VQ Newsletter November 2012 - The Future of Legal Service

2012-11-27T00:00:00

This issue of VQ Newsletter is dedicated to the recent VQ Knowledge and Strategy Forum, with reports from the predictions on the changing legal market and the discussions and different views on the future of legal service. VQ Forum is our annual legal conference focusing on leadership, strategy, innovation and technology trends for the legal market. This year almost 200 delegates attended the event. Amazingly the conference was also followed world-wide via Twitter to such an extent that VQ Forum became the highest-trending topic on Twitter that day.

Keynote speaker Susan Hackett, of Legal Executive Leadership (and former senior vice president/general counsel for the Association of Corporate Counsel), set the stage, followed by a numerous of internationally renowned speakers, like Charles Christian, one of the world's most influential legal tech commentators, Chris Bull, the highly respected strategy consultant at Edge International, award-winning law firm directors Eric Hunter and David Fitch and general counsel and former law firm managing partner Carl Östring.

Insights from Sweden's largest survey among buyers of business law services, Regi's survey Årets Advokatbyrå (the Law Firm of the Year), was then presented with the Law Firm of the Year awards ceremony as a grand finale of this joint event focusing on the future of legal service.

The perfect storm

The chair of the conference, Annette Magnusson, Secretary General, SCC, started off by referring to the dramatic notion of the perfect storm pointed out by Charles Christian: "We are witnessing a perfect storm in the legal sector with legal services as the final barrier to break under the consumer revolution." The components of this storm are present to any legal business, be it an in-house legal department, a law firm or an arbitral institution, even though they may play out a bit differently in the respective legal fields or practical operations. Some of the most distinct components are the financial pressure, the technical development, the new age of transparency, complexity and connectivity. The question is how are we - as legal businesses - holding out in this storm? The picture is not entirely clear - or maybe remains to be seen. As legal professionals we realise that yes, we need to change the way in which we do business and charge for our services, but are we creative enough to make it happen? This question by Annette served as a perfect introduction to the rest of the day, being all about "offering something different" and receiving insights from the speakers on how to approach the challenges of the future in a spirit of innovation.

The New Normal

Keynote speaker, Susan Hackett, started where last year's VQ Forum keynote left off: she cited to Professor Richard Susskind's controversial presentation which challenged the audience to consider the widespread changes impacting legal practice and client service. Susan wanted to soften the fear of the future challenges by providing practical insights and tools for legal businesses to meet the new reality. A scorecard for new normal practices to consider was therefore handed out to the delegates, to use as a tool for implementing the theories and ideas discussed during the day in practice when returning back to business after the conference.

Susan described current legal market developments based on shrinking demand and increasing supply, competition from non-legal sources, and a lack of experience to guide us in this rapidly changing reality. An issue like efficiency was not even on the list of key issues in the Altman-Weil annual Law Firm Leaders survey in 2009, but it ranked as the most important issue in the 2012 survey. Previously, law firms focusing on the need for change were doing so to gain new business, but the numbers show that now law firms need to change in order to keep current clients, too.

Susan's experience working with corporate clients highlights the problems that traditional law firms may need to address. She noted that law firms, with their focus on lawyer-driven service, have a difficulty including and valuing a wider variety of contributors to complex legal work: paralegals, technical experts, law firm staff members, and others: the result is that law firm lawyers don't easily work as a team or respect the skills that clients find necessary to more efficiently providing business solutions to legal problems. Susan made a comparision to the medical profession, asking the audience how they would react if hospital personnel could only provide treatments, procedures or cures through such a over-simplified division of labor as "doctors" and "non-doctors". To achieve an efficient organization, Susan believes that law firms must start to take advantage of their entire internal staff, better leverage technology and other "non-legal" skill sets, and make use of a wider array of trained personnel to perform repetitive or outsourced tasks. Today, many law firms still continue to work as if they can charge whatever they want for the limited services they wish to provide, which makes it difficult to profit from more efficient and effective service delivery demanded in this competitive marketplace.

Susan emphasised that clients want their firms to be profitable and encourage them to be part of their strategies and businesses. This notion was also supported by the results from the Law Firm of the Year survey. General counsel want legal advisers who have a deep understanding of their business and law firms should align their service to support client profitability drivers. "Law firms have to move beyond just offering a discount, they have to bring the cost of service delivery down." Clients aren't waiting for their firms to find ways to improve their efficiency, and are increasingly likely to provide their own solutions through outsourcing, increased internal staffing, automation and more. They are more expertly (and based on business procurement principles) leveraging their buying power and improving their management techniques in response to budget cuts and internal financial requirements. And they are working to develop stronger professional networks with other inside counsel to solve their problems without the need for firms at all: something which firms should recognize and address. In short, corporate clients are setting new directions by investing in new ways of thinking, adapting non-legal skills, drawing in non-legal experts to assist them, and measuring firm performance and shifting work - internally and externally - based on value.

