Trading ego for effectiveness, friendship, and purpose.
Joe Borstein and Paul Stroka asked me to get naked with them. I said yes. Then Bill asked me to write about it. So here we are.
Now that you’re hooked by the clickbait headline and the tease, we must, naturally, commence with an anecdotal aside before I explain why the platitudinous “our customers are our business” is especially true for LexFusion, why “everyone talks to us because everyone talks to us,” and what these say about the evolution of the broader legal innovation ecosystem.
Luggage and the Trust Economy
Our journey begins with the incredible, indelible Jae Um (then colleague at Baker McKenzie, now LexFusion advisor, legendary Legal Evolution contributor) and the laugh we shared soon after deplaning on our first trip as co-workers. See Post 081 (discussing amalgam of talent at Baker).
Our rendezvous in baggage claim revealed we had purchased the exact same luggage (make, model, color). In Jae’s words, we were “twinsies!” Yet our synchronicity was certainly not the result of any shared sense of style.
Jae’s style is deliberate, unique, bold, and impeccable (or, as she might emoji: ). By contrast, it would be incongruous to apply the word “style” to whatever it is I have going on — adjectives like basic, haphazard, and utilitarian are serviceable, if still too generous.
Our luggage convergence was also no happy accident. Somewhat predictably, we had turned to the same review website, Wirecutter, and purchased their top recommendation in the roller-bag category.
Speaking for myself, I had an immediate need for new luggage. I was not interested in finding the “best” luggage (whatever that would even mean) but, rather, merely quickly obtaining excellent luggage that would satisfy my travel needs and last long enough to justify the expense.
I knew I would live with my choice for years, but I soon realized the viable options were too numerous to view, let alone evaluate (“roller bag” returns over 2,000 results on Amazon alone). And I was approaching the selection at a complete information deficit.
I had not budgeted more than 20 minutes for the decision. Yet I was trapped in a paradox of abundance—an increasingly common scenario where the proliferation of options and information is a net negative for the median consumer (a.k.a. choice overload).
Below is a graphic that breaks down my choice overload dilemma into its various component parts.
Wirecutter was an intermediary that offered to resolve my paradox—for a cut of the purchase price. Remunerated through transparent affiliate marketing arrangements, the site had done the requisite filtering, vetting, and comparison work for me.
The reviewers had spent more than 100 hours researching luggage, including testing and speaking to experts. That was far more labor than I was willing to invest and was, for me, well worth the commission’s theoretical impact on price. In fact, decades of research — going back to when academics would use the word “webby” unironically — indicate affiliate marketing tends to drive down customer acquisition costs to the benefit of all involved, including the customer. See, e.g., Donna L. Hoffman & Thomas P. Novak, “How to Acquire Customers on the Web,” Harv Bus Rev (May/June 2000).
I quickly —and confidently — proceeded with my luggage purchase despite the site disclosing its financial interest in me doing so. Importantly, the site monetizes being a trusted review source, not selling any specific product or brand. The lifetime value of repeat customers (like me) who start with Wirecutter whenever the paradox of abundance strikes far outweighs the proceeds of any individual sale. See Amy Gallo, “The Value of Keeping the Right Customers,” Harv Bus Rev, Oct 29, 2014.
When you’re playing the long game, no sale is worth losing customer trust. In short, I trust Wirecutter because (i) Wirecutter has earned my trust (I’m satisfied with my purchases), and (ii) I recognize Wirecutter’s incentives are aligned with maintaining my trust.
The paradox of constant choices presenting endless options about which there is abundant information makes even pedestrian decisions feel like a Gordian knot — unless you know where to start. Where possible, we start with trust. Trust is a heuristic for navigating choice overload. Reliant on expert curation and crowd-sourced reviews, ours is increasingly a trust economy. Cf. Post 130 (Dan Currell discussing the emergence of the trust economy and its relevant to the legal profession).
Trust is the foundation on which LexFusion is built.
