Disruption in legal services, from within

6th February 2019

If you lead an established, market-leading firm, you face a dilemma.

You’ve cracked the recipe for success: you’ve listened to clients, played to your strengths, hired the right people and invested in processes and technology to maximise profits.

Despite all the noise – the disruptive innovations that are coming your way, your focus has not swayed, and you’ve reaped the rewards.

After all, why devote resources to ideas that clients reject, that offer lower profit, that underperform your existing service models, in markets that are insignificant?

Why do great firms fail? Answer: disruptive innovation

The phrase ‘attacker’s advantage’ was coined in the 80s and in 1997, Clayton Christensen unleashed his theory of disruptive innovation in The Innovator’s Dilemma. This text is still the gold standard in management thinking: how the pursuit of profits today leads to great companies falling victim to disruptive innovations. It’s a dilemma that acutely affects law firms and any business that’s structured as a partnership, where there are no retained earnings nor balance sheets that resemble what’s typically seen in companies.

If you’re a partner today, why would you invest in ideas that will not contribute to profits in the immediate or near term?

But as the legal industry evolves, like any in any industry, power gradually shifts from the seller to the buyer. We are now in a buyer’s market – a market where incumbents are susceptible to being caught off guard.

Great firms disrupting themselves

“Christensen observes that companies that survive and thrive in buyers’ market do so by establishing skunkworks (a small group of people who research and develop a project primarily for the sake of radical innovation) with the intention of ‘killing the mother ship’ and disrupting themselves.” – Eric Chin, Principal of Alpha Creates.

And great law firms are indeed disrupting themselves.

In 2015, strategy and innovation consultant Eric Chin (now co-founder at Alpha Creates) penned an excellent article applying Christensen’s theories to BigLaw, illustrating Allen & Overy’s response to disruptive innovation by segmenting legal work into three levels:

Mission critical: where clients are least price-sensitive, requiring specialist lawyers for complex, high risk work – the standard A&O offering.

Run-the-company: price-sensitive, routine work that still requires bespoke service and judgement – A&O’s Peerpoint (a flexible, consultant lawyer business).

Commodity: price-sensitive, low level, high volume work performed at the junior or paralegal level – A&O’s Belfast-based Legal Services Centre.

A&O has since launched Fuse, a tech innovation space where tech companies, lawyers, technologists and clients can collaborate to explore, develop and test new solutions.

Dentons and Mishchon de Reya have gone a step further in setting up #Lawtech accelerators under their respective Nextlaw Labs and MDR LAB operations, actively co-developing and investing in disruptive legal tech companies.

In Australia, Gilbert + Tobin has set up its own skunkworks under the  ‘g+t <i>’ brand, invested in ‘NewLaw’ law firm Legal Vision and launched its own in-house technology and transformation advisory capability, G+T Innovate.

While legal self-disruption has – for now at least – been largely quarantined to a handful of  well-resourced, top-end law firms, it’s strategists like Chin and his team who see the opportunity to help established, mid-market law firms by providing ‘Innovation on Demand’.

The question remains: when business as usual has served you well for so many years, when is it time to disrupt yourself?

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