[NOTE: This is another in the series of repostings of my previously-published articles. This article was written in early 2000 and comes from a presentation I gave based on the draft of a book I was then writing with the working title of "The Fully Connected Law Firm." Unfortunately, my publisher closed up its publishing business before the book was finished. I've lately been toying with the idea of going back to the book draft, so I'm interested in your comments on this article. I think many of these ideas are even more relevant (and possible) now than they were in 1998 - 2000 when I was first working on this material. This article is another favorite of mine – it reads like a bit of a Law 2.0 manifesto and it touches on many of the themes I've found most interesting and important over the years. If you read only one of the many articles I've posted, I suggest that this be the one.]
The Fully Connected Law Firm
Sometimes the best way to think about the future is to take a look at the past. So, rather than look 10 years into the future, I’d like to take us back in time about 550 years.
The year is 1454. The place is Germany. You’re in a small medieval village. You look up and see an ox cart on the road leading into your town. The cart has large wooden wheels. A lone driver is hauling a large piece of equipment covered with animal hides. As you wonder whether the stranger brings foreign conquest, a new pestilence, plague or promise, the man jumps off the cart and introduces himself as Johannes Gutenberg.
In his arms, he carries a box of books. He tells you that under the animal hides is his new invention — the movable type printing press. He regales you with stories of its potential. At the end of his conversation, he presents with three choices: Do you want to buy one of his books? Do you want to buy one of the printing presses? Or, do you want to invest in the pre-IPO stock of his new venture, which he calls Gutenberg.com?
We have the advantage of more than 500 years of hindsight in considering how we might answer this hypothetical Gutenberg’s questions. As a result, we know some of the legacies of the invention of the printing press: (1) universal literacy as books became widely available and used in education, (2) portability of information as people were no longer bound by geographic barriers, (3) new forms of communication such as the newspaper and magazines, (4) transformed political and religious structures, including the Protestant reformation and experiment in political democracy known as the United States of America, (5) the development of capitalism (some believe that the owners of printing presses were the first capitalists), and (6) the development of new forms of community, which I will later referred to as communities of interest, no longer based solely on geographic considerations.
But the most important legacy of the printing press was that ideas became as free as the air and, in a real sense, the genie was out of the bottle. And, as Major Anthony Nelson can tell us, once Genie is out of the bottle, it is very difficult to get her back inside.
I will cover (1) three key trends that underlie the development of the Internet and the Internet’s likely impact on the legal profession, (2) three practical areas to illustrate the impact the Internet is having and is likely to have on the practice of law, (3) where we are going and some ideas about how you should prepare to get where you’re going, and (4) six key points to think about over the next few days and weeks.
As we consider the legacy of Gutenberg and apply what we learn from the printing press to the Internet, you will see why I believe that the Internet is an event of historical dimension.
The Internet, however, has made its dramatic impact within a few short years, not several centuries. For my purposes, Internet history begins in 1995. Although we have recently celebrated the 30th birthday of the technical underpinnings of the Internet, to me, 1995 is the important birthday because it is the year that the Internet forced us to take notice of itself. It is also the year that Bill Gates publicly decided he was wrong about the Internet and turned the great ship of Microsoft toward becoming an Internet company. In January, 1995, somewhere between 8 and 15 law firms had any kind of Internet presence. According to recent surveys, over 90 percent of the largest 200 law firms have web sites and thousands of small firms and solos have web sites.
The demographics of the Internet audience are especially attractive to lawyers. Contrary to popular belief, the average Internet user tends to be older than the teenagers many people picture; less surprising, the average Internet user is more affluent and more educated than the average person. This demographic group is especially attractive for lawyers.
No technology, not the printing press, the telephone, the automobile, or the television, has achieved the level of market penetration in as short a time as the Internet has. The speed of acceptance of the Internet is startling and has yet to slow appreciably.