In other words: if people want to pay you a premium price to serve them whatever you think is best, rather than what they think they want, you’ve found something special. That’s trust. And I’m not just talking about sushi. https://t.co/aHru97R6Ki
— Luke Burgis (@lukeburgis) October 2, 2021
In the fall of 2020, Bill wrote a superb 2,500-word treatment of the LexFusion model. See Post 203. Yet, because it is a big ask for folks in the legal space to invest their finite attention in digesting something new, novel, or seemingly speculative, many continue to struggle to understand what we do. The core economic model is simple:
LexFusion is paid (i) a retainer by our member companies to help get them in front of legal decision-makers, as well as (ii) a commission on any sales that result from the introduction.
That is how we make our money.
Economically, it’s outsourced sales and marketing for an intensely vetted set of curated member companies that cover the most mature categories in legal innovation. Functionally, it is much more than that. Which is where confusion intrudes. The economics, we believe, is the least intriguing part, while also being the most transparent.
The real lesson is not in how we get paid but why. Specifically, why do decision-makers trust us so much? And why are they willing to meet with us so often? In Post 203, Bill formulated the most compelling, concise answer: We have come together at Lexfusion because we have an intense drive to deliver value to people who are, or will become, our friends.
That is, we live to get naked.
Getting Naked introduces Lencioni’s unorthodox approach to consulting. Note the subtitle: “shedding the three fears that sabotage client loyalty.” It is told as a fable because most of us just cannot tolerate a frontal assault on our emotions, feelings, and self-image. Lencioni writes:
At its core, naked service boils down to the ability of a service provider to be vulnerable—to embrace uncommon levels of humility, selflessness, and transparency for the good of a client … .
What clients want more than anything is to know that we’re more interested in helping them than we are in maintaining our revenue source. …
Clients come to trust naked service providers because they know that they will not hold back their ideas, hide their mistakes, or edit themselves in order to save face. (pp 197-99)
None of us had read the Getting Naked before I joined LexFusion. I picked it up (and then had Joe and Paul do the same) based on the recommendation of a friend, and former colleague, Irene Ivanova, who mentioned it as I struggled through an early version of my LexFusion elevator pitch (still a work in progress).
Lencioni articulates beautifully a gut feeling I had never been able to properly express. I always operated according to an impressionistic sense there was money to be made in giving away value for free. Writing. Speaking. Blogging. My guidebook. I started sharing when I was in-house counsel, long before I had immediate financial incentives to do so. Once I moved into legal operations consulting and my incentives changed completely, I continued to share liberally even though, in theory, I was cannibalizing my own business opportunities—doing for free what I could/should be paid for.
I found validation in Lencioni’s Getting Naked. Typical consultants (the ones with the clothes on) consume the customers’ finite time and attention with a pitch. Naked consultants, by contrast, do not try to sell consulting. They simply sit down with the customer, when and where invited, and start consulting on the spot.
To show, not tell, they ask questions, brainstorm, and offer advice before the parties have discussed working together, let alone agreed on the terms for doing so. In short, consultants dedicated to naked service “avoid, as much as possible, telling clients what they would do if they were to be hired; instead, they just start serving them as though they were already a client.” (p 201)
The naked-service approach does not win every project. But, on net, having meaningful conversations with customers about their needs resonates more than talking at the customers about yourself.
For an expert summary of Getting Naked, see Leena, “Book Summary — Getting Naked: A Business Fable About Shedding the Three Fears that Sabotage Client Loyalty,” Medium, Dec 31, 2015. The graphic below breaks down the three fears and the steps (often counterintuitive) necessary to overcome them.
Source: Leena, “Book Summary — Getting Naked: A Business Fable About Shedding the Three Fears that Sabotage Client Loyalty,” Medium, Dec 31, 2015.
Getting paid to work for free
Without putting it in Lencioni’s evocative terms, naked service is the vision Joe and Paul offered to make my reality.
Their inspiration for LexFusion was borne out of their own consultative sales experience inside some of the largest organizations operating in our space, Thomson Reuters and then EY. See 034 (discussing Joe’s and Paul’s careers and the increasing importance of consultative sales as change agents in law). Despite the breadth of offerings at their disposal, Joe and Paul were constantly fielding requests to solve customer problems beyond the scope of their companies’ considerable capabilities. LexFusion is the manifestation of their desire to curate their own diverse toolbox of excellence and overcome the limitations of Maslow’s hammer with its eternal search for a nail.
