Recommendations for corporate legal buyers and providers in the digital age

The industry is fixated on “innovation,” not its outcome-customer satisfaction. We will know innovation has occurred when customer satisfaction is up and legal services are accessible not only to large companies but also to individuals and small businesses.

Legal services were, until recently, principally delivered by law firms. That has changed, especially during the past decade when a growing volume and range of “legal” work has migrated from firms to in-house departments, law companies, other professional service providers. Many repetitive, labor-intensive services performed by attorneys are now automated. The change in legal delivery’s division of labor has been well-chronicled; however, the commentary largely overlooks law firms’ low net promoter score (NPS).  A 2017 study of the British legal market commissioned by LexisNexis and Judge Business School at Cambridge University contains a stark finding: ‘There is unambiguous evidence of a significant and persistent disconnect between law firms and their clients.” Only 25% of corporate legal buyers said they would recommend their “go-to” law firm.

Here are some recommendations to legal buyers and service providers.

1. Adopt A Client-Centric Philosophy

There is widespread consensus that this is “the age of the consumer.” The Internet provides consumers the ability to access information, products, and services easily and quickly. Social media affords buyers an easily accessible, free global platform to exchange information and opinions about goods and services. It gives consumers a powerful voice that can make or break a brand. Technology has shifted the balance of power from sellers to buyers.

Customer first business models

Digital transformation leaders like Amazon and Apple foresaw this shift and constructed “customer first” business models. Their profit derived from customer satisfaction. Digital companies—the largest buyers of legal services—have invested heavily to build digital platforms that harvest data that helps streamline operations and enables them to “know” their customers. Ram Charan, a leading business strategist, describes a digital company as “totally focused on the consumer.” That means getting to know everything about them-all the touchpoints and pain points—and reconceiving a new kind of end-to-end experience. In the digital world, according to Charan, “you’re a partner with the competition, and, at the same time, you’re competing head on.” Translation: tradition delivery paradigms are giving way to new ones. Zero-sum solutions designed to benefit providers are being replaced by collaborative ones that benefit consumers. It’s a new ballgame.

How does the legal industry stack up? Most large law firm websites tout their “client-centric approach” and “partnering with clients.” The data indicates otherwise. The LexisNexis UK 2018 Bellwether Report found that 97% of independent law firms surveyed recognized the importance of a “client-first” culture but only 69% acknowledged their firm is doing anything about it. Why? The Altman Weil 2018 Law Firms in Transition Survey provides the answer for the divergence: most firms have yet to feel the economic pain. How can this be when business is moving at warp speed, confronts a dizzying array of new challenges, and demands “more with less?

Ask General Counsel and they will tell you they’re feeling the heat. So why don’t they demand more from law firms? More importantly, why not reconsider how and when to engage law firms in the first instance? There is no simple or universal explanation. There are, however, several common reasons why so few GC’s are unable and/or unwilling to reconfigure traditional legal delivery sources and paradigms: (1) GC’s are lawyers trained to be risk-averse, not innovative; (2) many are alumni/ae of large firms and retain a law firm mindset hangover; (3) many manage their departments like captive law firms, not the business partners/enterprise defenders they should be; (4) political blowback from the department rank-and-file; (5) focus on cost containment, not contributing to enterprise goals. These obstacles will be overcome as the role, skillsets, age, alignment with the C-Suite, and diversity of GC’s changes.

Most corporate General Counsel have yet to materially restructure their relationship with law firms

This is unwelcome news to managing partners who are already being pressured by GC’s to do “more with less.” Reduced rack rates, discounts, reverse auctions, RFP’s, fixed-priced billing, and convergence of panel counsel are baby steps in law’s transition to a customer-centric approach. These palliatives have been initiated by buyers, not providers. A client-centric approach is provider agnostic; the key is what resource(s) is needed to solve a business challenge. In the legal context, the customer does not care whether that comes from a law firm, law company, in-house department, or elsewhere. It is also of no moment whether the “legal” issue (as characterized by lawyers, not clients) is solved by a licensed attorney, legal professional, or someone from another discipline having the required expertise. This is precisely what Ram Charan was referring to when he described the fluidity endemic to digital companies.

