Thursday, September 4, 2014
Plexus, a NewLaw law firm based in Australia, has just released a new legal product that purports to apply artificial intelligence to a relatively common, discrete legal issue -- detemining whether a proposed trade promotion (advertisement in US parlance) is in compliance with applicable law.
In the video below, Plexus Managing Partner Andrew Mellett (who is a MBA, not a lawyer), observes that this type of legal work would ordinarily take four to six weeks to complete and cost several thousand dollars. Mellett claims that the Plexus product can provide "a legal solution in 10 minutes" at 20% to 30% of the cost of the traditional consultative method -- no lawyer required, albeit Plexus lawyers were the indispensible architects for the underlying code.
From the video, it is unclear whether the innovation is an expert system -- akin to what Neota Logic or KM Standards are creating -- or artificial intelligence (AI) in the spirit of machine learning used in some of the best predictive coding algorithms or IBM's Watson applied to legal problems. Back when Richard Susskind published his PhD dissertation in 1987, Expert Systems In Law, an expert system was viewed as artificial intelligence--there was no terminology to speak of because the application of technology to law was embryonic. Now we are well past birth, as dozen of companies in the legal industry are in the toolmaking business, some living on venture or angel funding and others turning a handsome profit.
My best guess is that Plexus's new innovation is an expert system. But frankly, the distinction does not matter very much because both expert systems and AI as applied to law are entering early toddler stage. Of course, that suggests that those of us now working in the legal field will soon be grappling with the growth spurt of legal tech adolescence. For law and technology, it's Detroit circa 1905.
Sunday, August 24, 2014
Nashville, TN. It is time to put down the broad brush used to paint BigLaw as inefficient and out of touch. At least for me, that is the big takeaway from the 2014 International Legal Technology Association (ILTA) conference, which took place this past week at the Gaylord Opryland Hotel in Nashville and included nearly 2,000 lawyers, administrators, staff, and vendors from around the world.
My takeaway is based on what I saw during the presentation session for the ILTA Most Innovative Law Firm Award. The three finalists all qualify as big: Bryan Cave (985 lawyers), Seyfarth Shaw (779 lawyers), and Littler Mendelson (1002 lawyers). Presenters from each firm had 15 minutes to share their innovations followed by 5 minutes of Q&A. Afterwards, ILTA members in attendance casted ballots for first, second, and third place.
Kudos to Bryan Cave, Seyfarth Shaw, and Littler Mendelson for publicly sharing their innovations, as it demonstrates a commitment to the broader legal profession.
In this post, I will describe the salient points of each innovation. I will err on the side of detail because, when it comes to innovation in the legal space, there is a short supply of “guts of the operations” commentary. I will then offer some macro-level observations. As it turns out, BigLaw has on balance a surprisingly good hand to play. Many will thrive, but at the expense of taking market share from the rest.
Presenter: John Alber, Strategic Technology Partner
Bryan Cave has developed an ingenious and highly efficient way to educate its lawyers on the economics of its business. Prior to the presentation, I was familiar with the firm’s investment in a rigorous cost accounting system to guide the firm’s strategy and operations.
Yet, to get the full benefit out of such a system, the understanding needs to filter down to the individual lawyer-timekeeper level so that each lawyer-timekeeper can use the superior data to allocate time and effort in ways that strengthen the enterprise. Even in the year 2014, many successful and skilled BigLaw lawyers confuse revenues with profit. And the confusion is understandable because portable books of business, which tend to be measured in terms of revenue, drive the valuation of lateral partners. See Henderson & Zorn, Of Partners and Peacocks, Am. Law., February 2014.
The core Bryan Cave innovation is a simple dashboard that tracks a variety of statistics at the lawyer, practice group, and firm level. What is most striking about the Bryan Cave initiative is the sensitivity shown to the large percentage of lawyers who are not comfortable processing numbers (“arithmophobia” was the term used in the presentation). The Bryan Cave innovation team dealt with this constraint in two ways.
1. The Octagon. The Octagon is a data visualization technique that communicates eight key metrics in an octagon-shaped graphic. Wondering what the term "data visualization" means? It's finding graphical ways to communicate complex multivariable data in a format that requires the end user, such as a lawyer, to have very little technical training. The Octagon is a textbook example. It uses colors and distance from the center of the graphic to convey essential information related to origination, client relationships, matter management, days to bill, days to collect, hours billed, leverage, and profit margins. (There may be other octagons containing other metrics--the one we were shown appeared to be geared toward partners.)
Each lawyer each month gets a new updated Octagon; and that graphic communicates, through its shape, the lawyer’s relative contributions to the firm. Specifically, there are distinctive patterns well known within the firm that tend to signal rainmaker, service partner, project manager, technical specialist, or some blend thereof. The features of the Octagon also communicate how well a lawyer is performing in his or her various roles relative to his or her peers. So, on a monthly basis, self-image confronts hard numbers.
This type of transparency is bound to have a profound effect on behavior. (During another ILTA session I heard, from another Bryan Cave presenter, that since the introduction of the Octagon a couple of years ago, the average days to collect has fallen from 60 to 44.)
2. The Rosetta. Some lawyers are bound to prefer a story rather than a picture. For these lawyers, the firm has created a narrative, referred to as the Rosetta, that translates the numbers into a diagnostic story of strengths, weaknesses, and, most importantly, specific prescriptive advice on how to improve.
But there is an interesting catch—the stories are all written with a computer algorithm. How is this possible? It’s a technology pioneered by a company called Narrative Science. Note that computers that are fed nothing but a traditional baseball scoring sheet now routinely write sports stories that summarize the game for the local sports page. This narrative summary accompanying the Octagon removes any lingering ambiguity regarding what the diagram means. Further, all report generation, including practice-group level Octagon and Rosetta reports, has been entirely automated.
I am told that the Octagon and Rosetta programs can handle, and properly incentivize, work that is done on either a billable or alternative fee arrangement basis. If this is true, Bryan Cave has an innovation designed for the legal market of the future.
Some readers may be turned off that the Bryan Cave innovation may seem, on the surface anyway, entirely focused on law firm financial performance. I am not. To my mind, this type of technology is valuable for communicating the fundamentals of the business. This reduces the myths and false narratives that routinely take hold in data-poor environments. This innovation is also timely because it is getting harder to give clients superior value while also delivering a strong return to the firm's owners -- the best of whom could lateral to another firm tomorrow.
The challenge of every BigLaw firm is getting all of the firm's stakeholders to row in the same direction. The combination of the Dashboard, Octagon, and Rosetta is a breakthrough in lawyer communication and, by extension, change management. Bryan Cave attorneys have the information they need to both build their practices while also advancing the broader goals of the enterprise.
Seyfarth Shaw’s innovation is the creation of a true Research & Development Department staffed by lawyers, project managers, technologists, and software developers. The charge of Seyfarth’s R&D Department is to build solutions in advance of perceived client needs. As the presenters mentioned, “we are not doing this because our clients are asking for these solutions; we are doing this because our clients will ask.”
Sunday, May 4, 2014
The New York Times has is publishing a new series of short documentaries films called Op-Docs. The Op-Doc below is a dramatization of a deposition, albeit the script is a verbatim rendition of an actual deposition transcript. The plaintiff's lawyer is trying to establish whether the witness's office (which happens to be the Recorder for Cuyahoga County Court of Common Pleas) has a photocopy machine. Simple question, right?
The video is quite funny, but suffice it to say the verbatim transcript does not cast litigation in a favorable light. The fact that the Ohio judiciary is the defendant is even more troubling. Mediums like a documentary on the Times website seems like a promising change catalyst.
Sunday, March 30, 2014
Readers might enjoy my forthcoming essay, Letting Go of Old Ideas, 112 Mich L Rev _ (2014), which reviews two important new books on the legal profession, Steven Harper's The Lawyer Bubble and Richard Susskind's Tomorrow's Lawyers. If you want to know why the legal profession circa 2014 is such a rich topic for study, here is a useful clue: Harper and Susskind both critically examine this topic yet come to dramatically different conclusions that neither overlap nor conflict with one another. The complexities run that deep.
Thanks to his prolific commentary in the legal press, Harper's critique is familar to many readers. He is angry with the elite legal establishment -- large law firms and the legal professoriate -- for succumbing to "a culture of short-termism" that focuses obsessively on the AmLaw and US News league tables. As someone in the target group, I confess that I don't remember making a conscious decision to sell out. Yet, here is the problem. When all the facts in the public domain are arrayed by a skilled trial lawyer, the question can be asked, "why didn't you stand up to this nonsense?" This is a classic example of diffusion of responsibility. When we are all equally responsible for upholding good behavior, no one is responsible. Collective denial sets it, and the profession gets a black eye.