Read a more comprehensive summary of Susan's presentation here.

The More for less-challenge

The next session focused on the "More for less-challenge" when in-house counsel are struggling to meet the increasing demands while at the same time pressure is mounting from the business to cut costs by reducing spends on outside counsel. Five speakers presented insights, strategies and technologies to use for meeting this challenge in practice. The common themes from all the presenters was that technology can play part in driving down costs and that focus should be on developing greater efficiency. However, Charles Christian, who has been reporting and advising on developments in law office technology and online legal services for over 30 years, stressed the importance on focusing on people, culture, process and change before focusing on the technology. "Buying a new IT system is not a strategy - technology is a tool for implementing a strategy, not the strategy itself." Charles explained how he has seen too many examples of IT projects not delivering the planned results due to bad implementations and lack of strategy. Law firms first have to decide on their strategy on pricing and branding - "is your firm a Rolls-Royce, a BMW or a Mini?" - in order to implement efficient roles, processes and technology support. When looking at how to deconstruct legal issues to find parts that could be standardized by the use of IT, the roles of the CIO and the KM director could be combined into a new role as "Head of product design".

Read more about Charles Christian's presentation and the presentations by Ann-Marie Ovin, Vinge, Eric Hunter, Bradford & Barthel, Luise Gramkov de Kort, Karnov Group, and Knut-Magnar Aanestad, Schjodt law here.

Need for change

In the third session, Chris Bull, partner at Edge International, provided a legal market trend analysis on new law firm business models, technology innovations enabling transparent remote service delivery, price comparision sites, volume 'factories' service providers, the intensifying economic pressure on all corporate in-house legal functions with legal work flowing to legal process outsources and to businesses focusing on delivering lower cost legal support, by the mix of legal and para-legal support to provide the most cost-efficient and valuable service to the client. Basically, lawyers are now expected to give the same type of services as other businesses. "The 'New Normal' in the legal sector is everyone else's 'Old Normal'." Legal businesses have to learn to drive the business just like other companies. Another essential aspect that Chris emphasised is branding. In order to succed in the changing legal industry law firms need to stand out with a clear brand. Is the firm delivering high-end bespoke services or low-end commoditised services, or both? Just like Charles Christian's example on the Rolls-Royce, the BMW or the Mini, legal service providers need to think more in terms of brands with different positions on the market. By merely continuing to create more and broader offers to the clients you will be creating confusion and making the clients wonder if they overpay for the expensive service, since the firm obviously can do it cheaper in other cases, or if the less expensive offers are simply lower in quality?

Carl Östring, legal counsel at Traction, provided the general counsel perspective to the changing legal market. Carl pointed out that focus for law firms should be on how to add legal value to your clients. Therefore different kinds of matters need to be handled in different ways. For more high volume matters focus should be on efficiency by the use of advanced templates and automation, whereas for high-value services focus should be on being a true expert within that legal field. "To be successful, strive to dominate your niche." Carl also described how general pricing rules could be applied on legal service, by focusing on how to add value to a professional buyer and to price for the delivered service based on the circumstances.

David Fitch, was recently appointed Director of KM at Latham & Watkins, after several years as KM Director at Simmons & Simmons, and previously Head of KM Systems and Projects at Freshfields Bruckhaus Deringer. David is the first Director of KM at Latham & Watkins, hired as the firm looks to further develop and embed its KM efforts. The firm is now focusing on KM as one of the strategies of responding to the more for less-challenge. David stressed that the economics of KM are more important than ever before, and that an investment in KM must deliver measurable process efficiencies that support the firm to price work in different ways. Alongside that, KM continues to be used to directly support and add value to client relationships - both aspects important as rationale for investing in a KM program. David indicated the importance of developing and communicating a clearly articulated vision for KM that is understood by all at the firm. Developing a framework was said to be helpful, de-constructing the different layers of the KM service from current awareness, precedent management, through to drafting of higher value know-how assets like standard forms and practice notes. David contrasted the Swedish client survey results from Regi, with those of the recent US CLO survey, noting a great similarity in feedback. Clients want their advisers to be actively looking at strategies to bring the cost of service delivery down and are expecting their legal providers to have in-depth expertise of their business and market sector. As a summary of the need to respond, David quoted Rose Battaglia, COO for Legal & Compliance at Deutsche Bank in New York: "Those law firms that have better processes for managing workflow and have standardized templates for documents, for example, will be able to rise above the firms resistant to change. These firms will be able to offer a more competitive price and not need to compromise quality."

Pictures, presentation slides and further information

Presentation slides from the speakers' presentations as well as additional reference material can be found at VQ Forum presentations. For more pictures from the day, please see VQ Forum 2012 Pictures.

For more information about Regi's Law Firm of the Year awards, please see Årets Advokatbyrå.

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