It’s budget season for General Counsel, and that means expanded portfolios, stagnant or shrinking budgets, managing new risks, and heightened C-Suite expectation to defend the enterprise and advance business initiatives. Corporate counsel must “do more with less,” and that means they must find faster, better, more cost-effective, and smarter ways to get work done and free up internal resources for high-value tasks.
The challenge is clear, but what’s the solution? Short answer: deploy the appropriate resources for the task—human and/or machine. This is not as easy as it sounds, especially because it involves rethinking entrenched notions of how work gets done; taking on sacred cows and long-standing relationships; appreciating the distinction between legal “practice” and “delivery;” vetting new provider sources; evaluating not only legal but also technological and business expertise; rethinking value from a risk perspective; and reconsidering when, how, at what price, and from what supply source(s) lawyers are needed– and when others can do the job.
Legal delivery has become a three-legged stool supported by legal, technological, and process (operations) expertise. Providers—corporate legal departments, firms, law companies, and other providers—do not have differentiated expertise in all areas. That is why collaboration is critical to move the customer needle.
How We Got Here—From Guild to Marketplace
The legal industry is transitioning from guild to marketplace. When legal delivery was exclusively about lawyers and dominated by firms, there was little need for differentiation or collaboration. The profession operated from a self-regulated cocoon of ‘lawyers and non-lawyers.’ This spawned several industry myths: lawyer exceptionalism; all ‘legal’ work—as defined by lawyers– must be performed exclusively by them; legal work is ‘bespoke’; every case is unique; and lawyers are uniquely qualified not only to deliver legal services but also to procure them. It also spawned a ‘zero-sum’ ethos; firms handled matters from start to finish and rarely collaborated externally—even with in-house counsel.
These myths remained largely unchallenged for decades because lawyers controlled all facets of the legal ecosystem– regulation, education, licensure, delivery, and buy-sell in the corporate segment. Absent competition, and with little grousing from consumers, legal delivery remained monolithic and static–albeit with internal, pedigree-related stratification. Law was an insular world characterized by conformity, adherence to precedent, labor-intensity, leverage, and preservation of the status quo. Firms focused on input—hours and origination– and applied a brute force, labor-intense approach to all tasks and matters regardless of client value. ‘Budget’ was a foreign term, and law firms rationalized their ‘scorched-earth’ approach by conflating it with ‘practice excellence.’
Law firm hegemony waned with the confluence of the global financial crisis, rapid advances in technology, globalization, and a reboot of the buy/sell dynamic of goods and services. Legal practice—differentiated expertise, skills, and judgment possessed by some lawyers—remains in high demand and commands premium pricing. But much of what was deemed “practice” is now regarded as legal delivery/the business of law. This involves different expertise, skills, delivery and cost structures. Legal delivery is not solely about lawyers anymore.
Legal “service” is substituting products for services, automation for labor-intensive repetition, and data instead of speculation. Consumers—not lawyers– determine what is “legal,” whose expertise is required, when it is needed, from what structure/business model it is delivered, and at what price point it is valued. Practice expertise is one piece in a legal mosaic where technology and process have recast delivery, reframed customer expectations, and redefined “legal expertise” and when/from what delivery model it is required.
A Functional Definition of “Differentiation” in Law
Steve Immelt, CEO of Hogan Lovells, and I discussed law firm differentiation and collaboration recently. Steve divided differentiation into three parts: (1) practice—expertise, skills, and judgment; (2) delivery capability– the effective deployment of legal expertise, technology, and process to solve client challenges; and (3) customer satisfaction—achieving results and providing an excellent consumer experience that promotes trust. Steve noted that practice differentiation is shrinking and largely confined to “bet the company” matters. That means a firm’s unsupported claims of “elite legal talent and top-notch legal work”—without more—will no longer cut it.
For firms to be competitive, they must also possess—or collaborate with– legal operations teams that provide transparent, efficient, real-time accessible, cost-effective, price-predictable, expert legal delivery capability. Firms have three options: build, buy, or rent (collaborate). Collaboration is the best option for most firms because of financial, temporal, and cultural reasons. The remarkable growth of CLOC and ACC Legal Operations and well-capitalized, tech and process-savvy law companies—like Elevate, UnitedLex, and Axiom—evidence the industry’s newfound focus on legal operations and “the business of law.” This helps to explain why demand for law firm service is waning at a time of increased demand for legal services.
