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LEGAL SERVICES INNOVATION
Richard Moorhead
Director, Centre for Ethics and Law, Professor of Law and Professional Ethics
r...
OVERVIEW
CELs and me
Is there a paradigm shift underway in
law?
The UK case
You can’t systemise me?
Where this goes beyond...
ISN’T INNOVATION…
…THAT AWKWARD MOMENT
CHANGING RELATIONSHIPS
WINMARK LOOKING GLASS REPORTS

 cost reduction;
 changes in pricing models; and
 the development...
A PERMANENT
REVOLUTION?
IT’S THE RECESSION
STUPID…
Or is it?
THE PARADIGM SHIFT
HENDERSON AND ZAHORSKY, ABA J, 2011

 PP shrinkage is not just recessional
 Market growth slower than...
WHAT STARTS ON THE PERIPHERY….
TYMETRIX…
 Founded in Hartford in 1994
 In 1995, developed task-based billing system.
 1997 delivered online e-billing....
IT’S THE RECESSION, STUPID?
 US Lawyer headcount peaked in?
 2004

 And what else happened?
HENDERSON AND ZAHORSKY, 2011
THE DECLINE OF PRIVATE PRACTICE?
HENDERSON, 2012
NOVUS LAW
 operates 22 hours a day.
 electronic document review for large-scale litigation and corporate due diligence f...
 Since 2007, revenue-per-lawyer figures have been trending sideways or down for
the majority of the Am Law 100. …a sharp ...
EXAMPLES OF LESS TEMPORARY SHIFTS
 Some Fortune 500 companies have adopted the presumption that all legal work
will be do...
AND THE UK…?
LB100 THE AGE OF TURBULENCE
 Cobbetts, which went into administration in March, posted a profit per equity
partner (PEP) ...
LB100 THE AGE OF TURBULENCE
 Cobbetts, which went into administration in March, posted a profit per equity
partner (PEP) ...
TURNOVER TRENDS
LAW SOCIETY, 2013, FROM ONS DATA
LB100 – 2004 TURNING POINT?
LB100 – 2004 TURNING POINT?
LB100 – 2004 TURNING POINT?
THE RISE OF IN-HOUSE
MORE BUSINESSES WITH IHLS
AND BIGGER TEAMS
 number of solicitor PC-holders employed in commerce and industry increased by...
IS INNOVATION HAPPENING?
FIRM RESPONSES
 Cost Management/Headcount

 Response to metrics - Firms are making efforts to rationalise and
consolidat...
SUSSKIND’S FIVE STAGES
LPO

LACITY AND WILLCOCKS, “LEGAL PROCESS OUTSOURCING: LPO PROVIDER LANDSCAPE” (2012)
LACITY AND WILLCOCKS PREDICT…
 LPO providers will move up the value chain
 New engagement models will emerge
 The shape...
CHANGING NATURE OF RELATIONSHIPS
SHINE ON YOU CRAZY…
WHERE DOES THAT LEAVE
US?
MICHAEL PORTER, 5 FORCES MODEL
(2008) THE FIVE COMPETITIVE FORCES THAT SHAPE STRATEGY, HARVARD BUSINESS REVIEW, JANUARY 20...
RIVERVIEW LAW: THE CASE FOR
INSURGENCY…
WHAT DO ESTABLISHED PLAYERS HAVE…?
 Size
 Experience
 Personnel
 Information

 A merger strategy
 A cost reduction s...
RIVERVIEW’S MODEL?
 Fixed Fees
 More flexible expertise model
 Collaboration, information and insight
YOU CAN’T SYSTEMISE ME…
Without making me miserable, or unemployed, or cheaper, or less effective
THE JESUS MOMENT
THIS BOOK MAY SAVE YOUR LIFE
MEDICAL FALLIBILITY
GOROVITZ AND MACINTYRE

 “Necessary fallibility”—things beyond our capacity.
 Ignorance - we may err...
AVIATORS
 The test pilots made their list simple, brief, and to the point—short enough to fit
on an index card, with step...
THIS MAY SAVE YOUR LIFE
Pre-line insertion checklist. Doctors must:
(1) wash their hands with soap,
(2) clean the patie...
TOO BASIC?
 Nurses observed docters. 1 in 3.
 Became compulsory for nurses to stop doctors
 Ten-day line-infection: rat...
YEAH, BUT…

 You want people to make sure to get the stupid stuff right. Yet you also want to
leave room for craft and ju...
GEWANDE ON COMPLEX PROBLEMS
 Submittal schedules and conflict lists (Building Projects)
 Let the leader decide or make t...
…STILL, ITS NOT LIKE LAW…
IS IT LIKE VENTURE CAPITALISM…?
COPING WITH COCAINE BRAIN
 Mohnish Pabrai, Pabrai Investment Funds
 Greed mode/cocaine brain/do the deal
 Logged his ow...
G. H. SMART
“MANAGEMENT ASSESSMENT METHODS IN VENTURE CAPITAL: AN EMPIRICAL ANALYSIS OF
HUMAN CAPITAL VALUATION,” JOURNAL ...
SO ENOUGH OF INEPTITUDE,
WHAT ABOUT IGNORANCE?
HOW VERY DARE YOU…
 Ignorance - we may err because science has given us only a partial understanding of the
world and how...
INNOVATION AS AN OPPORTUNITY?
 Information
 Reputation
 Investment
 Experimentation