Along with the rapid rates of acceptance and change, the range of change the Internet has created is sweeping. In a matter of a year, an industry leader can be fighting for its very life. Take the example of Encyclopedia Britannica. New industry segments have grown up in months rather than decades. Billions of dollars of wealth have been created in a matter of year or two.
Let me emphasize that the change that the Internet has brought, and we all have begun to take for granted, has happened in the last five, not 500, years.
Three Key Trends.
There are three key trends to keep in mind about the Internet and its impact. By understanding these three trends you can analyze the impact that the Internet is likely to have on the practice of law and how you can prepare for and take advantage of what is to come. I sometimes think of these trends as the “three big words.”
These three key trends are disintermediation, collaboration and innovation.
But First, A Diversion: The Law of Unintended Consequences.
But before I talk about the three trends in detail, let’s briefly talk about the law of unintended consequences. The law of unintended consequences simply states that predicting the consequences of technology is extremely difficult, that technology and its consequences are in fact unpredictable, and that often the consequences we expect by not the consequences we get.
One example is the development of mass production techniques for automobiles by Henry Ford in the early 1900s. While it might have been easy to predict the likely effect of automobiles on blacksmiths and horse-drawn carriages, it was more difficult to predict the restructuring of the national economy, the development of roads, the impact of the automobile on railroads, and a variety of consequences that flowed from a widespread use of automobiles. Other effects which may not been intended or predictable include the demise of the family farm and an initial movement from the country to the city and the current movement to suburbs that is currently carving out the downtowns of many urban centers in this country.
At the root of the Internet phenomenon is the unintended consequence and the irony that was originally known as a computing tool has become a communication tool. Computers are fundamentally number crunching machines. The operation of ones and zeros perform a variety of high-speed mathematical calculations. In fact, in the early era of the computer, some experts thought we would not need more than a few computers in the world. Few foresaw the possibility that these number crunching computing tools would be used in their homes and offices. In a sense, most people do not visibly use the number crunching aspects of their computers. They focus instead on the ability to use a computer to communicate with people and, more important, to connect with people
As a result, people have been surprised to find that e-mail has turned into the “killer application” of computing. By killer application, I mean the one application that drives the purchase of computers for most people. People don’t really buy computers to do word processing or balance checkbooks. They want to communicate with friends and family and be connected by the Internet to others through e-mail. In the early era of the Internet, e-mail didn’t even exist. It came into play when someone got tired of constantly telephoning to connected computers to check if a file had arrived and invented a system to send a simple text message to which the receiving party could reply.
The unintended consequences of technology can be summed up in the notion of “high tech, high touch,” a phrase coined by John Naisbitt in his 1982 book, Megatrends. Naisbitt’s notion is that the higher the level of technology, the more important the personal element, that is, the “touch,” becomes. As he suggests, face-to-face contact becomes extremely important in a highly technical society. I like yet another sense of the term and suggest that the highest forms of technology in fact promote the highest forms of touch. The better the technology, the more it promotes the personal element. Simple tools like e-mail and browsers have allowed us to create communities where people could connect to each other and are excellent examples of creating high tech, high touch.
Disintermediation is a big but important word. It simply means eliminating the middleman. I’ve seen a cartoon that shows the classic scenario of a group of dark suited middle-aged white men surrounding a conference table. One of them says “on the one hand, eliminating the middleman will result in reduced costs, higher sales and greater customer satisfaction; on the other hand, we are the middleman.” We are the middlemen. Think about this notion and consider lawyers who perform essentially middlemen functions.
Bill Gates and others have talked about the “frictionless” economy. This is an economy that, using the Internet as a vehicle, tends to eliminate the drag and friction on transactions. In a frictionless economy, it becomes easy for buyers and sellers to transact business. Friction is reduced primarily by eliminating the middlemen who do not add value to transactions. Some examples might include car dealers and stockbrokers.
