Competitors or Frenemies?

[This originally appeared at Law Technology News, June 17, 2014.  It was written for the Legaltech(r) West conference on June 24, 2014, for a session focused on small firms.  The text has been modified to embed the footnotes as hyperlinks and make other minor tweaks.]

The marketplace for legal services has plenty of space for automation of commodity information and services and more typical solo and small law firms.

The law makes things knowable. A core principle of the rule of law is that it brings certainty to people’s actions. This legal certainty enables commoditization of some legal services. It also underpins the need for custom legal work because the law needs to be matched to the facts. Both custom and commodity work can exist side-by-side, as can online newcomers and small law firms.

And that’s “custom”.  I don’t use the term bespoke although it has become au courant as a description of customized services. Since it is as pompous to use Latin in these days of plain speaking, I will stick with normal North American English to describe information and services that are not commoditized.

It is Not a Zero Sum Marketplace

Technology appeals as a way to deliver commoditized legal services. Technology, and particularly Web-based services, that can scale and blanket regional or national jurisdictions offer a number of possibilities.  The assumption is that, by automating processes and certain common practices, lawyers will no longer be needed. This is true, so far as it goes. More importantly, there is a huge market of under- or un-served consumers who do not use lawyers for the very services that are now being automated.  These numbers are hard to pin down but, in certain practice areas like family law, may be a significant majority of potential clients.

Over half of all Americans do not have a will, according to a Martindale-Hubbell survey in 2007 and a Thomson Reuters Findlaw survey in 2011. Bar associations all across North America may be making a push for access to justice but the reality is that market is up for grabs. If any of those people who will otherwise die intestate end up getting a will from a service like Legalzoom.com, that isn’t taking business away from the solo or small firm lawyer. Similarly, someone who uses Nolo’s Estate Planning Basicsavailable at nearly 2,000 libraries for free – can avoid the legal marketplace altogether.

That a Legalzoom will comes with the potential of legal advice suggests a couple of things. One is that people may still want a lawyer involved in a transaction even if it is otherwise a commodity. Some customers want more than just the product.

Just as small law firms should be thinking about doing what are essentially form documents – if that’s what the client wants – services automating these documents can upsell. The other is that lawyers who want to focus on the commodity work can hang up their own shingle or fold and work for a document service.

If the commodity/custom discussion was truly either/or, how could we explain the difference between Zappos and Nordstrom? I can buy Dr. Marten’s “1460” boots at either place. But the experience isn’t necessarily the same and the marketplace allows me to choose.  Cost may be the only driver.  But what if I need a particular size, or want to understand the minor variations in other, similar boots.  Zappo’s has an incredible reputation as an online store.  Nordstrom is the gold standard in customer service.  There are benefits to either choice.

Breathless Change and the Flyover States

Robots. Artificial intelligence. App-ified law. There is a skew in discussions of legal technology that fails to take a national perspective on the use of technology by clients and legal professionals. There are services and information delivery that may work well when directed at a large urban market, but that are difficult to adapt in smaller, rural ones. When all of the people involved in the discussion of automating commodity work come at it from a particular perspective, there can be a breathless quality to the possibilities without regard to the challenges.

Lawyer web marketing is a great example of this. Not all lawyers need a Web site. Surveys by the ABA and Thomson Reuters Findlaw that looked at how clients find lawyers see that friends, family, and personal relationships are the most common ways. The Findlaw survey found Internet was the most common – which may not be surprising, given its business – but when you aggregate friends, family, and previous relationships with lawyers, it moves into second place.

Times may be changing. Clients are using Web search more often to identify lawyers so failure to have a Web site, even just brochureware, may limit a law practice’s growth. But those who find lawyers using Web search were, in the ABA survey, in the lower income brackets.  Lawyers may have Web sites but unless they are also priced for those who are searching for legal assistance, there may not be a meeting of the minds.  However, online legal information providers should be able to tap into that market if there is a correlation between lower incomes and under-served populations.

The aging of rural lawyers is creating a challenge in those more remote areas for legal services. On the one hand, online form delivery could be ideal to this audience. On the other, community ties and family connections that drive lawyer selection may keep the business with the local bar.

Reality is a Blend

Technology has the possibility of further reducing legal jobs. One might argue that Microsoft Word and document preparation improvements have eliminated jobs in small law firms since the experienced lawyer can accomplish more. Simple technology – better naming conventions, inexpensive or open source desktop search tools, networked file storage locally or in the cloud – can enable better delivery of legal services to clients by small firms and solos.

