• Should we listen to the customers?
• If so, to what extent?
• Is the customer the king?

The two experts engaged in a fruitful conversation on this subject. They concluded that clients might sometimes not have sufficient expertise to make the best decision. This thinking is not singular but rather commonly shared among innovators. For example, when Henry Ford was inquired if he’d asked the customers about their preferences, he replied: “If I’d asked my customers what they wanted, they would have asked for faster horses.” Likewise, if you ask legal customers what they want, they’ll ask for process improvement rather than radical change, automation rather than transformation. Another innovator, Apple’s Steve Jobs, bluntly noted that your “customers don’t know what they want until you show it to them.” It’s rare for the clients to be the innovators. They might know what they finally want, but don’t know what’s in fact available.

As legal service providers, we should first and foremost think in terms of outcome.

Clients don’t want innovation, artificial intelligence, nor state of the art technology. They actually seek lower fees, quicker results, and good quality. AI or ML might be the solution, but that’s not what it’s in itself sought after. Businesses don’t want lawyers; they want the outcomes the lawyers bring. And if they find ways of attaining these outcomes cheaper, faster, and more convenient, we can expect the market to default to these ways.

The example from Theodore Levitt’s 1960 HBR article, “Marketing Myopia” was truly thought-provoking. In this article, Levitt observed that many railroad companies failed because they thought they were in the railroad business when, in reality, they were in the transportation business. The punchline here is that, more often than not, service providers (lawyers included) forget to think from the perspective of their clients’ business.

Regardless, lawyers should keep in mind that their clients prefer a fence at the top of the cliff to the ambulance at the bottom. That is to say, they prefer measures to safeguard their assets and limit their losses rather than lawyers’ eloquence before the court.

Mark Cohen jumps in here and asks some fundamental, yet bluntly disregarded questions:

1. What is the industry that we lawyers actually activate in?

For a long time, it has been the business of legal expertise: lawyers have long had an asymmetrical hold on this craft. But now this is changing, and law firms must acquire business acumen, technological tools, and know-how to enable solutions aimed at empowering their internal operations and meet clients’ requirements. Also, lawyers must now make use of data.

2. Could it be that what has really changed is how we provide legal services?

Mr. Cohen cites a study he has undergone revealing that GCs anticipate significant and irreversible changes.  Things, they contend, are not going to be the same as in the pre-corona period.

So, legal expertise is becoming interdisciplinary not so much at the instance of the professionals, but rather at the pressure exerted by the clients.

The two experts then went on to discuss why a recent survey at GCs level had revealed that, while in the UK law firms are doing pretty well when it comes to client responsiveness, ALSPs lag behind. Intriguingly, in the US, the finding was just the opposite.

When discussing the UK survey results, Prof. Susskind pointed out that the relationships between law firms and their corporate clients had intensified before the COVID-19 crisis and got more robust, especially during the last couple of months. But clients were less interested in topics like AI and innovation. For this culturally-charged reason, law firms are successful in the UK, while ALSPs still have a smaller slice of the pie. Moreover, with the UK legal market liberalised, ALSPs are more distinctive, with a clearer voice. But, in the UK, ALSPs are seen as subcontractors of major law firms. On the other side of the pond, however, US companies are more pragmatic and mainly care about the solution. And that’s why ALSPs thrive.

Via the live poll, the audience requested that the two focus on SMEs.

Accordingly, the two luminaries observed that legal departments from big companies prefer to solve their legal issues internally without external legal aid. So, SMEs are probably in an even direr situation if big companies don’t feel well attended by external legal providers.

The current model of legal delivery has failed. Derek Bok, former president of Harvard University, famously said that” there’s far too much law for those that can afford it and far too little for those who can’t.” This creates a considerable slice of business targeting those that need legal services but simply can’t afford it.

At this point, the two dignitaries engaged in a discussion about lawyers’ monopoly over legal services providing. Richard Susskind anticipates that, over the coming years, we will see more solutions on online standardised documentation in help for those that need legal services but don’t afford it.

Historically, SMEs have not been the main target of big law firms. But if SMEs are to obtain their legal advice via online platforms and systems, this bears the question as to who will deliver and develop them? Such solutions require design systems, knowledge engineers, but, most importantly, tomorrow’s lawyers.

Q&A Session

This Q&A segment was moderated by Mrs. Lisa Hart Shepherd, CEO of Acritas.