E-Bay has an online auction company where buyers and sellers exchange goods through an auction bid system. The friction involved with brokers, sellers or other techniques to bring buyers and sellers together can be reduced or eliminated by using the Internet. A true free market is established and value is set by using an auction bid system. E-Bay has implications not just for the obvious reasons, but also as we see auctions used to purchase and sell heavy equipment, commodities and other items not traditionally sold by auction methods.
Sales of cars also have been affected by the Internet. I leased my last car using a web site, Autobytel.com. Autobytel helped me make my deal by allowing me to specify the car that I wanted and the options that I wanted. It then matched me up with a local dealer who could give me the best price. As a result, I did not have to trudge from dealer to dealer and the buying process was relatively painless. Because for so many people the car buying experience is so unpleasant, the notion of frictionless economy has profound implications for the whole car dealer system. It can be argued, and many people do, that the car manufactures would be better off, as would consumers, if consumers could order from the factory exactly the car they wanted and then have it delivered to them within a week or so. That process has profound implications for the whole car dealer network, but car manufacturers are starting to move gingerly to explore this approach.
Stockbrokers have also seemed the competition of the Internet and the frictionless economy. Merrill Lynch recently sent up the white flag of surrender and reduced its brokerage commissions substantially in response to competition from online brokerage firms. The question became why should someone spend two hundred dollars in commissions for the execution of a trade that they can do with an online broker for fewer than ten dollars in less than 60 seconds?
What about lawyers? Lawyers are classic middlemen and, unfortunately, like car dealers and others, they are not held in high regard as middlemen. In fact, many businessmen try to figure out ways to minimize the role of lawyers. Most lawyers are often seen as the friction in transactions. The fact that the Internet tends to route around middlemen and reduce intermediation, and the public is wary of lawyers, an especially deadly combination in the Internet era. Lawyers may be especially vulnerable to the disintermediation process.
The key word to think about is reintermediation. Reintermediation simply means reintroducing a middleman because that middleman provides value to the transaction.
For example, Autobytel can do more than simply find me a local dealer. If it only did that, I might search the web sites of local dealers for low prices myself. In addition, though, Autobytel provides great consumer information, financing calculators and the ability to pair me up with the someone who can give me quotes on insurance policies and many other services necessary for the purchasing of a new car. As a result, you want to involve Autobytel as a middleman because they add value, not friction, to the process.
Lawyers must focus specifically on what value they add to the processes in which they are involved as middleman and concentrate on those areas.
To me, collaboration means creation of communities of interest. The communities of interests refer to communities not based on the geographic constraints but those based on common interest. These interests can be business interests, hobby interests, academic interests or other interest. They can be temporary or long lasting, for one project for or for ongoing series of projects. In classic sense, a law firm is a community of interest.
An important question to ask a lawyer in a law firm in the Internet era is whether the expert he or she wants is really the person down the hall from him or her. If you can create communities of interest for a project using the Internet, is the real estate expert you need really your real estate partner in your firm or might somebody you met on an e-mail discussion group be better suited to your client and this project?
We will see the rise of the Hollywood production business model in the legal profession. In Hollywood, if we were making a movie, we would get a producer, a director, a crew of skilled people, and the actors we needed to create the movie. These people might be gathered from widely scattered parts of the country. Some may have worked together before. Some may have not. They would assemble for the project for several months, and then they would pack their bags and go their separate ways. Some of them might work on the next project together. Others might not work on projects ever again. The idea is to assemble the best team and the best talent for each project.
As a client, if you were able to assemble a dream team of lawyers and other professional service providers, why would you want to be limited to only particular lawyers solely because they are members of the same firm if they were not the best people for the project? This approach has profound implications for law firms.
In collaboration, all depends on the quality of the conversation. Collaborative efforts should be directed to improving the quality of the conversation of the team that you have involved on your projects. Collaboration can occur through intranets (internal Web sites), extranets (secure, private, limited Web sites) or a variety of other means and processes.
