Frugal innovation and the law

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Lawyers need to learn a very important lesson from a salad spinner.  Specifically, we need to understand the implications of the Sally Centrifuge, developed by students at Rice University in Texas:

The necessary parts: one salad spinner, some hair combs, a yogurt container, plastic lids, and a glue gun. The finished product: a manual, push-pump centrifuge that could be a lifesaver in developing world medical clinics. … A team of college students invented this low-cost centrifuge, which can be built for about $30, as a project for a global health class at Rice University. The teacher challenged them to build an inexpensive, portable tool that could diagnose anemia without access to electricity, and the tinkerers got to work.

The students, Lila Kerr and Lauren Theis, found that spinning tiny tubes of blood in the device for 10 minutes was enough to separate the blood into heavier red blood cells and lighter plasma. Then they used a gauge to measure the hematocrit, the ratio of red blood cells to the total volume. That information tells a doctor whether a patient is anemic, which can in turn help to diagnose conditions like malnutrition, tuberculosis, HIV/AIDS, and malaria. … “We’ve pumped it for 20 minutes with no problem,” Theis said. “Ten minutes is a breeze.” It has proven to be fairly robust. “It’s all plastic and pretty durable,” Kerr said.

If you think the multinational makers of expensive medical devices would fight a cheap innovation like this, then let me also introduce you to the Mac 400, a hand-held electrocardiogram developed by General Electric’s health-care laboratory in Bangalore, as reported in The Economist:

The device is a masterpiece of simplification. The multiple buttons on conventional ECGs have been reduced to just four. The bulky printer has been replaced by one of those tiny gadgets used in portable ticket machines. The whole thing is small enough to fit into a small backpack and can run on batteries as well as on the mains. This miracle of compression sells for $800, instead of $2,000 for a conventional ECG, and has reduced the cost of an ECG test to just $1 per patient.

The Economist goes on to explain, in a special report on innovation in emerging markets, what these developments represent: a reinvention of the product development cycle for markets with very limited resources. Like Japan before them, which developed lean production systems to compensate for a lack of physical space and material, India and China (and a few other smart entities) are developing production systems for buyers without much money, mobility or infrastructure:

[Companies] are taking the needs of poor consumers as a starting point and working backwards. Instead of adding ever more bells and whistles, they strip the products down to their bare essentials. Jeff Immelt, GE’s boss, and Vijay Govindarajan, of the Tuck Business School, have dubbed this “reverse innovation”. Others call it “frugal” or “constraint-based” innovation.

Chances are that you, like me, live in an affluent society and are familiar with unnecessary options. Most of us have more consumer choices than we need or could hope to sample, choices that don’t make our lives that much better or happier. Most of us have never used 80% of the buttons on a standard remote control or could even identify what they do. Most of us with elderly parents wish someone would invent a computer with only four functions: “Read email,” “Write email,” “Send email,” and “Check the weather forecast.” Most of us can, for a few cents, supersize the meal we just ordered, even though what we ordered was enough to satisfy us just a few moments earlier. Collectively, we’re hooked on the idea that more is better — and in our low-cost, resource-rich world, that’s an idea both easy to indulge and profitable to sell.

Frugal innovation is what the other 80% of the world needs. In places where resources are scarce but needs are great, solutions have to be affordable, reliable, resilient, easy to distribute, and easy to use. Consumers in these places don’t need the most complete, top-of-the-line, every-optional-extra product or service: they need something quick, sturdy and accessible, something tailored to their restricted circumstances. For a good example, watch this scene from Apollo 13, where the ground crew had to find a way to fix a carbon dioxide buildup in the capsule using nothing but the materials that the astronauts themselves had in their crippled spaceship.

