Mark Cohen opens Law in the age of the customer with the statement: This is the age of the customer.
The asymmetrical advantage that sellers long held over buyers is gone. Consumers have access to market information and choice that has transformed the buy-sell dynamic. Social media provides them with a reference source and a voice. The balance of power has shifted from the supply to the demand side. The customer is king in the digital age.
Leading companies across multiple industries are engaged in multi-pronged efforts to align with customers. They are upskilling their workforces; investing in technology, people, and processes; and reimagining traditional delivery constructs to improve customer service, experience, and outcome. Digitally advanced companies are mining and analyzing data to refine target markets, better understand consumer buying habits and profiles, and track competition. They are committing capital to shift risk from the buyer to the seller and updating service and product offerings to meet customer needs. They assiduously track internal performance and monitor customer satisfaction. Data, sometimes called “the new oil,” promotes a proactive mindset and advances rapid, informed decision making.
Customer alignment is the foundation upon which successful businesses are built in the digital age. It is a holistic compact between provider and customer, a melding of buyer/seller objectives and outcomes. This is the new buy/sell paradigm and the reason why it is the age of the customer.
Where is law in this process? Unsurprisingly, it lags other industries and professional services. The principal cause is the divide between the legal profession and the industry. How this tension is playing out in the marketplace provides insight into the pace and scope of legal transformation as well as the contours of law’s future.
The Profession and Business of Law
The legal sector has two parts: profession and industry. The profession is comprised exclusively of lawyers. The industry is a trinity of legal, technological, and business management expertise. There is a cultural divide between the two; the profession is precedent bound and inward-facing. It is rooted in “how things have always been done” and is generally resistant to change. The industry is driven by a growing market void for reimagined legal delivery and customer demand for delivery models with the capability and scale to provide bundled professional skillsets proactively competently, efficiently, predictably, and cost-effectively.
The profession is tenaciously clinging to legacy regulatory, structural, economic, and hierarchical models. Lawyers have relied on self-regulation to eliminate competition and to blunt the impact of megatrends that have disrupted multiple industries. This parochialism explains why most in the legal establishment—law schools, partnership model law firms, in-house legal departments, and the press—resist material change and pay lip service to it by operating at its margins.
Professional resistance to ‘non-lawyer’ ownership and engagement in legal activities—as lawyers define it— is alive and well even as lawyers tout “partnering with clients” and “innovation.” The American Bar Association (ABA) has nixed efforts to re-regulate the industry since the turn of the millennium. The reforms sought to relax current ownership rules that fail to recognize the distinction between legal practice and the business of delivering legal services. So too has the ABA and its dues-paying lawyer membership maintained rigid control over an archaic, one-size-fits-all core curriculum for law schools even as student outcomes have been decried by the Department of Education. These are two of a legion of examples of professional resistance to industry change and its denial that law is no longer solely about lawyers.
There are many reasons for the profession’s resistance to change—financial, structural, and cultural to cite a few. Lawyers are trained to produce the best possible legal work product no matter its materiality or client value. They are taught not to make mistakes and to identify and avoid risk, not to balance risk factors, be proactive, and deliver creative solutions. Doctrinally-skewed legal training provides a sound foundation for critical thinking that can be leveraged in many ways, but few lawyers currently possess the skills and training required to engage in the business side of legal delivery. Law schools remain diploma granters, not learning centers for life. Upskilling is virtually nonexistent among lawyers.
Law’s skills gap has led to the rise of legal service providers whose ranks are populated by licensed lawyers and allied legal professionals—technologists, project and process management experts, data analysts, risk managers, design thinkers, cybersecurity experts, and a slew of others. They engage collaboratively in multidisciplinary teams, sometimes with other providers/resources in the supply chain. Their mission is to provide solutions to business challenges that include legal as well as other risk factors. They are trained to quantify risk, the customer’s tolerance, and the risk: reward ratio before rendering a recommendation. Their decisions are data driven and they invest heavily in technology to streamline internal efficiency and to promote closer customer alignment.
