State of the legal market
A publication to look forward to each year is the Georgetown Law “2019 Report on the State of the Legal Market”, edited by Thomson Reuters (TR).
Why? Well, even though this is a report focussing on the state of the American legal market, there are lots of parallels to be drawn for the European market.
Let’s check the main findings together:
- The report suggests that there was an overall modest increase in demand for business law firm services.
- This is mainly driven by the top 50 Am law firms.
- Hence, it shows an increasing segmentation of the supplier market for legal services. Big brands vs. smaller brands.
- It also shows a more fragmented market (enter the new law service providers – process and technology driven)
- And finally, there is the increasingly tense war for talent. Finding (good) associates (and retaining them) has become a lot harder.
Recognise any of these pressures?
Now, link these findings to the 2018 TR report on the State of Legal technology main findings:
- Up to 66% of General Counsels would like to see increased value from their law firms.
- They want their firms to be partners in work, not vendors or suppliers of services.
- No less than 74% of General Counsels like to see their law firms charge less.
- Firms that invest in innovative technologies and promote workflow and efficiency improvements, see a clear positive impact on their bottom line.
So, as a law firm, you should invest in technology and charge less. Is that desirable or even possible?
What should you do?.
There is a hidden contradiction in all of this. In 2015, I already explained this contradiction in my paper labelled, “The Legal disruption dilemma”.
“The leveraged business model is inherently contradictory with the increasing market demand of more-for-less.
Put differently, when you introduce efficiency into a normal company environment, you reduce cost and thereby hopefully also increase your margin. When you introduce efficiency into a law firm leveraged business model, you reduce revenue. Understanding this dilemma is important. If you wish to change the service delivery model, you need to first address the underlying business model. If this cannot be done from within the existing structure, maybe then you need to look at setting up hedging structures.”
If you only focus on the billable hour, you will lose in the long run. Companies expect you to be flexible on how you charge for your services but more importantly, they are interested in how you can help them become more efficient and cost effective. Just charging less, is not an option. Every conversation I have had with General Counsel over the past few years always revolved around the same mantra: be more time and cost effective and work with us, not for us.
Real growth on the revenue side of law firms will need to come from business and service innovation. It cannot be sustained by recurring (realized) rate increases.
Service innovation is key.
At Legal Studio, we took a step back, before starting to digitalize our services, step by step. Actively working together with law firms and clients in over 40 countries, we are providing a different value proposition, which is now taking a foothold.
Repetitive volume in basic corporate work at fixed rates replaces maximisation of hours per instruction. That new business model, allows for service innovation, i.e. how you work together with your client.
Once that idea takes roots, you can start scaling up through smart technology adoption.
That volume in turn, drives revenue growth and further investment into efficiency and cost effectiveness.
Our platform connects different stakeholders from the client side (legal department, finance department, treasury, directors) via operational workflows to legal experts, simplifying work, reducing wastage of time.
If you are interested in learning more, get in touch here.