 Failure
INNOVATION AS BEHAVIOURAL COACH
 Supporting negotiations?
Don Philbin (Picture it Settled)
 https://www.youtube.com/watc...
THE FINAL WORD
INNOVATION AS COLLABORATION

 General counsel should be careful, however, not to overplay their hands. Alt...
LEGAL SERVICES INNOVATION
Richard Moorhead
Director, Centre for Ethics and Law, Professor of Law and Professional Ethics
r...
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Transcript of "Legal services innovation"

  1. 1. LEGAL SERVICES INNOVATION Richard Moorhead Director, Centre for Ethics and Law, Professor of Law and Professional Ethics r.moorhead@ucl.ac.uk
  2. 2. OVERVIEW CELs and me Is there a paradigm shift underway in law? The UK case You can’t systemise me? Where this goes beyond efficiency/cost
  3. 3. ISN’T INNOVATION…
  4. 4. …THAT AWKWARD MOMENT
  5. 5. CHANGING RELATIONSHIPS WINMARK LOOKING GLASS REPORTS  cost reduction;  changes in pricing models; and  the development of mutually beneficial relationships.  shifting work to lower cost resources;  improving value and predictability from external firms; and  using technology to increase availability of legal experts.  corporate procurement specialists  value-based and performance-based compensation.
  6. 6. A PERMANENT REVOLUTION?
  7. 7. IT’S THE RECESSION STUPID… Or is it?
  8. 8. THE PARADIGM SHIFT HENDERSON AND ZAHORSKY, ABA J, 2011  PP shrinkage is not just recessional  Market growth slower than historic levels and (even) less evenly distributed  Movement of jobs outside of PP and in-house  Associates' paths upward fade  Profits per partner and staff leverage problems.  Technology swallows billable hour  International competition hits (margins and market share?)  A more sophisticated corporate client with vast knowledge available at the click of a mouse.
  9. 9. WHAT STARTS ON THE PERIPHERY….
  10. 10. TYMETRIX…  Founded in Hartford in 1994  In 1995, developed task-based billing system.  1997 delivered online e-billing.  2000 automated compliance checks.  2001 online matter management solutions.  2002 ranked first in Deloitte & Touche’s Fast 50 in Connecticut and #72 in Deloitte’s Fast 500 Tech Companies in North America.  2003 acquired by the global information services company Wolters Kluwer. (€3.6bn, 18,500 employees)  Later TyMetrix opened its London office, the first outside North America. The first non-North American client was the global energy giant BP.  2004 an end-to-end enterprise legal management platform with e-billing, matter and case management, document management, budgeting and analysis, and reporting solutions.
  11. 11. IT’S THE RECESSION, STUPID?  US Lawyer headcount peaked in?  2004  And what else happened?
  12. 12. HENDERSON AND ZAHORSKY, 2011
  13. 13. THE DECLINE OF PRIVATE PRACTICE? HENDERSON, 2012
  14. 14. NOVUS LAW  operates 22 hours a day.  electronic document review for large-scale litigation and corporate due diligence for large businesses.  delivery of “a virtually error-free work product on time and within budget”  “via intricate, metric-driven work process certified by Underwriters Laboratories”.  They do not practice law
  15. 15.  Since 2007, revenue-per-lawyer figures have been trending sideways or down for the majority of the Am Law 100. …a sharp break from historical patterns
  16. 16. EXAMPLES OF LESS TEMPORARY SHIFTS  Some Fortune 500 companies have adopted the presumption that all legal work will be done in-house.  General Electric's legal department  lawyers in India supervised by in-house lawyers in the U.S.  Cisco Systems  a Web-based knowledge management system that  captures email conversations, facilitates secure communication with experts, and documents answers to frequently asked questions - all to boost in-house productivity and cut the law department's expenses.
  17. 17. AND THE UK…?
  18. 18. LB100 THE AGE OF TURBULENCE  Cobbetts, which went into administration in March, posted a profit per equity partner (PEP) increase of 16% in its last-ever LB100 appearance  Top 100 UK law firms revenue and profits up by 8% (£19.1bn and £5.8bn)  Headcount up by 10% to 61,299  RPL is down by 2% to £312,000  PPL, likewise, has fallen by 2% to £95,000.  PEP has dropped 4% to £622,000.  The losers– there isn’t the work, there’s too many lawyers  GCs – you have to change
  19. 19. LB100 THE AGE OF TURBULENCE  Cobbetts, which went into administration in March, posted a profit per equity partner (PEP) increase of 16% in its last-ever LB100 appearance  Top 100 UK law firms revenue and profits up by 8% (£19.1bn and £5.8bn)  Headcount up by 10% to 61,299  RPL is down by 2% to £312,000  PPL, likewise, has fallen by 2% to £95,000.  PEP has dropped 4% to £622,000.  The losers– there isn’t the work, there’s too many lawyers  GCs – you have to change
