Inflection point approaching: will your firm be a casualty?

By Ryan McClead

Last Monday in Las Vegas, Scott Klososky gave the opening keynote of the 2013 International Legal Technology Association Conference. In his talk he touched on a number of issues relating to the future of technology and law firms, but there was one point I felt he did not quite emphasise as strongly as he should have. He talked about inflection points within industries and how they conform to a common pattern. The industry leaders are on top of the world, making money hand over fist, when a competitor with a new business model appears on the horizon. The leaders can see their competitors, they are aware of the new business model, but as long as they are making money, they do not believe they need to act. After all, they think to themselves, this competitor is not providing the exact same service that I am, they are merely a niche provider providing a niche service. Invariably the market leader is absolutely correct, until they are not. They continue making money right up until they do not.

Klososky gave several examples that are familiar to most of us: Blockbuster and Netflix; Barnes and Noble, Borders, and Amazon; Blackberry, Motorola, and Apple. In each case, the market leader has a large investment tied up in the status quo and rather than innovate they allow a niche market competitor to steal their market leading business.

At this point in his talk I wanted Klososky to say, “OK. Now everyone count off and every third person raise your hand. Now look around at all of the raised hands and say goodbye, because in a few years, not only will those people not be here, but their firms will cease to exist.” Of course, he didn’t say that and I don’t have any data to back up that assertion, but an action like that could have made his point more effectively.

Blockbuster saw what Netflix was doing and didn’t try to change until it was too late. Netflix took them down by alleviating the pain points for Blockbuster customers, specifically late fees and driving to the store. Since then, Netflix has successfully undermined their own mail-order business by moving to a streaming service before anyone else could steal their customers. Netflix has stumbled along the way (no one is saying innovation is easy), but despite their slip-ups Netflix has managed to maintain their market leading edge by understanding exactly what business they are actually in. They realized that people are paying to have video content delivered, not little plastic discs. And they wrote off their heavy investments in envelopes and postage and invested even more heavily in bandwidth.

Many law firms pay lip-service to being in the legal results business, but they still run their business as if they are selling legal services by the hour. They maintain expensive office real estate and they manage matters by instinct rather than proven project management techniques. A competitor – probably a niche player that you currently believe provides only a niche service – is going to eventually provide your clients with the legal results they want while alleviating the pain points that your firm believes are just a part of doing business. Or, you can beat them to it. There really are only those two options. While we can argue about whether the legal industry inflection point is going to happen tomorrow, or next year, or a decade from now, it will happen. And when it does, your firm will either be part of its cause or one of its casualties.

Filed Under: Practice of Law

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