Yet, to my mind, there is an avenue for at least partial redemption -- reading Richard Susskind's slender 165 page book. In my Counterpoint essay, I lay out the mounting evidence that the legal industry is in the early stages of a sea change. The best theoretical treatment of this sea change is Susskind's Tomorrow's Lawyers. Yet, I am amazed at how many lawyers and law professors know essentially nothing about Susskind's work. Tomorrow's Lawyers was written for law students. It is a short, accessible book. After reading the first two paragraphs, I doubt anyone with a long-term time horizon in the legal industry will put it down without finishing it:
This book is a short introduction to the future for young and aspiring lawyers.
Tomorrow’s legal world, as predicted and described here, bears little resemblance to that of the past. Legal Institutions and lawyers are at a crossroads, I claim, and are poised to change more radically over the next two decades than they have over the last two centuries. If you are a young lawyer, this revolution will happen on your watch. (p. xiii).
If you have not read Tomorrow's Lawyers, you may be setting yourself for a Kodak moment.
March 30, 2014 in Blog posts worth reading, Current events, Important research, New and Noteworthy, Scholarship on legal education, Scholarship on the legal profession, Structural change | Permalink | Comments (2)
Monday, March 17, 2014
There is a line in Professor Reich-Graefe's recent essay, Keep Calm and Carry On, 27 Geo. J. Legal Ethics 55 (2014), that is attracting a lot of interest among lawyers, law students, and legal academics:
[R]ecent law school graduates and current and future law students are standing at the threshold of the most robust legal market that ever existed in this country—a legal market which will grow, exist for, and coincide with, their entire professional career.
This hopeful prediction is based on various trendlines, such as impending lawyer retirements, a massive intergenerational transfer of wealth that will take place over the coming decades, continued population growth, and the growing complexity of law and legal regulation.
Although I am bullish on future growth and dynamism in the legal industry, and I don't dispute the accuracy or relevance of any of the trendlines cited by Reich-Graefe, I think his primary prescriptive advice -- in essence, our problems will be cured with the passage of time -- is naive and potentially dangerous to those who follow it.
The Artisan Lawyer Cannot Keep Up
The primary defect in Reich-Graefe's analysis is that it is a one-sided argument that stacks up all impending positive trendlines without taking into account the substantial evidence that the artisan model of lawyering -- one-to-one consultative legal services that are tailored to the needs of individual clients -- is breaking down as a viable service delivery model.
Lawyers serve two principal constituencies--individuals and organizations. This is the Heinz-Laumann "Two-Hemisphere" theory that emerged from the Chicago Lawyers I and II studies. See Heinz et al, Urban Lawyers (2005). The breakdown in the artisan model can be observed in both hemispheres.
- People. Public defenders are understaffed, legal aid is overwhelmed, and courts are glutted with pro se litigants. Remarkably, at the same time, record numbers of law school graduates are either unemployed or underemployed. Why? Because most poor and middle-class Americans cannot afford to buy several hours of a lawyer's time to solve their legal problems.
- Organizations. The most affluent organizations, multinational corporations, are also balking at the price of legal services. As a result, foreign labor, technology, process, or some combination thereof has become a replacement for relatively expensive and unskilled junior lawyers.
The primary driver of this structural shift is the relentless growth in legal complexity. This increase in complexity arises from many sources, including globalization, technology, digitally stored information, and the sheer size and scope of multinational companies.
But here is a crucial point: the complexity itself is not new, only its relative magnitude. A century ago, as the modern industrial and administrative state was beginning to take shape, lawyers responded by organizing themselves into law firms. The advent of law firms enabled lawyers to specialize and thus more cost-effectively tackle the more complex legal problems. Further, the diffusion of the partner-associate training model (sometimes referred to as the Cravath system) enabled firms to create more specialized human capital, which put them in an ideal position to benefit from the massive surge in demand for legal services that occurred throughout the 20th century. See Henderson, Three Generations of Lawyers: Generalists, Specialists, Project Managers, 70 Maryland L Rev 373 (2011).
The legal industry is at the point where it is no longer cost effective to deal with this growing complexity with ever larger armies of artisan-trained lawyers. The key phrase here is cost effective. Law firms are ready and willing to do the work. But increasingly, clients are looking for credible substitutes on both the cost and quality fronts. Think car versus carriage, furnace versus chimney sweep, municipal water system versus a well. A similar paradigm shift is now gaining momentum in law.
The New Legal Economy
I have generated the graph below as a way to show the relationship between economic growth, which is the engine of U.S. and world economies, and the legal complexity that accompanies it.
1. Rise of the law firm. From the early twentieth century to the early 1980s, the increasing complexity of law could be capability handled by additional law firm growth and specialization. Hire more junior lawyers, promote the best ones partner, lease more office space, repeat. The complexity line has a clear bend it in. But for most lawyers, the change is/was very gradual and feels/felt like a simple linear progression. Hence, there was little urgency about the need for new methods of production.
2. Higher law firm profits. Over the last few decades, the complexity of law outpaced overall economic growth. However, because the change was gradual, law firms, particularly those with brand names, enjoyed enough market power to perennially increase billing rates without significantly improving service offerings. Corporate clients paid because the economic benefits of the legal work outweighed the higher costs. Lower and middle class individuals, in contrast, bought fewer legal services because they could not afford them. But as a profession, we barely noticed, primarily because the corporate market was booming. See Henderson, Letting Go of Old Ideas, 114 Mich L Rev 101 (2014).
3. Search for substitutes. Laws firms are feeling discomfort these days because the old formula -- hire, promote, lease more space, increase rates, repeat -- is no longer working. This is because clients are increasingly open to alternative methods of solving legal problems, and the higher profits of the last few decades have attracted new entrants. These alternatives are some combination of better, faster, and cheaper. But what they all share in common is a greater reliance on technology, process, and data, which are all modes of problemsolving that are not within the training or tradition of lawyers or legal educators. So the way forward is profoundly interdisciplinary, requiring collaboration with information technologists, systems engineers, project managers, data analysts, and experts in marketing and finance.
Why is this framework potentially difficult for many lawyers, law firms, and legal educators to accept? Probably because it requires us to cope with uncertainties related to income and status. This reluctance to accept an unpleasant message creates an appetite for analyses that say "keep calm and carry on." This is arguably good advice to the British citizenry headed into war (the origin of the saying) but bad advice to members of a legal guild who need to adapt to changing economic conditions.
There is a tremendous silver lining in this analysis. Law is a profoundly critical component of the globalized, interconnected, and highly regulated world we are entering. Lawyers, law firms, and legal educators who adapt to these changing conditions are going to be in high demand and will likely prosper economically. Further, at an institutional level, there is also the potential for new hierarchies to emerge that will rival and eventually supplant the old guard.
One of the virtues of lawyers is that we demand examples before we believe something to be true. This skepticism has benefited many a client. A good example of the emerging legal economy is the Available Positions webpage for kCura, which is a software company that focuses exclusively on the legal industry.
The current legal job market is terrible, right? Perhaps for entry-level artisan-trained lawyers. But at kCura, business is booming. Founded in 2001, the company now employs over 370+ workers and has openings for over 40 full-time professional positions, the majority of which are in Chicago at the company's LaSalle Street headquarters. Very few of these jobs require a law degree -- yet the output of the company enables lawyers to do their work faster and more accurately.
What are the jobs?
- API Technical Writer [API = Application Programming Interface]
- Big Data Architect - Software Engineering
- Business Analyst
- Enterprise Account Manager
- Group Product Manager
- Litigation Support Advice Analyst
- Manager - Software Engineering
- Marketing Associate
- Marketing Specialist -- Communications
- Marketing Specialist -- Corporate Communications and Social Media
- Product Manager -- Software and Applications Development
- QA Software Engineer -- Performance [QA = Quality Assurance]
- Scrum Team Coordinator [Scrum is a team-based software development methodology]
- Senior SalesForce Administrator
- Software Engineer (one in Chicago, another in Portland)
- Software Engineer (Front-End Developer) [Front-End = what the client sees]
- Software Engineer in Test [Test = finds and fixes software bugs]
- Technical Architect
- Technical Architect - Security
- VP of Product Development and Engineering
kCura operates exclusively within the legal industry, yet it has all the hallmarks of a great technology company. In the last few years it has racked up numerous awards based on the quality of its products, its stellar growth rate, and the workplace quality of life enjoyed by its employees.
That is just what is happening at kCura. There are many other companies positioning themselves to take advantage of the growth opportunities in legal, albeit none of them bear any resemblance to traditional law firms or legal employers.
In early February, I attended a meeting in New York City of LexRedux, which is comprised of entrepreneurs working in the legal start-up space. In a 2008 essay entitled "Legal Barriers to Innovation," Professor Gillian Hadfield queried, "Where are the 'garage guys' in law?" Well, we now know they exist. At LexRedux, roughly 100 people working in the legal tech start-up space were jammed into a large open room in SoHo as a small group of angel investors and venture capitalists fielded questions on a wide range of topics related to operations, sales, and venture funding.
According to Angel's List, there are as of this writing 434 companies identified as legal start-ups that have received outside capital. According to LexRedux founder Josh Kubicki, the legal sector took in $458M in start-up funding in 2013, up from essentially zero in 2008. See Kubicki, 2013 was a Big Year for Legal Startups; 2014 Could Be Bigger, Tech Cocktail, Feb 14, 2014.
