The market doesn’t care

Two of the smartest people writing on the web these days are Seth Godin and Scott Karp. They have an important message that everybody in the legal services marketplace, especially lawyers, needs to hear.

First, this is what Seth had to say in the course of a short but eye-opening interview about the book publishing industry, which is staring at hard times because of technology-driven upheaval:

First, the market and the internet don’t care if you make money. That’s important to say. You have no right to make money from every development in media, and the humility that comes from approaching the market that way matters. It’s not “how can the market make me money” it’s “how can I do things for this market.” …

The market doesn’t care a whit about maintaining your industry. The lesson from Napster and iTunes is that there’s even MORE music than there was before. What got hurt was Tower and the guys in the suits and the unlimited budgets for groupies and drugs. The music will keep coming. Same thing is true with books. So you can decide to hassle your readers (oh, I mean your customers) and you can decide that a book on a Kindle SHOULD cost $15 because it replaces a $15 book, and if you do, we (the readers) will just walk away.

Scott picks up this theme in a post about the newspaper industry, which is already deeply mired in Internet-induced hard times and has no clear way out:

[T]he web and the market don’t care. The web is the most disruptive force in the history of media, by many orders of magnitude, destroying every assumption on which traditional media businesses are based.

But the market should care, you say. What would happen if we didn’t have the newspapers playing their Fourth Estate watchdog role? Here’s the bitter truth — the feared loss of civic value is not the basis for a BUSINESS.

The problem with the newspaper industry, as with the music industry before it, is the sense of ENTITLEMENT. What we do is valuable. Therefore we have the right to make money. Nobody has the right to a business model. Ask not what the market can do for you, but what you can do for the market. …

I’ll repeat Seth: The lesson from Napster and iTunes is that there’s even MORE music than there was before. We’ve got highly entrepreneurial, creative, and driven people … working hard outside of newspaper company walls to invent new models for journalism. Journalism will find a way. Even if the industries that once supported it do not.

You can probably guess where I’m going with this: the legal services marketplace doesn’t care if lawyers make money. The irreversible changes that our industry is going through, the steady advancement of globalization and technology, the growing legions of competing products and producers — the earning expectations of lawyers and the atrophied business models of law firms mean nothing to them. What lawyers want is about as relevant to these forces as the farmer’s crop is to the tornado bearing down on him.

Let me rephrase some of what Seth and Scott have said specifically in the context of lawyers:

First, clients don’t care if you make money. That’s important to say. You have no right to make money from every problem or opportunity clients face, and the humility that comes from approaching clients that way matters. It’s not “how can the client make me money,” it’s “how can I do things for this client.”

The lesson from offshored lawyers and document management companies is that there are even MORE legal service providers than there were before. What will get hurt is law firms and the guys in the suits and the unlimited budgets for entertaining. The legal services will keep coming.

The web is the most disruptive force in the history of law, by many orders of magnitude, destroying every assumption on which traditional legal businesses are based. We’ve got highly entrepreneurial, creative, and driven people … working hard outside of the profession’s walls to invent new models for legal service delivery.

But the client should care, you say. What would happen if we didn’t have lawyers playing their role to uphold standards and protect the rule of law? Here’s the bitter truth — the feared loss of civic value is not the basis for a BUSINESS.

The problem with the legal industry, as with the music and newspaper industries before it, is the sense of ENTITLEMENT.

The power of positive blogging

It’s not often I can derive a blog post from a tweet, but Debbie Weil‘s recent Twitter entry sent me to this thought-provoking post at CopyBlogger, and got me thinking about the purpose of the legal blogosphere. Brian Clark’s entry talks about the phenomenon of “social proof” — people’s tendency to judge the quality of a thing, in the absence of other reliable indicators, by its popularity — in the context of social media. Among other things, social proof is the fatal flaw behind Digg’s claim to be a useful news filter, and to my mind at least, connects up with Jeff Jarvis’s recent admission that editors are necessary after all. (HT to Nick Holmes on that one.)

But as Clark points out, social proof is also dangerous because “[s]ometimes, your message inadvertently convinces people to do or accept the opposite of what you want…. [S]ocial proof tells us it’s okay to do what we already want to do. This isn’t all bad, especially when it involves the acceptance of your message. But it can also result in negative social proof, in that it motivates people to do the opposite of what you want because you’re trying to change behavior already supported by social proof.” He cites examples like littering statistics leading to more litter and suicide coverage leading to more suicides.

