Stagnation and the legal services industry

Real transformation has yet to arrive writes Ken Grady in his latest post Stagnation and the legal services industry. Welcome back Ken!  Readers can look forward to the sequel in a few days from now.

It is unpopular today to write something about the legal industry from a realist perspective. Optimism abounds among entrepreneurs, and among the old guard there exists the fantasy that the world is not as bad as everyone says it is. Unfortunately for me, I am a realist

I also was trained to believe that focusing only on the positive does not help us grow and improve. So, with apologies to all those people who like to read cheery stories, here is my take (after a long absence from writing) on what I see in the industry. I have written this article after reading many reports from the ABATechShow, various blogs on what is current in our industry, and loads of articles about new software.

Almost 25 years ago, I was introduced to lean thinking. As an American manufacturing executive, I was totally unfamiliar with the concepts that comprised lean thinking. It was hard to imagine how some simple rules and a new philosophy could radically change what we did on the shop floor. But, once I toured factories in Japan that had practiced lean for years and even decades, I was able to see the massive differences between traditional manufacturing and the lean style. This was radical transformation.

Even though my mind had been opened to this new approach, I could not convert my factory from old to new overnight. It would take years of concentrated effort to remake the world. It wasn’t simply a matter of changing the physical setup of our factory. It also required re-training everyone in a new way of thinking. Old habits die hard, and we all wanted to revert to what we knew best instead of the new way. This was especially true when the pressure was on. It took discipline and a willingness to fail time and time again to move from old to new. We slowly made progress, but it was measured in months and years not hours and days.

Still, it was possible to make some quick changes and achieve spectacular results. I remember an acquisition my company made about two years after I had been introduced to lean. Several of us who had more experience with lean thinking were sent to the acquired company’s main factory. After a tour, we sat with the factory’s management team in a conference room and talked about the changes to come. We bet the factory team that within six months, we would have the factory output tripled, but in 25% of the space currently occupied by manufacturing equipment.

Three months into the program, we assembled again in the same conference room and apologized to the factory team. After only half the time allotted, we had the factory producing four times the original output, but in less than 20% of the original space. Our sensei (mentors) could still see the tremendous amount of waste we had left. But, even with our relative inexperience, we had made significant changes. This was radical transformation.

No significant changes in law

Today, we talk about the legal industry going through a transformation. We point to new providers, the use of new tools such as project management, and the miracle of artificial intelligence and what it can or will do. But, if we look carefully at the legal industry, we can see that not much has changed from 100 years ago even with these tweaks. What passes for innovation is, for the most part, unremarkable. In many cases, it represents a Rube Goldberg approach to the industry — complicated ways to accomplish what doesn’t need to be done or could be done much easier without the software. Certainly, some software does amazing things and represents state-of-the-art applications in law. But, that is not the issue. The issue is whether we have updated the fundamental way law is practiced. The answer is a resounding “no”.

The industry has yet to reach the point of real transformation. We may have found more efficient ways to do a few things, and shaved some time here and there, but we are still hidebound to the basic approach to practicing law that has existed for decades. Labor and paper dominate. Fundamentally, nothing has changed.

This isn’t surprising. We have yet to have a player of size in the industry break with tradition and re-invent legal services. I don’t mean tweak what we do, I mean build a new model from the ground up. This isn’t because of a lack of tools or know-how, it is a cultural thing. If I sat down with a team today and did the same reinvention of legal services that we did in the factory with manufacturing, the market would reject our new approach. The industry, and in particular the buyers of legal services, are not ready for real transformative change. They aren’t ready for 60 minutes of work to be compressed into 60 seconds or 6 seconds. They aren’t ready for the labor of 20 to be done by 1. Even though there are isolated examples of this happening, it hasn’t become sustainable or wide spread. The buyers certainly aren’t ready for a world filled with paper to be converted to a digital, computational world. Here and there, capital has replaced labor. But fundamental, earth-shattering change is yet to arrive.

I remember years ago being at a conference where change in the legal industry was the main topic. Speaker after speaker presented ways in which they had tweaked the delivery of legal services. During a break, the CLO of one of the Big Four accounting firms came to me and said, “We both know the real problem here. We have the tools and ways to radically change legal services for the better. That isn’t the issue. The real issue is that those in the industry are not ready to accept change.” He was right then and would still be right today.

