I. A paradigm change in the legal industry: is there one and how are the players reacting to it?
The title of this article assumes that the legal industry is currently undergoing a paradigm change, but is there one, and what does it actually amount to? Fortunately, when we review both the academic and the professional literature, we can find a very large amount of studies that indeed suggest that a deep paradigm change is taking place. Many studies and reports from many jurisdictions—primarily common law jurisdictions, affirm that much. [1]
For instance, the 2018 Report on the State of the Legal Market produced jointly by the Georgetown University Center for the study of the legal profession and Thomson Reuters [2], affirms in no ambiguous terms that a change of paradigm is indeed in the making within the legal market across many jurisdictions, due to many variables, among which the expansion of market economies—despite the emergence of populisms, the digital and technological revolution, and the level of integration of the world economy—despite some setbacks. In discussing the response (or lack thereof) of many law firms to the disruptions that are taking place within the legal markets—particularly but of course not only in the US—the report draws a parallel between the responses of those law firms and the failure of the Maginot Line built by the French Government during the second world war to protect France from the expected German invasion. It took just sex weeks for Germany to cross the Maginot line and conquer France. The spectacular failure of France to defend itself was caused not by the difference of military might between the two countries—which did not really exist—but rather to France´s complete failure to understand that the nature of war had fundamentally changed between the two world wars. wheras France was preparing itself for a long and protracted war of attrition, Germany launched the Blietzkrieg.
But how can it be that a powerful country fails to detect such a massive and fast paradigm change in war strategy? The Georgetown University Report suggests that the reason has to do with a number of psychological biases, including:
The sunk cost fallacy, which leads organisations to stick to investments even if they are indeed irrecoverable.
Loss aversion, which attaches more weight to a certain loss than to an uncertain win.
Preference for completion, or the aversion to leave strategies unfinished.
Pluralistic ignorance, which deters the few that truly understand change from championing change as it might alienate others.
Personal identification with existing strategies and feeling that changing course will impact negatively on reputations.
To what extent is the abovementioned scenario useful in thinking about current change taking place within legal markets and the responses of current players?
One implication of the analogy seems to be that there are somehow two very different and opposed camps within legal markets: on the one hand the traditional players (here the report refers mainly to law firms) and on the other “law companies”, otherwise known as alternative legal service providers. The latter would be “eating away” an increasingly large proportion of market share from the former, even driving the less competitive out of business. This view is somewhat useful but nevertheless limited for a number of reasons. Law companies more often than not have law firms as clients, helping them to become more customer-focused and more efficient at what they already do. [3] Some law companies are “hybrid” companies, offering both legal advice and services (often around technology) to both law firms and in-house legal departments. But the market share of these hybrids still represents a very minor part of market share. [4] Traditional law firms are in fact changing already to adapt to the paradigm change, and in some cases are doing that fast and very successfully. [5]
So, while there’s some truth in the “two camps” view, the reality is that there’s a lot of collaboration too. This idea can be nicely captured with the concept of “co-opetition”. And what’s going on in the market. Of course, law firms that fail to adapt will disappear, as many new law companies will fail to survive. The market will take care of that. One way in which it already does so is by creating a number of vehicles to signal excellence in innovation. In opposition to the innumerable “traditional” law firm rankings, awards and directories [6] that exist, there is an increasing interest in new tools that seek to identify who are the best innovators in the field [7], with the benefits that come with it.
II. A paradigm change in legal education?
Once it has been established that there is indeed a paradigm change going on within legal markets, it stands to reason that it should be having already an impact on law schools. And indeed, many law schools in the USA have indeed been reacting for a while now, as it is obvious from sources such as the excellent Law Schools Innovation Index compiled by Dan Linna Jr and Jordan Galvin https://www.legaltechinnovation.com/law-school-index/. The goal of the index is to “create a measure of the extent to which each of the 200+ U.S. law schools prepare students to deliver legal services in the 21st century”, and to create a taxonomy of law schools. The index covers essentially three areas: (1) types of legal services delivery innovations (centers, clinics, incubators, etc; (2) legal service delivery courses taught within the J.D.; (3) “law and” courses. Such an index does not cover (yet) other jurisdictions, so it is not possible to tell yet how much adaptation is going on within Europe and Asia. But it is certainly possible to look at existing rankings or similar initiatives across the pond, if only to find out that none of them (including the now cancelled FT Innovative Law Schools Listing) consider innovation and adaptiveness to the paradigm change in the industry as a relevant variable. In part because of that lack of sensitivity to the issue, recent academics have found that EU law schools are generally “languishing” with a few exceptions [8]
There are generally three kinds of responses that law schools may provide to the paradigm change in the legal professions and the legal industry; (1) adapt the curriculum and programme portfolio to better reflect the paradigm change; (2) undertake legal research on emerging areas, such as AI, biotech, robotics, and so forth that can be translated into the curriculum; (3) use AI and big data analytics to undertake empirical research on (the evolution of) legal systems and the behaviour of stakeholders within them. Very often this effort will justify global networks of law schools, market players and regulators around the concept of innovation hubs. All these actors can profit from innovation at scale, as well as from robust methodologies that measure it and enable comparison across different schools to identify excellence in innovation.
III. The way forward
While rankings present many problems of their own, it seems that there is a need to find solutions to close the gap between the legal industry and legal education when it comes to innovation of the sort that will help students successfully navigate the paradigm change. Law schools that take the risks of innovating at scale to help their students face the paradigm change need to raise their visibility and, even more important, compare themselves more transparently with other players in order to enhance virtuous competition. This will be of benefit even for more conservative schools, as they can leapfrog on the innovator´s efforts. At the end, innovation at scale is what we are in urgent need of.
Notes:
[1] Tyler J. Replogle, “the business of law: evolution of the legal services market, Michigan Business & Entrepreneurial law review”, Vol.6, issue 2, 2017; Green Target, “2018 Legal industry outlook”, “The future of legal services”, Law society of England and Wales, 2016, “The future of legal services in Canada: trends and issues”, Canadian Bar Association, Commission on the future of legal service, American Bar Association, Task force of the IBA on the future of legal services => report on the future of legal services, 2018, work carried out by the Consejo General de la Abogacía, or the recent interest expressed by the Madrid Bar in this regard. Academic literature includes: Gillian Hadfield, Rules for a Flat World: how humans invented law and how to reinvent it for a global economy, Oxford University Press, 2017.
[3] John Croft, President of Elevate, intervention at panel session. Legal Management Forum 2018, 16 October 2018, Madrid, Spain.
[4] For instance, Elevate.
[5] One such example is Pinsent Masons through the creation of Vario.
[6] Such as Chambers, Legal500, etc.
[7] Examples include the LawyerPress Awards, FT Special Report on Innovative Lawyers and FT Innovative Lawyers Awards.
[8] Dyevre, Arthur; 2017. Fixing European Law Schools. European Review of Private Law; 2017; Vol. 25; iss. 1; pp. 151 – 168.
About the Author
Javier de Cendra is Dean of IE Law School and President of the Law Schools Global League during the last two years.
He is Honorary Senior Research fellow at University College London Faculty of Law and member of the international advisory board of CEID Colombia.
As academic manager, his focus lies in helping develop the blend of knowledge and skills that professionals and students working within the field of law require to ensure that law and legal systems remain relevant for society.