Snacking on Big Law’s Crumbs

1-2-3-4 cakeNo matter how careful you are when you eat, you inevitably create crumbs.  Do you know who is snacking on your crumbs?

According to a recent LegalFutures article, Professor Richard Susskind includes a warning for Big Law in his new book, Tomorrow’s Lawyers: An Introduction to Your Future:*

Professor Susskind accepted that there is some force in the argument from the largest ‘elite’ global firms – which he numbered at about 20 – that for bet-the-ranch deals and disputes, clients will still want the services delivered, more or less, as in the past.

`However, they should not be overconfident… If one leading firm breaks rank, or if a major new force (such as a “Big 4” accounting firm) emerges, and brings a new proposition to the market – a credible brand at half the price of its competitors, for example – then this could fundamentally and irreversibly change the market; and not just for the elite firms but across the entire profession.

`Leaders of the elite firms should suspend their likely incredulity at this scenario, if only because major clients, as never before, are commonly saying that they are now actively looking for alternatives to the traditional ways of some of the great firms whom many regard as too costly and sometimes too arrogant.’

After reading this quote, curiosity led me to the websites of the largest international accounting firms where I discovered some interesting things. While I didn’t find anyone there explicitly hanging out their shingle to offer legal services, I did see materials that could be viewed as coming close to offering advice on issues that lawyers have handled for years:

  • Compliance and Regulatory Risk Management
  • Financial Services Regulation
  • Privacy and Data Protection
  • Governance

Admittedly, Big Law doesn’t have a lock on either these issues or on the general counsel of their clients. Nonetheless it’s instructive to see the ways in which the accounting firms are talking about these issues with Big Law’s clients. Here’s a small sample of what they are offering:

When you dig into the financial regulatory offerings of accounting firms, you find content that could easily have been distributed in the form of that favored Big Law communication tool — the client alert:

And that’s not all. At least one accounting firm has gone far beyond the traditional legal alert memo. PricewaterhouseCoopers now offers PwC’s Regulatory Navigator: a mobile app available through the iTunes store that purports to provide

everything you need to know about how the changing regulatory environment is impacting your firm and the rest of the financial services industry. With a primarily US focus, this app provides access to PwC’s insights on the latest regulatory changes and links to key original source information, such as proposed and final rules.

In case you’re wondering how accountants are able to do all of this, the answer is pretty simple.  The accounting firms are hiring Big Law veterans to do the legal analysis and counsel clients. The ones I’ve talked to take great pains to emphasize that they are not practicing law.  Even still, they are finding lucrative ways to make their understanding of the law available to clients and in the process are offering a service at a price clients seem to find tolerable.

The crumbs from Big Law’s table may not be sufficient to feed another large law firm, but they might provide a lucrative snack for a host of uninvited guests from other professions. One day soon there may be enough crumbs for a veritable feast.

[Hat tip to Donna Seyle for pointing out the LegalFutures article.]

[Photo Credit: looseends]

*Disclosure: This link is through my Amazon affiliate account and may generate income to me.

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Help Law Firms Deliver Value (ILTA09)

Shift happens — even in law firms. Are you ready? That’s the question that kept surfacing at the ILTA09 conference last week.

You’d have to be living under a rock not to have noticed the impact of the economy on law firms and their clients alike.  Thankfully, ILTA09 didn’t just remind us of the bad news all around.  The conference did something more helpful — it provided information and real examples of how lawyers and technologists around the world are rising to the challenges of the shifting landscape.

