Law firms: consider the pilot fish and the shark

For all the well-known reasons, aggregate demand for legal services delivered by traditional law firms is flat. That has been pretty well documented. (In fact, enough already.)

So, the firms that are succeeding are the ones taking business from others (they are taking business from other law firms and taking it from alternative legal services providers, as well).

Here are three opportunities for midsize firms in this jungle:

Midsize firms can take business from big firms when clients elect to hire smaller firms where (i) the service is equivalent or better, (ii) costs are lower, and (iii) firm principals are more directly engaged in direct client service.

Midsize firms can take business from small firms where the midsize firm can bring broader and deeper capabilities.

Midsize firms can take business from anyone, anywhere, any time a midsize firm can provide experience-honed legal judgment delivered person-to-person by empathetic, seasoned professionals.

But “taking business” from others need not be all tooth-and-claw. Think instead pilot-fish-and-shark.

Artful midsize firms can build lasting, mutually beneficial relationships with other firms — large and small — law firm and alternative provider —  by networking, collaborating, complementing.

Midsize firms are uniquely apt for networking.

The ecosystem of our kind: consultants to consultants to consultants

First-of-the-year projections are still arriving at my inbox.

Added to the traditional providers now there’s a lively and growing new ecosystem of law firm consultants. There are all kinds of them. They do M&A, marketing, strategic planning, headhunting, IT, cyber security, all kinds of risk management, and more. Their categories are subdividing, their numbers multiplying. And they are projecting up a storm.

Many report that demand for legal services is growing again. “Exciting,” one of them said this morning. Transactional work for lawyers at all levels is growing, they say.

But just about as many say that demand is flat. That group tends to say that relatively few firms are taking work away from everybody else.

Still others are looking a bit further out. They are assessing artificial intelligence, non-lawyer legal services providers, the growth of legal departments, and the continuing expansion of accounting firms onto old-time lawyer turf. Most of them predict different kinds of long term demise. Some not.

I’m seeing a trend, myself. Demand for law firm consultants is up (it must be because there seem to be so many of them). But, wait, maybe it’s down (it must be because they are marketing so hard with their projections and all).

Anyway, I project a growing market for advisors to law firm consultants. Consultant consultants.  Just like anybody else, law firm consultants need advisors: someone to help them with their elevator speeches; someone to advise them about their mergers; someone to think about the impact of artificial intelligence on what they do.

They need somebody to tell them to be agile. We all do.

Holiday special: low rates for legal research and document review if you act now!

Holiday prices on selected services. Order now!

Did MidLaw recently say that “non-lawyer competitors are thriving based on the proposition that much that law firms do is not the practice of law”?

Well, you can get holiday pricing with that.

MidLaw received an email message that same day (subject: “Christmas Blast”) from somebody in India who offered an “end of the year special.” Special low rates, good only until December 31, for

• Legal research
• Summarizing medical records, depositions and trial transcripts
• Indexing, proofreading & cite-checking of legal documents
• Preparing case chronologies
• Review of legal documents
• Preparation of discovery requests & responses
• Contract review and abstraction
• Drafting of summons & complaints
• Doing redactions, and applying bate-stamps on legal documents
• Data entry, form fill-ups, template based drafting
• Making entries on accounting systems.

I am serious. This offer came from a firm that is “not a law firm and neither provides legal advice nor practices law.”

Cut-rate legal research and document review. But you must act now!

How beautiful on the mountains are the feet of those who bring good news.

Law firms are surrounded. We must circle the wagons. But around what?

The Financial Times recently published a very good, short article about legal technology: “Artificial intelligence disrupting the business of law.” It drives home the point that law firms are surrounded by new technologies, by alternative providers, by accounting firms providing legal services, and more. Big Law is under attack and it is beginning to fight back by investing in big technology.

MidLaw can never do that. Mid-size firms must look to third party providers to bring technology solutions.

But that’s fine. It frees mid-size firms to focus on their particular competencies, their core clients, and their home markets.

What does a mid-size firm do uniquely well? What is its focus? Get clear about that. There is a different answer for every firm. Context matters. Identity matters. Competence matters. Ethos matters.

The counter-intuitive next step after finding focus is to go beyond it. After you know who you are, the next step is to ask what goes with that? How do you grow it? What else can you be? What other services are natural expansions of core competencies?

And here is a key: growth beyond core competencies may not be limited to services that require a law license. The definition of the “practice of law” has limited relevance to the growth of a law practice. Do not allow the fact that you are a law firm delude you into the belief that you are limited to delivering legal services. Non-lawyer competitors are thriving based on the proposition that much that law firms do is not the practice of law.

Context matters:

• who are you?
• what are you good at?
• what are you uniquely good at?
• who are your clients?
• what services can you provide to them, whether the practice of law or not?
• what markets do you reach, can you reach?

The definition of the phrase “law firm” is shifting, shaking, and shrinking. Potential clients don’t see law firms as alternatives that all do about the same thing. And they don’t much care what the legal definition of  “the practice of law” may be.