Question no. 1

In this post-COVID era, we see some changes at the level of the catalyst attracting clients to law firms. Clients now prefer that lawyers be closer to the business (more business savvy) and increasingly responsive. In this context, Mrs. Shepherd asked why clients focus more on costs rather than on the quality of the legal services.

Richard Susskind answered this question by restating that the legal function, like any commercial function, is under the cost pressure. But he pointed out that the clients take for granted a certain level of quality when it comes to legal services.

Moreover, GCs and in-house lawyers, in general, prefer to handle their legal services internally because, more often than not, lawyers tend to deliver their gold-plated services in an unnecessary fastidious fashion. They often over-engineer a service when, in fact, clients usually need something “cheap and cheerful.” Susskind thinks that we will see a shift towards services that are “good enough.”

Mark Cohen weighed in and pointed out that clients look for lawyers that understand the business dynamics. And that is why they usually prefer in-house legal advice.

Question no. 2

Do you think law firms will change to be more like the Big 4, by incorporating other roles such as agile experts and technologists?

Richard Susskind was the first to try and answer this question. He recalled that The Big 4 started moving towards a more inclusive, comprehensive activity as early as the ‘80s. To that extent, Prof. Susskind anticipates that law firms will move towards incorporating consulting and business services. They will also embrace technology just like the big accountancy firms have done for so long.  But other than that, Richard Susskind contends, law firms and Big 4 are very different animals. Given the new circumstances, law firms should not try and copy the models of Big 4 but come with new models, combinations of people, processes, and technology to better answer pressing issues.

Mark Cohen agrees and adds that this is the perfect time for law firms to take a good look in the mirror and try to differentiate from competitors. Today’s market place also pushes law firms to collaborate.

Another ad-hoc live poll revealed that, given the current circumstances, law firms should invest in modernising culture. Susskind pointed out here that it’s unclear if the culture of an organisation or industry can be changed overnight. He hinted to the idea that this process is a lengthy one and cannot be expected to be finalised too soon. On a subsequent occasion during the discussion, Mr. Cohen addressed the issue of cultural shift. He outlined that culture is about the set of values that a group of people cherishes and respects. That’s why it’s challenging for the traditional partnership model to undergo a rapid, radical transformation. The entrenched stakeholder system is also expected to resist change.

2. Alternative legal suppliers – hope or hype? (Mark Cohen)

How ALSPs come about

ALSPS came about as a by-product of an unmet market need. They sprung on the market because new competencies were required (project management, design, etc.). As a consequence, they had a different kind of DNA, more of the DNA of business than of legal professions’. That is primarily because they did not need lawyers to own them or to engage in their activity.

They started as arbitrage places, i.e., cheaper alternatives for legal services. Steadily, they began to rely heavily on technology to transform the formerly labor-intensive task into more efficient ones.

From the beginning, ALSPS had different competencies, different models, in the sense that they had a more poignant corporate-based layout. ALSPs that are nowadays operational are tech-enabled, data users, and customer-centric; they are the personifications of the “better, faster, cheaper.” But, in many instances, ALSPs are highly sophisticated, global-wide, and employ thousands of lawyers. Those lawyers are mainly employed to leverage their legal training in different ways, such as helping to design tech applications, or risk management.

In a nutshell, the law is not about legal expertise anymore. Law is about operating at the intersection of technology and business proficiency. The legal function is constrained to be interdisciplinary because clients nowadays require an entire constellation of skills. At the end of the day, it’s all about the customers: it’s not about profit per partner (PPP) but about net promoter score (how likely is the customer to recommend a legal service provider instead of the other).

 

Differences from the traditional partnership model

The traditional partnership model was legal centric and hierarchical. Moreover, the profit is usually distributed yearly, which, in turn, creates a short-term mindset paradigm. On the other hand, the corporate system oftentimes entails that the profit is distributed on more extended periods and, most importantly, is reinvested.

Mr. Cohen identifies the following types of ALSPs:

• Big 4 – accounting firms, multi-disciplinary enterprises that collectively employ more than 10,000 lawyers;
• law companies like UnitedLex;
• law firms, such as Brian Cave LLP.

