Hello, and welcome to the first edition of The Law Firm Disrupted. I’m Law.com reporter Roy Stromand I’ll be using this weekly email briefing to make sense of the biggest challenges and opportunities facing law firms today. Well, trying to at least. I hope I can be a source for straight talk about the fast-changing and uber-competitive market for high-end legal services and that you’ll also share your stories, struggles and questions with me. For those of you innovating, managing firms, or just trying to stay relevant on the front lines of all this change, let me know what you think at rstrom@alm.com.

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A Diagnosis for Big Law


Not long ago, I went to lunch with a lawyer and his wife who have become friends of mine over the years I’ve covered Chicago’s legal market. The lawyer is nearing his 80th birthday and was recently suffering from debilitating back pain.

He had seen a number of doctors and each one seemed to be as helpful as the last. Which is to say, he was getting nowhere. As his frustration mounted, his wife took action. She told the doctor that her husband was a lawyer and, as such, he needed hard facts in order to operate. He can’t make decisions amid a drumbeat of ambiguous and uncertain reports, no matter how dire.

That kicked the doctors into action. They gave him a diagnosis; he had surgery; and I’m happy to report my friend is now feeling much better.

If only there was an assertive spouse to help managing partners and law firm executives make some sense of today’s legal market. As it happens, the editors at ALM believe I might be that person.

Who am I? It’s true, I’m not an assertive spouse (I’m not even married!). I’m a reporter for Law.com and The American Lawyer based out of Chicago where I’ve been covering the business of law firms for the past half-dozen years. Lately, I’ve been tasked with covering how the business model for large law firms is changing. That gives me access to leaders of top-tier firms, prominent law firm consultants across the country and a growing number of smart people interested in challenging Big Law.

In this weekly email briefing, I’m aiming to distill how the legal market is changing and what managing partners and executives are doing about it. I’ll be seeking your help and input, too. The hope is to make sense of what I see as the drumbeat of ambiguous, uncertain and dire reports about the future of Big Law.

In an effort to cut through the uncertainty, I’ll be providing more commentary in this space than I do in my news articles. I’ll share my impressions, raw thinking and theories on all that’s happening in the law firm world. As always, though, that perspective will be grounded in unbiased reporting on the legal industry.

To kick things off, below are four ways I believe the market is changing. These will serve as a set of theses that inform the stories I’ll be sharing and commenting on in this space. I’m open to being wrong about any of this. Please tell me when and how I am, because there are no laws when it comes to law firm disruption.

➤ Clients want efficiency and law firms need to change their operations to deliver it. Every firm will undergo or is undergoing its own change management project that some partners will buy into and others will not. Firms should cater to the former group. The uneven rate of change among clients means stubborn partners may have good reason for resisting change (other than an impending retirement).

➤ The large law firm model, in particular how it compensates partners, will be tested as revenue becomes disassociated from a human’s time, either because of flat fees, leaner budgets or technology-based legal products. Law firms won’t be selling time in the long run, and they should figure out ways to quantify and compensate for a lawyer’s value.

➤ Silicon Valley will try to replace lawyers, but that will take a long time if it happens on a meaningful scale. In the meantime, law firms will struggle to discern what technologies are worth their precious dollars. Chief technology officers have an increasingly difficult job, but they should be discerning; their voices should be empowered; and law firms should invest more.

➤ The law firm market has already stratified to a degree not seen before, and firms need to be honest with themselves about what market they’re competing in. The richest firms are doing work that’s still insulated from much of the cost-consciousness that less-profitable firms are struggling with. That may be changing at the margins, but for now most firms should operate under the assumption that the client’s purchasing power will continue to grow and do so in an increasing number of practice areas.

You can reach out to me via email at rstrom@alm.com or on Twitter at @RoyWStrom if these ideas already have you riled you up. I’ll be looking forward to hearing from readers, and helping you wade through the changing legal market. Cheers!

Roy’s Reading Corner 


—➤ On value-based compensation: Above, I mentioned that law firms should do better at measuring the value their partners generate and setting compensation from that. HereKeith Lipman of Prosperoware offers great detail on how they could go about doing that using what he calls a “sell-deliver-leverage-measure” model. He also sums up the changing legal marketplace in this way: “What was previously valued by buyers was simply the delivery of quality matters. Now clients value the delivery of quality matters—at the expected price. The insertion of price expectations and budgets has upended the business model of an entire industry.” —➤ The Alternative Providers are coming: This week I wrote about a survey by the Corporate Legal Operations Consortium that showed that about half of Fortune 500 companies had used an alternative legal services provider like Elevate Services Inc. The biggest takeaway was that law firms’ largest clients are the biggest opportunity for alternative providers. But speaking with Elevate founder Liam Brown, I also learned that alternative providers can be an opportunity for law firms. He had plenty of examples of law firms turning to his company to solve their clients’ problems. When I asked how that happens, he said this: “We don’t try to persuade law firms to work with us. We will help them if they would like help. But we don’t try to put a square peg in a round hole. Every firm has some innovative lawyers, and every firm has some who aren’t. We work with the innovative lawyers in a firm.”

—➤ A bizarre refrain: My colleague Miriam Rozen wrote about increasing client demands from law firms for lower fees and free work. Miriam spoke with a number of in-house lawyers who talked about wanting more from their law firms – more fixed fees, secondments, free hotline advice, etc. And then there was this statement, a version of which I’ve heard many times from in-house lawyers: “We are not trying to press a firm to go below cost without any margin built in. They have every right to earn a living.” That comment has always struck me as bizarre. First, it seems to misunderstand how pricing works – at least in a rational market. In theory, clients don’t have the ability to “press a firm to go below cost.” The firm won’t sell services at that price. Second, it assumes the client somehow knows what a firm’s margin is (when even the firm itself probably doesn’t). And it also sounds disingenuous; like a veiled threat. The fact is clients need law firms to be their partners; that’s why they purport to care about firm profits in a way they wouldn’t a car company’s. Clients also need their law firms to change. I just don’t know if that kind of language helps.

—➤ Speaking of help: Dentons became the latest law firm to offer clients assistance in modernizing their legal departments. That offering is similar to what firms including Bryan Cave, Seyfarth Shaw, Baker Donelson, and others have done. Because of the opaque nature of law firm financials, it’s hard to tell whether those initiatives have been successful. Public companies often break out their sales by product line. Apple, for instance, brought in 55 percent of its revenue from iPhone sales in the fourth quarter this year. The iPad accounted for less than 10 percent. I’d be surprised if consulting services for in-house departments was as important to these law firms’ top line as the iPad is to Apple. That will limit firms’ investment in this area, as they should focus on keeping healthy whatever they perceive as their iPhone.

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That’s it for this week. Make sure to let me know what you think by sending a line to rstrom@alm.com. See you after Thanksgiving for more talk on disruption!