Blockchain for dummies: more transformation, more change

Blockchain is coming. It will radically transform commerce. And the economy. And the practice of law. It’s another one of those things.

So what is blockchain? What is it going to change?

Start with this: blockchain is not a technology that blocks chains (of data). Instead, it assembles blocks (of data) into chains. Start there.

Blockchain is also called “distributed ledger technology.” In effect, it promises an internet-accessible registry system. Data is recorded electronically. And, instead of having one central official “place” where it resides, the data is “distributed” among all participants or potential users. Participants “agree” electronically about the validity of relevant information.

The resulting “distributed ledger” is analogous to land registration, such as that authorized in North Carolina, only it is digital and it goes much further. All the components of ownership, or an agreement, or a transaction, including enforcement, can be linked, block by block, into an inalterable, decentralized, automated digital chain — a ledger — that is Internet accessible.

1. There is no need for a government or other central registry to record anything because the distributed ledger does that, making the data universally accessible among participants. And the technology can make recorded data unchangeable.
2. There is no limit to what kinds of ownership or value or transactions can be recorded in a blockchain because the parties themselves make those choices electronically and the technology accommodates the data.
3. In effect, the technology enables a universally accessible decentralized registry whose validity cannot be forged, and whose terms cannot be altered. And it can be made  “smart,” which is to say, capable of executing agreed actions with certainty.

This has the potential for “radical transformation” of commerce. Ownership, agreements, and transactions can be digitized. The processes of authentication, verification, validation, recording title, and executing transfers upon counter-performance, can be blocked, chained and automated.

Currently, functions such as these are heavily dependent on assurances from lawyers: opinions and certifications.

But with the technology that is coming, lawyers will no longer be needed for those functions. Blockchains will provide them. Lawyers will be replaced by 1’s and 0’s.

Blockchains though will recast the role of lawyers.

North Carolina lawyer Nina Kilbride says that while lawyers will no longer be administrators of commerce; they will become instead its engineers. (That began this summer, she says.)  The future role of lawyers, she says, is not to administer and validate processes, but to design the digital processes (blockchain structures) best suited to automate particular commercial objectives.

Good places to start to understand this are

• Bettina Warburg’s TED Talk, “How the blockchain will radically transform the economy.”
• Nina Kilbride’s website, “Cryptolawyer.net, The Evolution of Law in the Digital Age.”
• The Monax Explainers.

North Carolina appears to be right at the center of blockchain’s emergence, with Nina Kilbride and Monax, the Raleigh company she’s associated with. At least, that’s the evidence of the recent North Carolina Bar Association program on the subject (“What Lawyers Should Know about Blockchain Today”).

This has the feel of that moment in 1839 when Caswell County’s Stephen Slade awoke from his slumber and discovered the process for flue-curing tobacco.

People get ready, there’s a chain a-coming.

Globalization, boundaries, lawyers

Should they have left? Should they have stayed? Should we build a wall around ours?

Technology, communications, transportation, the ability to operate at scale, the force of populations — irresistible forces. Globalization is upon us.

There will always be boundaries. Boundaries will always be crossed.

Commerce is inevitable. Ain’t no wall high enough, ain’t no valley low enough, ain’t no river wide enough.

Boundaries are terrains of uncertainty; they are where complexity grows.  That makes them hunting grounds for lawyers. Someone must make things predictable.

Mid-size firms have new tools for the harvest.

Organizations, including law firms — the new “defining archetype”

“The defining archetype of the new world of organizations is no longer the middle manager but in fact the free agent.“

Venkatesh Rao said this in the Podcast, “Venkatesh Rao on the Three Types of Decision Makers, Mental Models, and How to Process Information,” at The Knowledge Project.

Law firms planing for the #Social Era should start from this insight, which, as MidLaw has been saying, throws back to 19th Century models.

The ascendancy of free agents goes to the core of why the mid size is the right size for law firms. Rightly ordered mid size firms have no middles, and they are best suited to foster autonomous professionals.

New members of law firms, be wary of settling into roles that are too narrowly focused on your firm’s internal hierarchies or structures. Focus on external networks.

 

 

21st Century law practice: multi-jurisdictional and cross-border practice

Simply put, there is no way to hold back multi-jurisdictional and cross-border law practice, and that is reshaping traditional structures and the economics of law practice. 

When there are many small local markets, there can be a ‘best’ provider in each, and these local heroes frequently can all earn a good income. If these markets merge into a single global market, top performers have an opportunity to win more customers, while the next-best performers face harsher competition from all directions. Brynjolfsson & McAfee, The Second Machine Age

Geographical boundaries, even political and jurisdictional ones, have less and less grip on law practice every day. This is thanks to:

a)      the digitization of more and more information, goods, and services,

b)      the vast improvements in telecommunications and, to a lesser extent, transportation, and

c)      the increased importance of networks and standards.

(Brynjolfsson & McAfee, again, but not them alone.)

These are not changes that can be held back for long by local rules, especially as business has crossed borders in a fever, and because federal and uniform laws have cleared away field after field of what once were domains of state law.