Collaboration in the legal profession will lead to the development of the virtual law firm. Must a law firm have continuing existence or can it form freely on a project basis? Does a law firm have a mortars-and-bricks location? What are the implications for law firms when lawyers from different firms begin to work freely together on projects or are expected to do so by clients?
The third key trend is innovation. Innovation simply means making good responses in a time of changing rules. In the short history of the Internet, we have seen how the Internet changes many of the basic assumptions and rules of many industries and organizations, including government and education. The people who have been successful in the short Internet era are the people who try new things, innovate and make changes.
The best approach is something called “fast prototyping.” The people who do well are often the first to market, those who have an idea and implement it quickly. You want to create your business model and try it. See if it works, then adjust, evolve or terminate it depending on the response you get.
There is a danger in a time of innovation of focusing on fighting the last war. History is replete with examples of victorious generals who continue to prepare to fight the last war only to find themselves in a difficult situation at the beginning of the next war when all the rules have changed. In the legal profession, the recent discussion of multidisciplinary practice seems to be an example of gearing up to fight the last war. The Internet has placed emphasis on global efforts, on routing around information gatekeepers, and breaking down barriers to monopolies. The response of lawyers has been to focus on state regulation to reinforce the rules of the legal economic monopoly and to implement barriers to competitors of the legal profession. All these seem to be seen symptoms of fighting last war.
Nicholas Negroponte of MIT has said “incrementalism is the enemy of innovation.” Tom Peter, whose book, “The Circle of Innovation” was influential in the preparation of this section of this article, notes that Negroponte says incrementalism is the enemy, not just an impediment. In simplest terms, this means that half steps and partial steps are no better than no steps. The innovative law firm wants to take bold new steps and follow through on them.
In area of innovation, we can learn from the examples of Amazon.com, the classic example of Internet business. Because of the short five-year history of Internet business, it is important to be careful not to draw too many concrete lessons from any example. In the case of Amazon.com, this is especially important since the company has yet to turn a profit on its primary business. Nevertheless, we have seen a few things that are worth noting in the legal context. First, it is extremely important to be the first to market because being the first to market can create an enormous competitive advantage on the Internet. Second, successful Internet companies are willing to challenge traditional assumptions and turn traditional business categories upside-down. Third, Amazon.com has been successful by continuing to try new things and to bring those new ideas to its business on a consistent and rapid basis. Fourth, Amazon.com has constantly focused on improving the customer experience.
The Practical Areas.
We now turn to three practical aspects of the legal profession to show some of the effects that the Internet has had on those areas and the impact that is likely to happen in the future. The three areas are research, communication, and marketing.
It has become essential for lawyers to be conversant with Internet research methods. It used to be that you needed to know the books and, if you were fortunate to be in a firm that could afford Lexis or Westlaw, those research services as well. Lexis and Westlaw were thought to have impregnable monopolies because they had huge databases of cases going back over hundred years. Primary source material, however, including cases from courts, statutes from legislatures, and regulations from governmental agencies, have all become available on the Internet. For free. Lawyers found that for some other cases they simply don’t need cases from the 1800s and the current cases suffice. A company like Versuslaw can create a niche market for lawyers who don’t need cases going back so far at a price like $6.95 a month rather than several thousand dollars a month.
As a result, Lexis and Westlaw have been scrambling to find Internet models and are starting to see that the value that they have comes not from the databases themselves, but from their method of searching, the key number system, attorneys’ familiarity with those methods, and the brands they have established.
The Internet has begun to alter the basic materials of research. It has become essential that lawyers be familiar with Internet tools such as Findlaw, CataLaw, LLRX and other Internet resources.
The biggest development to come in research will focus on the collaborative elements of research through the use of intranets and knowledge management techniques. Often in many large law firms, research is duplicated and the wheel gets reinvented many times. Intranets and other knowledge management techniques allow law firms to take advantage of research already done in the firm and use it as a basis for further research and to keep existing research constantly updated.