Steve also stressed the importance of customer service and measurable results. This is another area where most law firms are faltering. Old-fashioned customer service and measurable results are key elements of differentiation not only for firms but equally for in-house departments and law companies. Law firm reliance on “practice excellence,” pedigree, and reputation—without more—is no longer sufficient to be competitive. Likewise, firm focus on profit-per-partner (PPP) rather than net promoter score (NPS) has led to client disaffection. Clients demand expertise, service, value, and results that integrate delivery and practice excellence, and that applies to practice and delivery. Collaboration and differentiation are no longer elective courses.
Examples of Marketplace Collaboration and Differentiation
Traditional notions of corporate legal departments, law firms, and law companies are being reshaped by collaboration and differentiated delivery capabilities. It’s worth noting a few examples because they provide a glimpse around the curve.
NetApp, a Fortune 500 storage and data management provider, and Elevate, a law company, have partnered to create and deploy an integrated, seamless enterprise delivery capability that sources needed expertise, resources—human and technological, and geographical coverage. Connie Brenton, NetApp’s Senior Director of Legal Operations and CLOC Chairman of the Board, says the impetus for the collaboration extends far beyond cost-cutting. Connie notes the Elevate enterprise partnership “drives efficiency, transparency, risk mitigation, and value to NetApp’s legal department and the enterprise.”
The NetApp/Elevate relationship has expanded over time, due to the virtual absence of Elevate turnover, its geographical nimbleness and reach, sustained performance excellence, and cultural fit. Elevate provides onshore and off-shore support to NetApp and expertise that spans the gamut of repetitive work to higher-value tasks. The relationship has resulted in increased efficiency for NetApp as well as millions of dollars of cost-savings. It has also freed-up the NetApp legal team to work on other mission-critical enterprise matters.
NetApp GC Matt Fawcett explained that “We constantly seek to improve service to our internal client, and that includes tapping into the best resources available. Elevate provides us with a comprehensive range of legal service capabilities and a demonstrated ability to mesh seamlessly with internal resources. Over time, Elevate has become an integral part of our team.” Elevate provides a full range of solutions including consulting (legal spend management, operations), technology (analytics, rate wizard, project management), and services (e-discovery and document review, contract management, compliance, IP). The breadth, depth, and seamlessness of the NetApp/Elevate collaboration exemplifies an emerging collaborative delivery paradigm that helps solve the “more with less” challenge.
Elevate has also collaborated broadly and deeply with top law firms including its recently announced flexible lawyering service partnership with Hogan Lovells. This new service to Hogan Lovells – powered by Elevate – means that the firm can focus on what it does best, knowing that Elevate will deliver and run a high quality, flexible lawyering business for them (comprised of the firm’s alumni/ae, among others) from day one. At the same time, firm clients benefit from Elevate’s delivery expertise, quality resources, and cost structure.
As with the NetApp relationship, Elevate’s partnering with Hogan expanded from its initial success. Hogan had previously selected Elevate’s Cael Project as the law firm’s Legal Project Management tool. It was natural, then, for the firm to tap Elevate again when they wanted to extend a full-scale flexible lawyering service to their clients. Stephen Allen, Hogan Lovells’s head of legal service delivery, succinctly summed up the Elevate relationship and its implications: “The key thing for me is that this demonstrates that both NewLaw and BigLaw are stronger when they work together.”
The DXC/UnitedLex collaboration is another example of marketplace transformation. Bill Deckelman, DXC’s General Counsel, was confronted with a perfect storm: a recent merger necessitating the integration of two large legal departments (CSC and a large division of Hewlett Packard) coupled with a mandate to “do more with less.” Deckelman took two bold steps: (1) for “practice” matters he collaborated with AdvanceLaw to lead a performance-based counsel selection on a global scale; and (2) for “legal delivery” he tapped UnitedLex to handle managed services. Deckelman’s moves appear to be paying off; UnitedLex has projected that it will save DXC 30% for transitioning work to its management. More significantly, Deckelman’s approach provides a glimpse into how GC’s—and providers—must differentiate and collaborate to move the needle for legal consumers. Deckelman explained this mindset shift: “We all needed to trust each other and challenge ourselves to re-think assumptions. It was a lot of work, but it stimulated a mental shift, and it’s getting us the results we need.”
Sophisticated legal buyers recognize the distinction between legal “practice” and “delivery” and are increasingly focused on differentiation of expertise, delivery capability, results, efficiency, transparency, risk mitigation, and collaborative capability within each category. That means that providers must take a long hard look in the existential mirror and answer the question: “What can we provide buyers of legal services—and other providers—on a differentiated basis that they cannot readily access from other sources?” Another question to ask is: “How can we collaborate with other providers to alloy our differentiated expertise with theirs to drive optimal value to customers?”
Differentiation, collaboration, and an openness to new delivery paradigms are key pieces in the new legal mosaic. They will reshape the contours of current providers and enhance customer choice and value in procuring legal services.