Legal market ripe for disruptive innovation
New entrants to the legal marketplace are threatening the traditional law firm model, writes Kelly Hazell Quill founder David Kelly.
“What’s the best way to stop yourself doing something? Try consulting a lawyer. By the time they have finished outlining the risks involved in your plans, and quoted you a price, you will have tears in your eyes and a large hole in your pocket.”
How many times have you heard someone say something like this about lawyers? It’s such a common perception there are even jokes about lawyers. Many times over the course of my career I’ve heard business owners and C-level executives express frustration and even disbelief at the expense, lack of transparency and delay associated with the process of buying time from a law firm.
Business people feel like law firms are not interested in selling legal work, but only interested in having clients buy the time used to deliver legal work. This is a subtle but extremely important distinction. Traditional law firms sell billable hours, not legal advice. If they truly sold legal advice we would see more flat fees and more value pricing, perhaps based on a percentage of the value of the solution.
More than ever before in history business moves fast and business leaders are under constant pressure to deliver more with less and more quickly. The traditional law firm business model of requiring clients to buy time isn’t designed to alleviate such pressures. In fact, it makes it worse with the dangerous result that lawyers are sometimes avoided altogether.
The legal market seems ripe for ‘disruptive innovation’. But what is disruptive innovation? What does it mean for the legal industry? Are there any true disruptive innovators out there?
Disruptive innovation defined
The phrase ‘disruptive innovation’ was coined by author and Harvard Business School professor Clayton Christensen. Put very simply it refers to the transformation of a high-cost, complex industry by innovation that results in greater simplicity, accessibility and affordability. Examples of disruptive innovation can be seen in a range of industries. For example:
- online shopping has disrupted traditional ‘bricks-and-mortar’ consumer retailing
- software like Xero is in the process of disrupting traditional book-keeping and accounting
- online offerings like youi.com.au and ubank.com.au (owned, by the way, by big traditional brands) are disruptors in the insurance and banking spaces respectively
- Airbnb disrupts hospitality and accommodation
- and of course Uber has the traditional taxi industry screaming “unfair” with its disruptive innovation
The legal marketplace is certainly a high-cost and complex industry. Clients, including large corporate clients, regularly complain about how expensive legal services are and it’s no secret that the law is complex. Not only that, but the process of buying time from a law firm can be fraught with price uncertainty, lack of price transparency, delays and overly conservative and uncommercial advice. The legal marketplace seems ripe for disruption, but is it actually being disrupted?
What innovative legal businesses are out there?
In the United States, businesses like legalzoom.com and rocketlawyer.com partially disrupt the legal marketplace by offering relatively cheap and easy access to legal documents. These businesses primarily target individual consumers, hence the moniker ‘DIY Law’ is sometimes applied to them. Corporate clients, and even SME businesses, find little value in what they offer because the offering isn’t sophisticated or tailored. In fact, it’s arguably not legal advice but just easy access to templates of certain legal documents.
In the UK, lexoo.co.uk is an online platform where people who need legal work can receive quotes from high-quality, pre-screened solicitors (according to the website). Its raison d’être is that large law firms are not set up to cater for the needs of smaller businesses and, these days, there are plenty of very competent lawyers available outside of the big firms (or who used to work for the big firms) who need only a laptop and a wi-fi connection to service clients. Again, this business isn’t a law firm and doesn’t itself offer legal services, but it does improve the accessibility and affordability of legal services, at least for small businesses and start-ups.
Another interesting and innovative business is equibbly.com. This website offers mediations and arbitrations online via a digital forum where the adversaries can submit evidence and seek to resolve small disputes before arbitrators or mediators. The business charges a fixed fee for its services and promises a cost reduction of 35 per cent. Certainly, the process outlined on the website makes it look much easier and more accessible than traditional dispute resolution – and this is the whole point of any disruptive innovator: making things simpler, more accessible and more affordable.
What about Australia?
There are some interesting and innovative legal businesses in operation in Australia. Websites like havenlawyers.com.au, lawyersonline.com.au and online-divorce-lawyer.com.au, each targeting the consumer end of the market, present a friendly and simple (or at least simpler) way for people to engage with lawyers. There is also a heavy focus on low-cost or cost-effective delivery of legal services by these businesses. For example, lawyersonline.com.au states “Your legal solution could cost only $35!”
Businesses like lawpath.com.au and legalvision.com.au are aimed at small businesses and start-ups. In many ways, these businesses are similar to the ‘DIY Law’ offerings of LegalZoom and RocketLawyer, providing cheap and easy access to certain standard commercial contracts and legal information.
Finally, there is khqapproved.com.au/contractreview, a division of law firm Kelly Hazell Quill, which provides contract review services to larger SME businesses and executives who don’t wish to spend several thousand dollars and wait weeks for legal review of an agreement.
Are these businesses true “disruptive innovators”?
Some do not regard these businesses as true examples of disruptive innovation. The argument is that they merely use existing technology to reduce costs and streamline delivery and are just more efficient examples of the same thing, rather than innovative new things. In other words, the argument goes, they aren’t true disruptive innovation like flash memory was to the disc drive or like mobile phones were to the telecommunications industry.
Others argue that these alternative legal service offerings are not true instances of disruptive innovation because they are too small and in some cases focused too much at the small end of town. In other words, they don’t make any significant difference or have any significant impact on the legal marketplace.
I don’t agree with either of these points of view. I think each of the businesses mentioned in this article represents true disruptive innovation in the legal marketplace because:
- Most traditional law firms can’t replicate the innovation seen in the businesses mentioned in this article. To do so would destroy, or at least hurt, their traditional business model of selling time. I submit that businesses selling legal solutions rather than billable hours are true disruptive innovators.
- Size doesn’t necessarily matter. Professor Clayton Christensen makes the point that disruptive innovation always starts around the edges and at the lower end of a market. It has to start there because that’s the proving ground for innovative approaches. Some will fail, but perhaps some will succeed and with success may come replication and the expansion of the innovative new way into the heart of the marketplace.
I think that innovative disruption is underway in the legal marketplace and that the challenge today for firms that want to be relevant tomorrow lies in adopting a strategic commitment to explore paths less travelled and to invest in approaches that challenge the way things have been done in the past.
To those lawyers and entrepreneurs brave enough to try to make access to the law simpler, more affordable and more transparent, I say bravo. Consumers and businesses will, I hope, reward you with their patronage.
David Kelly (pictured) is the founder and director of boutique firm Kelly Hazell Quill.