The roles of law librarians are also changing. As law firms realize that they have skilled professional librarians who can do research, we have started to see changes in the way those librarians are used in law firms. Some law firms have even started to contract out the research their librarians perform to clients and others. Some see the possibility that a library can begin to pay for itself or even to make money for the firm. As a client, the question may become whether you want to spend $30 an hour for professional librarians to find you a specific answer quickly or whether you want to unleash a team of four or five new associates to perform the same research at $150 an hour, producing a 45 page memo that really doesn’t seem to answer your specific question, and giving you a bill for $35,000? Increasingly, we will see the model for research in the law firm changing and the likely development of research attorneys and/or research librarians.
Legal publishing will likely change as well. Legal publications run the range of a continuum between timeliness of the information and quality of analysis. On the one end is the simple publication of a statue by a legislature at the time of the statute’s passage. It has excellent timeliness but because it is unanalyzed primary source material, it scores low on the quality of analysis scale. On the other end of the continuum is the classic law review article that has excellent quality of analysis but may be released the year or two after cases decided, giving it very poor timeliness.
The attractive part of the publications market will be the legal newspapers and publications that provide contemporaneous analysis. For example, if National Law Journal or Lawyers Weekly USA can provide within a few days a highly sophisticated analysis of the recently decided case, it has both excellent timeliness and excellent quality of analysis. A law professor who participates in your e-mail discussion group who writes a thoughtful response to a decision on the same date the decision is handed down also can provide timely, high-quality analysis. It is this niche of high timeliness and high quality that lawyers will increasingly look to and companies that fill that niche will do well. Publications with long lead times, such as law reviews, will be a competitive disadvantage.
An interesting new area in research is something called collaborative filtering. If you’ve been to Amazon.com and bought books, you will notice the next time you return some suggested books. Collaborating filtering is a technique allows someone like Amazon to use their customer databases to predict customer actions, such as what other books are bought people who bought the same books that you did. So, if you buy several books by the same author, the databases can predict, based on the behavior of others who bought books by the same author, what other books you might like. Legal research companies are looking at the same techniques. The model might look something like this: You enter a search of three or four keywords into Lexis and get your results. At the end of your research session, a box pops up and says people who also ran searches on those four keywords went on to do one or more of the ten following searches. Those searches may be irrelevant to you or they may be highly important to you. They may give you ideas that you wouldn’t otherwise have had and allow you to follow the paths of prior researchers as part of an anonymous community of interest.
Finally, as clients become even more skilled in the areas of Internet research, we are entering the era of the highly informed client. Lawyers, doctors and other professionals report that they are finding clients who are increasingly knowledgeable about the issues involved when they come to the professional. This is so because the clients have done their homework on the Internet. Not only do the clients who are highly informed come to doctors with diagnosis and suggested treatment and to lawyers with specific questions and solutions, but they want to and expect their professionals to be conversant with the same information. When I still had an estate planning practice several years ago, I was already seeing clients who used the Internet to find out a significant amount of information before coming to a lawyer.
Tom Peters has said “distance is dead!” If you are stuck in traffic with a bridge between you and your home, distance certainly doesn’t seem dead. Peters, however, makes an important point. It is just as easy and fast to send email to someone in Hong Kong as it is to send it to someone down the hall. Similarly, a local phone call is no different than international one, at least conceptually.
When we think about communications, we need to take a look at Metcalfe’s Law. Metcalfe’s Law essentially says that the value of a network increases exponentially with the number of nodes on the network. The classic example is the fax machine. When there is only one fax machine with no one to send to, your fax machine has no real value. It becomes more valuable when someone else has a fax machine. The fax machine becomes highly valuable when millions of people have fax machines and you are connected to the world.
