February 24, 2020
Fluid Law Firm: Break the doom-loop and engage in ecosystems to meet the increasing demand for client-centricity
The Fluid Law Firm is a concept we introduced in an article in Forum Magazine a few weeks ago. Since we were confined to the physical limits of the printed pages available, we believe there is a basis for an extended explanation of our idea. Because the fluid law firm is not just some futuristic vision of what a law firm could look like years from now, and it is definitely not a fixed concept. It is a set of tangible and easy-applicable elements that are being used by law firms all over the world already but by conceptualising fluidity we hope to make law firms and legal innovators aware that they should not just aim to improve the internal workflow of the organisation but also investigate how the firm engages in the surrounding communities.
So let us take a closer look at how law firms can become more agile, adaptable and engaged by prioritising fluidity and external client innovation.
Demand for client-centricity
The reason why law firms need more fluidity is the external pressure “to adapt to an increasingly client-centric market”. The current digital transformation forces every industry to reinvent itself in the image of its customers and adapt to the new power customers reside over. The legal industry is not alone here but it is lagging behind. According to a report by LexisNexis, “There is unambiguous evidence of a significant and persistent disconnect between law firms and their clients.” The participants in the report noted that the lawyers appeared to lack knowledge of their business and scored low on transparency through the whole process. Furthermore, the law firms had a too narrow focus on single transactions whereas the clients sought a more holistic overview which has caused more companies to move their legal affairs inhouse.
Consequently, there are huge advantages to gain by adopting a more client-centric approach. A report by Clio that states that “57% of consumers (...) don’t pursue their problems legally when it’s in their best interest to do so.” and that “delivering a more client-centered experience—by being more responsive and being more prepared for every client interaction—will help move a legitimate case forward.” According to Bain & Company analysis “companies that excel in the customer experience grow revenues 4%–8% above their market.”
As noted in our article, it is our impression that there is plenty of willingness to invest in legal tech companies. Cash is not the problem. The problem is rather the lack of willingness to implement new solutions and actually change habits. Also, most of the technology investments goes internal innovation instead of external innovation. Evidently, many law firms have hired CIO's and other C-level management to make their organisation more agile. While that is a clear upgrade to the traditional structure, the lack of client-centricity is not caused by a flawed “internal organization structure but rather a result of the firm’s lack of connection to its external environment.” In short, law firms should focus more on external innovation.
Most law firms focus their innovation efforts on review tools and case management systems that improve the internal workflow. Most often, the clients will not notice the benefits of those improvements. Of course, they will sometimes get a cheaper service as the amount of billable hours decreases, but that is same-for-less - not more-for-less. As shown in an article earlier published on Legal Tech Weekly, inhouse counsels are begging for law firms to provide them with digital products and IT-solutions. They simply want another kind of service, so investing in more client-faced tools that really change the delivery of the legal product is required.
Secondly, law firms should adopt more client-driven innovation instead of the usual firm-driven innovation. The perception in many law firms today is that the clients do not know enough about legal matters to know what they want. That might be true, but at the same time, lawyers do not know what the clients want if they do not start engaging them in the innovation process. Law firms must invite clients to co-create or at least participate in the innovation process. By understanding the client as an innovator: “these clients will automatically take ownership in the innovation. By taking ownership, the client will not only choose the product or service themselves, they will also forge a stronger bond to the law firm, increasing the loyalty of the client who will share knowledge of this new product or service with others inside their industry,” as earlier written in Thompson Reuters.
For law firms to meet this new demand for client-centricity, they must value inclusion over segregation, be less protective of their knowledge and re-arrange themselves in more radical formations. Instead of being closed entities with solidified boundaries, law firms must: “strategize for externalization, engage in collaborative ecosystems and replace their entrenched walls with flexible membranes that can absorb and extract talent and resources more seamlessly.”
The Firm of the Future
The theoretical background for the fluent law firm is an analysis called The Firm of the Future conducted by Bain & Company. It announces the end of “the shareholders primary era” - or in this instance the partner primary era - where managers are incented by the promise of huge rewards tied to shareholder interests. According to Bain & Company this paradigm is under pressure from modern technologies and new customer expectations. The next generation of successful companies will value ecosystems over assets and increase their focus on client intimacy by making quicker decisions and continuously improve their products.
As the pursuit of shareholder/partner value creates a narrow focus on short term value and shorter management horizons, long-term investments are suffering. Consequently, law firms and other shareholder primary companies get caught in a “resource-allocation doom loop that, despite best intentions, allocates next year’s resources more or less in line with this year’s revenue.” That is, in itself, an obstacle for digital transformation but even worse, it also slows down the company since it makes it harder to translate strategy into rapid and effective execution. The firm of the future must free resources to meet the need for speed and agility. Furthermore, they must focus more on client intimacy instead of shareholder value.
On top of that, Bain & Company predicts that the future generations of millennials will not be enthusiastic about long-planned career paths as they prefer freedom to stability. They simply prefer the gig economy, value learning over traditional incentives and often chose to work for companies that pursue a higher purpose. These trends underline the need for a fluid law firm structure where talent can easily be attracted from an ecosystem of clients, tools and professional talents.
These learnings combined causes us to conclude that: “All of this paints traditional law firms as doom loops of trapped resources where assets are everything and employees are on decade-long career paths. Clearly, it also testifies to one hard fact: The modern firm must embrace flexibility and fluidity.”
Or to put it shortly: “It is time for the fluid law firm!”
Fluidity in practice
In its essence, the idea of the fluid law firm is to introduce less solidified boundaries to the law firm organisation and thereby enable it to engage in the surrounding ecosystem. Law firms must open themselves up and restructure their workforce to become more agile.
