A slice is reserved for everyone who predicts the future of law.
Today is the debut of Anusia Gillespie’s monthly Q&A column on NewLaw Fundamentals. See Post 243. This post (241) is an explainer on why we are running Anusia’s series. One part of the explanation is practical. A second part is deeply analytical and likely of more interest to regular Legal Evolution readers. Both parts, however, are rooted in the value of humility.
The practical reason is that Anusia, who spends her days in the innovation trenches, thought it would be a good idea. First at Eversheds Sutherland, and now at United Lex, Anusia is engaged with lawyers and other legal professionals who are under enormous pressure to do more with less. Yet, very few of her stakeholders spend their discretionary time reading about how the legal industry is changing. For them, NewLaw really is new. Thus, perhaps it’s useful to slow down and articulate some first principles.
A second reason to run Anusia’s Q&A column is to help unravel a vexing question on legal industry strategy—is it better to retool an existing law firm franchise with one-to-many know-how, or are we better off starting from scratch?
Retool or start from scratch?
This is a very difficult question that’s destined to be answered through experience rather than logic. And it will be Anusia’s experience, and her NewLaw and BigLaw peers. This is because first-rate change agents are required for the success of both approaches. In fact, the strategy question will ultimately be resolved by the fate of the change agents.
Fortunately, the two sides of this debate have just been sketched out by three of the legal industry’s most distinguished thought leaders.
In case you missed it, Neville Eisenberg and Richard Susskind recently published “Vertically Integrated Legal Service” in The Practice, which is a practitioner-oriented outlet published by the Harvard Center on the Legal Profession. In brief, Eisenberg and Susskind argue that the winning model is a vertically integrated law firm that connects together three distinct segments of legal work: expert, everyday, and process.
Eisenberg and Susskind argue that Figure 1 is an “oversimplification” of the market as evidenced by ALSP’s relatively modest 1.5% market share. Instead, the best model is a vertically integrated legal services organization. See Figure 2. This is because “all legal matters require a mix of legal expertise, legal experience, and process, even if the great bulk of human hours spent are on the process component.”
I certainly don’t dispute the wisdom of Figure 2, as we’ve published nearly identical graphics to describe and advocate a similar strategy. See, e.g., Post 055, 120, 125. Further, all of these ideas and concepts likely trace back to Mark Harris, the founder and former CEO of Axiom, the original NewLaw organization. See, e.g., Post 010 (key graphic); Post 036 (key graphic).
The sticking point, however, is the primacy that Eisenberg and Neville give to “traditional lawyers.”
In a provocative essay just published on LinkedIn, “A Different Road,” Alex Hamilton, the CEO of Radiant Law, agrees that the vertically integrated law firm is the right model but argues that it’s a serious strategic error to attempt to get there by retooling an existing law firm.
Alex writes, “to make [the retooling strategy] work, you need to radically change how lawyers operate, the incentives that apply, and how decisions are made.” This is unrealistic, argues Alex, because “partnership models are perfectly designed to protect the current power structure and resist change, with the most successful under the old model holding the reins.”
Note that for Hamilton, this is not an academic or philosophical debate. Over a decade ago, he resigned from the partnership of Latham & Watkins to start what would eventually become Radiant Law, which is in all respects a vertically integrated law firm. Before resigning, he tried in vain to convince the firm’s leadership of the commercial opportunity in front of them. (More on that below.)
Alex provides three reasons why “traditional lawyers” are unable to lead the way to a vertically integrated model:
- “Traditional lawyers at law firms literally have no clue how to make everyday contracting (our speciality) go fast. We [at Radiant Law] now generally hire only junior lawyers because [as Paul Cravath learned over a century ago, see Post 235] it is too hard to reprogram senior lawyers who tend not to take it well when you explain that pretty much everything that they have learned to date from their firms is wrong.”