In the practice of law, email, intranets and extranets will become increasingly important means of communication. According to some reports, in 1998 more business messages were transmitted by email than were transmitted by telephone calls. E-mail has taken root in the legal profession and is likely to become even more important. The use of e-mail raises important issues about confidentiality, encryption and a record retention. Intranets for internal communication and knowledge, management will also become increasingly important.
Probably the key area development in communication for lawyers will be extranets. Extranets are private secure Web sites were people can share information, communicate, and collaborate. One example would be a mass tort litigation involving fifty law firms scattered around the country who use a secure, password-required web site to share research information, depositions, strategy discussions, and evidentiary material.
The key to communication is to focus on improving the quality of the conversation. Do the communication methods you are considering implementing improve the quality of your conversation with clients and others? Communication should also be focused on harnessing the power in the intelligence of the network. For many years, scientists have focused on creating artificial intelligence by brute force methods of throwing computing power at the problem and trying to create simple rules to mimic human intelligence. Now we’re starting to see that the true artificial intelligence comes from the network. If you ask a question you are likely to find an answer and see the network itself has intelligence. Communication efforts should be directed to harness the intelligence of your internal and external networks.
Communications efforts among lawyers will be largely client driven. It is clients who have seen the advantages of intranets, extranets, Lotus Notes and other groupware and want their law firms to participate in the benefits they have seen. Those companies want their law firms to be involved in the same processes. As a result, you’re likely to get push from clients for these new forms of communications. The savvy law firms will work with clients to implement these advances in communications.
Law firms need web sites. I’ve spoken to many lawyers about the value of web sites. Sometimes people were willing to listen. Sometimes they never saw the point. As I spent time on the Internet looking at lawyers’ web sites and observing what lawyers are doing, I began to realize that every firm already has an Internet presence, whether they know it or not. On the Internet, right now as you read this article, you and your law firm have an Internet presence that is available 24 hours a day, seven days a week. The presence may be a black hole. The presence may be a web site that embarrasses you. The Internet presence may include information that is inaccurate or incomplete. But that Internet presence is there.
You should be concerned about not just creating an Internet presence but managing the presence that you already have. Marketing on the Internet becomes largely a question of marketing and managing the image that you already have and starting to make improvements and bringing in your online image in line with what you want.
Marketing on the Internet should not be seen as something that takes the place of existing marketing techniques. Marketing on the Internet is just one component of your total marketing picture. Marketing on the Internet does not replace the face-to-face closing of sales. But marketing on the Internet can be funded through other marketing expenses, and directed toward making an effective and efficient uses of your marketing budget. Many law firms have boxes and boxes of brochures gathering dust in their closets. A web site allows you to revise and update those brochures and give them new life on the web, available to potential clients 24 hours a day.
The key to Internet marketing is creating a brand name for your law firm. Traditionally, lawyers have not developed brand names for their firms. You can be aware of hundreds of law firms and never really know what anyone stands for. Some of the firms that use television or other advertising media have begun to create some brand names, but these are largely local. It is rare that you find even a national law firm that is created a specific brand name. Most firms simply consider themselves full-service firms. Developing a brand and using on the Internet gives you access to those attractive Internet demographics which are ideally suited for law firms.
Law firms have used email newsletters, collaborative ventures and web sites to market their practices on the Internet. Unfortunately, some effective advertising techniques being used on the Internet by others cannot be used by lawyers because of existing ethical rules and state regulation. Ethical limitations on testimonials, specific words and phrases, and prior review that made sense in the context of television commercials are now in the process of being adapted to the Internet. The Internet is a moving target and current regulations make it difficult for lawyers to use existing technology. As an example, if there is a state requirement that they law firm keep a record of every advertisement for two years and a web site is deemed to be in advertisement, a web site built that is dynamically generated from a database (a common and useful technique) could not be used by law firm. Limiting the technology a firm can use would give law firms a competitive disadvantage against the Big 5 accounting firms and other consulting professionals.