This got me thinking about law blogs, particularly those that, like this one, want to encourage positive change in how the legal profession views its role, manages its business and serves its clients. You might have noticed, if you read (or write) these blogs or are familiar with the whole LPM genre, that a common tone in these conversations is frustration, if not exasperation, with the irrationality and immovability of the status quo. More hair has been pulled out over the billable hour, the alienated client and the overworked associate than any of us care to think. I now wonder if we haven’t been part of the problem.

If social proof operates in the legal blogopshere, then we run the risk that by constantly returning to the foibles and failings of traditional lawyer business practices, we actually reinforce them. Your average lawyer who happens upon a blog post railing against the billable hour, and promoting all the competitive benefits that would flow from changing your approach, probably doesn’t think, “Ah! You’re right! There’s a better way to go, and I can profit from following it.” That lawyer probably thinks, “See? Most lawyers, like me, still bill by the hour and keep their clients waiting. I’m not the odd one out, and I’m in no danger of being left behind.”

What can we, who write about these subjects, do to avoid reinforcing what we’d prefer to erase? Our options are admittedly limited: when most lawyers are doing it one way, and human nature is to do what most people do, we’re kind of up against it.

But I think we can refocus our efforts to find examples of lawyers thinking differently and acting innovatively, and to broadcast those examples with sufficient frequency and volume so as to disrupt the notion that “everyone’s doing it the old way.” The Financial Times’ innovative lawyers list is a good example, but I’m especially proud of the College of Law Practice Management’s Innovaction Awards (which I’m chairing this year), which specifically seek out the pioneering innovators in the law and promote their achievements. We need to accentuate the positive, to shake the perception that it’s okay for lawyers to walk the old ways because they have lots of company. We should do all we can to make the traditional road feel a very lonely one.

And this gives me a segue into responding to a meme I received a few days ago (on my birthday, no less) from Mary Abraham at Above and Beyond KM, asking a simple question: “How do you decide how/what/when to blog?” The “How” is: at a keyboard, with coffee, whenever I’ve got a story I need to tell. The “When” is: whenever an opportunity presents itself, which I can tell you is not nearly as often as I’d like.

But the “What” is the most important:  I want to write articles that help advance the day when the power of social proof works to benefit lawyers and their clients, not hinder them, because the old ways of doing business have fallen into disuse. I want to write about the legal profession as it should be, as it could be, and as, increasingly, it is.

These are the days of miracle and wonder

I’m not American, I didn’t cast a vote in the Nov. 4 election, and I’m not especially partisan (nor is this blog remotely political). I just wanted to make a very brief entry here about the courage to innovate.

All of us have said, at one time or another, that there’s no point in trying to break the pattern — we can’t change our career, our law firm, our faculty, our company, our whatever. We tell ourselves to be realistic: we can’t get past the entrenched interests, irrational biases or suffocating inertia that stand in our way.

That excuse just lost a lot of its power. It’s now recorded fact and history that all these things can be overcome. The unconventional can prove wise, the remotest odds can be surmounted, the unprecedented can become precedent — and president. The world now has an astonishing template and argument for innovation; no matter your politics or nationality, you’re the beneficiary.

Twenty years ago, our parents would never have believed it. Twenty years from now, our children will take it for granted. But right now, it’s our tremendous fortune to stand right on the equilibrium between “It can never happen” and “It can happen,” and to marvel at it. Take a moment to revel in a game-changing victory for the courage to innovate — the courage to try.

Then go make some precedents of your own. It can happen. It just did.

Dispelling the myths of lawyer education

There’s an old story about a supposed experiment in which five apes are placed in a cage containing a stepladder. A banana is hanging from the roof of the cage, and a sprinkler with ice-cold water is positioned above it. Whenever an ape tries to climb the ladder to get the banana, the sprinkler comes on and drenches all the apes until the ambitious ape abandons the effort. Eventually, after numerous attempts and soakings, the apes learn to avoid the ladder altogether. Then the sprinkler is turned off completely.

Now one of the apes is replaced with a new ape, who, not surprisingly, heads straight for the stepladder to get the banana. The other apes set upon him immediately, beating and shoving him until he gives up — even though the water never comes on. Then another replacement ape arrives, and when he tries to get the banana, the other apes attack him — including the previous new ape who has never been soaked! Eventually, five new apes who’ve never been showered with ice water will nonetheless avoid the stepladder and the banana. And that, the story goes, is where policy comes from — that’s the way we’ve always done it around here.