The legal tech sector is starting to take shape. Why? Because the imperfections and inefficiencies inherent in the artisan model create a tremendous economic opportunity for new entrants. For a long period of time, many commentators believed that this type of entrepreneurial ferment would be impossible so long as Rule 5.4 was in place. But in recent years, it has become crystal clear that when it comes to organizational clients where the decisionmaker for the buyer is a licensed lawyer (likely accounting for over half of the U.S. legal economy) everything up until the courthouse door or the client counseling moment can be disaggregated into a legal input or legal product that can be provided by entities owned and controlled by nonlawyers. See Henderson, Is Axiom the Bellwether of Legal Disruption in the Legal Industry? Legal Whiteboard, Nov 13, 2013.
The Legal Ecosystem of the Future
In his most recent book, Tomorrow's Lawyers, Richard Susskind describes a dynamic legal economy that bares little resemblance to the legal economy of the past 200 years. In years past, it was easier to be skeptical of Susskind because his predictions seemed so, well, futuristic and abstract. But anyone paying close attention can see evidence of a new legal ecosystem beginning to take shape that very much fits the Susskind model.
Susskind's core framework is the movement of legal work along a five-part continuum, from bespoke to standardized to systematized to productized to commoditized. Lawyers are most confortable in the bespoke realm because it reflects our training and makes us indispensible to a resolution. Yet, the basic forces of capitalism pull the legal industry toward the commoditized end of the spectrum because the bespoke method of production is incapable of keeping up with the needs of a complex, interconnected, and highly regulated global economy.
According to Susskind, the sweet spot on the continuum is between systematized and productized, as this enables the legal solution provider to "make money while you sleep." The cost of remaining in this position (that is, to avoid commoditization) is continuous innovation. Suffice it to say, lawyers are unlikely to make the cut if they choose to hunker down in the artisan guild and eschew collaboration with other disciplines.
Below is a chart I have generated that attempts to summarize and describe the new legal ecosystem that is now taking shape [click-on to enlarge]. The y-axis is the Heinz-Laumann two-hemisphere framework. The x-axis is Susskind's five-part change continuum.
Those of us who are trained as lawyers and have worked in law firms will have mental frames of reference that are on the left side of the green zone. We tend to see things from the perspective of the artisan lawyer. That is our training and socialization, and many of us have prospered as members of the artisan guild.
Conversely, at the commoditized end of the continuum, businesses organized and financed by nonlawyers have entered the legal industry in order to tap into portion of the market that can no longer be cost-effectively serviced by licensed U.S. lawyers. Yet, like most businesses, they are seeking ways to climb the value chain and grow into higher margin work. For example, United Lex is one of the leading legal process outsourcers (LPOs). Although United Lex maintains a substantial workforce in India, they are investing heavily in process, data analytics, and U.S. onshore facilities. Why? Because they want to differientiate the company based on quality and overall value-add to clients, thus staving off competition from law firms or other LPOs.
In the green zone are several new clusters of companies:
- LeanLaw. This sector is comprised of BigLaw that is transforming itself through reliance on process and technology. Seyfarth Shaw has become the standard-bearer in this market niche, see What does a JD-Advantaged Job Look Like? A Job Posting for a "Legal Solutions Architect", Legal Whiteboard, Oct 15, 2013, though several other law firms have been moving under the radar to build similar capabilities.
- NewLaw. These are non-law firm legal service organizations that provide high-end services to highly sophisticated corporations. They also rely heavily on process, technology, and data. Their offerings are sometimes called "managed services." Novus Law, Axiom, Elevate, and Radiant Law are some of the leading companies in this space.
- TechLaw. These companies would not be confused with law firms. They are primarily tool makers. Their tools facilitate better, faster, or cheaper legal output. kCura, mentioned above, works primarily in the e-discovery space. Lex Machina provides analytic tools that inform the strategy and valuation of IP litigation cases. KM Standards, Neota Logic, and Exemplify provide tools and platforms that facilitate transactional practice. In the future, these companies may open the door to the standardization of a wide array of commercial transactions. And standardization drives down transaction costs and increases legal certainty -- all good from the client's perspective.
- PeopleLaw. These companies are using innovative business models to tap into the latent people hemisphere. Modria is a venture capital-financed online dispute resolution company with DNA that traces back to PayPal and the Harvard Negotiations Workshop. See Would You Bet on the Future of Online Dispute Resolution (ODR)? Legal Whiteboard, Oct 20, 2013. LegalForce is already an online tour de force in trademarks -- a service virtually every small business needs. The company is attempting to translate its brand loyalty in trademarks into to new consumer-friendly storefront experience. Its first store is in the heart of University Avenue in Palo Alto. LegalForce wants to be the virtual and physical portal that start-up entrepreneurs turn to when looking for legal advice.
When I write about the changes occurring in the legal marketplace, I worry whether the substance and methodology of U.S. legal education provides an excellent education for a legal world that is gradually fading away, and very little preparation for the highly interdisciplinary legal world that is coming into being.
Legal educators are fiduciaries to our students and institutions. It is our job to worry about them and for them and act accordingly. Surely, the minimum acceptable response to the facts at hand is unease and a willingness to engage in deliberation and planning. Although I agree we need to stay calm, I disagree that we need to carry on. The great law schools of the 21st century will be those that adapt and change to keep pace with the legal needs of the citizenry and broader society. And that task has barely begun.
March 17, 2014 in Blog posts worth reading, Current events, Data on legal education, Data on the profession, Innovations in law, Innovations in legal education, New and Noteworthy, Scholarship on legal education, Scholarship on the legal profession, Structural change | Permalink | Comments (16)
Wednesday, November 27, 2013
If you have the courage and curiosity to understand the breadth and depth of the changes taking shape in the legal market, then I would encourage you to use some of your Thanksgiving break to read "Recalculate the Future of Law," which is Insight Lab's interview with MSU Law Professor Dan Katz.
It is all-too-easy to believe that innovation occurs in the wake of a great idea, but that is not quite right. Innovation is also about timing and understanding how human institutions are held together and change and evolve. If the innovator has the benefit of timing and understands how human institutions actually work, an effective adoption strategy is possible.
Fortunately, for Dan Katz, all of these factors appear to be in alignment. Katz is acutely aware of his timing and the myriad of factors that enable innovation to take hold. He is also young (35 years old) and has the courage to place very large bets -- the largest bet being that he is not waiting to get tenure before starting his life's work. He is doing it now in his third year of teaching.
But to mind, there is some additional secret sauce. What makes Katz so disruptive is his 100% personal commitment to the growth and potential of his students. He is awaking the sleeping giant -- hope and a sense of purpose for young people. Specificially law students. If you are in his ReInvent Law Labratory, you see a different legal landscape with a whole lot more options. But to tap into that hope, Dan makes you do the work. You have to challenge yourself. And you have to shed the bullshit phobia over basic math. He is building a community of interest that has the potential to morph into a movement driven by young lawyers and law graduates. For more on Katz's unusual bio, see "This is just an education design problem," LWB, Sept 23, 2013.
The interviewer over at Insight Labs got pretty close to the full, uneditted Dan. If you want to learn about the underinvestment problem that is undermining BigLaw, the crucial role of start-ups in the emerging field of legal R&D, how the next generation of law students can do well and do good, or the real hazards of the $1 Million JD debate, give it a full read.
November 27, 2013 in Blog posts worth reading, Current events, Fun and Learning in the classroom, Innovations in law, Innovations in legal education, New and Noteworthy, Structural change | Permalink | Comments (2)
Sunday, November 24, 2013
That is the title of a panel at the Annual Georgetown Advanced E-Discovery Institute conference. In an article in Law Technology News, Monica Bay does a wonderful job summarizing what appears to have been a lively, thought-provoking discussion. I can't do better than Monica, but I so want to highlight some of quotes that really caught my eye:
[DC Federal Magistrate Judge] Facciola served as moderator, and threw the first question at Butterfield [partner at Hausfeld], who dove right into a discussion of the explosion of data creation, citing a laundry list of impressive facts, including that "every minute of every day Google receives two million queries ... 571 websites are created every minute ... and more than 200 million emails are sent every minute. We are communicating in ways that didn't exist 20 years ago," he said. ...
Facciola asked Butterfield if he was troubled by the outsourcing of e-discovery to nonlawyers and/or machines. "I do see the tension because lawyers must certify the work," Butterfield acknowledged. ...
Facciola then turned to [SDNY District Court Judge Shria] Scheindlin, who shifted the focus to the courts. "All cases are now e-discovery cases," she asserted. "Even the littlest cases have e-discovery, everyone has to know how to do it," she said. ...
Scheindlin said we are entering an era of a divide between the "technology haves and technology have-nots," and noted that small firms may not be able to afford the start-up costs that e-discovery requires. She reminded the audience that not every litigant can afford a lawyer. "Twenty-five percent of my cases are pro se," she said. ...