We are of likely to see substantial changes in the ethical rules relating to marketing of law firms as law firms find themselves increasingly disadvantaged.
Here are some interesting developments that suggest that the Internet is arriving and its potential impact on the legal profession.
1. The Growth of Nontraditional Competition for Law Firms. From the big five accounting firms at the high end of the legal practice to legal publishers like Nolo Press and other providers of do-it-yourself legal kits, lawyers are experiencing the influx of nontraditional competition at both the high end and the low end. A few weeks ago I received in e-mail from Nolo with an offer that if I bought some do-it-yourself legal kits or purchased some books, I would receive a do-it-yourself will form free. For many people, the do-it-yourself legal kits are highly attractive. They see the efforts of the legal profession to shut down legal publishers providing these kits as another example of lawyers protecting their high-priced monopoly. On a regular basis, however, we’re seeing influx of nontraditional competition provided by the Internet.
2. Products Turning into Services. One of the trends we see on the Internet in the service industry is turning of services into products. These products might include books, pamphlets, videotapes, audiotapes and software programs. I received an e-mail from an attorney in Florida who realized that in an estate planning practice you tend to give the same explanations to clients over and over. Examples might include whether to use a will or a revocable trust, basics of the estate tax and other matters. This attorney prepared videotapes of her presentations on those topics and wanted to put the videotapes on her web site and direct clients to view the videos before coming and for an initial consultation. Not only would this streamline the estate planning process, but also it offers the opportunity to turn these videos into sellable products. We are seeing some of the larger firms turning presentations other materials into videos and products and putting them on the Internet, creating the possibility of an alternative income stream.
3. CyberSettle. Talk about eliminating the middleman! If you take the typical insurance company and insurance defense practice, there are a large number of cases on the docket and the sheer volume of those cases makes it impossible to determine which cases are actually worthy of being tried and which can and should be settled quickly. CyberSettle takes an interesting Internet approach. It allows plaintiffs and defendants to agree to submit cases to CyberSettle and submit offers of settlement to CyberSettle. When the CyberSettle web site receives the offers, it compares them. If offers are within 30 percent of each other, the parties have agreed to split the difference and the case is settled. The parties get three attempts to settle cases in this fashion. If none of the offers work out, no offer is revealed. At the end of three attempts, if the case cannot be settled, both sides know that they have a case that can and should be tried. This can be a way to reduce dramatically a large docket of cases.
4. Cherry Picking. We are already starting to see a trend toward cherry picking as law firms look for niche practices or to take lucrative segments of practice away from competitors. For example, a firm might do e-commerce law for a large corporation and strip away highly valuable and lucrative areas of representation from a traditional firm representing that client and leave the traditional firm with only lower-level or low margin work. Another example might be where a nonlegal competitor uses its skill set to provide services that can be highly lucrative, leaving law firms with less interesting work that cannot be compensated for as highly. An example might be litigation support or litigation management.
As you consider these signals that are showing us some of the trends that the Internet is bringing to the profession, what else can we expect?
Here are five key questions I think are especially significant and worth your while to think about and discuss in your firm.
1. Who or what will be the Amazon.com of law? And, why shouldn’t it be you?
2. What is the practice of law? The most disappointing part of the current multi-disciplinary practice debate was the unwillingness to define what the practice of law is. This makes it difficult for both those inside and outside the profession. Outside the profession there is pressure to define the practice of law down to the smallest level possible (rendering written legal opinions? representing clients in state sanctioned courts?). Inside the profession, there is pressure to expand the notion of practice of law to cover everything the law firm might conceivably supply to a client, including business services, consulting advice, technology consulting and more, to sweep more activities into the legal monopoly.
3. Will the law become a commodity? In the areas of bankruptcy applications, simple wills and other legal documents, there is pressure to turn these documents into commodities. If the practice of law becomes the commodity, there will be tremendous pressure to reduce price. The lawyers left in that part of the market that produces commodity items will be increasing driven to high-volume, low-margin practices.