The legal profession resembles that cage in a lot of ways, but how we educate and recruit new lawyers might be the best example. Our beliefs and practices about the legal training process owe far more to our professional myths and oral traditions than they do to the cold light of evidence. Here are two recent examples. Continue Reading

The law firm as middleman

This past week brought word that Axiom Legal is working on opening its fourth office, this one in Chicago. The company is now at 230 lawyers and growing, not bad for an operation that hasn’t yet celebrated its tenth anniversary. Axiom is a firm that provides highly credentialed lawyers on a contract or project basis to in-house law departments for substantially less than what major law firms — many of which have incubated current Axiom lawyers — would charge.

Axiom has been a hit with clients, but an even bigger hit with individual lawyers, who have responded to the promise of interesting work on location with major clients at good (but not stratospheric) salaries and reasonably flexible hours.  Bruce MacEwen featured Axiom in a couple of recent posts, and the firm’s website offers plenty of articles in the business and legal press detailing its rise.

Axiom’s foray into Chicago is occurring around the same time that The Practical Law Company is establishing its first North American beachhead in New York.  PLC needs no introduction for readers in the British Isles, who will already be familiar with the legal know-how company that provides knowledge, transactional analysis and market intelligence for business lawyers and clients. Doug Cornelius at KM Space published an account of PLC in a post earlier this month, identifying the company as embodying the future of knowledge management.

I had the good fortune earlier this summer to speak with Ian Nelson, PLC’s vice-president of business development and marketing, who provided me with an online tour of the company’s offerings. PLC’s value proposition is that its own crack staff of lawyers collects and stays on top of critical information in business law, so that its customers don’t have to continuously duplicate that effort. It’s not far off the idea of private KM teams that I suggested in a post earlier this year.

These companies are among the most innovative entrants in a legal marketplace undergoing a great deal of upheaval, and they’re both worth your attention and consideration on their merits. But while they provide two different types of service, it seems to me they have one particular thing in common: they pose a disintermediation threat to law firms. Continue Reading

Insights from the College of Law Practice Management

As usual, my trip to the annual meeting of the College of Law Practice Management was more than worth it (even considering that Chicago broke an all-time record for single-day rainfall while we were there). Listening to and exchanging ideas with so many thought leaders in law practice management was exhilarating —  a full-morning session of presentations and workshops was particularly thought-provoking. Other highlights included the induction of new fellows and the Innovaction Award ceremonies.

Rather than try to summarize everything we talked about, I thought I’d reproduce for you my page of “I hadn’t thought of that before” notes. These are ideas or insights that occurred to me or were delivered by speakers during the conference, and that might be of equal interest to you.

– “If you’re happy with your choices, you’re balanced.” This observation came from Carol Phillips, director of administration with Sidley Austin LLP, who was speaking about one of my least favourite terms, work-life balance. Carol expressed much of the frustration that many partners feel about the demands of the newest generation of lawyers, and while I don’t share it or agree that it’s all the Millennials’ fault, I do appreciate that the frustration is genuine. But in looking for a new way to define balance for lawyers, she offered the observation above, which I think contains a lot of truth and should be employed by more lawyers of all generations who are assessing their careers and lives.

– “Imagine Google buying Clifford Chance.” This truly startling scenario was one of those painted by Ward Bower of Altman Weil, in a presentation on the Legal Transformation Study: Your 2020 Vision of the Future, a major strategic research project released earlier this year by a wide range of law firms, legal organizations and consultancies. Ward talked about future possibilities such as 10,000-lawyer global firms, widespread automation of legal services, a Big Six worldwide hegemony of firms, and massive deregulation of the profession. It’s an important and thought-provoking project whose free executive summary deserves a read. Continue Reading

Repainting or renovating?

There’s repainting, and then there’s renovating. Innovation in the practice of law can take either of these forms, and while there’s nothing wrong with a fresh coat of paint or moving the furniture around, installing new support beams and ripping out the plumbing is a whole other order of commitment to change.

As a useful example of repainting, word from the UK is that 18 major law firms are getting together to establish a new “carbon footprint” protocol for their industry. The Lawyer reports that the “Legal Sector Alliance, a movement of law firms and organisations committed to working collaboratively against the climate threat, [will] provide law firms with a practical guide to adopting environmentally sustainable practices.”