Facciola then posed the question of whether lawyers as a group welcome technology and change.
"I think the reality is that most lawyers are not innovators and are afraid of technology," offered Redgrave. "There is a reality that to have continued value, lawyers need to understand technology. ... "
Asked Facciola: "Is this 'Star Trek'?" Scheindlin jumped in: "Of course trials will change—the question is, will we have trials anymore?" Scheindlin noted that routine technology, such as GPS, cellphones, Facebook and other location tools are changing our daily reality to the point where it's increasingly easy to prove facts. "There are no conversations any more, it's emails and texts. We will know where folks are," she said. ... Technology is making it so we always know where people are; thus no need for alibi witnesses." ...
Finally, lawyers need to abandon the "gladiator" role that is imprinted in law school, the panelists asserted, taking strong pokes at the current status of law schools.
"Do I think legal education is keeping up [with technology and cooperation]? Absolutely not....
Scheindlin warned academia that they need to get with the reality. "I think the notion of a two-year law school is coming, with the third year clerking." But, she qualified, "I wouldn't be surprised if law schools turn around. The younger generation is more tech savvy than we are. Many lawyers are technophobic, but the next generation is growing up with technology."
That was quite a provocative exchange, and not by legal futurists, but judges and practicing lawyers presiding over cases in federal court.
- How Do Law Professors Learn About the Intersection of Law and Technology?, LWB, Dec. 29, 2012.
Saturday, November 23, 2013
Is it important to help law students understand the disruptions that are now occurring in the legal industry? Well, let me ask a more fundamental question. How can a law professor efficiently obtain better information on these complex and diffuse changes? None of us legal academics are experts in this area, and that's a problem in and of itself.
In the process of struggling with these questions, I decided to carve out 15% of the grade in my Corporations class for team-based profiles of NewLaw companies. Here is how I described the conundrum in my syllabus:
The legal industry is changing in dramatic ways, including the creation of new legal businesses that rely upon technology and process design to solve legal problems that have traditionally been handled by lawyers. These businesses are often financed and managed by nonlawyers, which some of you may find surprising. ...
Remarkably, very few practicing lawyers grasp the type of industry context described above ... Yet, the influx of financiers and technologists is likely going to have a dramatic effect on your future legal careers. These changes are extremely foreign to the substance of traditional legal education – we (the legal professoriate) just don’t understand the breadth and depth of the changes that are now occurring. Rather than sweep this uncomfortable fact under the rug, let’s do what great lawyers do with their clients. Let’s learn about the business and the industry so that we understand the context. Armed with this information, we can make better decisions with regard to our own careers.
Two months ago, I circulated the full assignment to the class, divided the class into teams, and gave students two weeks to select a company. The only restrictions were no duplicates, so first-come first-serve, and the company had to be a non-law firm business operating, partially or entirely, in the legal industry. (BTW, JB Ruhl's Law Practice 2050 course at Vanderbilt Law tackles this topic head-on.)
Students made their presentations this past Monday evening (Nov. 18) in Indiana Law's Moot Courtroom. It was a marathon session that ran nearly four hours. Because of the novel content, several practicing lawyers showed up to see the presentations. The following companies where profiled:
- AdvanceLaw. Privately held company that operates a closed community of legal departments who share information on law firms and individual lawyers in order obtain better quality at a lower cost. Discussed on the LWB here.
- Axiom Law. Venture and private equity-based company that helps legal departments more efficiently manage and source their legal needs. Discussed on the LWB here.
- Black Hills IP. Privately held onshoring company that does highly specialized IP-related paralegal work -- their internal motto is "innovate and automate." Founders were involved in an earlier LPO that sold to CPA Global a few year ago. Discussed on the LWB here.
- Datacert. An e-billing platform for legal departments that has added on a large overlay of data analytics so legal departments can more aggressively benchmark and monitor their expenses to outside counsel.
- Ernst & Young. Big Four accounting firm that hires an enormous number of law grads each year for its tax and consulting practices. Very much set up for the tastes and preferences of Millenial professionals including training, work space, and work-life balance.
- Exemplify. Start-up company founded by Professor Robert Anderson at Pepperdine Law and his student. Used super computer technology and inductive computational linguistics to identify the market standard language in a myriad of forms found in the SEC Edgar database. Will speed up negotiations on what is "market"; setting stage for eventual market convergence on standards.
- Huron Consulting. Publicly held consulting firm that formed out of the ashes of Arthur Anderson's post-Enron collapse. Although a business consulting organization, a surprisingly large part of their business is e-discovery through attorneys in U.S. and India. This group trudged through the company's 10Ks, which was a great educational experiemce for them. Discussed on the LWB here.
- Integreon. Venture- and private equity-based LPO that has tried to distinguish itself with its global platform and language capabilities. The company recently cut a deal with Microsoft to handle a large tranche of their patent portfolio work.
- KM Standards. Privately held legal knowledge management company that is trying to deconstruct the logic of contracts into standardized terms to enable autonmation and reduce ambiguity (and thus litigation). Potentially very disruptive.
- LegalForce. Privately held company hoping to recapture the lost consumer and start-up market through a novel storefront strategy. Financed at least initially through LegalForce's enormously successful online trademark practice run by the company's founder, Raj Abhjanker. More trademarks granted by PTO than any other law firm.
- Manzama. Privately held company in Bend, Oregon that scrapes the Internet with machine learning technology to filter business intelligence for law firms and other professional service firms track. Enormously scalable. Daily results presented through a dashboard technology.
- Modria. Online dispute resolution system that enables businesses and governments (mostly municipalities) to avoid costly, in-person legal proceedings to resolve a steady stream of similar disputes that are part of running a business or government. Discussed on the LWB here.
- Neota Logic. Privately held company founded by former Davis Polk partner and CIO Michael Mills. The company specializes in the creation of expert systems that can improve the quality and efficiency of many transactional and compliance related activities.
- Pangea3. LPO with substantial operations in India. Initially back by venture capital in 2004 but subsequently sold to Thomas Reuters in 2010. Employs roughly 1,000 lawyers in the US and India. Discussed on the LWB here.
- Recommind. Privately held company that specialized in predictive coding for use in document review and e-discovery. Founders were graduate students in Artificial Intelligence programs at Stanford and UC Berkeley in early 1990s. Discussed on the LWB here.
- Stewart Richardson. A privately held Indianapolis-based deposition services company that has gradually and successfully expanded into a broader array of law firm support services. Very focused on technology to make the job of clients easier.
The assignment was an experiment, albeit one that worked very well. Both students and the visiting lawyers reported surprise at the depth and breadth of the innovations taking holding the legal market.
Although some of the innovations where clearly eroding the need for traditional legal service jobs, the profiles also revealed the tremendous opportunities for those willing to stretch into the law and technology space. Many students commented that the evening drove home the point that they need to proactively obtain new skills and knowledge. Why? Because the emerging market has no secure place for the complacent or mediocre. Better for them to discover it in the course of an assignment than for me to say and have it fall on deaf ears.
Many thanks to the profiled company, who exhibited enormous generosity in helping my students complete this assignment. Remarkably, most groups had the benefit of a lengthy conference call with senior leadership. My only regret is that more practicing lawyers did not attend. My students, who have have 1L team and presentation experience, brought their "A" game. I will fix that in the next class, as there is no shortage of NewLaw companies to be profiled.
Sunday, November 17, 2013
Two years ago, when all other large law firms were slashing expenses to prop up partner profits, Milbank Tweed went in the opposite direction and invested heavily in an executive education program for midlevel associates. The program, called Milbank@Harvard, required all 4th, 5th, 6th, and 7th year associates to spend one week per year at Harvard University taking course work from HLS and HBS professors along with Milbank partners. At the time, I wrote an in-depth analysis for the Am Law Daily. See Milbank's Big Bet, May 11, 2011.
In the video below, Bloomberg Law provides an update on the program via an interview with David Wolfson, the Milbank partner who oversees the firm's professional development programs. Here are three takeaways from Lee Pacchia's interview with Wolfson:
- Two years in and its a big success. Law firms are innovating these days, but they don't always advertise what they are doing lest their failures become public or their successes get copied. Why is Milbank talking about this very expensive program? My best guess is that the firm's bet is paying off. Thus, the firm is in an ideal position to use the program to differentiate itself in the minds of clients and prospective recruits, including laterals. In short, this is the branding component of a longer term strategy. To get his payoff, Milbank started three years ago and invested--back of the envelope calculation--$20 million, which amounts to $150,000 to $200,000 of forgone profits per equity partner.
- The skills gaps are primarily in business and leadership. Wilson criticizes law schools for not doing more in this area, particularly in the collaboration and leadership areas. But he also acknowledges that the biggest part of hard skills gap, financial literacy and acumen, requires learning in context. At year four, the associates know what they don't know. The original Cravath System was a lawyer development machine. So is Milbank@Harvard, albeit the specifications have been updated.
