That’s me all over

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Posted in: Law21

In addition to keeping busy with client work, I’ve had the opportunity to write a number of articles recently and to be interviewed for a few others. I thought you’d be interested in checking some of them out.

And here are links to some articles for which I’ve recently been interviewed.

Finally, I’m especially honoured to report that for the third consecutive year, Law21 has been chosen among the top 100 law blogs by the ABA Journal. Here’s the LawBiz category in which Law21 appears. If you wanted to cast your vote for this blog, well, I certainly wouldn’t stand in your way.

My congratulations to all the Blawg 100 nominees, and my sincere thanks to the ABA Journal and, as always, to everyone who reads this blog.

The law firm of the future: Thomson Reuters

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Posted in: Competition, Innovation, Publishing

Earlier this month, I wrote a blog post called “Destroying your own business” that explained why law firms, in order to adapt to the emerging marketplace, needed to blow up their own business models and essentially start over. I also lamented the fact that hardly any law firm was willing or able to do this. I asked, rhetorically: “Where are the law firms buying out LPOs and bringing them in-house?” As it turned out, it wasn’t a rhetorical question; I was just asking the wrong people.

Late last week, Thomson Reuters rocked the legal world (or at least, this corner of it) by announcing it was buying legal process outsourcing provider Pangea3. Coming on the heels of Norton Rose’s merger with/acquisition of firms in Canada and South Africa, it amounts to one of the most momentous weeks in recent marketplace memory. Neither side confirmed the price of the Pangea3 purchase, although sources estimated it between $35 and $40 million, and that would be a good price for Thomson. It’s difficult to overstate just how important this purchase is — it will transform at least two legal industries and quite possibly the whole marketplace. Here’s a quick summary.

1. The legal information market (formerly legal publishing) has been thrown for a loop. It’s been clear for a while that the end of “publishing” per se as a major product category was drawing near, so companies like Thomson and LexisNexis have been branching out into complementary areas. But bringing an LPO into the mix is a whole different story — it’s a gigantic gauntlet that other companies will have difficulty picking up. As Legally India points out, it’s difficult to find any trace of the LPO that Lexis set up in Chennai years ago. Thomson has taken a major step towards fully redefining the legal information sector, and everyone else will have to adjust and respond.

2. Equally, the LPO sector must be in some serious turmoil. This is still a very young industry — some of Pangea3’s original venture capital investors were among those Thomson bought out — and although several of the biggest are pretty well capitalized, Thomson is a financial colossus. If I’m an LPO competing for the same types of clients as Pangea3, I’m suddenly up against pockets much deeper than anything I’ve had to deal with before. This could drive a series of mergers within the industry (a consolidation process that’s already started with UnitedLex’s purchase of LawScribe) or a flight to find similarly global and well-financed partners or buyers. Pangea3’s founders were clear: they went looking for capital, but realized they needed a strategic partner.

3. The law firm marketplace cannot help but take notice of this: the company that used to sell lawyers their textbooks and caselaw databases is now, in effect, competing with them in the delivery of legal services. LPOs don’t need to exist in an either/or relationship with law firms — smart clients are using both, and smart firms and LPOs see each other as partners. But it’s also a fact that most law firms view LPOs, if they view them at all, as a threat to their ability to leverage billable junior work out of associates and “train” those associates (I use the word advisedly) in how deals and cases are structured. Law firms that thought of LPOs as a distant entity need to think again — especially because, with Thomson’s assistance, Pangea3 is going to open more offices in the US.

But for my money, the main event here is the transformation of Thomson Reuters from a company that provided legal support services to law firms and law departments into, well, something brand new. It’s not clear yet that we know what we’ve got on our hands here. Thomson has so many lines plugged into this marketplace that it is on the verge — it might already have tipped over — of changing from an information services company into a whole new beast.

Here’s a quick list of the companies, products and services that operate under the Thomson banner:

  • WestLaw: Legal research, legislative and case law resources
  • West KM: Knowledge management services for lawyers
  • ProLaw: Law practice management software
  • Serengeti: Legal task management and workflow systems
  • Elite: Financial and practice management systems
  • FindLaw: Website development and online marketing
  • Hubbard One: Business development technology and solutions
  • Hildebrandt Baker Robbins: Law firm management and technology consulting
  • GRC Division: Governance, risk and compliance services
  • IP Services: Patent research and analysis, trademark research and protection
  • TrustLaw: Global hub for pro bono legal work
  • Pangea3: Legal process outsourcing services

Missing from that list is BAR-BRI, the bar exam training and preparation company that Thomson purchased several years ago — and that, at the same time as it announced the Pangea3 purchase, Thomson also put up for sale. Above The Law drew some reasonable inferences from the fact that Thomson is getting out of the business of helping US lawyers enter the profession and is getting into the business of competing with the firms that would be hiring those lawyers. In terms of a clear signal about where Thomson thinks the marketplace is heading, it’s difficult to beat that.