- “Traditional law firms are structured for the bespoke and are in no rush to do anything. It takes a typical large law firm about two days to complete a conflict check and this can extend to weeks … “
- “Traditional law firms aren’t optimised for cooperation, they are optimised for autonomy of partners. Good luck telling them that they all have to work in the same way, a fundamental for doing routine work. Good luck getting them to switch to fixed fee only and ditching timesheets (despite being talked about for decades, can you name one large firm that has done it?).”
It is hard to overstate the amount of conventional business theory one has to throw overboard to side with Hamilton over Eisenberg and Susskind. Law firms have every conceivable advantage over NewLaw or a greenfield start-up like Radiant Law: tremendous cash flow, a trusted brand, and a large base of clients open to a conversation on better, faster, and less expensive legal work. From the outside looking in, a new entrant would have to be nuts to bet against law firms.
Yet, the Eisenberg-Susskind analysis has its own problems.
According to Eisenberg and Susskind, the reason that ALSPs have not scaled is that “it is neither possible in practice, nor desirable for most clients today, for great quantities of work to be undertaken without the direct and active involvement of practicing lawyers.”
“The one exception,” notes Eisenberg and Susskind, “is the great success of e-discovery business,” which, they concede, is a place where the ALSP disaggregation strategy has clearly worked.
I worry that, in hindsight, this e-discovery carveout will become the functional equivalent of the mini-mill strategy in Clayton Christiansen’s The Innovator’s Dilemma (1997). In Christiansen’s touchstone example, the incumbent steel manufacturers were dismissive of the mini-mill strategy because, during the window of time the steel companies had to set strategy, the new entrants had only conquered the market for rebar, which was a low-margin commodity.
Alex Hamilton has a simple reply to Eisenberg’s and Susskind’s relatively negative assessment of the new entrants: “be patient.”
And ultimately, we have to be. This is because, during the 15+ years that ALSPs amassed a 1.5% market share, not a single AmLaw 200/Global 100 law firm has retooled itself as a vertically integrated law firm. In light of their tremendous natural advantages, see Post 039, Post 053, Post 081, Post 126, Post 213, this is the real mystery that needs to be sorted out.
Eisenberg and Susskind also argue that current market players have, to date, “not delivered the outcomes that clients want.” Their prescription is for law firms to do what they’ve failed to do for more than 15 years: build a vertically integrated model.
An alternative explanation of the market, however, is that “clients” don’t know what they want, perhaps because they have a BigLaw mindset due to their early career socialization. See Post 040 (Casey Flaherty concluding, after 10+ years of faulty analysis, that “in-house and law firm lawyers are the same people” with the same “go-to move[s]”). A second alternative explanation is that “clients” is too big a category for meaningful generalizations. See Post 048 (discussing how “clients” vary by size, legal needs, and openness for change, making generalizations confusing and often counterproductive). If you live long enough, you realize that tough-talking GCs are wonderful people but unreliable data points.
Humble pie for all
Predicting the future of law is a treacherous undertaking.
By a wide margin, the futurist with the best track record is Richard Susskind. Indeed, we are surrounded by a sea of legaltech and NewLaw companies powered by a one-to-many methodology predicted by Richard in The End of Lawyers? (2008) and Tomorrow’s Lawyers (2013). Yet, the pace of change is arguably slower, and certainly less disruptive, than initially anticipated. Indeed, in “Vertically Integrated Legal Service,” Richard acknowledges that “[c]hange will evolve over time, rather than suddenly.”
Alas, we’ve all learned this lesson together. After penning his essay, Alex Hamilton tweeted:
For his part, Alex Hamilton resigned from Latham & Watkins back in 2010 because the firm’s executive committee had the temerity to not follow the strategy laid out in his meticulous 17-page memo that heavily cited Susskind (and included a footnote to Henderson!). I kid Alex that the memo was his Jerry McGuire “mission statement.” The year Alex resigned, Latham & Watkins posted $1.9 billion in gross revenue and $1.1 million profits per equity partner (PPP). In 2021, they were $4.3 billion and $4.5 million respectively. (Query whether, at the end of your career or life, success is best measured in dollars.)