Probono.net’s LawHelp.org site is another example of the mixture of automation and people, using the A2J Author and document automation. Legal aid groups have developed the content in states and provinces across North America. Access to justice community groups and courthouse law libraries have connected self-represented clients to the site so that they can help themselves.

The competition will be happening at the fringes. The self-help end of the market can turn to free or commodity services like LegalZoom or RocketLawyer or Nolo or other competitors that are sure to emerge over time. Those clients may not have selected to use a lawyer in any event. As the commodity services insert lawyers into their offering, they start to provide small law firm services. Not surprisingly, they are then investigated for the unauthorized practice of law, in North Carolina and other jurisdictions.

Technology. Price. Income. Geographic location. Current legal issue. Previous legal issues.

All of these will factor into whether clients will use emerging automation tools on commodity work or select a legal professional – as we see lawyers joined by regulated paralegals and, in Washington, Limited License Legal Technicians, in providing personal legal services – to assist them.

Where’s the Small Firm Value Add?

We can easily see how an online service provider can edge into services that small law firms have provided in the past. The question becomes, then, what value does the small firm provide that distinguishes it when commodity work is involved.

I recently heard a presentation by a lawyer who said that it was “physical presence”. By having somewhere a client could go and interact with a lawyer, a small firm could differentiate itself from online tools. There’s a cost to a physical space. It’s the rent, and the staff support, and all of the other things that an online service does not need to replicate to compete against thousands of small law firms.

These overhead costs can be critical. If there is one thing that is creating friction, it is the price pressure law firms are experiencing. When work is commoditized, online or not, the client comes in the door with an expectation of the cost. The Axxess firm’s partnership with Walmart Canada is an example of monetizing this expectation. They can generate a will for $99 using their proprietary software, have more flexible hours, and are easy to access. But they’re up front that they wouldn’t handle a will in every case: capacity issues, undue influence, and so on.

A client who hears about $99 wills at Walmart may wonder why her lawyer can’t provide the same service at the same price. It’s a fair question. If I can buy the same pair of boots at two different stores, what explains the difference in price?

I’m not persuaded the physical presence is the differentiator. I think the client relationship is one of the few things that a small law firm can provide that is harder to reproduce in a commoditized, automated environment. Even for users of the Lawhelp.org forms, there are often legal aid lawyers or duty counsel available to assist in getting the person into the legal process. Unfortunately, many lawyers fall down when it comes to the basics – like strong client communication about the process, as evidenced by professionalism complaints – and so something so obvious as managing relationships may actually be a challenge for many lawyers.

Change. Or Don’t.

There are firms that have gone online and added commodity, unbundled options to their other legal services. Considering that some lawyers are still on Windows 98 and XP, this may seem a stretch of the imagination. But clients of Linda Long in Alberta or Rachel Rodgers in New Jersey can experience online service that mixes unbundled resources with typical legal representation.

Small law firms have a variety of options to shift their practice to better accommodate client expectations for online access and convenience. Companies continue to build out law firm client extranets, if lawyers do not already have them as part of the firm’s case management system. There are still simple options: sharing secured cloud folders on a service like Dropbox or Box to enable clients easy access to their files, as a lawyer in Manitoba does.

Lawyers who focus on creating the relationship and maintaining it can find that their subject matter expertise extends beyond what they do themselves. There may be times that, for a simple document, it is better to send the client to an online service. This is not very different from the referral network that most lawyers create during their practice.

They can also adopt automation for their own practice efficiency. This may enable them to deliver better service, to revisit their business and pricing model, even to differentiate the type of information they provide their client.

The impact of commodity, online legal service providers will vary widely with the small law firm practice. Law practice is evolving for everyone and this impact is just part of that ongoing growth. Online legal services offer some remarkable opportunities for reaching those who are currently not using lawyers. The commoditization can bring a sense of certainty to everyday lives that is missing otherwise. Small law firms can continue to practice as they have, meeting their clients needs. Automation and commoditization are unlikely to be the cause of the demise of the small law firm.

[This paper was developed for the following conference session and so it should be read within that context.]

Competitors or Frenemies?  Session Description, Legaltech(r) West Coast 2014

Traditional small firms that serve family law, wills and trusts, personal injury, and small business clients often struggle to survive. WIth the emergence of do-it-yourself options for consumers, it can be difficult for small firms to prosper.  Is it time to rethink the approach? This panel will look at new options for small firms that capitalize “commodity” opportunities for routine work.  Has the day come that a small firm lawyer might actually encourage clients to use self-help tools? Will small firm lawyers act more like collaborators with their clients? Or like concierge?  Will they deliver “better, faster, cheaper” services by guiding their clients, and only turn to traditional lawyering tasks when they become “bespoke?”

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