It is hard to explain to people what radical change would look like. Just as I as a manufacturing executive had difficulty seeing what a lean factory could look like until I toured several, lawyers have difficulty envisioning what a radically different legal service delivery system would look like. It takes the imagination of an Elon Musk to see the future when it doesn’t exist. But, the practice of law does not offer the outsized rewards Elon Musk and others can get in other industries, so law does not attract visionaries willing to build the future and hope others will buy into their vision. As I said, we could build the radical new legal services delivery vehicle, but customers wouldn’t patronize it.

Lack of transformative change doesn’t mean change isn’t happening

That leaves the legal industry with a peculiar problem. Change happens at an almost imperceptible rate while the world around changes at lightening speed. Lawyers, to put it politely, are being left in the dust. Legal services are being displaced by business/technical services which do a better or at least more efficient job. Consumers are finding themselves squeezed out of the legal system. The government as adjudicator and controller of the rule of law is being replaced by private parties. Overall, the real transformation occurring in the legal industry is not substantive change, it is the transition from public to private of the legal system itself. The federal and state court systems are becoming relics of the past.

Since corporations control the bulk of legal spending, at least in the United States, and since the switch from public to private favors corporations, this transformation has not been heavily publicized. Like many changes, it has happened over the years. We wake up one morning to find that our courts have become truly venues of last resort and the real action occurs behind closed corporate doors. Simply looking at the history of Federal Arbitration Act cases highlights what has happened.

Corporations may be incentivized to drive faster and deeper transformation in legal services. As they take over the bulk of the legal industry, it is possible they will simplify the chaotic world known as the law. New technologies, such as artificial intelligence and blockchains, may help with that transformation. It is too soon to tell, but the possibility is there.

Whether individuals will benefit from these changes is an open question. So far, the privatization of law has worked to the benefit of corporations, not individuals (again, see Federal Arbitration Act cases). The trend will probably continue absent some intervention by the government. We could see a reduction in the cost of legal services, but also a sacrifice of individual rights in commercial areas along with that reduction.

An industry stuck in the past

This brings us back to the initial point of this article. The legal industry has yet to see any real transformative change. The very modest tweaks heavily publicized represent not radical change or even significant change, simply the introduction of a bit of efficiency into what is otherwise a 100-year old stagnant industry. The same is true as new providers arise to do the work formerly done by law firms. These small improvements will continue to receive disproportionate amounts of press, just as I’m sure updates to the original typewriter were met with superlatives and stories of great efficiency gains.

Perhaps somewhere, there will be a research effort funded by brave souls that will showcase radical transformation in the legal industry. Much like the old world’s expositions showcasing future technologies, this research effort would show the industry what real transformation would look like. Maybe then, we would start to see the future of legal services delivery. Until then, however, expect to hear the same stories you hear today: how this or that software has moved law forward an inch while the rest of the world travelled a mile.

After 40 years arguing for change in the industry, I have come to accept that we have no visionaries who, like Elon Musk, see us traveling to Mars. The industry does a very efficient job of weeding them out. Instead, our visionaries see us traveling a few miles down the road. Go to any of the tech shows and you will see what I mean. My hope today is that this recalcitrance will not lead to the demise of the industry. As it stands, there will be a role for lawyers, but that role will be greatly diminished. For it to be otherwise, we must accept some visionaries who at least see travel to the Moon as a worthy goal. We need those Elon Musks who dare to dream big and are willing, in our industry, to act on those dreams. We need that real transformative change.

In my next post on this topic, I’ll give a glimpse of what that real change could look like. Many argue that if we simply stay the course, eventually innovation in the legal industry will catch up to where it needs to be. I think the pace is too slow. There are many forms real transformative change that could happen in the legal industry, but we can extrapolate from where we are today to a reasonable possibility for the future. For some, that may help set a direction of what they can do to prepare for change. Perhaps it will even inspire others to drive for that change.

Author of Stagnation and the legal services industry

Ken is a speaker and author on innovation, leadership, and on the future of people, process, and technology.

Ken is Adjunct Professor & Member, LegalRnD Faculty, Michigan State University. On Medium, he is a “Top 50” author on innovation and leadership. You can follow him on Twitter, connect with him on LinkedIn, and follow him on Facebook


Stagnation and the legal services industry first appeared on Ken’s blog, The Algorithmic Society on March 12, 2018.


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