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Innovative products and services feel magical to the user. To create that feeling, however, innovation teams must grind through lots (and lots) of work. Fortunately, we have a playbook.

The core insight embedded in Rogers Diffusion Curve is that the adoption of new ideas occurs in a specific order through a social system comprised of five distinct segments. See Post 004 (introducing diffusion curve); Post 007 (explaining adopter types). Rogers’ research eventually found its way to Silicon Valley and got relabeled the Technology Adoption Life Cycle. See Posts 024026. Along the way, technology marketer and consultant Geoffrey Moore added a key modification: a material gap, or “chasm”, between early adopters and the early majority. If a company can “cross the chasm”, commercial success becomes inevitable, as sales then occur largely through a social process of one peer imitating another.

To boil it down, Rogers proves out the science, while Moore provides the playbook. This one-two punch dramatically increases the odds of successful innovation adoption. But let’s keep it real: This is a lot more work–and deeper thinking–than law firms are used to.

One of Moore’s most useful adaptations to Diffusion Theory is the use of buyer personas to correspond with each adopter type. Moore’s book Crossing the Chasm is peppered with many detailed narratives about the trials and tribulations new product teams encounter in their efforts to sell to each persona/adopter type.  The persona approach is a profoundly powerful way to design a product or service offering that the target end-user finds irresistible.

Below is a summary of how to apply Moore’s buyer personas to the legal market.

1. The Early Markets, Where Things Often Go Swimmingly

In his discussions, Moore provides a practical description of a functional job each adopter type tends to perform in the diffusion process. This post draws heavily on Chapters 2 and 3 of Crossing the Chasm, but with particular emphasis on Early Adopters and the Early Majority.

Innovators / “Techies”

Techies often embrace the nuts and bolts of how stuff actually works. Over time, Techies tend to amass a wealth of technical knowledge through self-initiated and self-sustained study.

In its earliest days, an innovation needs social proof to validate not only its novelty but its objective superiority. Moore describes Techies as “the gatekeepers for any new technology… the ones everyone else deems competent to do the early evaluation” (p. 39).

Of all five adopter types, Techies have perhaps the most straightforward and unambiguous job: to curate and assess new technologies or methodologies and endorse those with true technical superiority over currently available alternatives.

Early Adopters / “Visionaries”

Visionaries have both the imagination to see the world as it could be rather than as it is and the ambition to try to make those possibilities the new reality. Curious and ambitious, they gravitate toward high-impact, high-visibility roles within organizations. Along the way, Visionaries often gain access to significant discretionary budgets earmarked loosely for “strategic initiatives.”

The innovation function of the Visionary is easily described but exceedingly difficult to perform. Visionaries match emerging technologies or new ideas with systemic opportunities to drastically reshape existing markets. In other words, they identify business opportunities for a strategic leap forward. This requires not only an already rare combination of innate traits (curiosity, risk tolerance, openness to new ideas) but also an asset acquired over some years of experience: deep domain expertise in a specific industry.

“Huge, if true”

In the parlance of renowned venture capitalist Marc Andreesen, the most ambitious and canny Visionaries find and bet on ideas that will be “huge, if true.” Their work looks and feels nebulous because it is.

Moore’s critical insight here is that Visionaries balance risk against reward: they must perceive reasonable potential for significant breakthroughs to justify the risks attendant in sponsoring new ideas. To the uninitiated, Visionaries are regularly seen signing irresponsibly large checks to sponsor the development of murky endeavors that are often nothing more than a doodle on a whiteboard. The gift of vision enables this group to see the possibility of what Moore calls “order-of-magnitude” returns in the competitive positioning of their business (p. 44).

Given the stakes, Visionaries present as the least price-sensitive adopter type, and money is usually not the type of capital that is top of mind for them.  Rather, they tend to hold their reputations and political capital at a higher premium. As a buyer group for new products or services, Visionaries like to structure deals into pilot projects, replete with milestones and other signifiers of measurable progress. The perception of smooth progress toward tangible “wins” is critical for Visionaries to maintain not only their social status but also their professional standing.