Frugal innovation is also what the legal services marketplace needs. This marketplace, led by its dominant providers in the legal profession, has always tried to offer more and costlier services to more and richer clients, time after time. Its business model assumes that the ability and willingness of clients to pay whatever is charged for the most comprehensive services is inexhaustible, despite the reality that that particular market feature peaked long ago. We continue to focus our efforts on offering more and more services to fewer and fewer people at higher and higher prices. In the short run, hardly anyone benefits except us; but in the long run, we won’t either, because our product development cycle is now out of step with the growing reality of the marketplace.

Most people have very limited resources to spend on legal services, and I don’t just mean money. Obviously, the price of legal services is what discourages many people from seeking them out, but there are other and more acute resource deficits. Time is a big one: the legal process can be tortuously lengthy and complicated, especially in litigation. Moreover, lawyers are notorious for making clients wait months to hear from them. Even the process of learning about your legal situation and finding a lawyer who can help you is so diffused and decentralized that many would-be clients give up after the first hour of searching. In addition, most people work or have family responsibilities during the day; where do they find the time to make their way downtown to a law office during regular hours? These are resource shortages, just as a lack of money is. But by and large, the legal profession hasn’t concerned itself with these shortages, because we’ve made a good living serving the minority of the population that’s willing and able (or obliged) to purchase our services on our terms.

The winners of the 21st-century legal marketplace, however, will include those who offer frugal legal services. They’ll figure out the resource restrictions under which most people labour and will modify their products, services and delivery systems accordingly. They’ll strip down their offerings to the bare minimum to ensure functionality, remove unnecessary features, and automate and externalize as much of their process as possible — not just to streamline costs, but also to give clients hands-on access to those services, to be used on their terms. Frugal innovators will relentlessly simplify and de-accessorize legal offerings, constantly asking themselves: can we make this easier? Are there steps we could remove, features we could do without, elements that add cost without adding equivalent value? Can we make this mobile, scalable, adaptable, or 24/7-accessible? If you’re not asking these questions, I can promise that your future competitors — both inside and outside the profession — already are.

There are three good reasons why lawyers should embrace frugal innovation. The first is that it opens up much of the dormant legal market, teeming with would-be clients who can’t afford much but are absolutely willing to pay it. It’s a categorical falsehood that you can’t make money on low-cost products in low-income markets; ask Wal-Mart and McDonald’s, to name just two consumer-friendly corporations, about their most recent quarterly profits. There’s only one rule for turning a profit: spend less than you charge. The recent leaps forward in technology, automation, project management, unbundling and other cost-reducing measures in the law have provided lawyers the tools to do this. Frugal legal services can generate a profit, so long as they’re offered in an efficient, systematic, cost-conscious way.

The second is that frugal innovation in the law would go a long way towards making access to justice a reality for millions of people. Regular readers will know how outrageous I find our current complacency with a legal system that’s accessible only for institutions, the well-off, and the very poor. The unacceptability of heart disease running rampant in India, with only clunky, immobile, expensive ECG machines to deal with it, is what led GE to develop the Mac 400. What is the legal profession — specifically, what are our biggest, richest, GE-equivalent law firms — developing to meet the needs of millions of people whose lives are harder than they need to be because they can’t afford traditional legal services?

And third, frugal innovation in the law will lead lawyers to rediscover the power and attraction of the basic. We’ve developed a fondness for complexity, not only because it pays more, but also because it satisfies our risk-averse need to cover off all possibilities. Most clients, however, don’t need all or even most possibilities covered off. They just need something they can afford that meets their present demand. They understand that the less you pay for something, the more you take your chances — they accept this trade-off all the time, in every industry and walk of life, and they’ll accept it in the law too, if we just give them the opportunity. It’s time we ended our infatuation with expensive complexity and began offering affordable simplicity again.

Lawyers, as much as anyone else, have become hooked on the “more is better” fallacy; in the future, thanks to frugal innovation, less will be better. Less will be more profitable, more market-aligned, and more socially necessary than ever. The only thing we really need to change, in order to get there, is our minds.