While I’ve provided some fairly detailed reporting of several ILTA09 sessions during the course of the past week,  I want now to take a step back and try to convey some general themes that emerged across sessions.  My first focus is on delivering value.  This theme was launched officially with a keynote address by Richard Susskind entitled, “The End of Lawyering?”.  Over the course of his keynote address and panel presentation, he made the following points:

  • If law firms are serious about addressing client concerns regarding the rising cost of legal services, those firms will have to increase efficiency radically.  In order to manage costs, clients are going to have to consider collaboration with other clients and thereby share costs.
  • The best way to reduce costs intelligently is to start by analyzing your current costs of delivering services.  Once firms break down service into its component parts and price those parts, firms can then experiment with finding cheaper ways to provide those components.  This may mean sub-contracting the work or moving it offshore, for example.
  • One way to reduce costs is to standardize services (e.g., creating model or standard form documents). Going further, you can systematize or automate those services (e.g., by using document assembly tools).  Once automation is complete, a firm can then package these services and make them available online to clients, who can use the packaged services as and when needed.  The example Susskind cited was Wilson Sonsini’s contract generator for start ups.  He described packaged services like this as a means for firms to “make money while you sleep.”
  • Central to rethinking how we deliver services more efficiently is disrupting the current business model and deploying disruptive technologies in our firms.  However, while these disruptive technologies will give a firm competitive advantage, Susskind believes that most firms don’t seek this.  In his experience, firms are more concerned about suffering a competitive DISadvantage rather than having a competitive advantage.  In other words, they are more worried about being left behind than blazing a new trail.
  • Here are the top 10 disruptive technologies  Richard Susskind identified:
    • Automated document assembly.
    • Relentless Connectivity.  (Clients expect 24/7 availability, so lawyers need to use online tools to provide a continuous online presence.)
    • Electronic legal marketplace.  (Like on ebay, clients will have better pricing information and will be able to auction/bid for legal services.)
    • e-Learning.  (Laws schools are beginning to use online simulation tools train students for modern legal practice circa 2009 not 1980.)
    • Online Legal Service. (There are many English public sector websites that offer online legal guidance, so you don’t have to hire a lawyer.)
    • Legal Open-Sourcing. (Some legal resources are now gathered and offered free of charge.  This trend will grow like wikipedia.)
    • Closed Legal Communities. (More clients will form online communities to collect and share legal know-how.)
    • Workflow & Project Management. (Automation and enhanced project management can improve margins on high volume, low value work.)
    • Embedded Legal Knowledge. (More systems will embed compliance requirements, thus removing the need for separate legal advice.)
    • Online Dispute Resolution. (Moving dispute resolution online eliminates the expense of having to meet in a physical location.)

At a later session, Fred Krebs (President  of the Association of Corporate Counsel in Washington, D.C.) spoke about the ACC’s Value Challenge, which is based on the premise that it is the clients that define what constitutes “value” in legal services.  He started by pointing out that while overall costs to corporations have increased by 20% during the past 10 years, their legal costs have risen by 75%.  In order to address this imbalance, the members of the ACC have issued the Value Challenge to counteract what they describe as the “perverse incentives of the billable hour.” The Value Challenge aims to help corporate counsel manage costs by increasing transparency in the process for setting prices for law firm services.  Their hope is that this will bring about more efficiency and cost predictability.

Moving from theory to action, we then heard from some firms that were taking concrete steps to address the new economic realities.  One firm that has moved significantly down this path is Bryan Cave.  As John Alber and Connie Hoffman told us over the course of two sessions, they have spent significant time analyzing their services and business processes and now believe they know what it really costs to deliver services to clients.  With this data in hand, Bryan Cave can model the impact on price by changing the components of service (e.g., what happens if you change the staffing?).  Along the way, they created an online tool to help with this analysis and then licensed that tool to Redwood Analytics, who now provides it to other firms.  (This is another example of what Susskind calls “making money while you sleep.”)  Bryan Cave has also rethought how to conduct a due diligence review and created an online tool that streamlines the due diligence process.  They have been able to push due diligence work down to less expensive personnel while ensuring quality through a training component embedded in the tool.  In addition, they are providing transparency by allowing clients to obtain reports on demand regarding the process and cost of the due diligence effort.

On the subject of transparency, Mallesons in Australia has blazed a new trail with Mallesons Connect.  As described by Gerard Neiditsch, this new extranet application gives clients real-time information regarding lawyer activity, progress against project goals, and fees incurred.   It also provides information on billing history and outstanding invoices.  In the process, Mallesons learned that this transparency can have unexpected benefits.  Besides keeping everyone accountable, Mallesons discovered that once their law department clients saw the invoice information, they were able to expedite payments.

