'Legal Innovation' Is Not An Oxymoron -- It's Farther Along Than You Think

The legal industry is known for adherence to precedent, not innovation. While precedent remains a guiding principle in the practice of law, innovation is transforming the models, methods, and players involved in the buy/sell process of legal services. Technology, process, access to institutional capital, re-reregulation, client demand for enhanced value, and changes in other professional service industry delivery models—notably medicine and accounting-- are legal innovation’s principal drivers.

Legal innovation has lagged compared with other industries. Law’s Uber has yet to pull up to the curb. But that does not mean that the breadth, scope, and pace of legal delivery innovation has not picked up in recent years. Consider, for example, that in-house corporate departments and legal service providers (read: legal providers that do not ‘engage in the practice of law’ but deliver ‘legal services’) now account for nearly half of total legal spend. The rapid growth of these new supply sources—and their tech and process savvy delivery capability and corporate structures that are better aligned with client standard operating procedure—is a paradigmatic shift away from the long-dominant law firm partnership model. So while no dominant provider has emerged to replace traditional law firms, it’s clear that the search for new delivery models is well underway and yielding an ever-expanding array of client options.

BigLaw partners still rake in princely sums, and entry-level lawyers at their firms earn a lavish lunch less than $200K, but that hardly makes the case that the traditional law firm model is alive and well. Consider the shift in buying practices among corporate clients and the delta between overall legal demand and flat demand for law firm services during the past five years. Then note the shrinking number of equity partners, the smaller classes of incoming associates and the overall declining percentage that large firm lawyers represent in the overall legal population. This is the fallout from changing customer expectations that no longer align well with the traditional law firm partnership model. In-house growth--a panacea not a cure to the search for BigLaw alternatives--and a steady migration to well funded, tech and process savvy service providers is the story here. Customers are looking for a new delivery paradigm. It's coming. Money and entrepreneurs are pouring into the once static legal vertical. New delivery models and players will push the already rapid pace of innovation.

Let’s consider for a moment ‘disruptive innovation,’ the oft-misapplied term coined by Clayton Christensen to describe a paradigmatic industry shift. Professor Christensen’s theory posits that change takes hold in the lower end of a market, introducing new customers into the marketplace by creating ease of access, lower cost, and greater efficiency. That’s precisely what is happening in the retail segment of the legal industry.

LegalZoom, a legal technology company that now has over 3 million customers—and sky-high approval ratings-- is successfully using technology to improve access, promote efficiency, and reduce the cost of legal services. The company is also bringing new customers into the market and creating a template for how, when, and for what service level lawyers are required for different tasks and functions. LegalZoom is pioneering levels of 'lawyer touch' determined by the value assigned by the customer, not the provider. This ranges from self-serve (standardized documents); to limited access (short online chats with lawyers or calls on a fixed fee basis); to full-blown engagements (with approved panel counsel). This 'as much lawyer as needed' approach is a paradigm shift worthy of the ‘disruptive innovation’ moniker. More importantly, it is one that will migrate to more complex matters in the corporate segment of the legal market. The issue is: who and what is the appropriate resource to deploy for a specific task, matter, or portfolio based upon its value to the client?

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