Skip to 0 minutes and 6 seconds We can now talk about how the legal market will become more polarized between bespoke and commoditized work. Commoditized work is where there is little to differentiate one law firm from another. They do the job you give them, and it doesn’t matter much who does it. Bespoke is just the opposite. It matters a lot who does the work for you and how they do it. Orange juice is a commoditized product. It’s basically all the same stuff. You don’t care very much who made it, you’ll pretty much buy the cheapest product. Top end wine, is just the opposite. It’s a bespoke product. People are prepared to pay huge amounts of money for particular vineyards and vintages.
Skip to 0 minutes and 46 seconds There is likely to be a greater split in the legal profession between bespoke and commoditized work. As more and more work becomes commoditized due to technology, a lot of law firms will see themselves with a choice. Move into bespoke work or compete in a commoditized market. Commoditized work will compete mainly on price with small profit margins available per piece of work, but they will be able to undertake a large volume of work. So firms will be looking for efficiency and to automate as much work as they can. This is likely to lead to mergers between law firms to maximize the economies of scale in the commoditized market.
Skip to 1 minute and 29 seconds Firms that are successful in developing efficient or automated systems will increase their market share and be able to retain or even increase their overall profitability. For example, a law firm which develops an app or program which solves a particular legal problem, could sell their app to a near unlimited number of clients. The restrictions on capacity or office space that you would find in traditional legal work just won’t apply. » This is likely to put a huge strain on really small firms, who can’t match the investment in tech of their larger competitors. There will be selling the same commoditized service at a more expensive price, which is not a good business model.
Skip to 2 minutes and 12 seconds Really small firms can still carve out a role for themselves, for example, in providing a local personal face to face service, but it will be tough. Bespoke work will be much less affected by automation, certainly in the medium term, and will remain profitable, as it is hard to replicate en masse. But as we have previously said, even bespoke work has elements to it which are mundane. The decomposition of work will mean that in order to stay competitive, the law firms doing bespoke work will still have to strive to embrace efficiency and automate parts of their work.
Skip to 2 minutes and 49 seconds When it comes to the really big ticket work, the once in a lifetime that the farm deals, the mergers worth billions, there is a good argument to say an extra few thousand in legal fees won’t matter to the client. The thinking is, that there is no need to strive for efficiency gains if you are doing this type of work. That was certainly true ten years ago, and there is some truth to it today. But I don’t believe this thinking will last another ten years. » We’ll round out this video with a discussion of disruption and diversification in law firms. Accountancy firms have been great examples in moving out of their core areas to add value to clients.
Skip to 3 minutes and 31 seconds They offer a huge range of management as well as consultancy services, and many other things besides. Clients want any advice that helps their business. They’re not only looking for legal advice. With access to a lot of clients data, law firms should be using technology to branch out into other commercial services. The Big Four accountancy firms are acquiring legal expertise, a legal reputation and they are already equipped with diverse commercial offerings for clients. Traditionally, they’re also better at using technology in their businesses. They’re not yet challenging for legal work, but they are growing in capability. Law firms could learn a lot from these examples. » Imagine a website which compares law firms prices, or even individual lawyers prices for particular jobs.
Skip to 4 minutes and 24 seconds Picture a comparison website like Compare the Market or Money Supermarket for lawyers. It’s not exactly a stretch of the imagination for standard jobs to be quoted for in this way. This would allow individuals to compete with law firms on smaller jobs. The cost of advertising and the high street office space would no longer be necessary. The gig economy has began in earnest with firms like Uber and Airbnb allowing people to offer their services as they like, rather than under a contract. Legal services have already shown signs of moving towards a more flexible model, where individual lawyers can be added or removed from a team easily. Sometimes there’s a peak of work, sometimes there is a trough.
Skip to 5 minutes and 10 seconds Axiom Law and Lawyers on Demand are two early adopters of this model. Another possible future is that clients form conglomerates to reduce legal spend. Instead of simple regulatory or compliance work being repeated for ten different clients. Clients may clump together and only pay for the advice once. If they can do it, law firms could end up supplying clients with software that will allow them to perform their own legal work. In this way, some law firms could end up being software developers rather than giving advice directly. Law firms at the moment mainly use a partnership model, and most law firms pay out 100% of profits each year.
Skip to 5 minutes and 56 seconds This doesn’t lend itself well to funding long term projects, and the partnership model may well have to change. » As the world changes, new areas of law will come into being, and old ones will cease to exist. Software, or even objects can be programmed so that they must stay within certain boundaries. Imagine self driving cars that cannot speed and cannot be driven drunk. There is no need for a lot of road traffic advice. As old areas of law shrink new ones grow. The regulation of the use of data is one such growth area with GDP are experts in huge demand at the moment.
Skip to 6 minutes and 38 seconds This trend will only increase as more data is produced and more can be done with that data. Real change in the legal industry may come from a tech giant entering the legal market. In November 2016, IBM bought a financial consulting firm, which gave legal advice on regulatory compliance matters.When IBM puts the data it acquires from this law firm into Watson, which is a very advanced piece of AI software, there is no telling how much it will be able to accomplish. Firms like IBM, Google and Microsoft have global reach, near unlimited budgets and tech expertise. More importantly, they are not tied to the old ways and can approach it with fresh eyes.
Skip to 7 minutes and 21 seconds This takes us to the end of this video on the future of law firms. We’ve explored some of the major changes that are likely to be coming our way in the next few years, and how the legal landscape may alter. We’ll see firms making greater use of technology and changing the people they employ as a result. We’ll also likely see that technology create different ways of billing clients, and a more noticeable split between those firms who do commoditize work and those who do bespoke work. Look out for our next video where we’ll explore entrepreneurship, design thinking and cognitive diversity. Thank you for watching.
Legal Innovation - The Future of Law Firms Part 2
Join ULaw’s Cemile Cakir and Simon George and look at how the law firms of the future are shaping up in part 2.