A recent article in Inside Counsel magazine, Boston corporations demand changes in law firm billing, declares in its subhead that "A major shift is taking place in Boston’s legal industry as more corporations shop for legal services based on price, not brand."

What took them so long?

Clients have always had the power to do this. The 2008 recession gave them the institutional wake-up call and (you'd think) the motivation to use their buying power to effect rational change. Yet they didn't.

I've never understood why they didn't just tell all their law firms, "OK, the gravy train is over; we're no longer willing to pay exotic fees and finance seven-figure profits-per-partner for work that's necessary, perhaps even important, but far from exotic. Here's how it's going to be from now on."

Law is a mature business category, which means there are more sellers than buyers. In every other business category, that has translated into increased competition, decreasing prices, and increased innovation. Yet, corporate law clients have continued to tolerate a grossly inefficient guild system, cost-plus hourly billing, rate increases, and operational recalcitrance on a massive scale. The entire law business model has operated -- and charged -- as if every matter was of high impact, requiring painstaking craftsmanship by scarce artisans, with costs to match. The 10,000th real estate lease was handled just like the first; there's only limited re-use of previous work product. 

A recent article about legal process outsourcing posed a pointed question: If computer intelligence has reached the point where it can defeat a chess grand master, and is nearing the point where it can drive a car on a CA freeway, what support is there for the argument that it can't in the not-too-distant future replace a high percentage of lawyers' work product? 

When LPO began, lawyers scoffed, saying it was suitable only for low-level tasks such as tedious document review and other grunt work. Over the past 10 years, we've seen LPO vendors move up the value chain to where some are now doing pretty sophisticated work. Business history suggests they'll continue that functional ascension.

For a cautionary tale, look no further than the consumer electronics industry, where offshore manufacturers started out as low-cost OEM suppliers, reducing component cost for US manufacturers. Then they evolved to making subassemblies, then entire white-label products. They recognized that the profitable top of the value chain was in the branded-consumer-goods end of the business. Now, former OEMs such as LG, Lenovo, Haier and others have displaced longstanding US brands such as RCA, Magnavox, etc. 

As Gandhi is quoted about established authority's response to new, disruptive thinking: "First they ignore you. Then they ridicule you. Then they attack you. Then you win." 

In just the past few months, legal industry conferences have featured themes like "Disruptive Innovation" and other titles usually seen in the Silicon Valley lexicon. In fact, Silicon Valley thought leaders are increasingly the keynote speakers at these future-of-the-law-biz conferences.

Change is coming. Will you initiate it on behalf of your clients, thereby aligning yourself with their interests, or will you be the firm and lawyer that clients must drag, kicking and screaming like a three-year-old, down the path to their future? If the latter, how long do you think they'll tolerate that before they seek your replacement? Once they seek, it will take very little time to find it.

Mike O'Horo

One longstanding practice that clients will no longer tolerate is the pitch meeting. Invest six minutes to learn what legal service buyers have to say about pitches, and Why You Need to Market and Sell Differently