Bill Deckelman, Executive Vice President and General Counsel of DXC Technology, is in the vanguard of legal digital transformation. Perhaps it is because he works for a large global technology company that sponsored a book titled “Seeing Digital: A Visual Guide to the Industries, Organizations, and Careers of the 2020s” and has taken it to heart. Maybe it’s because when Bill took the helm of the legal department of DXC, the product of a 2017 merger of two well-known tech companies, he had to work quickly to meld  two large legal departments and serve as an active business partner. No matter the impetus, Deckelman’s bold moves—that have included a blockbuster managed services agreement  with law company UnitedLex and customer lifecycle platform (CLM)—evidence his willingness to think and act “out of the box.” His response to my question about his strategy offers a glimpse into legal delivery’s future.

Our first step to ready ourselves for Digital Transformation was moving to a managed services model with a CLM technology platform. Our internal contracting costs were reduced by over 35% in the first year and we increased speed to final contract.  Now, having embarked on the serious work of detailed planning and initial implementation of a Digital Transformation program, we are seeing that a transforming workforce over the next couple of years is going to bring even stronger benefits for our people and for the business—better career paths for ‘digitally-minded’ professionals, higher quality work product, increased speed-to-market, even lower cost to deliver, and data and metrics-driven management capabilities.

2. Differentiate 

Differentiation did not matter much to legal providers or buyers until recently. The legal industry’s transition from guild to marketplace began in earnest during the post-financial crisis decade, and all indications point to more rapid acceleration in the coming years. Buyers have more choices, technology has made them more informed, new skillsets are required in legal delivery, new tools are available, new models exist, and corporate legal buyers confront new and complex global challenges that demand rapid, interdisciplinary responses.

What is legal differentiation? There are three key components, all of which must be provided to clients: (1) practice—differentiated expertise, skills, judgment, and experience; (2) delivery capability– the effective deployment of legal expertise, technology, and process to solve client challenges; and (3) customer satisfaction—achieving results and providing an excellent consumer experience that promotes trust. This is achieved by data, metrics, results, constant improvement, transparency, and knowing the client.

Collaboration is the best option for most firms

Practice differentiation is shrinking and largely confined to “bet the company” (1%-2% of a legal portfolio and approximately 15% of total spend) matters and highly specialized work typically managed by law firms and/or in-house legal teams. For firms to be competitive, they must also possess—or collaborate with– legal operations teams that provide transparent, efficient, real-time accessible, cost-effective, price-predictable, expert legal delivery capability. There are three ways to achieve this: build, buy, or rent (collaborate).  For most firms, collaboration is the best option. The remarkable growth of CLOC and ACC Legal Operations and well-capitalized, tech and process-savvy law companies—like UnitedLex, and Axiom—evidence the industry’s newfound focus on legal operations and “the business of law.”

Customer service and measurable results are critical. This is another area where most law firms are faltering. Old-fashioned customer service and measurable results are key elements of differentiation not only for firms but equally for in-house departments and law companies. Add to that digital tools that afford providers that deploy them data-driven “knowledge” of the customer that services/products can be tailored to.  Law firm reliance on ‘practice excellence,’ pedigree, and reputation—without more—is no longer sufficient to be competitive. Clients are becoming more discerning and demand expertise, service, value, and results that integrate delivery and practice excellence.

Too few law firms have undergone the difficult process of self-identification—what do they presently offer, what should they offer, with whom do they collaborate and when, and what do they see as their role in the fast-changing legal ecosystem?  Talent development, constant improvement, and collaboration are other important considerations. The toughest part of this existential exercise is to implement the takeaways. That might mean cutting ties with practice groups, offices, personnel, partners, and even client relationships. But the harsh reality is that firms, legal departments, and law companies all share one thing in common: they must be differentiated to survive in the current business climate.

This is the first in a series of articles that contain recommendations for corporate legal providers and buyers.

Author

Mark Cohen is a lawyer, law professor, legal innovator and strategist, and founder of Legal Mosaic. 

Mark says of himself “I write about changes in the global legal marketplace”.

Recommendations for corporate legal buyers and providers in the digital age was first published by Mark in Forbes on September 24, 2018.