4. Is law really different than any other information business? If it is not, the same pressures that drove Encyclopedia Britannica from being the leading encyclopedia manufacturer and a highly successful business into fighting for its very life within a period of a few years will also apply to legal profession. The answer to this question is that the practice of law is not like any other information business, but lawyers have to understand why it is not, and focus on those differences as they develop their practices. The Internet tends to route around anyone who tries to become a gatekeeper to information. There are aspects of practice of law that involve being a gatekeeper to information. To the extent that you’re involved in the simple gatekeeping of information, you should be concerned what the Internet will mean to you and your practice.
5. What do you do?
Here are ten ideas about what to do:
1. Meditate on the word “reintermediation.” In what ways can you reinsert value into the process in which you are involved?
2. Embrace the Internet. Use the Internet to develop your ideas. As you develop your Internet presence, consider how the Internet changes your business model.
3. Think about what services you can turn into products. Videos, books, pamphlets.
4. Self-cannibalization. This term is used in the technology industry. The notion is that if you are aware that there are areas in which you’ll be vulnerable to competition in the next few years, then you should consider being your first and toughest competitor in those areas. You should be willing to put yourself out of those businesses. This approach has huge implications in a law firm where you may be considering a limiting certain areas of practices and focusing on others.
5. Fast prototyping. Get the idea, get it out there, and try it.
6. Do not fight the last war. Pulling up the drawbridges, relying on state regulation, and enforcing the legal monopoly are bound to be losers in the Internet.
7. Focus on cost-cutting, both for you and for your clients. The Internet gives you some ways to save postage, long distance and other costs. Focus on ways to save the money. More important, focus on ways to make it cheaper and easier for your clients to work with you. By reducing the costs the clients have associated with using your for legal work, you make it harder for your clients to leave you to go to another firm that cannot provide the same efficiencies.
8. Turn the kids loose. The Internet is largely a young person’s game. There is now a generation of people who will have grown up with no experience other than that of having the Internet available. They simply see a different world. Recent law school graduates understand the implications of the Internet and how to live in its environment. Law firms must be increasingly willing to turn over portions of their businesses and the growth and evolution of the firms to the younger generation of lawyers.
9. Gregory Bateson has said you can’t live without an eraser”. Be willing to try things, take a hard look at them and admit your mistakes. Then take an eraser and try again.
10. Wayne Gretzky has said “you miss 100 percent of the shots you don’t take.” The Nike commercials say “just do it.” In the Internet era, if you have opportunity, you must seize it. Don’t get involved in the bureaucratic situation of constantly planning and never implementing.
The conclusions are simple, but the efforts involved and the implications are profound. Treat the Internet with respect. Keep your focus always on the clients. Innovate, collaborate and reintermediate.
In my thinking, the most important and unintended consequence of the Internet era and the greatest impact of the Internet on law firms will be the growth of meaningful diversity. For a half-dozen years, I was a member of the steering committee of the minority clerkship program in St. Louis. It is a joint effort to increase minority participation in larger law firms by providing summer clerkship opportunities for minority students. A lot of smart and creative people were involved in this process. When we look at the actual results we achieved, I think we would say that were disappointed with the results. The paradox of the Internet is that to be successful in this increasingly global and diverse marketplace, you must have an increasingly global and diverse law firm to respond. As an unintended consequence of technology, we are very likely to see firms making steps to diversify themselves in meaningful ways not through mandated programs or well-intentioned efforts, but because that is what it takes to survive in the Internet era. This diversification will be one unintended, but welcome and overdue, result of the Internet revolution in the practice of law.
Finally, the choice is yours. Gutenberg stands before you and makes you an offer to invest in his book, his printing press, or Gutenberg.com. What is your choice? Now, apply that lesson to the Internet.
[Originally posted on DennisKennedy.Blog (http://www.denniskennedy.com/blog/)]
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