Thomson has 55,000 employees in 100 countries worldwide, and although only a minority of those employees are in the legal area, that is still a number that dwarfs the world’s biggest law firms and is within shouting distance of the accounting giants that dominate the professional services landscape. Most importantly, Thomson is in the business of information and systems, and those are two of the keys to the future development of this marketplace. Peter Warwick, Thomson’s president and CEO, says that his company’s mission is “to help the legal system perform better, every day, worldwide.” Right now, Thomson is doing everything within that system other than the actual practice of law — and in a post-Legal Services Act age, Pangea3 is an awfully big step in that direction.

Something very big is going on, right now, in the legal services marketplace, and Thomson just became a major part of it. Get ready for a constellation of domino effects throughout the marketplace in response — and try not to stand in the way of any oncoming dominoes.

Canada’s Big Bang

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Posted in: Big Firms, Globalization

Earlier this fall, I gave a presentation to a Canadian law society that described the key trends in the current legal marketplace and forecast where they’re likely to lead in future. As part of the presentation, we discussed a series of hypothetical future developments that would require the profession’s regulators to respond. One of them went like this:

A new legal services company, GlobalLaw Inc., has risen suddenly and dramatically. Based in London, it has taken advantage of the non-lawyer equity provisions of the Legal Services Act to collect massive amounts of capital from investment banks. With this money, GlobalLaw has bought law firms and hired lawyers worldwide, created a huge and sophisticated online service infrastructure, and marketed itself aggressively in multiple jurisdictions. GlobalLaw has now announced plans to buy mid-sized firms in Vancouver, Calgary, Toronto and Montreal simultaneously, and to re-brand and operate them all as GlobalLaw offices. What do you do?

That scenario stopped being hypothetical yesterday, with the bombshell announcement by UK-based global law firm Norton Rose that it was merging with South Africa’s Deneys Reitz and Canada’s Ogilvy Renault. You can read the details in any number of places, including The American Lawyer, LegalWeek, the WSJ Law Blog, the Financial Post, and The Globe & Mail — a range of international coverage that underlines the fact that this, as Joe Biden might say, is a big freakin’ deal.

Norton Rose started the day with close to 2,000 lawyers in 31 cities on three continents, whereas Deneys and Ogilvy together total about 600 attorneys in eight cities, so this looks more like strategic acquisitions as part of a global expansion than a merger of near-equals. I can’t speak to the South African side of this deal, and I’m not even that interested in the logic of the moves from the firms’ respective strategic perspectives (though it sure looks sound to me). What I’m most interested in today is the impact of this development on Canada’s legal marketplace, which I think will be extraordinary.

Some context is necessary, especially if you’re not from around these parts: nothing like this has happened in the Canadian legal marketplace before. Baker & McKenzie was the first “global” firm to come to Canada, but its Toronto office opened in 1962, virtually the Mesozoic Era in law firm history. In 1999, Tory Tory DesLauriers & Binnington consummated Canada’s first (and to date only) cross-border merger with New York’s Haythe & Curley, a union that took something of a star-crossed turn for both firms. In 2008, pulses quickened briefly on a report, immediately denied by all parties, that DLA Piper was in talks with national giant Fasken Martineau DuMoulin. And that’s pretty much the entire notable history of foreign forays into the Canadian legal market, until yesterday.

So you can understand why much of Canada’s legal profession looked like a poleaxed mule when this news broke. Before yesterday, the largest law firm in Canada was Borden Ladner Gervais with 753 lawyers; with this merger, Norton Rose will have more than three times that number. The Canadian firm with the most overseas offices was Macleod Dixon with four, followed by Faskens with three; Norton Rose will soon have nearly 35 offices outside Canada. This is like Gulliver buying a house in Lilliput; or, to borrow a metaphor from the US-Canada relationship, like the elephant moving in next to the mice. This is the world arriving on your doorstep without calling ahead — all the talk about globalization suddenly turned into the reality of a legal behemoth setting up shop down the street.