Law firms – no, legal services organizations – of the future will be shaped by these changes forevermore. They already have been.

The only real question is how to take advantage of these changes? The opportunities available to small and mid-size firms are unique to them – different from those open to large firms, and not the same for all small and mid-size firms. This requires knowing who you are and identifying your opportunities. And, focus. Not following, not copying.

On organizing law firms around professional values

Competence, autonomy and connectedness.

These factors were recently correlated with a sense of well-being and life satisfaction among lawyers. They far exceed money, status or prestige.

In plain terms, lawyers who feel a sense of competence, a sense of autonomy and a sense of connection with others are the contented ones. These factors, the study also found, are less often experienced in large law firms than they are in public service jobs. But note well: the satisfaction achieved in public service is not said to come from the greater nobility of the work, or from reflection on a life well spent. Rather, it’s because public service lawyers are more likely than big firm lawyers to experience a sense of personal competence and autonomy and meaningful connections with others.

Surely, achieving those modest conditions are within the grasp of virtually anyone with a law license – big firm or small, private or public. It’s not about the job; it’s a matter of how the practice environment is structured.

In fact, it might be argued that law practice, certainly “classical law practice,” is the natural home of competence, autonomy and connectedness. Those factors align remarkably closely with the traditional culture of the legal profession. And, now-days the emerging culture of all knowledge work, not just legal work, (think Google) seems to be aspiring to the same principles.

Traditional legal ethics. The heart of legal ethics has always been in the lawyer’s duties of competence, independence and loyalty. It’s not much of a stretch to see competence-autonomy-connectedness as equivalent to those ancient ethical precepts. This is where lawyers began.

Maybe in some ways, large, leveraged and departmentalized law firms have moved away from this core. Large organizations inevitably limit autonomy and may dilute personal connections with clients and colleagues, and they concentrate individuals on narrower and narrower circles of competence. Even so, few law firms, large or small, do not claim competence (they call it excellence), some form of autonomy, and professional connections (collegiality) among the foundations of their culture.

Knowledge workers.  Even as lawyers may have moved away some from this original core, organizations of knowledge workers are moving rapidly toward cultures that prize flat or non-hierarchical structures,  a sense of community and, of course, excellence.

My best guess is that business organizations of the future will look more and more like what law practice might have looked like in the 19^th Century. (OK. Please allow a bit of latitude here, but you get the point.)

Technology. Technology is abetting this. The thrust of 21^st Century technology is to “commoditize” knowledge, to equalize the capabilities of small organizations with larger ones, and to create new capabilities for networking and for social connections – in every instance promoting individual competence, autonomy and community.

Millennials. Is it a cause or is it an effect? In 2013, Millennials made up a third of the population of the United States. They constitute a majority of the work force.  And, they are often characterized by attributes that line up with these same factors. Legal employers are commonly admonished to provide work cultures that meet Millennials’ expectations of professional development and recognition of individual achievements, while anticipating their independence from institutions coupled nonetheless with a desire to work as part of a community or team broader than themselves.

So, it’s simple enough. The pillars of professional satisfaction are competence, autonomy, and connectedness. Traditionally, these values have been at the exact center of the professional lives of American lawyers. And now American business culture generally is creating new forms of organizations founded on these same things.

So – as law firms find themselves being reshaped by technology, by non-lawyer service providers, by the expanding role of legal departments, and by limited-service law firms, a key to recruiting and retaining talent will be to create future firms in which professionals can build their careers around competence (professional development centered in meaningful experience), autonomy (participation in a non-hierarchical business organization) and connectedness (collegiality, shared values, and close connections to clients).

Achieving this in law firms that handle larger, complex matters is harder than it looks, but it is imminently doable.

Core lawyer function not special knowledge, but managing hard problems – Mauboussin: a thinker about that

Farnum Street recently called attention to Michael Mauboussin‘s observation that the capability of IT-enabled networks, which can harness the wisdom of crowds, reduces the scope for experts to add value.

A much narrower but related point has been made here at MidLaw in the context of law firms. The growing ability of smaller firms to network with each other and harness combined wisdom, diminishes the advantage of larger firms. Much of the value that large firms bring can be replicated by networking; and technology is rapidly enabling better networking. This does not eliminate the need for law firms, but it reduces the need for so many large firms, and it affirms the growing opportunity of mid-sized firms.

Mauboussin extends this thinking beyond the observation that problem-solving is no longer something that must always be handed over to subject matter experts. He suggests methodologies for solving problems, including solving problems with networks that include experts.

This is important learning for lawyers. Subject matter expertise is not what’s at the core of lawyering. Problem-solving is. Lawyers are not so much possessors of key knowledge as they are professionals who know how to confront and manage hard problems. Mauboussin provides useful thinking about how to think about thinking about these problems.

Knowing when and how to hand things off to subject matter experts and then how to use what you get from them, is an important part of solving problems. As computering advances, this kind of competence will be a larger part of lawyering.