Techies + Visionaries Make Unlikely 💖 Pairings That Make Perfect Sense

At first blush, Techies and Visionaries tend to look and sound quite different, and the collision of their two worlds often take casual observers by surprise.  Many Techies are self-proclaimed nerds who dig deep into their chosen area of interest. Visionaries tend to be well-connected individuals who travel far and wide, always in search of a new idea that will spark their next “initiative.”

But the natural affinity between these two types is quite easy to understand when viewed through the lens of shared values.  Both groups seek new things, though for purposes that are quite different in both behavior and motivation.

Techies and Visionaries each provide an invaluable service by performing key jobs that advance the goals of the other. Techies willingly volunteer their time, effort, and expertise to curate and test new offerings, but they often lack the social and professional standing to make things happen. Visionaries are big thinkers who share the Techies’ future-orientation, but with the upwardly mobile executive’s knack for imposing their goals onto the agendas and budgets of a well-resourced organization.

Thus, Techies and Visionaries tend to form symbiotic relationships that provide mutual benefit and fulfillment. Perhaps because of this unusual affinity, innovations that target Techies and Visionaries in the correct sequence are able to build impressive traction in early markets.

2. Into the Chasm, Where Things Get Dicey

When Bill first introduced the five adopter types, he had this advice to offer: “If you want your innovation to be adopted, don’t waste time trying to convert the early majority, late majority, or laggards. You only have one audience that matters – early adopters.” Post 007.

This is excellent advice. The work of taking innovations off the paper, out of the lab and into the real world requires the successful penetration of early markets.  In these early days, Visionaries are crucial to the innovation effort because they perform critical jobs for which they are uniquely equipped.

But why do so many innovation initiatives stall in the chasm, even with the support of the Early Adopter?

This is a critical question for our industry. See Post 051 (positing that the true bottleneck in legal innovation is a commercialization gap). The latest Altman Weil survey of law firm leaders reports that 38.3% of firms are actively engaged in creating special projects to test innovative ideas or methods – down from 50.4% in 2017.  While the decline is concentrated in smaller firms, the dip in experimentation suggests that the chasm threatens to dampen the overall pace of innovation in legal markets.

If you hope to scale innovation beyond experiments in the lab, understanding the psychographic (the “why”) and functional (the “how”) dynamics around the chasm is a must. An examination of the often fraught relationship between the Early Adopters and the Early Majority who bookend the chasm is particularly instructive.

Simply put, the chasm exists because the buying criteria and performance expectations of these two groups are so dramatically different. These very differences form the crux of why Early Adopters make poor reference clients for the Early Majority.

The perpetual tension between Visionary Early Adopters and the Pragmatist Early Majority stems from many dispositional differences, but there is one factor that we must always keep in mind. Despite the best of intentions and the best of efforts, the Visionaries’ bets do not always pay off. The hoped-for “order of magnitude” returns fail to materialize, and the new idea, product or service is found insufficient to catapult the innovation sponsor ahead of the competition.

In these unfortunate instances, it is often a Pragmatist, not the Visionary, who sounds a quiet death knell for the innovation experiment.

3. Pragmatists Hold the Keys to the Mainstream Markets

When David Cambria, the Director of Global Legal Operations at ADM, and Jeff Carr, the General Counsel of Univar, talk of “massive passive resistance,” or MPR, they are describing the attitudes of mainstream markets.

No single person or segment among the Early Majority, Late Majority, or Laggards holds nearly as much influence or prestige as the Techies or Visionaries who comprise the early markets.  All the same, the mainstream markets derive massive power from massive numbers – and their passivity actually makes them more intractable. They are hard to understand because they are not as vocal or as distinctive as the early markets, and markets that are not well understood are hard to penetrate.  Unfortunately, the failure to understand 85% of the target audience usually portends a slow but certain death for any new process, product or service.