Norton Rose OR (as the new firm will be officially known) seems likely to affect the Canadian marketplace in a number of ways. Obviously, with a critical mass of lawyers in cities across Europe, Asia, the Middle East and Australasia, Norton Rose will be a serious contender to pick up Canadian multinational clients (or the Canadian work of multinationals with head offices elsewhere). That platform will be equally attractive to potential lateral hires at other Canadian firms who’ll want to know whether there are wider horizons than those they’re currently flying. Aside from possible client and partner losses, incumbent Canadian firms will also be faced with new management pressures: as the Legal Post‘s Mitch Kowalksi points out, Norton Rose brings unprecedented financial transparency (the firm makes its annual report public) as well as superior knowledge management and online services to Canada. All of this changes the competitive calculus of a law firm marketplace that traditionally has behaved more like a cozy fraternity of genteel rivals.

I can see two other Canadian impacts flowing from this merger. The first is the fact that a precedent for global mergers has now been set, and precedent is both a reassuring and a galvanizing strategic force: nothing motivates a law firm more than removing the fear of going first while simultaneously creating the fear of going last. Will we see a stampede of Canadian firms rushing into global mergers? Not likely. But a lot of executive committees will meet to talk about what this merger means for them and whether there are similar overseas opportunities that their firms must now consider. There’s been a sense here that there are too many large firms in Canada for a population and a capital base this size: the Potash Corporation of Saskatchewan notwithstanding, this country is not and isn’t likely to become the world’s corporate headquarters. Some people think that if the law of conflicts of interest were loosened, a wave of national mergers would soon follow. This is a marketplace more than ready for change and consolidation.

But here’s something else to think about: Norton Rose is on a major expansion tear. Last June, the firm made headlines when it merged with Australia’s well-regarded Deacons. Deneys Reitz itself was Chambers’ African Law Firm of the Year in 2006 and maintains a strong commercial law presence in the continent’s biggest economy. (It’s beyond debate that Norton Rose must be looking very hard at potential US merger partners as we speak.) Ogilvy Renault is not a “national” firm as we understand the term — it has little presence west of Toronto (though its Calgary office, opened last year, has grown to eight lawyers), and it still houses more lawyers in Quebec’s capital (Quebec City) than in Canada’s (Ottawa). But it represents global companies like Bombardier, SNC Lavalin and Royal Bank of Canada, and is widely considered a “blue chip” firm within the Canadian profession.

All of which is to say, each of these three firms brought serious credentials to the table, yet each agreed to give up their names and identities to join another firm. So we’re learning that global platform matters, and global capacity matters, and maybe above all, global brand matters — we might very well be on our way to the Legal Transformation Project‘s suggested outcome of a future filled with megafirms and boutiques.

But we might also keep this in mind: the Alternative Business Structure (ABS) provisions of the UK’s Legal Services Act come into effect next fall, and any law firm aiming to be a global powerhouse would want to consider all available options to finance and pursue such a strategy. And I do know this: any global law firm with an office in Canada and with access to global private capital would turn this country’s legal profession upside down, from acquiring talent to investing in online infrastructure to marketing its brand to forcing law societies across Canada to look hard at regulations surrounding non-lawyer investment in or ownership of law firms.

This is all extremely early days yet, and the merger won’t even take effect until next June. But my feeling is that something very big happened in this country’s legal profession yesterday. The sudden deregulation of financial markets in England on October 27, 1986, has come to be called the “Big Bang,” and the coming introduction of ABSs in England & Wales on October 6, 2011, has already been anointed as the legal profession’s own explosion. Well, that was one very loud sound we heard across Canada on November 15, 2010.

Destroying your own business

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Posted in: Big Firms, Competition, Innovation

Well before Blockbuster Video actually filed for bankruptcy protection earlier this fall, The Onion produced a prescient video about a museum tour based on the movie rental chain: Historic ‘Blockbuster’ Store Offers Glimpse Of How Movies Were Rented In The Past. One dazzled visitor remarks: “It’s like stepping into a time machine … it’s hard to believe people used to live this way.” The whole feature is well worth the two minutes, but the sting comes at the end, as the anchor adds: “Blockbuster joins a growing number of historical sites, including Buffalo, New York’s re-creation of a Virgin Records music store and Iowa City’s Borders Bookstore Museum.”

The only thing more striking than the dismantling of these former powerhouse franchises is the speed at which they’re coming apart. Blockbuster, Virgin and Borders were corporate giants with global reach and massive brand strength. Yet today, when you think of videos, music and books, you first think of Netflix, iTunes and Amazon, companies that launched in 2001, 1999 and 1995, respectively. How did the mighty fall so swiftly?