A new poll revealed that the audience wanted both experts to focus on legal tech companies. Prof. Susskind pointed out that, although there are thousands of legal tech startups now, their chances of survival over the next 3-5 years are rather low. While each of them tries to disrupt the legal industry like Amazon disrupted bookselling, it doesn’t take all of them to reach this goal. Richard Susskind also pointed out that a vast majority of the legal tech companies serve law firms, which means that, although wanting to be disruptive, they, in fact, benefit the old way of doing business. Mr. Cohen weighed in here and outlined that all legal tech companies should be looking at everything from their clients’ perspective and try and see how a particular solution is useful to the end-users.

As a takeaway, Mark Cohen outlines that, while there’s nothing wrong with law firms as they are now, there is no obligation to follow the traditional model. For example, Axiom is what Cohen calls “the non-law-firm law firm,” with approximately 2,000 highly selected lawyers (they employ one in 20 applicants), which stands as proof that ALSPs are as sophisticated as any law firm. Another example is FisherBroyles, a law firm that almost 20 years ago decided they want to have a distributed model and let their lawyers set their rates. This gave an entrepreneurial flavour to the law firm’s legal services. This goes to show that there are many ways in which law firms can be successful, but the traditional partnership model, with some minor exception, has reached its sunset.

Both Susskind and Cohen conclude that law students are bound to see more legal businesses when entering the professional market. Legal tech will soon be taken for granted. We’ll see groups of legal hybrids that are technologically sophisticated and qualified as lawyers while being passionate about changing the industry. Susskind considers that 20 years from now, the discussions we currently have will look rather quaint.

 

Q&A Session

Question no. 1

Mrs. Wendy Butler Curtis, Chief Innovation Officer at Orrick, took the stage, and her question revolved around the legal profession surviving and thriving. She basically asked what we, as legal professionals, need more of and less of in order to prosper.

Mark Cohen started by emphasising that traditional legal practice is shrinking. As a lawyer, there’s a challenge to acquire new legal skills, and there will be many career paths for legal professionals.

Richard Susskind added some more nuances: as lawyers, we need a more open attitude, inviting suggestions and ideas while refraining from over criticising. He also emphasised that “the best is the enemy of the good”: it’s common for lawyers to resist change because they have an idealist notion of change. The change will be incremental, not overnight big bang.

Question no. 2

Do law firms and ALSPs share the same market?

Here, Mr. Cohen doesn’t think there’s a zero-sum game. There will be times when they compete, but they’ll probably be collaborating more often than not.

On his turn, Prof. Susskind thinks that ALSPs might tackle a broader market. They are more likely to think of business adviser service and design legal services as a part of multi-disciplinary services.

 

3. Impressions and Sidenotes

By and large, the answers to the questions on why and who should attend this series were answered in our post on the first event of the Legal Geek’s Uncertain Decade series, so be sure to read it up.

Consequently, I’ll jump directly to pointing out some aspects specific to this second event.

As a personal note, I think the 28 May session was insightful and worthwhile. The natural effervescence of the live discussion managed to maintain structure and clarity while, at the same time, engaging the audience. Allowing a few members of the audience to log in to the video session and ask questions in real-time gave a personal, more human touch to the dialogue.

I appreciated how boldly the speakers tackled issues such as lawyers’ monopoly over legal services, old system vs. new system, changing entrenched cultures, and shifting paradigms. These topics are widely avoided by the vast majority of legal professionals, especially in the CEE. Why do professionals shy away from these topics?

Could it be that, particularly in the CEE, we are so busy working in more or –often – less efficient ways that we don’t have time to pause for a moment and think the matters through? Is this status quo an illustration of clients’ requests and market demand? Do people trust ALSPs less than they trust traditional lawyers? If so, why is that? Most importantly, should we wait for the clients to be the innovators or, just like Apple’s Steve Jobs, place the new product on the market so as to educate and broaden clients’ expectations?

These are not questions to be answered light-heartedly.

As rightfully pointed out by the two expert speakers, the process of legal innovation will not be an “overnight big bang”; it will take time, patience, resilience and, more importantly, vision. And I expect that the CEE will find its hopefully original way to move the legal industry forward. Basically, it’s not a matter of if, but instead of how and when for, no matter the internal resistance, external economic and cultural forces will bring about legal innovation diffusion across the region.

Do you have any comments or questions related to the ideas above? How do you see legal innovation in general and in the CEE, in particular? Get in touch and let’s discuss! ?