Techies and Visionaries are united in their continual quest for new things, but mainstream markets are equally unified in the opposite direction.  The vast majority of B2B buyers do not care for novelty. Rather, mainstream markets generally seek proven, complete solutions to known problems. Lack of clarity on either side of the problem-solution equation usually translates to substantial costs to educate the market. Within each organization, change agents also must contend with the costly battle against legacy infrastructure and cultural antibodies reinforcing the status quo.

Early Majority / “Pragmatists”

Pragmatists tend to gravitate toward roles of responsibility and stewardship in sizable corporations and in professional communities.  Hence, Pragmatists are often the de facto keepers of the core company budget as well as industry standards and best practices.

According to Moore, the “Fortune 2000 IT community, as a group, is led by people who are largely pragmatist in orientation” (p 55). We can easily envision how this type would dominate positions of authority across legal functions of the same companies, and the description fits reasonably well for practice group or industry group leadership roles across NLJ 500 law firms.

An Advanced Exercise in Empathy

As a buyer group, Pragmatists are practical, stringent and value-conscious for entirely rational and comprehensible reasons.  Early markets opt into their innovation roles, but Pragmatists have their responsibilities thrust upon them.  Pragmatists are the ones usually held internally accountable for building, integrating, testing, debugging, and maintaining a new reality but at realistic levels of cost and effort – all while supporting their entire organization as it is nudged and prodded through all the unpleasantness of learning a new way to work.

For the would-be entrepreneur or intrapreneur, the skeptical demands of Pragmatists throw cold water on all the dreams nurtured by early market success.  For that reason alone, an “extended exercise in commercial empathy” for this group’s point of view can feel very taxing.  We often find it easier to vilify Pragmatists as unimaginative, plodding, and ornery – for the simple reason that they stand towering like an impassable mountain range between us and all our innovation dreams.

(For an illuminating glimpse at the world through the viewpoint of a Pragmatist, set aside some time to at least skim through the narrative vignettes in “What is Code?” – an award-winning 38,000-word showpiece on Bloomberg Businessweek.)

Innovations Start Life As Hypotheses, and Hypotheses Need Testing

Visionaries craft many scenarios about what the future might look like, but it is the Pragmatists who ultimately decide what the future actually will be.  Pragmatists derive this considerable power not from glamorous positioning and self-promotion, but rather from the distinctly unglamorous work of safeguarding their organizations against catastrophic system failures and irresponsible budget leakages.

Along the way, Pragmatists provide an invaluable service not only to their own organizations but also to the innovation teams who listen with the intent to understand.  Visionaries deal in the murky realm of intuition and hunches, but Pragmatists are the keepers of cold hard truth.  And cold hard truth is what we need when we tackle one thorny question after another to validate the Visionary’s plausible theories:

  • Are we addressing a business problem that matters?
  • Does this problem matter to a market of sufficient size?
  • Have we built a complete product that solves enough of the problem?
  • Does our offering solve the problem more effectively than any other available option?
  • Can we deliver sufficient business value to justify not only our asking price but the total cost of adoption and use?
  • Does our offering actually work reliably and for real users in the real world?
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Asking and answering these questions in an evidence-based manner demands extraordinary emotional discipline. The interest of early markets, no matter how exciting, is necessary but insufficient proof. The true test of market viability is forged through the exacting requirements of Pragmatists.

Prior to crossing the chasm, the Pragmatist’s buying requirements present material barriers to further diffusion:

  • insistence on a whole product solution
  • reliance on peer references from other Pragmatists
  • penchant for backing the market-leading solution
  • attention to practical deployment levers (e.g. infrastructure compatibility)

However, the innovation teams able to meet these demands find themselves well positioned to capture market share quickly. And the innovations that survive these trials are often imbued with an invaluable attribute of mainstream success: scalability. Lastly, because Pragmatist are fiercely loyal once won, the innovation team can expect to enjoy a highly defensible competitive position.

4. Even In A World of No, There Are Lessons To Be Had

The Late Majority and Laggards do not feature as prominently in our narrative. Legal innovation is not yet mature enough to grapple seriously with the market extension opportunities offered by these adopter types, who are generally resistant to trying new things.