James Surowiecki asks that very question in a recent New Yorker column, citing not just Blockbuster but other former “category killers” like Home Depot, Toys R Us, and Circuit City, companies that dominated the “big-box” developments that spread like wildfire throughout suburbia over the last few decades. These stores were also giants in their day, but today each is either struggling badly in the new economy or has already sunk beneath the waves. Surowiecki puts his finger on the problem in three paragraphs that every law firm leader should read and take to heart:

The problem — in Blockbuster’s case, at least — was that the very features that people thought were strengths turned out to be weaknesses. Blockbuster’s huge investment, both literally and psychologically, in traditional stores made it slow to recognize the Web’s importance: in 2002, it was still calling the Net a “niche” market. And it wasn’t just the Net. Blockbuster was late on everything — online rentals, Redbox-style kiosks, streaming video.

There was a time when customers had few alternatives, so they tolerated the chain’s limited stock, exorbitant late fees … and absence of good advice about what to watch. But, once Netflix came along, it became clear that you could have tremendous variety, keep movies as long as you liked, and, thanks to the Netflix recommendation engine, actually get some serviceable advice. (Places like Netflix and Amazon have demonstrated the great irony that computer algorithms can provide a more personalized and engaging customer experience than many physical stores.) …

Why didn’t Blockbuster evolve more quickly? In part, it was because of what you could call the “internal constituency” problem: the company was full of people who had been there when bricks-and-mortar stores were hugely profitable, and who couldn’t believe that those days were gone for good. Blockbuster treated its thousands of stores as if they were a protective moat, when in fact they were the business equivalent of the Maginot Line.

What happened to Blockbuster and Virgin and Circuit City is now starting to happen to law firms, for all the same reasons. Firms have invested heavily in legacy costs like long-term leases of downtown offices with rich interiors, and have resolutely refused to take the internet seriously as a service delivery vehicle. They have thrived from the absence of client choice, but will suffer as new competitors offer more options and, ironically, more personalized service. Firms aren’t evolving because they can’t evolve: the lawyers within these firms are so invested financially and emotionally in the old structure that they can’t believe things could change.

It’s difficult to see how the outcome for our profession will be any different, because like Blockbuster, we aren’t even trying to adapt. Almost all the innovation in the legal marketplace is now taking place outside of law firms or on their periphery. Contract lawyers work from home, legal process outsourcers work from Mumbai or Manila, LegalZoom works entirely on the internet — these entities are the drivers of change today. The happy result for clients is a fractured marketplace in which they’ll have their choice of which providers to provide which services in which priority.

If you want to see what the client of the future looks like, in fact, take a good look at Colt Technology Services, a UK-based Europe-wide IT company profiled this week in The Lawyer. Colt’s GC uses a combination of providers, including law firms, an offshore captive operation, contract lawyers, and Berwin Leighton Paisner’s revolutionary Lawyers On Demand service, to meet his company’s legal needs. This is an established client trend towards using a portfolio of legal providers, and law firms should be aware of it by now.

But what really concerns me is this: where is the strategic response from law firms to the revolution outside their gates? Where are the signs that firms recognize the existential threats to their marketplace position and are reacting accordingly?

Here’s an example: last month, Bloomberg BusinessWeek published a cover story about Diapers.com, a sort of Amazon.com for baby and infant products that looked to be the next evolution in online shopping. Its founders were quoted in the article as saying they’d welcome a price war with Amazon, and the article was in fact titled “What Amazon Fears Most.” This week, Amazon announced it had bought out Diapers.com for a truly stunning $545 million. That is how you handle upstart competition that threatens your market position.

So what are law firms, facing the same kind of threat, doing these days? Merging with each other, of course: mergers within the United States, within Canada and across the Atlantic, with more surely to come. Same old response, same old thinking. Where are the law firms buying out LPOs and bringing them in-house? Where are the law firms adapting the online delivery methods of startups? Where are the law firms that recognize the peril of their position and are moving to thwart, or to transform themselves into, their smaller, swifter, hungrier new rivals? They’re nowhere to be found, and that’s why the future of law firms looks a lot more like Blockbuster than Netflix.

Surowiecki concludes his article with an observation that readers of The Innovator’s Dilemma will find familiar: “Sometimes you have to destroy your business to save it.” Law firms, unfortunately for them, don’t come with self-destruct buttons.

What’s your sports department?