- The idea for Milbank@Harvard came from a German partner. One of the many fruits of globalization is getting an outsider perspective on old problems. Perhaps U.S. law firm partners are too embedded in the year-to-year AmLaw league tables to see and appreciate the power of a longer-term strategy based on aligning the needs of clients, partners, and associates. That said, the American brain trust at Milbank was smart enough to listen their German partner.
In this book, Tomorrow's Lawyers, Richard Susskind predicts that the market for high-end bespoke legal services will consolidate to "20 global elites." That said, 50 to 100 US and UK firms are hoping to make that cut. This gradual winnowing process is what is causing all the groaning these days from millionaire BigLaw partners.
Milbank is one of the few firms, however, that is pursuing a unique, public strategy: (a) attract, develop, and retain mid-level associates who know they need business training, (b) impress clients through improved value in the mid-level ranks, and (c) as I noted in the original Milbank's Big Bet essay, make Milbank the preferred recruitng grounds for in-house legal talent.
To my mind, that is a compelling and likely winning strategy.
Sunday, November 10, 2013
I think the answer is yes. For the last several years, I have been an avid watcher of Axiom's growth, but this article in Friday's Houston Business Journal finally convinced me that the top-end of the legal industry is changing and that Axiom is setting the standard for disruption.
On a surface level, many of the facts in the HBJ article are unremarkable. Axiom opened its Houston office back in May 2012. Since then, it has grown to 30 lawyers and expects to add another 15 over the next 12 months. Yet, during this same period, the boom in the energy sector has caused several national and international law firms to also open offices in Houston, including Reed Smith, Dentons, Katten Muchin, and K&L Gates,
Axiom and large law firms are definitely targeting and servicing the same clientele -- Fortune 100 legal departments. The substance of their work is also very similar -- sophisticated, complex legal work related to disputes, transactions, and compliance. But in many cases, the solutions offered by Axiom are radically different.
Okay, now a reasonable expectation of any reader is likely to be, "Now explain that difference." Back in 2010, Axiom's CEO Mark Harris told Law Practice magazine that Axiom was "trying to invent a whole new category of law firm. When you’re doing that there is no vocabulary [to describe your business model]."
In my experience, the opaqueness of Axiom's business model actually works to its advantage. Specifically, it encourages Axiom's primary competitors (large law firms) to put Axiom in a box based on an outdated caricature. That, in turn, gives Axiom more running room to fully implement the "whole new model." Let me start with the caricature; then I will do my best to explain what the company actually does.
The Inaccurate Axiom Caricature
In its early years, Axiom was described by many as a high-end "temp" service for legal departments. See, e.g., Peter Lattman, Axiom: A Different Kind of Legal Practice? WSJ Law Blog, Nov. 27, 2007 (describing Axiom as having developed "a niche as a provider of high-end temp services to blue-chip corporate clients").
The simplified version runs like this. Lawyers working in large law firms trade-in their partner status, or shot at partnership, for more autonomy and a better work-life balance. By brokering relationships between legal departments and skilled but disaffected lawyers, Axiom ditches the "class A" overhead and reduces the allocation of legal fees that would otherwise support record law firm profits.
Under this caricatured model, all parties are made better off -- the client (who gets the same quality work, but cheaper), the lawyers (who get off the billable hour trend mill and are able take vacations again), and Axiom (which collects a fee). The caricatured model also enables large law firms to dismiss the Axiom model on the belief that only a small tranche of legal work is at risk of being siphoned away. And that work is lower margin and price sensitive -- so-called "commodity" legal work. Finally, the lawyers leaving for Axiom are not the heavy-hitter equity partners who control client relationships. Hence, the analysis is complete: Axiom represents zero threat to the BigLaw model.
Yet, if brokering lawyer services was originally the core of Axiom's business, they have subsequently expanded their offerings. Back in 2007, Axiom was #73 on Inc magazine's list of fastest growing companies, with revenues of $17 million per year and 1000%-plus growth over three years. Since then, its revenues have grown another ten-fold. Earlier this year, Axiom took $28 million in outside investment, which it plans to invest in technology. See Mark Harris of Axiom Answers Hard Questions, Legal Whiteboard, Sept. 25, 2013.
With this kind of growth, and the backing of very serious venture capital funds, perhaps its time to check the assumptions surrounding the Axiom caricature.
The "Managed Services" Business Model
Based on my own discussions with Axiom management and several articles on the topic, see, e.g., Adam Smith, ABA Journal, Strategic Legal Technology Blog, the fastest growing part of Axiom's business is its "Managed Services" practice.
Part of the managed services practice is analyzing and redesigning workflows so that in-house lawyers have the cost and quality information needed to make better sourcing decisions. Because Axiom is helping to redesign the workflows, including the specifications for sourcing decisions, it is well-positioned to do much of the resulting work -- indeed, unless it can manage both the design and execution of the work flow, Axiom can't warranty the results.
What is the goal of the workflow redesigns? To reduce legal risk and legal cost at the same time, primarily through process, measurement, and feedback loops. Virtually the entire law firm and law school universe is stuck in a mental frame that believes that better, faster, and cheaper are in permanent tension with each other. This is because our mental frame of reference is based on artisan-trained lawyers working in a traditional office environment with Word, email, and a searchable bank of forms and briefs.
Yet, when systems engineers, information technologists, and project managers because equal members of the team, "better, faster, cheaper" becomes a straightforward problem that can be solved through a four-part continuous process: design, execute, measure, repeat.
Much of the key design and execution work at Axiom is done by nonlawyers who formerly worked for global consulting businesses. See, e.g., this opening in Axiom (Chicago) for Project Management Director of Managed Contracts.
Indeed, the head of Axiom's Houston office is Brian Bayne, a business development professional with an MBA from the University of Dallas. Before joining Axiom, Bayne worked for IBM. Here is how Bayne described Axiom to the HBJ:
"The heart of what motivates us as a company is to be seen as an agent of change ... . We want to be a leading voice for transition in the industry. It really is a new way of doing business and offers a completely different value proposition that most law firms are not in a position to do."
Is Axiom a Law Firm?
Over at the E-Lawyering Blog back in April, Richard Granat did a very careful job trying to answer this question, and concluded that the answer was "no." In fact, Axiom is a Delaware C-Corp with nonlawyer investors as equity shareholders.
So, how is Axiom getting around the Rule 5.4 ban on fee-splitting with nonlawyers? The answer to this question has a lot to do with the nature of outsourcing and managed services within legal departments. A general counsel for a corporation controls the legal functions of the company. Because he or she can't do all the work themselves, they hire in-house legal staff and outside counsel. In recent years, legal departments have also contracted directly with LPOs, particularly on matters related to e-discovery and M&A due diligence. When it comes to non-law firm options, such as LPOs, the general counsel and his or her staff are "supervising" the work within the meaning of the legal ethics rules.
When a general counsel of a corporation uses a managed service provider, such a Axiom, they are diverting a tranche of work they control. The value of the managed service provider is process expertise plus economies of scale and scope. Axiom, through a contract with the legal department, manages some of that legal workflow that supports in-house lawyers in their counseling and compliance roles. Yet, the buyer of the managed services is himself a lawyer, and that lawyer is ultimately responsible for advising the corporation on legal risk.
On one level, Axiom is a niche business. As Granat notes, "If you don't have an in-house counsel, then you can't use Axiom's services. Not being a law firm, Axiom cannot provide services to the public (individuals or organizations) directly." Yet, this niche accounts for a huge proportion of the entire legal services market. In this American Lawyer article, one of Axiom's venture capital investors, opined "With a worldwide legal market that is a trillion dollars each year, there is plenty of running room to build a successful business."
Ultimately, the value proposition very simple. As an in-house lawyer, you can educate yourself on the Axiom managed services approach and be comfortable that, through process and measurement, you have a solid handle on this tranche of the company's legal work, likely within budget. Or you can have the CYA coverage of a brand name law firm and continue to do battle with your CFO over rising legal fees. If you were an investor, which approach you would bet on?
So Axiom can't help you with your divorce, will, or personal injury case. Don't worry, Jacoby & Meyers, Legal Zoom, Legal Rocket, and others are trying to tap into that market. See Legal Futures, Nov 8, 2013. In the meantime, Axiom may be gunning to be a service provider to your large corporate employer.
The Last Days of a Bloodless Revolution
I am sure that a state bar regulator, taking a very formalistic approach, can take issue with Axiom's construction of Rule 5.4, which prohibits profit-sharing between lawyers and nonlawyers from income generated from the practice of law. But the purpose behind Rule 5.4 is to preserve lawyer independence so that the quality of the underlying legal advice won't be compromised by the nonlawyer's pursuit of profit.
In the case of Axiom, however, the person making the buying decision is a highly sophisticated lawyer who is struggling to manage his or her organization's legal needs within a budget. Stated bluntly, the GC of a multinational corporation does not want the kind of consumer protection that a formalistic construction of Rule 5.4 would provide.