If your firm would like to rethink how it delivers value to its clients, the panelists advise you to start by analyzing your business processes.  Using a simple Gantt chart,  identify the components and dependencies of your process.  Once you really understand the workflow, introduce simple technology to help automate parts of the process.  If it works, extend it.  If it doesn’t work, learn from it.  Throughout this process, however, don’t forget the advice of Steven Levy, as quoted by one of the panelists:  “Technology cannot replace thinking. Automating broken processes won’t make us smarter; it can make us stupider faster.”

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For more information on delivering value to clients, see the following resources:

My post on a prior talk given by Richard Susskind and its implications for law firm knowledge management.

David Hobbie’s Caselines posts on Richard Susskind’s keynote address and the related panel presentation.

Andrew McLennan-Murray’s summary of Richard Susskind’s keynote and panel presentation.

Susan Jacobsen’s post on the the ACC Value Challenge session at ILTA09.

ACC’s resources on Leveraging Knowledge, including specific measures taken by various law firms.

[Photo Credit:  dasmart]

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Alternative Billing, Alternative Lawyering

Richard Susskind likes to be provocative.  And, he’s good at it.  After hearing his talk at Harvard’s Berkman Center for Internet & Society, I found my mind churning with ideas of what it might be like if his vision became our reality.  However, I soon felt stymied by the enormity of the challenge of changing our profession’s approach to work and compensation.  And I’m not the only one.  Most law firms have yet to find a comfortable way to determine an alternative billing structure or adopt alternative methods of lawyering. Thankfully, Susskind proposes a solution:  break legal services down into bite-size pieces, analyze them, and then reassemble them in a way that permits alternative lawyering and alternative billing.  Central to this solution is his analysis of legal services, which run the gamut from “bespoke” (i.e., customized, tailor made) to commodity.  Here are the five levels he sees:

  • Bespoke/Customized
  • Standardized
  • Systematized
  • Packaged
  • Commoditized

Most of our firms are awfully good at doing customized work.  Some of our firms have even standardized their work through the creation of checklists and model documents.  A few have attempted systematization through document assembly and automated decision trees.  Even fewer are actually providing packaged online legal services (e.g., Wilson Sonsini’s term sheet generator).  And then, there are the firms that freely admit that their work product is a commodity and act (and bill) accordingly.

Naturally, our billing follows our style of work:  hourly billing is used for bespoke and standardized work, while fixed fee (or alternative) billing is possible with systematized, packaged and commoditized work.  For Susskind, the key is to break down legal services into their component parts and bill each of those parts accordingly.  For example, you may be advising on the world’s most complicated merger, but chances are you won’t be generating a due diligence request list or closing schedule from scratch.  So, what would happen if you billed the parts of the transaction relating to due diligence and closing preparations as if they were systematized, while billing the process of negotiating and drafting the critical sections of the merger agreement as if they were customized?  Suddenly, you’ve expanded the scope of alternative billing and reduced the need (and attendant client relationship risks) of hourly billing.

Now, what if you took each of the components of your transaction, broke them into discrete tasks, and made sure the right people (e.g., legal or lay, working in the office or remotely, employees or subcontractors, etc.) were handling each task using the right tools?  What if, with respect to each component, you searched diligently for ways to provide higher quality work product more efficiently and cheaply by using collaboration and technology?  These steps should result in a cost structure that is substantially reduced and predictable, thereby facilitating alternative billing.

Law firm knowledge managers with practice experience can play an important role in this process.  They can help identify the component tasks, and then find ways to standardize, systematize, package or commoditize as many of those tasks as possible.  They can bring to bear their knowledge of available technology, they can help draft, they can help automate.  Law firm knowledge managers may be the key to solving the alternative billing, alternative lawyering puzzle.  Are you using them?

[Photo Credit:  hto2008]

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