The Many Facets of Legal Market Disruption

  • May 17, 2018
  • Michael Sauber

The legal market is changing. Is it disruption or evolution? That may be irrelevant as firms must innovate to compete with emerging new business models.

 

The Forces Driving Change

 

Technology has been a disruptive force in industries as diverse as transportation and healthcare. Uber has redefined taxi service, Netflix almost singlehandedly eliminated video rentals1, and Airbnb offers an alternative to traditional hotels. Is the legal market next? Until now, it’s been stubbornly resistant to change. But, according to lawyer and entrepreneur Monica Zent, three significant new factors may soon drive changes that could create a very different legal landscape.2

  1. The gig economy. The freelance workforce is at a forty-year high. With technology enabling lawyers to work remotely and independently, more lawyers will feel empowered to go it alone. The virtual law firm will become a reality.
  2. The millennial workforce. Millennials have a different set of values than their predecessors, with an emphasis on work flexibility and work-life balance, including flexible hours and telecommuting. This generation will welcome technologies that free up time to spend on themselves and family.
  3. Savvy clients. Clients expect more transparency and demand greater efficiency for rote administrative work. If artificial intelligence and machine learning can streamline repetitive tasks such as search and form fill, clients will expect lawyers to embrace them.

 

Disruption vs. Evolution

 

What changes can we expect in the legal landscape as a result of these market shifts? Is the legal market on the verge of disruption, or are we already there? For that we turn to the definitive source on disruption, Clayton Christensen.

The concept of market disruption was first popularized in Christensen’s seminal book “The Innovator’s Dilemma”3. As Christensen describes it, market disruption occurs when a new supplier appeals to market demand in a way that incumbent suppliers can’t, delivering value that’s better aligned with what the market wants.

The new supplier steadily grows market share, beginning at the edges of the market, with the simplest and lowest-value needs, then gradually working up to higher-value segments, until established players disappear and the challenger becomes the new incumbent.

The conditions for disruption in the legal market are here now. The demand side is substantial, with several hundred billion dollars spent on legal services each year. On the supply side, incumbents are clinging to traditional models – including the billable hour – as alternative options emerge.

 

Emerging Disruptive Models

 

So, what are the emerging alternative models? Jordan Furlong, in “Why law firms should focus on adaptation, not disruption” describes three alternatives to traditional legal services4:

  1. Non-lawyer legal services. These are legal services that can be delivered through technology. They include online dispute resolution, e-discovery, advanced document assembly, and others.
  2. Alternative legal service models. Some demand for legal services can be met without a traditional law firm. Alternatives include flex lawyer networks, managed legal services, and legal departments within accounting firms, among others.
  3. Internal options. Some corporate law departments are expanding internal capacity through new hires and technology-based productivity tools. A variant on the Christensen model, this alternative is driving change from the demand side.

So far, these alternative models have only captured a small piece of the legal market. As they chip away at the fringes, Christensen would say we’re seeing the first signs of a market facing disruption.

 

Innovate to Adapt

 

In many industries, organizations that sense imminent disruption will avoid it by disrupting themselves first. This means innovating internally, a challenge for most firms because these initiatives require an entrepreneurial mindset that is often foreign to the average lawyer. Moreover, firms need to tread carefully to ensure they nurture innovation without threatening the current business model. 

In spite of these hurdles, some firms have already found success with internal incubators, bringing together lawyers from the firm with entrepreneurs and technologists from the outside.5 These collaborative arrangements help transfer entrepreneurial thinking to the lawyers so they begin to see how technology could improve the service and experiences they deliver to clients.

 

Concluding Thoughts

 

The fact that today’s change appears small should be no reason for firms to slip into complacency. It may look like a slow evolution now, but disruption will arrive in time, because the value delivered by new legal models is just too compelling. Traditional firms would be wise to ask, “How can we change now? How can we improve productivity and deliver the value that an increasingly sophisticated buyer demands?” Firms that wait until disruption is staring them in the face may find it’s too late.


1    Downes, Larry and Paul Nunes. Blockbuster Becomes a Casualty of Big Bang Disruption. Harvard Business Review. 7 Nov 2013.

2    Zent, Monica. 3 Reasons the Legal Industry’s Ripe for Tech Disruption. HuffingtonPost.com. 21 Mar 2016.

3    Christensen, Clayton. The Innovator’s Dilemma: the Revolutionary Book That Will Change the Way You Do Business. HarperBusiness. 2000.

4    Furlong, Jordan. Why law firms should focus on adaptation, not disruption. LegalBusinessWorld.com. 27 October 2016.

5    Simpson, Kate. Disrupting from within. Canadian Lawyer. January 8, 2018.

About the author

Michael Sauber leads the marketing program for Korbitec, producer of Automated Civil Litigation Software (ACL). He has worked with document production technologies and professional services for over 30 years and is a frequent blogger on these topics.

 

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