They say the optimal recipe for being disrupted is a stable business: A business model which has provided stable revenue year after year.
The most important strategy is long term focus while competency in entrepreneurship among the management is weak. The managerial culture still dictates “give me the solutions, not the problems”.
During the years, we have seen industry after industry following this recipe succumb to new actors entering the market and changing the gravity.
Is the disruption now happening to the legal industry? And in which form? Why aren’t law firms acting on these legal tech opportunities? When will this begin to materialize?
The financial industry ten years ago has a lot in common with the legal industry today. Let’s segue over to the Financial Industry for a moment. You can argue that the legal tech space is where the fin tech space was 5–10 years ago, and now the Big Financial players such as Banks are really feeling the urgency to transform to keep up with the phase of new competitors. According to the Innovation Director of one of Norway’s largest banks DNB, 3 new competitors appear every day with the world as their market. That’s EVERY DAY.
The financial industry ten years ago has a lot in common with the legal industry today.
It’s both highly profitable industries. The top tier law firms in Norway still touching 50 % margin, the revenue is up and not just in Norway — the largest law firms in the U.S. just posted their best financials since 2010 according to The American Lawyer. The industries both operate in heavily regulated markets, with holding close to monopolistic market shares. The financial industry didn’t think they were subject to competition and the law firms still think it is hard to see what’s going to be their outside competition.
Interestingly, it took the Finance industry a decade to really make transformation a priority and maybe it’s already too little too late. In our time of fast-paced change, the days when it took years to change customer behavior is long gone. Today, we’re talking about the number of days it takes to achieve large scale adoption to more or less useful products (Pokemon, Facebook). The days of hesitation is numbered.
Despite the increase in law firm revenue, they can’t beat the growth of legal tech. Some numbers can pose as indicators: The number of legal tech startups listed on Angel Lists have increased by a spiking 596 % since 2010. Patent applications for legal technology increased nearly 500% from 2012 to 2016. According to the Boston Consulting report on “How Legal Technology Will Change the Business of Law” technology could perform up to half of the work which is currently being performed by junior lawyers today.
While the law firms might not feel the new legal tech actors breathing down their neck just yet, it doesn’t mean it won’t happen soon. Adding to that is the increasing industry fragmentation, where the lines between traditional silo based services is washed slowly away. Accounting and financial services may no longer be viewed as separate services offerings from two different industries. Maybe legal advice and account services as handling the tax statement wouldn’t be separated anymore. How fast could it go?
It’s not all bad
There’s good news in sight, too. Lawyers in Big Law are looking increasingly positive to digitization and automation at least according to a survey performed in Norway by the Norwegian Bar Association. Big Law has started using document automation and contract analysis tools to ease the workload and larger clients are increasingly demanding for understanding the ROI of the large fees they still pay. These are forces of change. But is this enough?
One key point taken from the Bank industry is that it finally occurred to them to put the customer in focus instead of only maximizing the shareholders dividends. The legal industry is not just there yet. They still have to put their customers experience in focus — and while they’re at it, maybe their employees too. This might as well mean they need to change their entire business model, rethinking how they should perform their business.
And while we’re waiting for that to happen, their Kodak-moment might very well be fast approaching.
This article was originally posted on Medium on November 16, 2018.
About the Author Merete Nygaard is founder and CEO of Lawbotics AS, Norway’s’ leading legal tech company.
After working as a business lawyer for almost a decade in some of Norway’s top tier firms, she left her job to resolve the inefficiencies in the business of law.
Now she’s eliminating mundane legal work with Lexolve, a multi-sided platform for document automation making life easier for businesses and the people who work in them. She is dedicated to advocate innovation in the legal industry, and have built one of the world’s largest communities of people interested in the intersection of law and technology.