It does not mean that law firms must fire all their employees. The fluidity could easily come from an external layer around the current law firm structure. As mentioned in the original article, Pinsent Masons have launched a freelancer platform called Vario that works as a brilliant model for externalization. Another great example is the Chinese mobile company Xiaomi that has replaced their customer support team with a community of super users that help other users with their issues in return for access to tools, features and sub-products. Such a model could also be interesting for law firms. They engage young law students to volunteer and deliver free legal aid to young entrepreneurs or certain social under-privileged groups that are not well-off enough to afford legal services or representation. In return, the young law students would get valuable experience, improve their CV and get stronger ties to the law firm. A version of that is the Justice Café in Atlanta where you can go and get simple legal services “á la carte” at a very low cost.
The gig economy for lawyers continues to expand and companies like Atrium have already received a lot of positive attention for their model. While such platforms are created to handle lower-skilled, repeatable tasks that require few attorneys and digital products, we will most likely see fluid law firms geared to handle more complicated cases using tech-stacks and project management.
Like in the consultancy- and accountancy industry, legal work will be more project-based. Such work will be executed on small, flexible units with few permanent managers that hire freelance professionals to solve specific issues in the case.
The legal project managers will also get to handpick various digital solutions to their cases from a broad tech stack. That will require law firms to spend more energy on scouting the tech-market and finding the best talent, but if done right, the law firm will get access to a wider circle of talent and a free flow of knowledge. One of the largest benefits of this case-by-case model is that fluid law firms will get full utilisation of their employees and specialised talent at the same time. They will avoid the resource doom-loop with attorneys waiting for new tasks or lawyers working in areas they do not have specialised knowledge of. The clients will, on the other hand, receive better and more transparent legal advice at a predictable cost.
Some law firms are already applying project management in their work. In the article, we mention the Danish law firm DAHL Advokatfirma. They are using project managers and interim teams consisting of both clients and attorneys to attract larger clients and solve more complicated case matters.
The Big Four are already having success with one-stop-shop concepts that applies project management strategies. By adopting similar working methods, law firms will be able to deliver better and more transparent results with as an increased ability to forecast and manage the projects reduces pricing shock caused by lack of planning.
Ideas for fluid law firms
We do not suggest that a law firm should pursue all strategies of fluidity. Instead, they should focus on a few ways to open up and engage in a meaningful relationship with the ecosystem in which they operate. Here, we have listed a few focus areas that would be interesting for any kind of law firm to investigate:
A fluid law firm should always have the best legal technologies in their tech stack. They must engage with developers, startups and digital providers and form partnerships with digital consultants to make sure that they can always from a large range of tools. Fluid law firms could then create inhouse tech-incubators and make office space available for the tech providers. In this way, they can collaborate closely to create the right tools and the tech providers can get easy access of legal and economic advice. A brilliant alternative is the Norwegian BAHR LEAP Law Tech Lab where clients, lawyers and technologists can interact and test new ideas. In this way, BAHR gets access to the newest ideas on the legal tech market and they can guide the tech startups to make better solutions. Another way to engage in the community is to have events such as legal hackathons, demo showings, study groups, conferences, seminars and much more. The fluid law firm could either create their own initiatives or engage in existing movements such as Legal Hackers. The fluid law firm should also engage with the established market and offer a comprehensive tech-stack to their clients. Such a setup requires business models where the law firm pay-per-use. The tech solutions should be agile and client-centric themselves. That means low entry barriers, no onboarding fees and a plug-&-play subscription model that is easy to scale.
The educational ecosystem
The foundation of the law firm pyramid is cracking. As noted in a previous article: “The repetitive work tasks that have historically comprised the bulk of the traditional work on which young lawyers cut their teeth are increasingly facing pressure from digital tools, legal project outsourcing, or alternative legal service providers (ALSP).” These tasks have an educational purpose as they prepare young lawyers for more complicated tasks and influence the internal hierarchy of a firm. Simultaneously, law schools struggle to prepare lawyers for a more digital future. The model where law schools theory and law firms practices are under pressure. That calls for closer collaboration between the educational institution and the firms. Formalised collaboration with universities will bring an abundance of benefits to the law firm. They will get a direct line to prime research and by engaging in the education ecosystem they will get an entry to find raw talent among law, business and tech students. The fluid law firms could engage these individuals through projects, in voluntary legal aids, mentorships and various competitions.
The professional ecosystem
A fluid law firm needs a large ecosystem of talented professionals from all kinds of practice areas. Furthermore, we predict that legal designers, accountants, technologists, project managers, political scientists and data analysts will get more significant roles in the future legal industry where one-stop-shop concepts will be more and more frequent. The fluid law firm should engage, educate and gather many kinds of freelance professionals to always have a pool of talent and knowledge available. Seminars, office spaces and after-work network sessions could be obvious ways to keep freelance workers closer. Another solution could be to have a legal market platform that engages freelancers in matters that only needs a single lawyer. Such an ecosystem should also engage with the educational ecosystem to ensure that the freelancers are trained continuously.
All of these networks should also engage clients. The reason why we need more fluid law firms that engages in those ecosystems is that client-centricity is becoming increasingly important. Client-driven innovation requires clients to take part in the tech ecosystem by co-developing and testing new knowledge. Clients should also be part of the educational ecosystem as they have the important insights into what legal services they want. And last but not least, by engaging clients in the professional ecosystem, you can benefit from the network of your increased and specialised freelance workforce.
In general, there are millions of ways to open up a firm to the world: seminars, networking sessions, office spaces, free consultancies - the list is long - but it all contributes to attracting talent, clients and knowledge. An expanded ecosystem is this the perfect way for the fluid law firm to build a customer-centric culture that increases client loyalty and meet there demands. And as we finally conclude; the fluidity is “an essential ingredient to regaining the declining trust in the legal industry.”