Still, we append a few remarks. Despite the best efforts of innovation teams to convert each of the adopter types in the prescribed order, the messy and chaotic nature of legal markets all but guarantees that we will encounter all adopter types in our quest for market entry.

Late Majority / “Conservatives”

Risk aversion, price sensitivity, and tendency to follow rather than lead are the identifying characteristics of Conservatives. Whereas Pragmatists seek demonstrable gain in a defensible cost-benefit analysis, Conservatives in legal ecosystems are more likely seek minimal pain in their individual buyer and user experiences. This has the benefit of forcing us to focus on convenience factors such as ease of purchase and use as well as performance reliability.

Conservative buyers reward innovation teams for attention to human factors, optimized product design, and streamlined sales operations. However, none of this matters without the requisite social proof and peer pressure from Pragmatists and other Conservatives. For this reason, premature focus on these factors generally bodes ill for innovation teams, particularly in B2B markets. Making something more usable before verifying that it is actually useful to a sufficient number of paying customers is usually an expensive exercise.

Laggards / “Skeptics”

Skeptics are as likely as not to avoid adoption to the bitter end. As hostile as Skeptics may be to any innovation endeavor, engaging them in good faith whenever they are encountered can deliver at least one important benefit.

Skeptics tend to draw attention to specific gaps between product promises and actual performance. (This rarely feels beneficial or benign to innovation teams grappling with concept models and prototype.) Still, innovation teams who are open to engaging with this challenging segment gain precious opportunities to achieve greater user understanding, client empathy & client orientation. Particularly if the spotlighted performance gaps lead to specific insights about customer failures – e.g. critical breakdowns in business processes or the user journey – we can gain a much deeper understanding of the customer’s work context, business problems and use constraints.

5. Innovation Is Really Hard

All of this is much easier said than done. It is an inordinate amount of work and most of it cannot be done sitting at a desk. If we intend to put a dent in the universe, we cannot expect to coddle our creations in a pristine but sterile lab. Instead, we have to venture out into the messy and chaotic world that we hope to change.

Effectuating meaningful change is also hard because it demands, early and often, productive collisions with many people who will disagree with us. That work involves lots (and lots and lots) of dismissal, criticism and outright rejection.

To survive this bruising onslaught, innovators and change agents need to develop not only relevant expertise and skill sets but also habits of mind. Chief among these is a habit of thinking deeply and constructively about the viewpoint of the customer.

Much like a fledgling magician without an audience, an innovator without a customer is just another person with a quirky hobby.

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What’s Next? See ULX Partners: UnitedLex develops solution to law firm innovation risk (053)

Legal innovators yearn for a big payday. The obstacle course in their way? A messy, fragmented, and chaotic legal market.

Why is the legal industry so slow to change? This question gets asked all the time – particularly during conference season – but it gets more than its fair share of airtime year-round. It is ever-present in the blogosphere and hotly debated on Law Twitter at least once a week.

However, the most frequently given answers are largely unsatisfying and the ensuing discussion often recursive. If the legal industry is on tape delay, the change conversation may be stuck in a Delos-worthy loop.

Legal innovation stands at a critical juncture. With mounting momentum comes heightened scrutiny, and though we may be on the cusp of significant breakthroughs, we also stand on the precipice of an industry-wide chasm.  It’s time to acknowledge that we are working within an environment of extraordinary complexity and inefficiency, where innovation offerings are at clear and overwhelming risk of faring poorly.

(Market) Context Matters More Than (Lawyer) Character

One popular fallback is a narrative that I’ll call “because lawyers.”  Because lawyers are skeptical, because lawyers are conservative, and the list goes on (and on and on). The “because lawyers” train of thought goes something like this: because lawyers are different, the legal industry must also be different, and what has worked to advance positive change in other industries will not apply here. I disagree.