But, as it turns out, the more problems you are equipped to solve, the more people whose trust you’ve earned turn to you for solutions outside your current inventory (a common origin story; from Amazon to full-service law firms and the Big 4). Resisting the urge to chase short-term dollars by adding too many members too fast, Joe and Paul sought to lean into meeting customer needs without fundamentally changing their nascent business model. That meant free. That meant me.
They did not expect me to sell. They expected me to consult with customers, at no charge.
What can we do for free? Team whiteboarding sessions. State-of-the-industry briefings. Thought leadership. Mostly, intimate meetings where we speak with customers about whatever is of immediate interest to them, whether or not it is monetizable by our members. The objective is to be of service, as I had been for years as a consultant—but without the implicit pressure of turning free support into a paid engagement. This variability combined with the deliberate distance from the actual economics of the business is what makes the elevator pitch a continual challenge.
At the heart of this decision is the recognition that our customers are our business, even though our members pay our bills. We have many members, most of whom will change out over time (part of the model is evolving with market needs). No single sale, no matter how large, is worth sacrificing customer trust. Our reputation with our customer network is the only asset of enduring value. Respecting, rewarding, and reinforcing customer trust is our daily discipline.
Our commitment to add value in every interaction is one reason so many customers take our calls, repeatedly. In our first year, we had 2,591 meetings—51% with law firms; 49% with companies—across 213 unique law firms and 346 unique companies. (Joe and Paul launched LexFusion in October 2020 in the middle of the pandemic; I did not join until April 2021, still in the middle of a pandemic).
Active market listening
As far as I know, we do more active market listening than anyone. Our ability to synthesize these conversations into composite market intelligence is a major selling point: one reason everyone talks to us is because everyone else talks to us.
We not only accelerate sharing within natural affinity groups, we also strengthen understanding across borders that, unfortunately, are becoming less permeable (e.g., law firms are keenly interested in what is top of mind at law departments, and vice versa). In fact, we regularly speak to decision-makers who have no foreseeable need for any member offerings because the mutual exchange of information benefits everyone. Every active node increases the value of the network for each participant, making LexFusion another example of Metcalfe’s law.
Indeed, more important than cascading otherwise siloed market intelligence is making meaningful connections between people and, ultimately, fostering community. In addition to forming new friendships ourselves, we make a point to introduce peers to each other. Sometimes, the sole action item post-meeting is to connect fellow travelers who are working the same problem. My favorite emails open with, “You are two people who should know each other.” For example, we’ve helped customers avoid considerable pain when initiating a new technology implementation because we were able to introduce them to other customers who just completed implementing the same technology (again, whether or not the technology is a member offering).
Of course, we also make connections to vendors and consultants. That’s the economic model. But only when there is a problem/solution fit. This merits repeating; Only when there is problem/solution fit. Wasting a customer’s time imperils trust, which, in turn, undermines the long-term viability of our business.
Often, we connect customers to our members, who are truly excellent and cover most mature categories of products and services; they can help solve a large swath of common problems.
But we also regularly make connections to non-member companies where we know that non-member can address a customer pain point our members cannot. In fact, despite being full up on members (there’s a waitlist), we still make time to look at 5-10 new offerings every week to keep abreast of an exploding ecosystem Jae and I just wrote about for NASDAQ and Bill so aptly compared to the auto industry circa 1905. See Post 231 (legal’s own paradox of abundance). Market scanning is appurtenant to market listening. The more we know, the more value we can add for our customers.
A word about our members
We ❤️ our member companies. We work for them. We selected them for reasons we never tire of sharing. Because we take vetting so seriously, I feel more confident recommending our members than many BigLaw partners feel recommending other practice groups or offices in their own firms. Our members’ capacity to delight customers is inextricable from the trust-building at the core of LexFusion. We represent our members. But they also represent us.
Our members are truly excellent. They are also gamblers.
Our model has caused confusion not because it is complicated but because it is foreign to the legal space. Our members bet on the unknown. They also bet on the uncomfortable. Recognize that every LexFusion member is fully aware they will not come up in every customer meeting. Indeed, every member recognizes we will have meetings where no member is mentioned.