Not meaning to discourage any sensible steps towards a better environment, and the firms deserve credit for promising to reveal footprints that could be embarrassingly larger than expected; the free market in saving face is a powerful force in a tightly knit profession like ours. But best intentions aside, this initiative will have a lot more of an impact on, say, marketing and community relations than it will on the fundamental business of these firms: serving their clients.

Clients are looking for something a little more substantive. Mike Dillon, GC of Sun Microsystems and occasional but engaging blogger, expressed as much in a post last month called simply “Finding Value.” Mike ticks off areas of needed reform in law schools and legal media, and acknowledges that clients need to step up, too. But law firms, he says,

need to understand every component of their operating expense and business model. What is the cost of attorney turnover in the firm? What are its core v. non-core technical strengths? Can the firm manage sub-contractors (i.e. other legal service providers) to provide more cost effective services to clients in non-core areas? Does the firm fully understand its customers and does it tailor its services to the customer’s specific needs?

These are the kinds of questions that start the kinds of conversations among lawyers and clients that we need. To that end, let me direct you to a very promising conversation just getting started: Continue Reading

Preaching to the choir about innovation

Legal Times reports the release (2nd ed.) of Fair Measure: Toward Effective Attorney Evaluations, by the ABA’s Commission on Women in the Profession. Fair Measure offers law firms instructions and materials to help them conduct performance evaluations free from gender bias. And it offers us a useful prism through which to view the most important role innovation plays in the practice of law.

I haven’t read the book, but its central premise — that evaluations are (a) key to lawyers’ career progress in law firms and (b) extremely susceptible to both overt and unconscious gender bias in favour of men — seems unassailable. But the book also seems vulnerable to two underlying assumptions: that (a) most law firms systematically rely on evaluations or indeed any other rational method when assessing and promoting lawyers, and (b) most law firms are sufficiently troubled by their clear inability to retain women lawyers that they’ll actually do something about it.

In a typical law firm, when partners evaluate associates, they often do so in a peremptory manner that reflects the low priority management has accorded the task — it’s not billable, it’s not tied to the partner’s own status or compensation, and it’s not part of a holistic approach to associate development that includes mentoring and training. Similarly, decisions to extend partnership offers are often made with subjective criteria that reflect partners’ own personal likes and dislikes, which invariably includes stereotyped beliefs about gender and ethnicity.

The real problem is the absence in many firms of rational, consistent mechanisms for evaluating and nurturing talent, and the untroubled attitude towards the negative impact that absence has on fairness and diversity within the firm. In other words, Fair Measure is a book designed for the small minority of firms that actually believe they have a weakness and actually want to fix it. The bulk of the profession likely will pass it by.

But you know what? That’s fine. Continue Reading

Capped fees, limited innovation

To the well-known list of companies that have consolidated their roster of outside counsel to one firm (DuPont, Tyco, and Linde, most prominently), you can now add Pfizer, which Corporate Counsel magazine reports has given all its employment litigation work to Jackson Lewis and its 500 lawyers across the US. But this one comes with a twist: in exchange for its sole counsel designation, Jackson Lewis is capping all its fees to Pfizer, issuing one invoice a month containing one-twelfth of its annual fee and an accounting of its its time spent on Pfizer matters in the last 30 days.

There are three interesting points to take away from this story. The first is to note that when Pfizer’s GC was asked to list the reasons why Jackson Lewis won this ten-firm competition, the first thing she cited was trust: “We were putting all of our eggs in one basket. Before, we had a choice among ten firms. Making this decision meant that choice was gone.” Never mind the economics: you don’t win a contest like this unless the client has the utmost faith in your reliability and wisdom.

The second is to observe what happens in the absence of trust: tucked away in a sidebar at the bottom is an account of Pfizer’s frustration with fat, vague law firm invoices that didn’t comply with the department’s well-established billing guidelines. So the company hired a legal bill assessor called Legal Cost Control, which found that Pfizer’s outside counsel were billing for things like making copies, sleeping on airplanes and assembling budgets. Now Pfizer sends all outside counsel invoices to a billing review team — and it’s fair to assume that firms submitting questionable bills won’t be in that trusted inner circle, if they remain counsel at all.

But the third, and most significant, aspect of this story is that while Pfizer is combining two innovations here, convergence and capped fees (well, UK law departments wouldn’t call law firm panels exactly innovative), it missed an opportunity to add a third when it retained the right to recoup Jackson Lewis’s unspent fees at the end of the year. Continue Reading