It's Time For A Digital Legal Marketplace
Many years ago at a Finley Kumble partnership meeting a friend wryly commented, ‘We’re tents in the bazaar.’ He was right; each partner operated his/her own mini-firm-- setting rates, hustling business, and engaging in non-stop origination disputes. It was by no means a collegial bazaar. Decades later, the Finley Kumble version of ‘partnership’—once anathema to white shoe firms—predominates. But in addition to the ‘bazaar’ that most large law firms are, a broader competitive marketplace exists. Law firms once dominated the legal vertical, and there was plenty of work to go around. Those days are over. In-house legal departments and legal service providers now combine for nearly half of total legal spend. The ‘tents in the bazaar’ remain, but a new digital marketplace is also emerging. It is changing the way legal services are bought and sold.
GE’s ‘Preferred Counsel’ Digital Marketplace
General Electric’s recently launched an internal website for its approximately 800 strong in-house legal team. The site, called ‘GE Select Counsel’ enables users to search the roster of more than 200 law firms that are GE ‘preferred providers.’ Each firm posts its profile which GE counsel can access for reviews, rates, discounts, diversity data, and a range of other information relevant to retention decisions. This is GE’s version of ‘Yelp meets LinkedIn,’ part of the company’s broader initiative to become digital to achieve a shared services model. Welcome to the new legal marketplace where legal providers vie for work in a digitized marketplace and where buyers can comparative shop as never before.
There are several takeaways from the GE site. First is its prerequisite that to become a ‘preferred provider’—and to maintain a profile-- a firm must agree to play by GE’s rules. That includes signing an agreement to provide negotiated rates. Next, the site enables GE counsel to make more informed buying decisions; they can access and compare firm expertise, experience in similar matters, price, peer reviews, and other criteria. This signals the end for the ‘water cooler recommendation.’ Most significantly, the GE ‘marketplace’ underscores the fundamental shift in the way legal services are bought—and sold. To borrow from Facebook, clients were once ‘in a relationship’ with particular lawyers and firms. Now, ‘it’s complicated.’ In a digitized world, buying decisions are less relationship and more procurement driven. This Tinder-type transactional dynamic between seller and buyer is a reminder that legal services are generally perceived by buyers to be more fungible than bespoke. And now buyers can make more informed, less subjective, and more cost-effective buying decisions. And sellers that are truly differentiated benefit, too.
The legal vertical is one of the last large guilds to resist digital disruption. Those outside law’s self-regulated cocoon wonder why change in the legal industry has been incremental, not disruptive. Fair question, especially when one considers that some estimates peg legal service as a one trillion dollar (that’s ‘t’ as in ‘tons of money’) annual global market. Not only is the size of the legal service market enormous, but also its traditional delivery model is misaligned with market need and demand. Derek Bok, the former president of Harvard University and dean of its law school, summed it up this way: ‘There is far too much law for those who can afford it and far too little for those who cannot.'
Approximately 85% of all Americans as well a majority of small businesses cannot afford legal representation at current prices. This is often referred to as ‘the access to justice crisis.’ At the same time—and paradoxically—tens of thousands of under-employed and unemployed attorneys are looking for work. Nor is there much love for the incumbent law firm delivery model in the corporate segment of the market. Only a small fraction of General Counsel would recommend their ‘go-to’ law firm. If the legal industry’s pent-up market demand and underutilized supply capacity—and buyer frustration-- appears ripe for an Uber, Airbnb, or other tech-enabled model to connect buyers directly with sellers, it does to me, too. It’s time for a digital legal marketplace.
GE’s internal digitized marketplace pairing its buyers with ‘preferred’ sellers indicates that a far larger marketplace could be created. The marketplace could be divided up into many different segments- each one catering to a particular market segment or geography, for example. Digital marketplaces would ease the access to justice crisis, permit sellers to better differentiate themselves through direct, data-driven comparisons to competitors, and enable legal consumers—retail and corporate—to acquire legal services and products with greater ease, efficiency, choice, transparency and due diligence—at a lower cost. And if this sounds far-fetched, consider Amazon.
Why Not An Amazon For Legal Services?
Amazon is the granddaddy of digital marketplaces. It has reimagined retail, utilizing technology to create a vast, multi-layered marketplace for buyers and sellers. By removing the middleman and making the purchase and sale of goods easy, accessible, efficient, and less expensive than the traditional delivery model, Amazon has brought new buyers into a rapidly expanding marketplace. Amazon’s multi-level e-commerce strategy has created multiple channels for businesses and consumers to interact in different ways, each one expanding the size, breadth, and vibrancy of the marketplace. Approximately 40% of Amazon’s sales are third-party product; its not a zero-sum game for sellers. A marketplace where products and services are easier to access, compare, review, buy and sell benefits all and expands the size of the pie. Why not apply this provider-agnostic approach to legal services?
Technology is not a panacea for the legal vertical any more than it is for medicine or a slew of other industries it has disrupted. But IT can enable the formation of a marketplace that breaks down traditional access barriers; promotes competition; affords consumers greater choice; and enables providers to differentiate themselves based upon data rather than hearsay and puffery. Most importantly, a digital legal marketplace will bring millions of new clients/customers into the market and provide many of them with affordable legal representation. In the end, a marketplace will help to realign the interests of lawyers, clients, and society at large. It will also preserve the rule of law by providing greatly improved access to legal representation and promote public confidence in lawyers.
The delivery of legal services remains largely fragmented, outdated, and inefficient. A digital legal marketplace is needed . Critics will say such a marketplace will undermine the legal profession. Not so; a digital marketplace will not change the practice of law but it will significantly improve and expand the delivery of legal services. A digital marketplace will enable lawyers, technologists, and process experts to better leverage their skills to deliver services and products more efficiently, cost-effectively, and transparently to a greatly expanded universe of clients/customers. It will provide consumers greater access to those products and services, enabling them to make more informed buying decisions at more competitive terms. It's time that legal services are accessed via a digital market, not a bazaar.
Mark A. Cohen is also contributor to Forbes.com. This article is also published in his contributors section