A betting person, such as a nonlawyer Axiom investor, would likely conclude that the bar regulators are not going to pick a fight with the largest corporations headquartered in their jurisdiction. Why would they? The subtext of economic protectionism would set them up for ridicule in the legal and mainstream press--who, exactly, is being harmed besides the law firms who are losing market share? And is there a principled basis to distinguish LPOs from managed services?
Expect to read more about state regulators in the "risk factors" section of Axiom's S-1 registration statement if and when Axiom decides go public. I think these risks will likely remain hypothetical, but as my friend Ed Reeser is known to say, "That is just my opinion. I could be wrong."
Truth be told, the nonlawyer revolution in U.S. legal services is occurring right now. And there is a good possibility that the whole revolution will take place without a single shot ever being fired.
Back to Houston
The HBJ reporter asked a local Houston legal recruiter about the future prospects for Axiom. The recruiter commented that he was "[n]ot sure how well they will do in Texas, given the conservative nature of the legal business here."
In my own experience, general counsel in Texas are among the most innovative and entrepreneurial in the country. The General Counsel Forum was originally founded in Texas as a state-level organization, and it is now rivalling the Association of Corporate Counsel (ACC) in terms of eduational programming for in-house lawyers and sharing best practices and benchmarking.
Lawyers as a group may be conservative, but within that distribution there is a small cadre of innovators and early adopters. Although most people don't change their behavior in response to abstract ideas, innovators and early adopters are at least drawn to the possibility. Not every idea will be successful -- indeed, the trial and error of the innovators is often a basis for dismssing them as fringe players. Yet, when an innovation produces a significant leap forward, the resulting success eventually sets off a widespread diffusion among the broader population.
There is a rich sociological literature on this topic, which was pioneered by Everett Rogers in his 1962 book, Diffusion of Innovation. It turns out that self-interest is often inadequate to overcome inertia and prejudice, at least in the short- to medium-term. The classic example is hybrid seeds, which have a host of advantages for producing more bountiful, disease-free crops. Yet, that innovation took decades to take hold among farmers.
Looking for another example? In the early 1980s, Bill James was publicizing the benefits of his stats-driven approach to baseball. The advertised benefits were clear -- "you can win more baseball games." Isn't that what every baseball team wants? But what's the cost? "Well, you'll have to change the way your evaluate talent." For nearly twenty years, the implicit answer of the baseball establishment was "no, that price is too high." Within the last decade, however, the stats-driven appoach has become commonplace in baseball and in other sports as well. The innovation has become diffuse.
I suspect that Axiom's senior management fully understands these dyanmics. Looking at the distribution model from Everett Roger's book, if you are trying to sell your unproven innovation, you are literally wasting your time trying to sell to your wares to 85% of the market. Indeed, if you are in the very early stages of innovation, 98% of the potential buyers are likely to be resistant to your pitch.
The problem here is not economics -- its human nature. This may be hard for many lawyers to believe, but lawyers, including general counsel, are human beings. And human beings are prone to a series of predictable reactions when presented with various stimuli, such as new ways to perform their work. Rather than process the merits of the idea, many human beings, including lawyers, will instead gauge the reactions of the market leaders. If the market leaders react with approbation, the early and late majority become willing to actually engage with the idea.
What this means is that the merits of a good idea are not enough to ensure its success, at least immediately. This is a key practical insight that the reformer/innovator class seldom grasps. Without understanding Roger's Diffusion of Innovation curve, an innovator's success becomes a function of timing and luck -- that is the story of Bill James.
But if you understand the diffusion process, it is possible to construct a filter that locates the innovator/early adopter class. And if you study their beliefs and problems, you can more effectively tailor your pitch. This approach saves time and money and holds the team together in the belief that they will ultimately be successful.
So, where is Axiom on the Rogers Diffusion Curve?
My best guess is the "early adopters" stage, as Axiom has relationships with roughly half of the Fortune 100 and is working hard to widen those relationships with more ambitious projects. Their goal, as best as I can tell, is to generate a clear proof-of-concept that they have solutions to the risk/cost conundrum that plagues so many legal departments and causes them to blow their budgets. With sufficient market testimonials, and as in-house lawyers with exposure to Axiom migrate to other legal departments, the broader legal market will begin to tip.
I find the Axiom story refreshing, primarily because the legal market has fallen under the spell of the fast follower strategy. In my travels, I often encounter the attitude "Let someone else prove that it can be done differently and better and then we will follow." When virtually the entire market adopts this worldview, incumbent institutions begin to relish the false starts of others and a general sense of complacency begins to set in. Frankly, I find this whole dynamic unprofessional is the classical sense of that word -- i.e., at variance with professional standards and conduct.
Axiom, in contrast, is on the brink of demonstrating the benefits of the first mover advantage in law. This is bound to have the beneficial, balancing effect on the rest of us.
- "LPOs Stealing Deal Work from Law Firms", Feb 6, 2013.
- Mark Harris of Axiom Answers Hard Questions, Sept 25, 2013.
November 10, 2013 in Blog posts worth reading, Current events, Data on the profession, Innovations in law, Law Firms, Legal Departments, New and Noteworthy, Structural change | Permalink | Comments (0)
Friday, November 8, 2013
Clayton Christensen is the Harvard Business School professor who wrote The Innovator's Dilemma, the seminal book on why successful businesses so rarely stay on top over the long term. Although focused on the tech industry -- where product cycles are very short -- Christensen's framework has a much wider application, including legacy industrial enterprises and countries. In 2011, Christensen published a book called The Innovative University, which applied the Innovator's Dilemma framework to higher education.
Below is a YouTube video of Christensen explaining his thesis to a conference in Dallas organized around the future of public universities. His talk is very long by online video standards (80 minutes) but worth the time of anyone who wants to understand the Christensen framework and its application to higher ed. At approximately minute 45, Christensen specifically mentions law schools. Below the video is some additional context on Christensen.
Remember that near presidential coup at University of Virginia, which was reported in the New York Times Magazine last fall (link)? Well, Christensen's ideas had begun to propagate within the university trustee community, thanks in part to a letter than Christensen and Henry Eyring had recently written to the American Council of Trustees and Alumni (ACTA).
As discussed in the New York Times article, the coalition that was animated by Christensen's ideas was ultimately defeated by the palace guards. But that was the first attempted coup at a major research university, not the last. As Christensen points out in the video, universities are feeling pressure from innovative models that "compete against nonconsumption." In other words, lots of people would like the knowledge taught in the great universities, but that demand goes unsatisfied because of selective admissions requirements, tuition, and geography.
MOACs are the first volley in figuring out this untapped market. Those that dismiss MOACs as irrelevant are missing the bigger picture of what early stage disruption looks like.
Specifically, according to Christensen, here is the recurring dynamic: the new entrants siphon off work from the bottom-end -- work that the high-end says it does not want anyway. The cycle repeats itself a few times until, much to the incumbents' surprise, the bottom-end becomes more economically relevant and powerful. Why does top-end let this happen? Because the incumbents have come to view success as elite status and high margins, which is an unrealistically high long-term bar unless you are continuously innovating. Eventually, the so-called high-margin niche becomes insufficient to sustain the enterprise, and giants fall -- see the automotive industry, steel, computer hardware, televisions, consumer electronics, etc.
That said, does the university model of education have a life cycle, or is it above these coarse market considerations? I think it probably does.
In the year 2013, lots of knowledge is free or incredibly cheap. Next year, even more, and so on for the foreseeable future. As a result, many people are able to become astonishingly knowledgable and skilled because of the sheer joy of learning and becoming more competent. It turns out that university credentials are a pretty noisy signal for knowledge and competence -- a small positive correlation, yes, but not much more. This is an information gap problem.
In terms of sheer productitivity, most employers would prefer the folks who are driven to learn and continuously improve. Google has already figured this out, as a substantial portion of their high-end workforce has never completed college. Google employs them for their abilities, not their degrees.
When opportunity is unbundled from university credentials -- i.e., the information gap problem described above becomes cost-effective to solve -- the demand for university education as it currently exists (expensive and in limited supply) will go down. From a social perspective, this is a good thing. But it means that universities will have to innovate in the years to come in order to justify our tuition and fees.
Sunday, October 27, 2013
There is an interesting article in The Times of India business section that says, essentially, large Indian corporations are realizing that legal strategy and compliance are too important to not elevate these functions to the C-Suite. As a result, the pay, influence, and prestige of in-house positions in India are now very much on the rise.
This is the same evolution that has occured in the U.S. over the last two to three decades, albeit the evolution appears to be occuring in India at a much faster pace. So any temporal gap in structure is unlikely to be permanent.
This dynamic reminds me of my visit to India in 2009, when Marc Galanter and I spend time with several law firm leaders. One of the most striking features we noticed is that all the name partners were alive and very much in their prime. (In the U.S., the equivalant year would have been roughly 1940.) These lawyers very much enjoyed being engaged on the future of India. And unlike the U.S. or U.K., where the market is now defined by league tables, the topic of money never came up -- granted these Indian lawyers were all making plenty of it.