How “Because Lawyers” Fails the Industry

The “because lawyers” narrative can offer insights of value to would-be change agents, but I tend to think it suffers from two limitations that are closely related:

  • Firstly, it is better at explaining failures than explaining successes (and there have been some successes). This suggests that the “because lawyers” narrative lacks explanatory power: designing around lawyerly tendencies is likely a necessary but insufficient condition to driving systemic change.
  • Secondly, “because lawyers” is an intrinsically blame-based narrative, built on hypotheses about highly stable aspects of lawyer disposition and personality. This is especially problematic where it invites proactive defensiveness from lawyers and engenders cumulative resentment in change agents. These two consequences conspire to erode rather than promote collective psychological safety. Cf. Laura Delizonna, “High-Performing Teams Need Psychological Safety. Here is How to Create It,” Harv Bus Rev (Aug. 24, 2017).

Instead, I think we (legal innovators and change agents) would reap greater benefit from thinking and talking more specifically about target markets. For example, which buyers have underserved needs that they are willing to pay to address now? And what, precisely, are those needs?

Buyers Rarely Beat the Proverbial Path to Your Door

Developing new products and services is hard – in any industry.  Even when there is a proven customer base with clearly articulated and well-understood needs, incremental improvements do not readily and reliably translate into profit.  Disruptive products and services are another order of magnitude difficult: they occur because of discovery of a whole new set of needs not yet known or understood by anyone (we want 1000+ songs on demand at all times); or because of a wholly new configuration of value creation and delivery that substantially displaces the current solution (we want to order every book and eventually every product under the sun and have it delivered tomorrow).

In either context – incremental improvement or true disruption – would-be innovators must proactively define a reachable target market. Because new things take time to refine and scale, the survival of new ideas often depends on identifying and addressing the correct market first.

This implies a deep understanding of buyers and markets:

  • how buyers currently organize and identify themselves into groups;
  • how each group might differently perceive their needs and potential options to fulfill those needs; and
  • how they prefer to buy and consume products and services that present a solution.

This is especially tricky because markets for new things are fluid and sometimes cut across existing or obvious demographic segments.  Indeed, as this publication has well established, receptiveness to new things – in any context – are more dependent on psychographic attributes than demographic ones. See Post 007 (covering the basics of adopter types).

Ideas Need Market Feedback to Become Real

In the legal industry or anywhere else, ideas are rarely in short supply. Ideas are necessary but insufficient for meaningful progress – what we need are effective and reliable means to validate and refine ideas into tangible products and services that will survive contact with reality.  This almost always requires the participation of potential buyers.

Unfortunately, optimal buyers in early markets do not always self-identify or congregate conveniently in a physical marketplace that innovators can visit to announce or demonstrate their idea.  Instead, as the graphic above suggests [click to enlarge] the innovation team has to think creatively and undertake all manner of legwork outside the lab, to discover or pull together niche markets or sub-segments who will provide feedback and stress-test hypotheses about how the new process, product or service should work.

The onus to find the right prospects and convince them to try new things rests with the innovator, entrepreneur or intrapreneur. Yet, how often do we revert to the “because lawyers” narrative to explain away the many promising ideas that have stalled without achieving significant adoption?  If a product or service is actually effective in addressing a problem that matters to the customer, the change management burden can be reduced (although perhaps never fully eliminated). Cf. Post 008 (49 to 87% of the rate of adoption typically turns on just five product attributes–relative advantage, simplicity, cultural compatibility, trialability, observability).

Unfortunately, “going to market” has become shorthand for any number of sticky problems and nebulous questions to work through. When we use that phrase, we need to acknowledge the enormous time, effort and difficulty that lies ahead.

As an industry, we are not yet mature in our collective ability to define and size new markets for innovative offerings. In simpler terms, our most critical gap isn’t ideation and it probably isn’t change management either.  We have a commercialization problem, and to improve our industry-wide win rate we need to address the actual choke point.

Legal Innovators Face Extreme Conditions

In a recent discussion, Bill offered this insight: the legal industry isn’t different; rather, it’s extreme.  I think this is a superior framing device to drive constructive dialogue and to advance our thinking about legal innovation.