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3 Responses to “Frugal innovation and the law”

  1. Jason Wilson

    Jordan,

    Who is the target audience for this piece? I like the message, but most of the solo and small firm practitioners I know are already “frugal,” and have perfected the art of streamlined, low-cost, services tailored to the client’s exact needs, and nothing more. In fact, it is the only way to compete for business in the low to mid-range markets, otherwise you will spend more than you make. I think there might be some lawyers reading this piece and seeing images of “QUICK DIVORCE CHEAP!” next to “TAXES & ESTATE PLANNING” and “PATENTS FILED.”

    If I’m reading it correctly though, I see a not so subtle message to large law to (1) examine their workflow processes and tools for cost savings and (2) understand that “zealous” representation doesn’t mean 100 m.p.h. in the Porsche. Sometimes a slow ride on a tandem will do.

  2. Jordan Furlong

    Jason, thanks for your post. There is definitely a call there for BigLaw to do what GE is doing and push for innovations that can reach the under-served client market, not just for ethical but also for good business reasons. But my larger complaint lies with the way lawyers in all sizes of firms have been insensitive to the wider marketplace.

    Frugal innovation means developing products, services and systems that are specifically tailored for low-income, low-resource markets. These consumers have the same needs as more affluent consumers but nowhere near the resources, so they have a choice: get nothing, or get something substantially less than the best but still functional. Is the Sally Centrifuge as good as a full-scale hospital-quality model? Not at all. But it’s good enough for the purposes and markets for which it’ll be used. “Good enough” is the cry we’re hearing from clients across all income types these days, from GCs to working moms. We need to get a lot better at providing “good enough” services.

    I hear what you’re saying, that small-firm lawyers have been trying to fill that niche — but the evidence suggests it hasn’t been a very successful effort. It seems to me that the range of consumer clients within reach of even sole practitioners’ services is a lot smaller than it ought to be. Take family law, an area where a substantial minority of parties go unrepresented and one served almost exclusively by the small-firm bar. Or consider the fact that slightly over half of all Americans don’t have a will — another product provided by solos and small-firm lawyers.

    Certainly there are various reasons for this — divorcing partners rarely want to hear a lawyer’s cool advice, and few people want to think actively about their death — but we can’t honestly say this is all the clients’ fault. These people need legal services but they’re avoiding lawyers, and we have to consider that an indictment of our efforts to serve them. We may consider that we’re offering services at prices as low as they can go, and maybe we are; but they’re not low enough for people to buy them, and that’s the bottom line.

    What it comes down to is this: either lawyers can afford to offer services within the price reach of this market, or we can’t. If we can, then it would be foolish of us not to try, for example, through stripped-down offerings made profitable through high sales volume or greater systematic efficiency or risk- and responsibility-sharing arrangements with clients. But if we can’t — if it’s simply impossible for lawyers to meet professional standards of competence at low prices, no matter how hard we try — then the next step is to lower the barriers to entry in the legal marketplace and let other providers take a crack at it. What’s not acceptable is for us to claim that we can’t afford to provide these services while simultaneously blocking other entrants to the marketplace who might.

    Frugal innovation ultimately signals providers’ willingness to change how they go about their business in order to serve an untapped market. I do not see that willingness today in the legal profession.

  3. Carolyn Elefant

    I read the article on Frugal Innovation in the Economist on my recent trip to Paris.

    The one disadvantage that solos and small firms have with frugal innovation is that they lack economies of scale. Even a “volume practice” simply doesn’t generate the volume needed for Walmart type success. Consider a firm that handles only unbundled small biz matters, at an average fee of $750 per case. The firm would need to bring in 4 matters a week, 50 weeks a year to gross $150k. That’s 20 matters a month, 12 months a year which is going to demand extensive marketing efforts.

    I’ve always thought that there should be a way for a group of solos to band together and create a national firm that serves frugal clients and share the marketing costs, while continuing to handle bespoke legal matters on the side to diversify their income. I don’t know what kinds of manipulation bar rules would require for this, but I do think that frugal innovation requires economies of scale bigger than what a volume practice can provide in order to really work.

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