One of the things most on the minds of the Indian law firm leaders was how they could create a vital, useful organization that would survive them. So, much to our surprise, the India law firm leaders discussed things like Kaplan Balanced Scorecard for determining partner compensation (based on the work HBS Professor Robert Kaplan). Another leading law firm, Nishith Desai, constructed its entire firm based on the best practices of professional services firms worldwide. This was the result of a 20-year reflection on this topic by the firm's founder, who is also still in his prime. See Nishith Desai, Management by Trust in a Democratic Enterprise: A Law Firm Shapes Organizational Behavior to Create Competitive Advantage, Wiley Journal of Global Business and Organizational Excellence, Sept/Oct 2009.
It was almost as if the Indian bar was skipping 100 years of evolution and instead decided to converge immediately on the state of the art. Well, the same may be happening in India legal departments.
Wondering what a Kaplan Balanced Scorecard looks like? Here is a good sample.
Tuesday, October 22, 2013
My colleague and collaborator, Chris Zorn, is teaching a course at Penn State called "Big Data & the the Law." It draws upon several disciplines, including the law. See BDSS. He has been telling me about the crazy creative projects that are taking root in this class, which includes aspiring statisticians, geographers, political scientists, sociologists, public health professionals, and information science folks (alas, no law students, though the course was open to them).
Data visualization is one of the lynchpins of big data interpretation. Below is a very good example. It was generated by Josh Stevens, a grad student at Penn State who is enrolled in the class. I am told this specific work flowed out of the GDELT hackathon hosted by BDSS a few weeks ago. Kind of useful for allocating scarce resources to reduce violent conflict. Uses both time and space. For the full context, see this post.
Sunday, October 20, 2013
I would. The best example of ODR I have come across is Modria, who's tagline is "Any issue, resolved."
Before dismissing Modria as a trivial Internet parlor game, consider this: The technology and process at work here got its start at Paypal and Ebay. Why did Paypal and Ebay become so good at dispute resolution? Because their goal of becoming mega-volume businesses depended on it. If you have millions of transactions daily, a huge volume of low-stakes complaints is inevitable. If dissatisfied customers stay dissatisfied, they don't come back. Worse, they'll talk to their friends.
Now watch is video. Note that the target audience is businesses who (a) feel disputes are a drain on their time and energy, and (b) want happy, loyal customers who vouch for them to friends and family. A prompt, fair resolution to a dispute actually deepens the trust relationship. That's not speculation. That's science. And Modria, and it investors, know that.
In this book, Tommorrow's Lawyers, Richard Susskind talks about ODR as a highly disruptive innovation that will fundamentally alter the legal landscape. It is hard to fully appreciate that claim without seeing concrete example, like the Modria business model, up and running. Many businesses could be drawn to Modria, but so could/would many smaller governmental units. Indeed, several (progressive) county governments have become clients (e.g., on property assessment appeals).
Modria is disruptive because so many forums for resolving disputes, such as courts, repeat-player arbitrations, and various government boards, are not perceived as prompt, fair, and/or just, often times because costs of dispute resolution are so high. So even if the dispute is resolved correctly on the merits--for the subset who can pay the cost--there remains a large residue of dissatisfaction.
This is fundamentally a problem of institutional design. (The ReInvent Law folks understanding this.) The goal, or ought to be, a speedy, low-cost, resolution that is maximizes on the uumber of user who perceived the outcome as fair. Does any state or federal court think this way? In Tomorrow's Lawyers, Susskind asks whether "court is a service or a place" (p. 99). Alas, this is a staggeringly very large market.
Check out the management team of Modia. These folks come primarily from the dispute resolution programs in business and public policy schools. It is worth noting, however, that Modria's Board and its big-time investors include several lawyers, including Jason Mendelsohn, a former lawyer at Cooley who now works as a venture capitalist. Jason has invested in other businesses in the emerging legal vendor space.
Times are changing. And the pace of that change is picking up.
October 20, 2013 in Cross industry comparisons, Current events, Data on the profession, Important research, Innovations in law, New and Noteworthy, Structural change, Video interviews | Permalink | Comments (4)
Thursday, October 17, 2013
That is the message of Larry Richards, a JD-PhD consultant who runs a company called Lawyer Brain. At the 18th Annual Law Firm Leaders Group Conference here in NYC, Larry made this point with the video below. Very effective.
Five years ago, Larry told me to read Daniel Pink's book, A Whole New Mind. (Daniel Pink, by the way, is a lawyer by training.) The message of that book is developing the right side of brain (emotive, aesthetic, storytelling) with our left side (analytical, quantitative). That was very good advice. Thanks, Larry!
Tuesday, October 15, 2013
Below is job posting for a new type of job called a "legal solutions architect."
The job post just appeared on the website of Seyfarth Shaw, a large law firm based in Chicago. Seyfarth was one of the first to embrace the movement toward technology and process. See Six Sigma at Seyfarth Shaw, Legal Professions Blog, April 14, 2010.
Before getting to the text of the ad, a few of observations for what this posting is telling us about legal education and the emerging legal job market:
- This is a pure JD advantaged job. "Juris Doctor or MBA with legal industry experience strongly preferred job" (emphasis in original). It is full-time, long-term job in downtown Chicago. it is not reviewing documents. This is a good professional job doing very sophisticated and challenging work.
- The job is not partner-track. But it terms of economic potential and job security, does that matter? In the years to come, folks that understand the overlay between law, technology, and process are going to be great demand and have a lot of options.
- Undergraduate education matters, but the majors are far from typical among traditional law students: finance, business administration, computer science, or "other technical discipline."
- It is easier to get this job if an applicant has familiarity with "extranets, intranets, document assembly, enterprise search, relational databases and workflow." Also, it is "a plus" to have "familiarity with Agile and Scrum [two software development tools]." We don't teach any of this stuff in law school. Perhaps we should.
- The required skills are an blend of technical skills and knowledge plus higher order professional abilities that, frankly, are not explicitly taught in law school. Law schools need to take notice, as this an order any decent professional school should be able to fill.
Now the actual job posting:
Legal Solutions Architect
Seyfarth Shaw is one of the most progressive, forward-thinking law firms in the world. Seyfarth’s commitment to delivering legal services in a new way through its SeyfarthLean program - with an emphasis on value and continuous improvement - has been praised by the Association of Corporate Counsel (ACC) as being “five years ahead of every other AmLaw 200 firm.”
Legal Solutions Architects anticipate, identify, sell and drive innovative business solutions. Through an understanding of technology, knowledge management, business analysis, process improvement and project management, this role provides solutions that enhance the client experience. These multidisciplinary resources are aligned with Firm strategy and play an important role in driving the Firm’s innovative approach to the practice of law and the delivery of legal services.
This position will report to the Director of the Legal Technology Innovations Office. Seyfarth Shaw recently received awards for 2013 Innovative Law Firm of the Year and Innovative Project of the Year, and the efforts of the Legal Technology Innovations Office played a significant role in earning those recognitions.
- Partner with clients, Seyfarth legal teams and legal project managers to enhance the delivery and effectiveness of services provided within legal engagements
- Translate stated and inferred needs of clients and attorneys into specific technologies and methods
- Synthesize the needs of multiple engagements and create requirements for systematic solutions that underpin Seyfarth’s varied legal practices
- Team with the Application Development Group to design and plan for custom solutions and oversee the construction and implementation of these systems
- Manage multiple projects concurrently, juggling priorities, deadlines and essential duties for each project
- Collaborate with other Firm departments, including Legal Project Management Office, Practice Management, Finance, Marketing and Professional Development to provide comprehensive solutions
- Act as an effective change manager – keeping client and Firm culture, group behavior and individual habits in mind in order to best circumnavigate roadblocks and pitfalls for solution adoption
- Provide presentations to individuals, small groups and large audiences of clients and Seyfarth attorneys in a persuasive and encouraging manner
- Contribute to continuous improvement, promote the use of technology solutions and help improve the awareness of the impact of the solutions on the business
- Perform vendor due diligence and serve as a point of contact for third-party technologies leveraged by the Firm
- Conduct market, external and internal research and convey results to forward assigned projects and to aid projects lead by teammates, other groups and other departments
- Proactively research and maintain knowledge of emerging technologies and service delivery models and possible applications to the business
- Highly motivated self-starter with an entrepreneurial bent
- Uses intelligence, creativity and persistence to solve varied, non-routine problems
- Possesses an understanding of knowledge management, process improvement and legal project management and an appreciation of the benefits to law firms employing these approaches
- Passion for legal technology, including technical platforms, specific technical applications and their impact on the practice of law
- Keen grasp of project management, flexible in project execution and able to meet aggressive deadlines
- Strong business analysis approach
- Visualizes how raw data can be converted into useful information for client and Firm decision-makers
- Pays attention to detail but still maintains focus on the bigger picture
- Comfortable working both independently and in diverse teams
- Excellent written and verbal communicator that is able to distill complex concepts into simple messages
- Familiar with the software development cycle
- Capable of managing and motivating up, down and across the organization
- Appreciation for user interface and user experience design
- Embraces change and seeks to create order from chaos
- Bachelor’s degree, preferably in finance, business administration, computer science or other technical discipline
- Juris Doctor or MBA with legal industry experience strongly
- Experience working within a large law firm preferred but not required
- Familiarity with extranets, intranets, document assembly, enterprise search, relational databases and workflow preferred
- Familiarity with Agile and Scrum a plus
Seyfarth Shaw is committed to working with and providing reasonable accommodation to individuals with disabilities. If, because of a medical condition or disability, you need a reasonable accommodation for any part of the employment process, please call (312) 460-6545 and let us know the nature of your request and your contact information. We offer an outstanding benefit package which includes: medical/dental, 401k with employer contribution; life insurance; transportation fringe benefit program; generous paid time off policy; and long-term and short-term disability policies. Equal Opportunity Employer M/F/D/V
Tuesday, October 1, 2013
The Legal Whiteboard was created to focus on "facts, trends, and ideas on law and legal education." Well, nothing is more salient these days than the rise of the legal tech sector which -- trust me here -- is growing rapidly and will soon hit a tipping point. What happens at the tipping point? The tastes of clients and highly talented workers shift, leaving old institutions very vulnerable.
