Nearly a quarter of a century ago I began on the circuitous path that is my career with a few jobs working for the big accountancy firm KPMG. Back then big accountancy firms were big accountancy firms, but they were beginning their mutation into what they have become today – multidisciplinary professional services providers.
Over that same period, big law firms have remained big law firms.
As I reflect back on a six-month stint working in the legal sector, I’m increasingly coming to the conclusion that understanding the reasons why accountants diversified and lawyers didn’t is key to understanding the challenges that law firms have ahead of them as the world of digital (whatever that means) starts to disrupt the profession.
I think primarily much of the advantage that the accountants had in their ability to diversify is merely circumstantial: if your primary purchaser at your client is the Finance Director, you have a soft route in to cross-sell services. Finance people are really good at stopping others in their businesses from wasting money, but when it comes to their own domain they can be remarkably profligate (witness the trillions of dollars spent on ERP systems over the years…).
But there is something about accountancy that is inherently tied to business and commerce that means that that profession is “within”, where law is something that predates the mercantile and industrial world by centuries. Law is something that exists outside of business in a way that accounting does not. And as a result the profession focuses on the delivery of law possibly more than on the delivery of a valuable business service.
Whilst General Counsel and Chief Legal Officers may have swanky offices and a big paycheck to boot, they’re not people in positions of great power or influence in many organisations. They are a necessary expense for many companies, not a source of strategic or competitive advantage. That in turn can make the value proposition for a law firm hard to express (other than one of value equating to cost). Law (or at least, legal advice), whisper it, is a commodity. Commodification of services? Hmm. This sounds familiar.
The legal industry is also, at its heart, an information business. And in an era where the distribution of information has essentially become free, maintaining closed, expensive access to privileged information is challenging to say the least – just ask any journalist.
I think that we are on the cusp of significant change in the legal industry. Whilst it is probably facile to say that something like Uber will do to lawyers what it is doing to taxi drivers, change will be much more significant than offering opportunity for business process streamlining through the replacement of paper, which strikes me is where many in the legal profession currently think it’s at.
Services will be commoditized, and margins slashes as a result. Fixed price domestic conveyancing, now deregulated, is a early sign of things to come. In a commodity market, established players will struggle to compete with new entrants who focus on doing one thing and one thing well; witness the way that Amazon have commoditized compute power and stolen a march on the IBMs, Oracles, Microsofts and SAPs of the world. This is classic Innovators Dilemma territory.
But I also have a hunch that the broader things at play will reduce the need for lawyers; Creative Commons is a case in point. In the world of the Internet, stopping people from copying content is a futile task. Creative Commons is a new IP framework that acknowledges that, and diminishes the needs for IP lawyers at the same time. Blockchain has, amongst other things, the potential to do the same for contracts. You won’t need a lawyer to assign ownership on a blockchain registry in the way that they do constructing contracts today.
Lawyers and law firms aren’t going to disappear. But those that will be successful will be those that adapt how they operate to reflect the new realities, rather than those that merely try to streamline their current mode of operation. An example from another industry this week illustrated this for me perfectly: I had a conversation with a book publisher earlier this week about The Book, and the most contentious moments were dissatisfaction with my working title because it wasn’t SEO or search engine friendly. Those were conversations impossible to have 20 years ago when I worked at a book publisher.
Which brings me back to my original point – and a possible word of caution for the industry. Uncertainty rules these days, whether through the emergence of as yet unknown technologies, or the ongoing madness of our country’s departure from the EU, or a myriad other factors. And it seems that the sort of person who becomes a lawyer isn’t necessarily well placed to deal with uncertainty. Well, at least in comparison to other professions. It’s those pesky accountants again…