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Posted in: Innovation

As both a former journalist and a recovering professional sports fan, I was intrigued by this entry at Mark Coddington’s blog about innovation in newspapers. He reports on a study that found the department within most news organizations most amenable to innovation is actually Sports. The two journalism professors who prepared the report, along with other commentators, offered a series of possible explanations for this finding:

  • Sports journalists’ frenetic pace and round-the-clock deadlines are more conducive to the web than to print.
  • Sports journalists have tended to value their readers more highly — a key attitude in adapting to the two-way nature of online news.
  • The web was practically tailor-made for the way fans want to consume information about sports.

But the number-one reason cited, one that I think has resonance for law firms as well, was this:

  • Sports departments operate outside the rest of the traditional newsroom structure.

Coddington writes: “Innovation and risk-taking usually take place in autonomous divisions within an organization, ‘and at most news organizations, the sports departments are separate beasts, often working different schedules and feeling relatively less shackled by [tradition].’ Sports have long been thought of as the newspaper’s ‘toy department,’ the place where journalists can try out new styles and strategies, and since it’s not ‘real news,’ no one will get too worked up about it. Most sportswriters still bristle at the term ‘toy department,’ but as Jeff Jarvis and John Zhu suggested, it’s easier to experiment when you’ve been cordoned off from the sections of the paper that take their mission too seriously to try anything out of the ordinary.”

I’ve tried to become a kind of innovation botanist over the past several years, figuring out why it flourishes in some environments but wilts and perishes in others. This explanation makes a lot of sense to me, especially in the legal profession. Lawyers, risk-averse and change-resistant to a fault, hardly ever sign off on wholesale change from the start; but they’re often willing enough to offer up a small section of the garden for a new kind of approach and see what grows there, so long as the potential downside is clearly defined and delimited.

When I worked for the Canadian Bar Association, for example, and we needed to introduce an innovation of some kind (moving association newsletters from print to email, for instance), I made more headway through the liberal use of “pilot projects” than with any other method. Two or three small sections would agree to run parallel print and email publications and see which the members preferred. Virtually without exception, the pilot projects succeeded, and the majority of the control group switched to the new approach ahead of schedule. It was a demonstration of how innovation and experimentation in legal organizations is tolerated at the edges, a safe distance from the business core, where “no one will get too worked up about it” — but when it succeeds, converts can follow rapidly.

I also see this in my role as chair of the College of Law Practice Management’s InnovAction Awards, which were handed out at the College’s 2010 Futures Conference last month. This year’s winner, for example, was Pro Bono Net’s LawHelp Interactive program, which helps low-income people to quickly and easily complete essential legal forms online at no charge. Moreover, we gave an InnovAction Honourable Mention to Axiom LLP, a virtual or distributed law firm, for its function outsourcing initiative. Both of these winning organizations operate on what most lawyers would call the periphery of the traditional legal marketplace — yet it’s precisely on the periphery that real progress towards better systems and better results is being made, not least because these initiatives don’t appear to threaten anyone’s established position (so far).

There’s always a caveat, of course, and in this case, it’s the problem of migrating successful innovation from the periphery to the center. One of the comments on Mark Coddington’s post makes this point: “While the ‘toy department’ rep helps make it easier for sports departments to experiment, I fear it also makes it harder to reproduce that level of experimentation in other areas of the news organization. It’s much harder to convince management to remain as hands-off for “serious” news, and when you say, ‘Well, this worked for sports,’ it’s always shot down with, ‘Yeah, but that’s just sports.’” This will sound depressingly familiar to advocates of change within law firms, who consistently run into opposition from lawyers deeply versed in the art of distinguishing precedents to suit their own purposes.

But that’s not a good enough reason to quit before you even start. Right now, within your law firm or legal organization, is a sports department just waiting for the chance to rip off the restraints and show what it can do. Maybe, if you’re lucky, they’re not even waiting, and they’re already conducting furtive experiments like publishing a practice-group blog, offering and profiting from risk-sharing fee arrangements, making use of contract lawyers and LPO services, or designing the software that will revolutionize this practice area in a year or two.

Your mission is to find these subversives and give them everything they need to succeed. Cordon off a section of the garden, provide them with a wheelbarrow full of supplies, and let them know they’re free to fail without consequence. At the same time, protect them from pressure and second-guessing by the organizational establishment. Don’t let anyone violate the Roman Rule: “The person who says it can’t be done should never interfere with the person who’s doing it.” Find your sports department, and do whatever you can to help it infiltrate your entire operation.