Change the game, or miss your turn

There is no doubt that the legal industry is facing unprecedented and rapid change.

A new era of practice, enabled by technology and globalisation, will irreversibly impact legal service delivery and business models.

However, many firms are in a state of inertia, too focused on the day-to-day humdrum to see the advancing peril which will significantly impact those not prepared to meet the future head on.

While the changes in our industry will not be heralded with a ‘big bang’, they will nevertheless be characterised by a not-so-slow creep that will affect the undiscerning practitioner in the following ways:

• continual decline in overall net profitability
• decreasing profit margins on traditional legal products
• gradual loss of clients to more sophisticated competitors
• widening of competitors, no longer limited by geographic location
• continual downward pressure on fees
• loss of key staff to more sophisticated and flexible offerings.

Like any change, there will be three types of industry players:

1. The game changers – These are the firms which are reading the warning signs and have gone out to meet the new era head on. You already know which firms these are. They are the ones you read about virtualising, outsourcing, creating new legal products, introducing fixed fees, going paperless, developing workflows and new ways of interacting with their clients. There will be more game changers over time and there is an abundance of opportunity for them. These firms have the greatest chance of success and longevity.
2. The late bloomers – These firms will eventually see the light and adapt to the new era. They will follow the game changers and mimic the advances they make. They will be survivors, albeit a little bruised around the edges.
3. The diehard traditionalists – These firms will sit back and let their future be dominated by others. Unfortunately there is not much that can be done to help our traditionalists. Their practices will decline as the new era of legal practice gathers pace.

Which type of industry player will your firm be? The answer to this lies in the skillset of your leader – whether or not your leader is an influential visionary prepared to drive change. If your firm is being led by a traditionalist, it is likely that there will be tough times ahead, as considerable foresight and a willingness to try new ways of delivering legal services is becoming a prerequisite for continued success.

If, indeed, you are lucky enough to have an influential visionary in your midst, then you are in a great position to be a game changer, but to be successful you will also need to use two critical business tools– strategy and project management.

The vast majority of legal firms do not have ‘active’ business strategies. It is of no use having the strategy safely tucked into the managing partner’s bottom drawer, never to see the light of day.

Strategy is often confused with technology purchase or development, but in actual terms technology is merely an enabler for the overall goals of the business. The trick to strategy is to create a vision of what is possible by daring to be different, gaining a competitive edge or challenging the status quo. The strategy should then clearly state how you will achieve your vision.

Good strategies will consider the following aspects:

services that will be provided

• Game-changing firms will consider social, political and economic trends, developing new innovative services in turn. They will ensure that they are only offering services that are profitable and that there is a clear need in the marketplace for these.

how services will be provided

• Legal service provision is heading toward highly automated, virtualised workflows. Consumers of legal services are becoming more discerning and demanding. As the industry becomes more sophisticated, so too will the level of choice offered to consumers.

how clients will be communicated with

• The traditional model of clients and lawyers phoning each other and meeting at the lawyer’s expensive offices is being threatened. Tech-savvy consumers want immediate answers to their questions, on a 24/7 basis, and via their device of choice.

what people resources are needed and how they are engaged

• Will you join the trend of legal process outsourcing, either overseas or in Australia, or will your drive you own bus? Futurists predict that workplaces of the future will need to be flexible and agile – full-time workers will not dominate the workforce.

where people work

• Will you continue to commit to expensive fitouts in premium locations, or will your people work remotely or on client premises?

when people work

• Will you require your workforce to do the old-style nine to five, or will you give them flexibility as to when they work, but based on service standard levels?

how services are delivered

• Will you continue with paper files, silo-driven manual work, or will you invest in workflow systems and standardised business processes to ensure that you deliver high-quality services at least cost?

ensuring services are cost-effective

• Cost-effectiveness is about delivering the right service for the lowest cost. The most significant costs in a legal firm tend to be tenancy and people. Game changers don’t have expensive offices and they use low-cost labour alternatives, for example, outsourcing or leverage. Over time this will mean that disruptors will place significant downward pressure on legal fees.

billing legal services

• Will you join the industry trend and convert to fixed fees? Will you do away with timesheets? If so, how will you judge fee earner and product profitability?

branding your firm

• What type of firm will you be – traditional, tech-savvy, lifestyle-oriented, premium, specialist or low-cost?

selling your services

• Who will you sell to? What demographic will you market to, how you will market and what geographic areas will you market to? Virtualisation and improvements in digital communication mean that you can widen your marketing, but it also means that you will have many new competitors to contend with.

Once you have formalised your strategy, make sure that you actually implement it. Some firms pay considerable amounts of money for consultants to develop strategies for them, but no one in the firm takes responsibility for driving the implementation of the strategy.

To be successful, strategies need to be broken down into a series of projects. Then the projects need to be prioritised and delegated to a responsible project manager. The board should ensure that there are clear deadlines and measurable key performance indicators in place for each project, reviewing the progress of the projects at board meetings. A board sponsor should also be appointed to champion each project at board level.

Being a game changer means creating an entrepreneurial vision and then systematically building the vision, step by step. In short, it is tedious work, but very worthwhile for those willing to take the plunge.

(This article was originally published in Proctor in March 2016.)