Two distinguishing features of the legal industry’s structure contribute to make it an unusually unfavorable ecosystem for innovation: (1) extraordinarily balkanized and (2) fractally opaque.  That sounds highly academic and esoteric, so I explain in plainer English below, with some supporting figures and visuals.

Balkanized and Isolated

Many industries are fragmented (i.e. crowded without a clear or dominant market leader), but legal is something more: extremely fragmented into many smaller units that are mutually hostile or uncooperative.  This is true at the establishment level (individual firms) and at the segment level (the categories and subgroups into which firms roughly organize themselves).

The above diagram [click to enlarge] conceptualizes the evolving landscape of legal service providers, along the two-hemisphere model advanced by Heinz and Laumann and Susskind’s bespoke-to-commoditized continuum. See Henderson, What is more important for lawyers: where you go to law school or what you learned? (Part II), Legal Whiteboard (July 19, 2015). The left side of the chart captures the broad categories of incumbents (“the artisan guild”). The middle and right regions capture the broad categories of emergent competitors who seek to leverage new technology or process innovations to offer a different value proposition. This graphic is effective in communicating the increasing complexity of the legal marketplace.

However, it’s important to note that the above depiction of market composition is conceptual and categorical – it is not a scale representation of current market share along any quantitative measure. To add a more quantitative dimension, the below chart [click to enlarge] relies on U.S. Census data to show the composition of the legal services market by establishment size:

While this is an incomplete view of the market and a fairly imprecise mapping of segment to firm size, it still offers added quantitative support to the idea posited first in Post 005 “Six Types of Law Firm Clients” and clarified recently in Post 048 “Confusing Conversations with Clients”: namely, that we talk past each other because we each bring varying perspectives from different work contexts.

Most market composition analyses are based in revenue share. On infrequent occasions, the point is made that the vast majority of firms are solos or small firms (over 90% in the Census data above). But it is an analysis of job share that gives a more accurate sense of our industry as well as the best real-world explanation of why we often talk past each other.

Roughly 1,200 of the largest companies in the legal market account for about a third of all jobs, with small firms and solos splitting the remainder fairly evenly. If a Martian visiting Earth to learn about our legal ecosystem were to randomly select 3 people who work in legal services, the most likely scenario is that he will end up with 3 people who come from dramatically different work contexts and have almost no consistent information to offer.  Even if our Martian were to beat the odds and pull together a focus group of 3 individuals who at least work in similarly sized organizations (he has about a 3.7% chance of getting that lucky), it’s also likely they come from firms with different specializations serving different client segments, who are accustomed to completely different workflows, technology environments, and compensation and incentive schemes.

Like any balkanized region comprised of hostile states, the legal market is difficult for outsiders to navigate or understand. For those of us on the inside, we should remember that each of us brings to the table a labyrinthine set of customs and experiences that create significant divisions and critical barriers to cooperation.

Fractally Opaque → Perpetually Lost in Translation

By and large, we remain in our silos and fail to cooperate. The “lone wolf” proclivities of lawyers (so autonomous and so competitive!) have been cited frequently as a primary barrier to open communication and collaboration. However, I think the phenomena is subject to more contextual explanation. Some legal work is intrinsically adverse and nearly all of it is highly confidential in nature. These factors serve to anchor a high baseline of opacity and create communication infrastructures that are designed to impede, rather than promote, the efficient sharing of information.

Despite the efforts of some forward-thinking corporate law departments to drive deeper collaboration across their supply chains, firms within each category tend to engage in vigorous competition, which in turn drives even greater opacity. The intensity of that competition has only increased in recent years as corporate budget pressures and insourcing strategies have depressed demand growth for the “artisan guild.”  Subsequently, an open exchange of new ideas or practices within categories is more the exception than the rule, and usually only happens under diligent and hands-on management by a shared client.

In the current state, we also see very little systemic cooperation across segments (e.g. sustained strategic alliances or partnerships across service provider types). The artisan guild tends to regard newcomers with suspicion, and many forward-thinking incumbents are embarking on long-range initiatives to future-proof their businesses against down-market threats. In this, the incumbents engage in completely rational competitive behavior: many new entrants seeking entry points into the corporate buyer ecosystem are essentially positioned to displace corporate legal spend that has historically been held captive by the artisan guild.

