May 11, 2020
Who is the legal consumer of the 21st Century?
The Age of the Consumer is here. In the past 10 years, technological development has empowered consumers and enabled them to be a driving force of innovation in almost every industry. While some believe that increased focus data is the main characteristic of the digital transformation, others argue that it is, in fact, the emphasis on customer satisfaction. For example, Bain & Company has announced the shareholder primacy era over and encouraged the Firm of the Future to adapt to a more service-oriented economy with higher customer expectations. Research from Deloitte also shows that customer-centric companies were 60% more profitable compared to their shareholder-focused competitors.
Suddenly, buzzwords like customer-centricity, client-driven innovation, or customer success management are used by everyone. Jack Ma, founder and executive chairman of Alibaba Group said that: “Customers are No. 1, employees are No. 2, and shareholders are No. 3,” while SAP CEO Bill McDermott has stated that: “We're in the midst of a customer-driven growth revolution in which every single company is going through digital transformation”. However, most law firms seem to consider themselves immune to the concept of client-centricity. They regard their profession as too complicated to be defined by consumers and they still measure their success in partner equity.
All that is going to change if one is to believe Mark A. Cohen who is a passionate advocate for increased client-centricity in the legal industry. The former trial lawyer, BigLaw partner and founder of a multi-city litigation boutique is now CEO of the legal business consultancy Legal Mosaic as well as regular Forbes contributor, author of the excellent Essays on Legal Transformation, and international speaker and thought leader. In other words, Mark Cohen is a global colossus who is truly fit to be part of the Global Thought-leaders of Legal Innovation series.
Legal Tech Weekly has, therefore, spoken with him to learn his views on the client-centric movement in the legal industry, and to find out who is the legal consumer of the 21st Century?
Who is the legal consumer of the 21st Century?
What is the concept of client-centricity, and why has become so important?
To explain client-centricity in the context of the legal industry, one should start by looking at its traditional focus which has been lawyer-centric. Lawyers have been the ones who defined what legal work is. They have created a self-regulated industry where the legal profession has systematically prevented other professionals and paraprofessionals from engaging in what lawyers define as legal work. They have also constructed rules that largely prevent other professions, or as lawyers like to say, non-lawyers, from owning law firms. Law has historically taken a very insular, inward focus. Let's pivot to today, and what client-centricity means. In the last decade, since the global financial crisis, what we are beginning to see is that clients/ legal buyers are beginning to exercise their might. Lawyers may have certain differentiated expertise that only they are equipped to handle, for example, high stakes M&A work or representation before tribunals. The UK calls this ”regulated activities.” But there are many more functions that others in the legal supply chain can do. Also, machines are increasingly able to do some of these functions. So client-centricity today is a focus on what does the client need and who are the appropriate recourses to satisfy those needs.
But these rules were created to protect the legal consumer?
That was the rationale, yes. However, let's take the United States as an example. How are those rules protecting consumers when the data shows that 85 % of Americans, even when they are in dire need of legal services, can't afford them or are effectively denied access to them? That number is 67 % when it comes to businesses. So, I don't think you can argue that rules are protecting consumers when the net impact of those rules is to deny most prospective legal consumers access to legal service.
You mentioned the financial crisis as a tipping point. What impact has that event had?
It's actually a trinity of factors. The financial crisis was one, acceleration of technology was a second and globalisation was a third. With the financial crisis, businesses across all industries became more efficient, cost-effective, and customer-centric. This filtered into the legal industry as well because the law was never before required to be financially accountable. Lawyers could charge what they wanted. They had the leverage over clients but post-financial crisis that pendulum started to swing. Likewise, technology became a greater change agent after the financial crisis. Go back to 2007 - social media was in its infancy, a lot of the large tech companies like Facebook and Google were neophytes, Amazon was bleeding red ink, Uber barely hit the road, and Airbnb wasn't really up and running. You had all these new tech-enabled business models which were really customer-centric that came into being in the last decade. Then finally there is globalisation. Technology has accelerated globalisation and that has two facets. One is labour arbitrage and sourcing a growing list of low-value/high-volume tasks to lower-cost jurisdictions. Likewise, technology enables remote resources to work in a far more agile fashion. You these elements together and one is left to wonder, how can lawyers think that they are immune from the changes affecting every other industry?
So the legal demand has changed. What does the modern legal consumer want?
As recently as 10 years ago, it's fair to say that law firms remained the dominant provider source in the legal industry. But over the past 10 years, you have had a significant migration of work that was once performed exclusively by a law firm that is now done inhouse by corporate legal departments or by other legal service providers. They are often referred to as alternative legal service providers. I don't like the term ”alternative because it suggests these providers are fringe or less qualified than law firms. There is a growing consumer recognition that there is the practice of law, which is narrowing, and the the business of law or legal service delivery which is expanding rapidly. As a consequence, what you are seeing is a p proliferation of providers with different delivery models better aligned with clients. Law used to be exclusively about lawyers and legal expertise. Today, legal delivery is a stool supported by three legs: legal, business, and technological expertise. Legal consumers recognise that there are different resources and skillsets required to do different aspects of legal delivery. Law is not just about lawyers anymore. It's equally about technologists, data analysts, project managers and a whole raft of other professionals with multidisciplinary skilllsets.
You have said that the legal industry is too fixated on ‘innovation,’ not its outcome-customer satisfaction. Do you have any practical advice on how to change that?
Look at businesses focus on to see how they are doing. Number one is their bottom line. And if they are a public company, how is the market perceiving them? But equally important to business today is Net Promoter Score: how likely are consumers to recommend them to others? The promoter score is something that law firms don't pay much attention to. There is a recent Cambridge University business study conducted on large law firms in the UK that concluded large law firms had one of the lowest net promoter scores of any type of provider in any industry. The legal industry has a lot of improvement to make in terms of customer satisfaction.
Going back to your question; what are customers looking for? They are looking for more data-driven solutions. Lawyers have been famous, if not infamous, for speaking from their gut as opposed to relying on data. Trial work is all about evidence and proof, and yet, rather than having proof derived from data, lawyers prefer to talk about war stories or what’s in their belly. Clients want data-driven recommendations. They want answers to questions, not legal briefs. They want solutions to business challenges, not narrow, one-dimensional legal answers. Law is only one in a constellation of factors and variables that go towards making an informed business judgement. So increasingly clients are looking for multidisciplinary, holistic counsel as opposed to just legal advice. Obviously, clients are looking for value, speed in terms of response time and, ultimately, they are looking for a better customer-experience. If you look at numerous surveys, you will find that lawyers don't fare well with client communication. There’s more than a bit of irony to that.
The legal industry seems to be doing fine nevertheless. When will this manifest for real?
As my good friend Richard Susskind said about a decade ago: It's hard to tell a room full of millionaires that their business model is broken. A lot of managing partners from major law firms will tell me privately that they agree the model is broken. But you have to understand that a lot of legal buyers and general counsel grew up in a culture where it is more important not to make a mistake than it is to innovate. There is this entrenched conservatism and cultural hangover that is prevalent among many general counsel. But you are certainly seeing a growing number of them that are getting increasing pressure from the C-suite to do things differently. Particularly as companies engage in digital transformation. That is going to accelerate the pressure on the legal function to operate differently--not just in terms of cost but more importantly in a paradigmatic shift in what clients expects from the legal function.