A handful of tech-enabled, process-oriented, data-driven, agile providers are filling the market void created by practice-centric law firms. They are prompting legal consumers to consider whether, when, from what delivery model, and at what price point licensed attorneys are required. This is new to law but not to other professional services. Medicine, for instance, experienced a similar metamorphosis from profession to profession-within-an industry decades ago.
Law’s Taxonomy Reflects Its Guild Hangover
Why do lawyers bristle when clients are called customers? Are legal buyers clients, customers, or both? Does it matter? Short answers: legal exceptionalism; sometimes clients and always customers; and yes. Law is locked in a culture war pitting the profession and the industry.
The client/customer distinction is more than fodder for semantical debate in a cheroot-filled drawing room. The blurring of the client/customer line results from the ongoing transformation of the legal function as well as how, by whom, from what model, and at what cost legal services are delivered. Law is undergoing a convergence of systemic changes that include: the erosion of lawyer hegemony in legal delivery, multidisciplinary practice, technology, process, data, and capital utilization, new delivery models with corporate structures and customer-centric models, and a shift in the legal buy-sell balance of power from provider to consumer.
The profession now functions in a marketplace with allied professionals, paraprofessionals, and machines. Lawyers are part of a supply chain, and law firms are no longer the only game in town. Legal expertise is one in a trinity of core delivery components that also include process and technological. This expansion of delivery elements requires new skills that include risk management, data analytics, project management, and design thinking. The practice of law—differentiated legal expertise, experience, skills, and judgment— has been subsumed by the trillion-dollar legal services industry. Practice—as it was once defined by lawyers— is shrinking. The business of law—everything else required to deliver legal services— is expanding rapidly.
The legal function and legal delivery are being reimagined and refashioned. There is a marked increase in the volume and complexity of work migrating from law firms to in-house departments, agile talent management companies like Axiom, and a handful of enterprise legal service providers that include UnitedLex and the Big Four. A common element of each of these provider types is that their lawyers collaborate with allied professionals, paraprofessionals, and machines.
This does not mean—as many lawyers suggest—that the profession will be gutted. The unique characteristics of the attorney-client relationship, notably confidentiality, privilege, and the rules and ethics that are the cornerstones of legal practice remain intact. What’s changing are the models, skillsets, capital investment, data, and other tools and resources required to improve legal delivery.
Several large law firms have recently launched and/or expanded ancillary services to preserve revenue, protect client relationships, and offer end-to-end capability. These are legitimate reasons from the firm perspective, but that is no longer what matters—legal buyers do. Law firms are practice-centric organizations; that is their core business. Legal service providers are technology and process organizations with different organizational structures, management, expertise, workforces, DNA, agility, access to capital, and customer dynamics than law firms. This is not to say that law firms cannot succeed in their efforts to deliver legal services, but the jury is out. Sellers and buyers of legal services confront a common question: “Who should do what?” This is the seminal issue that is reshaping the legal industry.
Record-setting capital investment in a handful of customer-centric providers is a bellwether of legal consolidation, platform models, continued market share shift, and scalability. Providers that are differentiated, scaled, capitalized, and aligned with customers will dominate the legal marketplace. That’s who customers and clients will align with.
Mark Cohen is a lawyer, law professor, legal innovator and strategist, and founder of Legal Mosaic.
Mark says of himself “I write about changes in the global legal marketplace”.
Mark is a member of the Program Board and Teaching Adviser for Australia’s College of Law new Master in Legal Business. Mark is Teaching Adviser with Teaching Fellow Alison Laird for two subjects related to innovation and entrepreneurship.
Mark Cohen first published Law in the Age of the Customer in Forbes on September 24, 2019.
Words matter: Customers, not Clients by Patrick Lamb re-posted on Dialogue on September 24, 2019