Love it or loathe it, we are living in the age of the sharing economy. Long-standing vertical leaders have fallen like dominoes. They have been marginalized by new, tech-enabled entrants that deliver “faster, cheaper, better” access to goods and services. Uber, Airbnb, and Zipcar, are three among a growing list of disruptors. These companies have a common model: harness technology and social media to provide information that optimizes resources through the redistribution, sharing and re-use of excess capacity in goods and services.
Paradoxically, the sharing economy disruptors have gone back to basics: “give the people what they want,” creating a “win-win” between provider and consumer. They have achieved this by cutting out incumbents’ costly infrastructure — and monolithic delivery mechanism — replacing it with a peer-to-peer marketplace. They have successfully tackled highly regulated industries and have used their widespread market acceptance as a defense to regulatory blowback from the growing list of deposed incumbents. And they have set aside an ample war chest for legal expenses.
Sure, “the house” takes its cut in shared business models, but who cares when provider and consumer are both happy?
“Why own when you can rent?” has been taken to the next level. Now, it’s “Why rent when you can share and have it when you need it?”
And to those who think the sharing model is low-end stuff, consider that in preparation for her Super Bowl appearance, Beyonce bunked in a $50 million dollar Airbnb listing for $10,000 per night. Even the 1 percent is getting in on this.
But would the sharing economy work in the legal sector? And could it work in the corporate segment?
Most lawyers would say “No way!”— it’s one thing to create a new marketplace for cars and residences and quite another for legal services. But as Lee Corso, the former coach turned sports broadcaster says, “Not so fast, my friend!”
Why Legal Delivery is Ripe for the Sharing Economy
The delivery of legal services is an ideal candidate for a sharing economy model. Consider that:
- Legal delivery has a significant distribution problem — thousands of unemployed and under-employed lawyers and millions of potential new clients (the access to justice crisis).
- Legal delivery is begging for a “better, faster, cheaper” alternative to the usual suspect providers.
- The traditional law firm partnership model and its cost escalators are finally showing serious stress cracks.
- Law firms no longer have a monopoly on what’s needed to deliver legal service. Legal delivery now requires legal expertise plus business process and technology.
- Law firms provide legal expertise but are generally deficient in the other delivery components.
- We are living at a time when 1040 workers are being replaced by 1099’s.
- Many younger workers focus on work-life balance as an important work consideration, making sharing companies more appealing than traditional law firms.
- Technology has significantly reduced the need for expensive office space.
- Legal re-regulation has been successfully undertaken in the UK and other advanced economies in response to public demand. And it’s working.
- The public is not enamored of lawyers, especially their sky-high cost.
The Sharing Economy and Corporate Law
Many corporate lawyers — especially those working in big firms — still cling to the notion that even if their work is not “bespoke,” it’s damn special. Maybe yes and maybe no. But that misses the point.
The real issue is the structure by which legal expertise is delivered. Data confirms that law firm size affects rates; larger firms tend to charge more than smaller ones. That begs the question: are large law firms and their cost-inflating partnership model, expensive real estate, and infrastructure necessary in the age of the sharing economy?
With the exception of a handful of brand-differentiated firms that are price insensitive (like other elite goods and services), most corporate firms are experiencing significant cost pressure. It’s fair to ask from both the client and elite lawyer (not firm) perspective: “Who needs large firms and their partnership structure?” That’s one explanation why so many well-known lawyers have recently left their firms to start boutiques. It’s also a reason why legal networks comprised of smaller independent business law firms are showing signs of becoming a potent market force.
And clients now have the option to cherry pick individual lawyers from firms and pair them with lawyers outside their firm that are best suited for a matter or task. Don’t think this can happen? Top plaintiff class-action lawyers have worked this way for years. Not only have they cherry picked talent to form ad hoc teams, but they have also tapped into technology and process as few corporate firms have. Translation: Legal expertise is but one necessary skill set in legal delivery, and this has changed the composition and dynamics of legal delivery.
It’s the lawyer, not the firm. And technology and process exist to enable lawyers to deliver their services from models other than the partnership one that escalates cost, focuses on PPP to the exclusion of most everything else, and is short-selling the next generation for short-term profit maximization. Where’s the client in all this?
So, could the sharing economy model be applied to corporate legal delivery work? Of course it could! Let’s consider a few forms it could take but first repeat — one more time with feeling — that legal delivery is no longer exclusively about selling legal expertise. It’s equally about technology and business process. And here is where there is great opportunity for new model providers and a concurrent existential threat to all but a handful of elite firms.
If one were to take the legal expertise resident in the traditional model (f/k/a The AmLaw200) and put it into a new, more specialized and networked structure that has technological and business process prowess, it would be a potent combination. The result: reduced cost, customer-centric approach, and risk mitigation. Why’s that? Because people would assume roles and perform tasks they were trained for. Technologists and process experts would also have an equal seat at the management table, ensuring that legal delivery — as opposed to practice — is managed as a business. And metrics — both client and internal — would gauge efficiency and performance.
Legal delivery is not solely about lawyers anymore.
Lawyers are not going out of business. But the traditional partnership model might. It’s not lawyers that are under attack so much as the traditional partnership that, until recently, was the only game in town.
If neurosurgeons can undertake procedures remotely, collaboratively, and with paraprofessionals, then lawyers can work that way, too. And those neurosurgeons leave the business side of health care delivery to other professionals trained in technology and management. Why should lawyers operate differently?
Lawyers should take a lesson from the taxi industry: Listen to your customers, because you may not always be the only game in town.
This post was originally published on Bloomberg Big Law.