New Business Models - Not Technology - Will Transform the Legal Industry
New business models are the key to innovation, not new technology. That’s the conclusion of a recent Wall Street Journal CIO article that draws from business guru Mark Johnson’s new book “Reinvent Your Business Model.” Johnson offers several cogent observations on business transformation:
(1) a business model is “a representation of how a business creates and delivers value for a customer while also capturing value for itself, doing so in a repeatable way;”
(2) successful business models have four interdependent elements—customer value proposition, profit formula, key resources, and key processes;
(3) most successful new business models come from startups, not well-established companies; (4) new technology alone, no matter how transformative, is not enough to propel a business forward; (5) the new business model, enabled by technology, is key to an organization’s success or failure; and (6) many successful companies are risk averse and reluctant to venture into “white spaces” (new opportunities) that require new business models and skillsets.
How does the legal industry align with Johnson’s observations? Does it matter whether the business model-not technology-is the prime driver of transformation? Short answers: not well and yes.
Law Is Focused on Technology, Not Consumers
Legal technology is a good news/bad news story. The good news is that technology’s utility as a tool to help solve law’s wicked problems—notably the democratization of access to and improvement of the delivery of legal services—is now widely recognized, if not applied. That has had a profound impact on the labor-intensive, lawyer-centric delivery of legal services. Technology has fueled the disaggregation of “legal” tasks and has morphed legal delivery from the sale of legal expertise to legal expertise leveraged by technology and process—the business of law. There is a “legal tech” frenzy across the globe; it is often difficult to separate the hype from the reality. Artificial intelligence (AI), blockchain, enterprise platforms, and software will not replace lawyers, but these tools will change how, when, for whom, and at what price they are engaged. It also means that “knowing the law” is a baseline, not an end-game for lawyers. It must be augmented by additional skills-- business basics, analytics, project management, “people skills,” and collaboration, among others.
Law’s preoccupation with technology diverts attention from its real value: to enable new business models to better align with and serve customer needs. Law’s focus should be on its objectives—what can lawyers/legal providers do to solve the industry’s wicked problems and what kind of business structures would facilitate that? This requires a cultural shift within the profession, an appreciation that law is an industry of which the profession is a part but by no means the whole. It also demands that legal consumers—not lawyers—are the focus of legal service business models.
Technology is not a panacea for consumer challenges. To be meaningful, technology must be relevant to a material client use-case. Legal tech holds tremendous potential, but its efficacy is a footnote to the culture it operates in and the business models from which it is deployed. Tech alone will not drive legal transformation; new business models will. Those models will extend management and compensation parity beyond licensed attorneys to tech and business professionals. Failure to do that has a chilling effect on the impact of technology and process.
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