I don’t know a single legal industry thought leader who has not earned one or more slices of humble pie. Further, like Alex Hamilton, some of the very best made their predictions by starting businesses rather than writing a book or essay. See, e.g., Liam Brown (Integreon and Elevate), Mark Cohen (Clearspire), Eric Elfman (Datacert & Onit), Mark Harris (Axiom), Kevin O’Keefe (Prairelaw & Lexblog), Bruce MacEwen (JD Match), and Dan Reed (UnitedLex).
If we are playing the legal industry long game, which is the only game of any consequence, the sole purpose of staking out a position in writing is to solve, or help solve, a problem. Not any problem, but one of many wicked problems that constrain our ability to serve clients and advance the public interest, and, derivatively, earn a living. See Post 210 (Jason Barnwell discussing wicked problems that constraint the growth of solutions in corporate law practice); Post 239 (Dan Rodriguez discussing wicked problems in licensure and access to justice). Folks like Jae Um, Casey Flaherty, Jordan Furlong, Ron Friedmann, and Josh Kubicki aren’t keeping score. They’re learning.
Personally, I have gotten fat on humble pie.
I don’t expect all readers—or, frankly, any reader—to agree with my views on the legal profession and the broader legal industry. I do my best to stake out a point of view backed up by ample research and data. Further, with experience and reflection, my views change and evolve.
In the year 2021, it is my view that the best metaphor for today’s legal market is the auto industry circa 1905, see Post 231; that the legal industry is undergoing a paradigm change from one-to-one consultative services to one-to-many products and solutions that will take decades to complete, see Post 233; and that, amidst all this complexity, the best way to adapt to invest in an intergenerational strategy, see Post 235.
Regarding this last point, why is an intergenerational strategy the right way to adapt to a paradigm change? Because, for the most part, the old guard is going to struggle to make the jump. For a more detailed explanation, see Post Post 235.
This is why, in my view, Alex Hamilton is likely right: despite their vastly superior endowments, traditional law firms are unlikely to retool themselves into vertically integrated legal service organizations, at least of the “transformative” type described by Eisenberg and Susskind. A few might, perhaps through superior leadership and shedding “traditional” from their culture. Honestly, I am rooting for them.
But all of this is really beside the point. Whether it’s BigLaw, NewLaw, or a sophisticated greenfield firm like Radiant Law, the organizations that successfully combine/integrate law with data, process, technology, etc, will do so because of their superior ability to assemble large teams of legal professionals who can persuade and execute. And this brings us back to Anusia.
The humility of change agents
In her day job, Anusia Gillespie doesn’t have the luxury of debating the future of law.
Whether she’s talking to a corporate counsel, law firm partner, or a paralegal assigned to a change initiative, Anusia’s success depends upon her ability to obtain the confidence of a diverse group of stakeholders. Think about the audience. It’s a tough group with little patience for theory, data, or jargon–often the antithesis of an LE reader.
The innovation trenches in law are remarkably similar. In virtually every context, you are working as a change agent within a social system that is, on balance, resistant to change. See Post 020 (foundational post on change agents); Post 034 (consultative sales is work of legal industry change agents). Fortunately, there’s a rich, empirically grounded literature on how to do this well. Here is the basis block-and-tackle checklist culled from Post 020:
- Make frequent contact with clients
- Orient yourself to their problems rather than your need to sell
- Empathize with clients so you can fully grasp their priorities and tradeoffs
- Blend in with clients in dress, communication style, and other things that put them at ease (technical term for this is homophily)
- Build credibility by knowing what you are talking about and racking up little wins
- Identify and work with opinion leaders; be wary of innovators who lack influence in the social system.
- Improve the technical competence of your clients so, eventually, they won’t need you.
Anusia’s NewLaw Fundamentals Q&A Column is an attempt to modestly scale the work of fellow change agents by creating a resource that is likely to check several of the items listed above. See Post 243 (discussing challenges of one-to-one conversion of OldLaw to NewLaw).
Suffice to say, Legal Evolution wants to aid this cause. Please help Anusia make it a big success.