The bet our members placed is that by consistently adding value over a massive number of interactions LexFusion will organically surface more, and better, opportunities (the Glengarry leads if you will) than an equivalent spend on traditional sales and marketing. This should, in theory, drive down the costs of sales, like the affiliate model described above, creating a surplus for buyers and sellers. Meanwhile, in practice, many new market entrants (not our members) are alienating prospective clients because they are betting on dead-end short game sales. See, e.g., Frank Ready, “‘Aggressive’ and ‘Demeaning’: Some In-House Departments Aren’t Happy With Recent Tech Sales Pitches,” Law.com, Aug 20, 2021.
Everything is obvious—once you know the answer. But what a wild bet this was in the beginning. Recall, LexFusion gets paid a meaningful membership fee whether or not we ever deliver a lead, let alone source a sale. The then-unproven premise put before the original members was that a fractional amount of Joe and Paul’s experience, time, and rolodexes was a superior investment to hiring a dedicated junior salesperson.
This, in part, reflects Joe’s well-informed viewpoint that a great salesperson is orders of magnitude more impactful than a mediocre one (not dissimilar from how we think about, and value, superstar lawyers, executives, entertainers, athletes, etc.). Cf. Andrew Maloney, “Spread of Partner Pay Widens in Parts of BigLaw,” Law.com, July 15, 2021. But it also speaks to the advantages of the LexFusion model—more than just three connected industry veterans—from the members’ perspective.
Synergy, the not-so-secret secret sauce
Unquestionably, we secure more meetings because we know more (of the right) people, who have grown to trust us over the decades we’ve spent innovating in the legal space. But we are the thin edge of the wedge. The real game is a perpetual motion machine of high-quality leads generated by synergies among the members.
Quantity is a quality all its own. We get more meetings, in part, because we have more to talk about. Different offerings open different doors at different places at different times. Or, in terms our law firm customers understand, we are cross-selling done well—the right combination of offerings in front of the right buyer at the right moment.
Moreover, it is not just us opening these doors. LexFusion is a collective. We bind together nearly a dozen category-leading companies, each with its own deep industry ties. Our members open doors for one another by introducing us to their existing relationships—an obligation of membership. The network invariably has a warm, trusted connection ANYWHERE our members want to be. That’s a powerful and unique value proposition.
Feedback & foresight
Helping our members go-to-market is central. But, done properly, this also entails feeding back what the market is telling us.
Feedback includes candid assessments, positive and negative, about our members—customers know we have a direct line to our members’ C-suites and avail ourselves of it frequently. But it is also more general insights from customers about gaps in the market, their pain points, their unmet needs, and their aspirations. These insights are invaluable to our members’ strategic investment decisions.
We are not just hired guns interested in driving sales in the near term; we’re consultants who work with our members on their long-term strategy — product roadmap, acquisitions, integrations, market segmentation, hiring, marketing, etc. Central to our own member-selection criteria was our confidence in members’ strategic vision, leadership team, and organizational agility.
We are similarly invested in our customers’ own long-term success. Certainly, we follow up on their implementation, adoption, and satisfaction post-purchase. But, more importantly, we keep up with our friends professionally and personally because we truly care—and, coming from that genuine place, we maintain that real human connection remains an unparalleled source of actionable business intelligence.
Ultimately, we are intent on accelerating a virtuous cycle with LexFusion connecting different pieces of ecosystem in a feedback loop (see graphic to the left) that gives meaning to our tag line “better together.”
Are we on to something? We already have our first imitator. See Richard Tromans, “World’s 2nd Legal Tech Consortium Launches,” Artificial Lawyer, June 9, 2021 (discussing Jameson Legal Tech and noting LexFusion was the first).
What LexFusion says about the state of the industry
My initial observation was, “LexFusion is a terrible business idea … for almost anyone other than Joe and Paul.” Trust is hard-earned and easily lost. There are only so many Joes, Pauls, and Jaes (ok, there is only one Jae).