In the legal industry, very real differences are present at many different resolutions: across segments, firms, practices, case teams, and individual roles. The resulting translation barriers add opacity to an already complex ecosystem, and that opacity is fractal in nature. In other words, you can take any subpart of the legal industry and it will display structural features that make each part just as opaque as the whole.

Even when we want to, many of us working in legal businesses find it challenging to relate meaningfully to each other. The emergence of new types of businesses and the continuing proliferation of new roles for allied professionals add more dimensions of complexity and friction in communication:

If innovation is a process by which new ideas spread across a social system, see Post 004, then legal innovators and change agents would be well served to recognize that the legal industry is not one single monolithic social system.  Rather, it is a complex and complicated network of distinct and disparate subsystems, with almost every organizing principle conspiring to create friction in the diffusion process.

In an illustrative comparison, our close cousins in accounting have a slightly easier time. About 50% of accounting jobs are concentrated in firms of 500 employees or more. The perennial focus in legal press on the fates and fortunes of the richest firms, see, e.g., “The Super Rich Are Getting Richer” in American Lawyer (April 2018), also conspire to give a broad sense that the legal market is exceeding top-heavy.  In short, the legal market appears to be a textbook example of the top 1% claiming the lion’s share of clients, revenue and profits, but this turns out to be a distortion of reality. The legal market most likely suffers from a slower pace of innovation because it is not top-heavy enough.

Though an apples to oranges comparison, the Big 4 enjoy much greater advantages of scale and scope relative to even the largest global law firms because they’ve consolidated a much larger portion of market share. Collectively, the Big 4 clocked about $130bn in global revenues in 2017 – more than revenues of the Am Law 200 combined.

Historically, the Big 4 draws roughly 40% of its revenues from the Americas and about 30% from audit.  To match the Big 4’s Americas topline, the largest 32 Am Law firms would need to pool their collections. Because each of those 32 firms is organized into its own unique matrixed structure of regions and practice areas, the adoption decision must be made many times over, whether on a collective or authority basis, see Post 008 (type of decision affects rate of adoption). Either way, overall cost and effort required to spread new ideas through law firms are exponentially greater.

Market Inefficiencies → Innovation Inefficiencies

These structural barriers to the spread of new ideas are very real, even for the vast majority of the market conducting business as usual and merely looking for ways to drive incremental improvements to how they work. However, their adverse effects are perhaps felt most keenly by those trying to drive significant change in the industry.

In the aggregate, these structural barriers are experienced as friction in the procurement process and as inefficiencies in the marketplace. What do I mean by inefficiencies?  In classic economic theory, an efficient market is one in which asset prices accurately reflect true value. Clearly, the ongoing dialogue around the need for pricing innovation – as well as the anecdotal evidence of high price dispersion for similar services – suggests the legal services market is highly inefficient.

But I also think the current makeup of the legal services market makes it highly inefficient in the literal and colloquial sense of the word: it takes too much time and effort for buyers and sellers of specific services to find each other, and once they meet up it also takes a great deal of time and effort to agree upon a fair rate to exchange money for services.  More often than not, buyer and seller arrive at some accord using highly technical methods best described as “eh ¯\_(ツ)_/¯ looks about right.”

Assessment and evaluation of new substitutes implies an even greater burden of time and effort, along with the added element of risk in what is defensibly an environment of exceptionally low tolerance for failure. Moving fast and breaking things is great for startups… until Cambridge Analytica happens.  Generally speaking, breaking things is less great for lawyers who are often hired to prevent bad things from happening or to argue over liability for bad things that have happened.

To succeed in this unforgiving ecosystem, innovations must offer an undeniable value proposition that functions as a complete solution to a material customer problem.  In the next post, we will revisit the five adopter types with the goal of understanding the specific and unique contributions each type can offer to the would-be change agent seeking to cross the chasm.

What’s next?  See A playbook for innovation magic (052)