If you are interested in this topic and want a time-efficient primer, check out this ABA Journal podcast, which went live yesterday. It is 15 minutes long and can be downloaded. Thanks to good questions from ABA editor Reg Davis, and some editing magic, the interview is a pretty good starting place for the uninitiated -- the only downside is that you have to listen to me, as interview keys off the "Who's Eating Law Firms' Lunch" story (Oct ABA Journal).
Our conversation is also transcribed.
Monday, September 23, 2013
A few years ago I had the good fortune of teaming up with Rachel Zahorsky for a series of feature stories in the ABA Journal, including "Paradigm Shift" (July 2011), "The Law School Bubble" (Jan 2012), and "The Pedigree Problem" (July 2012). The fourth article, "Who's Eating Law Firms Lunch," is now online; and without a doubt it is my favorite.
Why? Because of the final vignette in the story, which features Dan Katz of ReInvent Law fame. We were sitting at the bar at the January 2013 AALS Conference in New Orleans when Dan told me this story. My jaw just dropped. Dan has faith in his students, just like Bellotti had faith in him. Dan believes, so Dan just does. No fear. No bullshit. It was, suffice to say, quite refreshing.
I am reposting the whole vignette in the hope that a few more academics, lawyers, and law students will read it. The title of the post is the last line in the story. To my mind, that Dan Katz line sums up the next ten years of innovation in legal education. Please keep reading until you get to that final line. The insight is worth the effort.
For the past two years, MSU’s Katz was the only full-time law professor who spoke at the LegalTech conference. Katz and Knake are creating a curriculum relevant to the emerging law and technology sector, albeit primarily for companies like Novus Law and Recommind, whose competitive advantage is rooted in process and technology.
Within the legal academy, Katz is an anomaly. Aside from his JD, he has a PhD in political science and public policy from the University of Michigan. However, he focused almost all of his graduate study on complex systems. It’s a relatively new scientific field that uses mathematical modeling to understand how a multitude of human and nonhuman factors interact and influence one another. Human society and the human brain are two examples of complex systems. Neither can be effectively modeled by conventional math or statistics.
The late Larry Ribstein at the University of Illinois was one of Katz’s early mentors. When he went into teaching a few years ago, Katz says, Ribstein told him: “I bet you must feel like an alien. I greatly admire your work. You are definitely on the right track. But the rest of the legal academy is just not ready for you.”
In June 2011, Katz joined the faculty at MSU Law. Michigan State partnered with the Detroit College of Law in 1995 and moved the law college into a building in East Lansing two years later. Though the school’s rebranding efforts did raise its profile, to most of the profession, MSU Law remains a nonprestigious regional law school located in the heart of the Rust Belt.
None of this dissuades Katz from his sincere belief that it is possible to turn any institution into the preferred recruiting grounds for the nation’s emerging law-and-tech industry.
“When I was 18 years old,” explains Katz, “I had the privilege of joining a transformative organization”— as a kicker for the University of Oregon football team, the Ducks. “We were in the Pac-10, but it’s in Eugene, Ore., where it is often cloudy and raining. We had no shot at all with the top recruits from Southern California. So coach Mike Bellotti had to figure out ways to stretch and optimize what some might call second-tier talent.
“Oregon is now a national powerhouse, but the seeds of that success were sown much earlier. It was difficult to be bigger or faster than USC or UCLA. So Coach Bellotti decided we would be better on the details of the game. We would be better conditioned and we would pay significant attention to special teams. Our emphasis on special teams got us better field position. And by the third or fourth quarters, our opponents would have their hands on their burning legs. But because of our conditioning regimen, we had more stamina. Our success became contagious. Over time, we were able to get prized recruits. It was a culture of innovation.”
During Bellotti’s tenure at Oregon, from 1995 to 2008, the Ducks had only one losing season, blotting out decades of mediocre performance. The year that Katz graduated, the Ducks were co-champions of the Pac-10, a feat that makes him beam with pride.
Katz’s “secret sauce” for ReInvent Law is arguably much more important than a degree in complex systems. He looks at the 25 students entering the ReInvent Law Laboratory as raw human potential. Katz also actively recruits potential law school applicants to his program, though he declines to discuss his strategy.
Katz understands that the most attractive candidates for the law and technology sector are those with special skills that are often obtained through prelaw work experience. “But there is no reason why some of those key skills and experiences cannot be learned and obtained right here,” Katz says of the MSU program.
He notes that virtually all law students have high cognitive ability. He feels the key to their future success is mastery of domain-specific knowledge—often in areas that are complementary to law—and the ability to collaborate across disciplines. This requires engagement and an immense amount of time spent on the task. So how does one develop the educational program that will prepare the law student for legal-tech jobs—some that may not yet exist?
“This,” Katz says, “is just an education design problem."
Perhaps the key insight is that "data by itself is useless. To extract value from it, you need the ‘three Ts’: talent, technique and transformation.
- Talent. "When you start out, you don’t need the top experts to start making sense of your data. You may just need people with curiosity, good statistical skills and a desire to learn. These are the kind of people who will quickly see how data can be managed and packaged to solve problems. And once they do, they will want to get better at it."
- Technique. "Big Data needn’t mean Big Complexity. ... [A]nalytical techniques can be sophisticated, but it’s also possible to keep it simple – especially at the start of the journey. Get the basics right first, and then you can become more advanced as you get better at it."
- Transformation. "Becoming a data-driven legal team – law firm or corporate – is a journey. Change is slow, so don’t expect an overnight transformation. The best approach is to bring the whole organisation with you - if everyone from the partners and CEOs to the interns buy into your data strategy, it will start delivering returns faster."
So who will be the big winners when it comes to Big Data? Definitely some start-ups become they they don't have to transform -- it's a clean sheet operation from the very beginning; they also have more patience and tolerance for trial and error. Yet, BigLaw is sitting on top of a lot of the essential data, so there will be some winners there too. To my mind, it will turn on the ability of some BigLaw shops to leverage talent and technique into some early victories that will aid the tranformation project. If it works, it will be a case study in strategic leadership and effective change management.
By the way, Wolters Kluwer Corporate Legal Services is a sophisticated place. They own TyMetrix, which is the perhaps the best current example of BigData operating in the BigLaw ecosystem. TyMetrix's Real Rate Report is being used to agressively control lawyer billing rates.
Sunday, September 22, 2013
Disruption in the legal industry appears to be crossing an important milestone -- the emergence of the revolving door among the first generation innovators. Evidence comes from this press release published on the Wall Street Journal website.
In 2010, a BigLaw partner leaves BigLaw (DLA Piper) to take a high-level job at Axiom, the most well-known disruptor in the legal industry. Then, 2.5 years later, he leaves to run the Discovery Services practice at Huron Consulting Group. Huron Consulting, by the way, is a publicly traded company (NASDAQ: HURN) with $626 million in revenues in 2012. Legal is one of Huron's core industries. It currently has 1,500 "seats" for conducting 24/7 document review services in the U.S., Europe, and India.
Let's summarize: BigLaw to legal start-up to publicly held company trying to expand its wedge in the legal industry. Granted, career moves are motivated by a wide range of factors, not just a string of successes that create better oppportunities. Outsiders can only speculate why someone changes jobs. That said, in a start-up environment where the market opportunity is large but the know-how to tap into it has to be developed through trial and error, false starts are just part of the learning curve -- the building block of future success. Indeed, there are books and articles on this topic.
What is revealed by the emergence of the revolving door among legal innovators is that there is tremendous opportunity to make traditional legal services better, faster, and cheaper. Talented people are persisting and betting their careers on it. The biggest unknown is timing -- it is risky to get there too early, and disastrous to get there too late. Alas, it is better to wrestle directly with the issue of timing than to deny that the change is real.