More broadly, LexFusion is an idea whose time has come. Or, as Bruce MacEwen observed to us, LexFusion proving to be a viable business is “a sign of a maturing market.” Calling back to where we began, that maturation is evident in how many decision-makers in law departments and law firms have concluded they face the innovation version of my luggage paradox:
- They have an identified need (to innovate)
- They recognize meeting that need requires investment (in innovative infrastructure and services)
- They concede they lack the available bandwidth to become expert in all the available offerings
- They dismiss “perfect” as a distraction but consider excellence essential
- They desire to move quickly, with confidence
For them, the benefits of people they trust ‘getting naked’ to deliver value in every interaction —including curating excellent offerings with problem/solution fit — are obvious. What is nonobvious is the metamorphosis this reflects. Does the above sound at all like our traditional view of change-averse, autonomy-seeking, perfectionist legal professionals?
I may be an eternal optimist (though, importantly, one who has placed life-altering bets consistent with his stated beliefs) but my sense is the pressures Bill, Bruce, et al. have been writing about for years have finally built to the point we’ve experienced a phase shift in perspective, if not totally in practice. See, e.g., Bill Henderson, “The Legal Profession’s Last Mile Problem,” Law.com, May 26, 2017; Bruce MacEwen, “We have a Scal(ability) Problem,” Adam Smith Esquire, July 6, 2021.
Standing on the shoulders of Bill, Bruce, and others, I have made the case that we collectively face an innovation imperative. See Flaherty, “Explaining the joke: lawyers lagging behind,” 3 Geeks and a Law, Aug 22, 2021 (analyzing various legal industry bottlenecks that can only be solved through productivity-enhancing innovations and are still likely to require increased funding for the legal function).
Don’t wait, act now
As always, I return to Jason Barnwell’s observation, ”if capacity must increase by 10x, our current approaches breaks, as the option of a 10x increase in hiring is simply off the table.” See Post 210 (framing our dilemma as a series of wicked problems).
If we accept Jason’s premise, we must also accept Jae’s conclusion, as she remarked to me recently, “Five years ago, the risk of attempting to displace hours with tech outweighed the risk of inaction. Today, the risk of inaction far outweighs the risks of experimentation.”
Responding to this real, pressing need, we operate in an increasingly rich and diverse ecosystem, bursting with potential but fragmented and fractured. Competition is a byproduct of opportunity. It is really hard out there. It is supposed to be hard. But does it need to be this hard?
- Legal innovation companies, your buyers loathe being hounded. The only thing worse than receiving a cold marketing email is fielding a cold, personal call. They would rather you invest more in great product (problem/solution fit) and customer success (implementation, integration, adoption).
- Buyers, legal innovation companies loathe hounding you. The only thing worse than sending a cold marketing email is making a cold, personal call. They would rather invest more in great product (problem/solution fit) and customer success (implementation, integration, adoption).
Everyone decries the status quo. But the status will remain quo until we solve our matching problem. How do legal innovation companies get in front of the right buyers at the right time (i.e., lower customer acquisition costs)? How do buyers find fit-to-purpose legal innovations (i.e., reduce search costs and selection risk amid choice overload)?
There is no lack of demand, interest, effort, talent, options, or, especially, information. Yet, in an information-abundant environment, attention is the scarcest commodity. Cold sales outreach and marketing blitzes are desperate bids for attention. Trust, by contrast, is an earned right to attention. Maintaining trust requires rewarding attention. The more the ecosystem grows, the more expensive trust becomes—to give, to earn, and to maintain.
LexFusion is an experiment in how trust can alter the market dynamic. The early returns are promising. But not because we got everything right. Rather we seem to have gotten a few big things right: latent demand, timing, and the advantages of naked service. Beyond that, we are still working out many of the details, especially as we seek to fully harness synergies and feedback loops.
Our business is meeting real customer needs. The model is functional and sustainable in its current form. But it is far from optimal, let alone scalable. Which, when you think about it, is an apt description of most successful companies in the legal services ecosystem.
Enough about us. We’ll be back at the end of the year to share what we’re seeing, hearing, and thinking as we explore an ecosystem we’ve made our lives’ work. Until then, I invite you to have a laugh if you have yet to see our one-minute video (which Joe thinks is hilarious, and I nerded out on here).