The idea of a black swan, minted by Nassim Taleb in 2007, defines a situation where unpredictable events change the market. The term „black swan” is the aftermath of a situation where scientists were certain that only white swans existed in the world. That is, until unexpectedly they came across a species of black swans. The current situation fully reflects this idea.
Covid-19 has bought many well-worn rules into question. Rules we considered irrefutable have ceased to function, changing the organisational culture in almost every business. One of the main characteristics of the crisis is that it has exposed the organisational lack of technology readiness. In consequence, it may change how the market is divided, promoting those who invested in technology transformation before the crisis, and taking down businesses with a traditional model.
The market today
Information flowing from the market shows that most companies are not prepared to efficiently transfer to remote working and remote client services. Particulary in Poland, in family-owned businesses, making up around one-half of the Polish GDP, 57.7% stated that they will not survive the next 12 months, according to research done by The Family Business Initiative. Legal firms are equally affected, if not more. They have been relying on the traditional model of contacting clients in traditional, representative offices. Quoting one of my favourite clients, a partner in one of the legal firms „ We shine with the light of our clients.”. According to the ABA Legal Technology Survey Report from 2019, 84% of law companies state that they have some legal technology solutions accessed remotely, however in small firms the number is only 66%. The question remains if „some” solutions will be enough. Of course, most employees can perform their tasks remotely, however not all are comfortable with it, as they are not used to this type of work.
The second threat to the legal business is „cost-cutting” within firms. Unfortunately, this also concerns legal services, which are costly and the need for them is associated with the number of market transactions, which have significantly diminished. On the other hand, the demand for services that are not provided by a specific law firm with an excellent opinion, but are “good enough” is growing, similarly to basic products on store shelves. Firms that will retain their clients will have to consider changes to the pricing of their services, as the client will not be understandable towards including costs such as exploitation and office expenses, when services are performed from home.
These are not empty words. Faegre Drinker, a law firm employing 1300 people, has closed its 22 offices explaining that their employees are prepared to work remotely, preserving the same quality of services.
Soon, the „moment of truth” will come, along with the payment deadlines for March and April invoices. The fact that a firm had clients in March and April and issued invoices is only a part of the success. It is only when the payment appears in the account balance, that firms will be able to breathe a sigh of relief. As has been previously stated, a growing number of companies will have issues with cash- flow. I know from experience that many polish law firms find it troublesome to execute due payments.
It appears that the most sought-after law firms will be not those that have the largest number of specialties or an office in a prestigious location, but those who effectively use cloud-based solutions, have virtual communication channels in place and manage documents virtually. What is more, it will be law firms whose employees are trained to work at home and their partners in charge do not have a mental blockage with limited trust towards employees- “I’m not sure what exactly are you doing while at home.”
A list of CyberSins
It is difficult to assess the number of companies not ready to take their business into the virtual world, but definitely some of the largest sins in neglecting the digital transformation can be shown:
- No option of remote work – some companies make it possible to only work within the company’s network. This means that working remotely, the employee cannot access servers or network drives containing required data- client agreements, knowledge library or notes.
- Archives which are not digitised and are stored in paper, most often as document-filled binders containing client agreements and invoices etc. According to the aforementioned ABSL report, a little over one-half of the firms surveyed have any document-management system, not even discussing a cloud-based system- in single proprietary firms the number is only 37%. This means that each time an employee will have to access paper documents, a trip to the office will be unavoidable.
- No infrastructure to ensure effective work – i.a. equipment that is not adapter to hold videoconferences, data transfer or even home Wi-Fi, which does not fulfil standards as it was not installed for remote work purposes.
- Being unprepared for remote meetings – most of us have probably experienced situations where the beginning of a videoconference was marked with sound or video issues or a slow internet connection.
Is the team ready for a change?
The last piece of the puzzle is the team’s ability to work remotely. Many companies never required digital abilities from their employees, especially older ones- they simply were not needed. The management of law firms did not need to take an interest in cloud solutions, e-invoicing or videoconferences, and some even gloated about it. Meanwhile, cyber-dinosaurs might meet the same fate as their ancestors millions of years ago. This might also be a chance for smaller companies which had these skills or adapted them faster than their larger competitors.
The situation is complex. It seems the traditional model of legal services, based on tradition and ignoring technology advancement has been confronted with quick-paced changes. Some firms will probably not be able to cope with the challenge that firms embracing the tech-drive prepared for. This will mean significant shifts in the legal business after the crisis. When the dust settles, we will probably witness spectacular downfalls and successes as well. The market will become more polarized. Only those well prepared from a technology and business standpoint will survive, strengthening their position on the market. Those holding on to the traditional model of a lawyer will fall or be marginalised. The future may show that a breath of fresh air in the legal profession will bring more advantages to clients and legal firms themselves, giving them an occasion to drop disadvantageous practices held in place by the traditional status quo.
About the Author:
Kamila Kurkowska, CEO of Firemind, President and Founder of Women in Law Foundation, Ambassador of European Legaltech Association in Poland.
Kamila is experienced and innovative business manager, focused on legal marketing, Legaltech and corporate innovation. She have gained her knowledge and experience leading marketing and business development teams at Deloitte Tax and Legal Advisory and Harvard Business Review. Since 2015 she has been successfully running Firemind - consulting company, specialized in strategic and marketing advisory to professional services and technology companies. She advices Clients on digital and offline marketing, business development strategy and ongoing projects, serving as Head of Marketing on a number of occasions. Thanks to years of effective management of large and complex teams, combined with effective building of relationships with different groups of stakeholders, business partners and clients, she has been able to build a broad and strong business network.