SPECIAL ADVISORY ARTICLES
The Seeds Of Competitive Disruption
Today there is a new reality in which increasing numbers of legal departments, constrained by tight budgets, are demanding cost concessions and predictability in their bills. That shift has brought with it a groundswell of new entrepreneurs who have responded to these changing demands by starting practices or businesses predicated on delivering services in the most cost-effective way possible and disrupting the traditional model of the larger law firm. What many find surprising is that these businesses are often financed and managed by non-lawyers.
There is a tendency in some firms to equate all of this to simply more attention on alternative fee arrangements. This tendency fails to comprehend that the ground is moving. It is particularly difficult to disrupt any industry where there is a healthy active competition that drives a lot of change and innovation. The best target is a sector with large complacent firms resting on prosperous margins earned by firm leaders who feel safe, and are perhaps too secure to risk innovation.
According to Clayton Christensen’s 1997 classic book, “The Innovator’s Dilemma,” new competitors typically start wooing a firm’s least profitable clients with a service offering that is cheaper or one that costs the same but boasts innovative features, or is more easily customized. They then gradually bite off bigger chunks of a market as their offerings become better known.
Suffice to say, the legal profession is changing in dramatic ways, including the creation of new legal businesses that rely upon technology and process design to solve legal problems that have traditionally been handled by lawyers. As one of my colleagues used to say, “the huge advantage that law firms have is that they only have to compete against . . . other law firms.” But that is not the case anymore!
What follows is a brief profile of 20 of these competitors, with a major presence in the U.S. that are growing, disrupting traditional law firms and taking away work that they would normally have expected to handle. You may find it useful to pass this along to the partners in your firm such that they might begin to get a better appreciation of some of the forces at work in their marketplace.