  20. 20. TURNOVER TRENDS LAW SOCIETY, 2013, FROM ONS DATA
  21. 21. LB100 – 2004 TURNING POINT?
  22. 22. LB100 – 2004 TURNING POINT?
  23. 23. LB100 – 2004 TURNING POINT?
  24. 24. THE RISE OF IN-HOUSE
  25. 25. MORE BUSINESSES WITH IHLS AND BIGGER TEAMS  number of solicitor PC-holders employed in commerce and industry increased by 183% since 2000  the number of head offices of businesses employing PC holders increased 93% in the same period (Law Society Annual Statistics Reports).
  26. 26. IS INNOVATION HAPPENING?
  27. 27. FIRM RESPONSES  Cost Management/Headcount  Response to metrics - Firms are making efforts to rationalise and consolidate systems to enable better management information  Firms are increasingly focussed on better matter management analysis and more rigorous pricing approaches  More interested in ABSs??  Diversification in influence? More Non-Exec, Non-L equity
  28. 28. SUSSKIND’S FIVE STAGES
  29. 29. LPO LACITY AND WILLCOCKS, “LEGAL PROCESS OUTSOURCING: LPO PROVIDER LANDSCAPE” (2012)
  30. 30. LACITY AND WILLCOCKS PREDICT…  LPO providers will move up the value chain  New engagement models will emerge  The shape of enterprise legal functions will increasingly move from pyramids to diamond  Enterprise legal functions will reduce the number of law firm partners and increase bundled legal services  Significant M&A and strategic alliance activity will fuel provider growth and capabilities
  31. 31. CHANGING NATURE OF RELATIONSHIPS
  32. 32. SHINE ON YOU CRAZY…
  33. 33. WHERE DOES THAT LEAVE US?
  34. 34. MICHAEL PORTER, 5 FORCES MODEL (2008) THE FIVE COMPETITIVE FORCES THAT SHAPE STRATEGY, HARVARD BUSINESS REVIEW, JANUARY 2008.
  35. 35. RIVERVIEW LAW: THE CASE FOR INSURGENCY…
  36. 36. WHAT DO ESTABLISHED PLAYERS HAVE…?  Size  Experience  Personnel  Information  A merger strategy  A cost reduction strategy
  37. 37. RIVERVIEW’S MODEL?  Fixed Fees  More flexible expertise model  Collaboration, information and insight
  38. 38. YOU CAN’T SYSTEMISE ME… Without making me miserable, or unemployed, or cheaper, or less effective
  39. 39. THE JESUS MOMENT THIS BOOK MAY SAVE YOUR LIFE
  40. 40. MEDICAL FALLIBILITY GOROVITZ AND MACINTYRE  “Necessary fallibility”—things beyond our capacity.  Ignorance - we may err because science has given us only a partial understanding of the world and how it works.  Ineptitude - he knowledge exists, yet we fail to apply it correctly.  Complexity - science has filled in enough knowledge to make ineptitude as much our struggle as ignorance.
  41. 41. AVIATORS  The test pilots made their list simple, brief, and to the point—short enough to fit on an index card, with step-by-step checks for takeoff, flight, landing, and taxiing. It had the kind of stuff that all pilots know to do. They check that the brakes are released, that the instruments are set, that the door and windows are closed, that the elevator controls are unlocked—dumb stuff. You wouldn’t think it would make that much difference. But with the checklist in hand, the pilots went on to fly the Model 299 a total of 1.8 million miles without one accident  Memory  The tendency to skip under pressure  A bridge to higher performance
  42. 42. THIS MAY SAVE YOUR LIFE Pre-line insertion checklist. Doctors must: (1) wash their hands with soap, (2) clean the patient’s skin with chlorhexidine antiseptic, (3) put sterile drapes over the entire patient, (4) wear a mask, hat, sterile gown, and gloves, and (5) put a sterile dressing over the insertion site once the line is in. Check, check, check, check, check.
  43. 43. TOO BASIC?  Nurses observed docters. 1 in 3.  Became compulsory for nurses to stop doctors  Ten-day line-infection: rate went from 11 percent to zero.  Saved  43 infections  8 deaths  £2m  In one hospital  Went statewide: $175 million in costs and more than fifteen hundred lives saved
  44. 44. YEAH, BUT…  You want people to make sure to get the stupid stuff right. Yet you also want to leave room for craft and judgment and the ability to respond to unexpected difficulties that arise along the way. The value of checklists for simple problems seems self-evident. But can they help avert failure when the problems combine everything from the simple to the complex?
  45. 45. GEWANDE ON COMPLEX PROBLEMS  Submittal schedules and conflict lists (Building Projects)  Let the leader decide or make the teams talk?  Simple nudges towards communication:  introductions and quick concerns/critical dangers (Surgery)  “activation phenomenon” activate their sense of participation and responsibility and their willingness to speak  Key steps  1 in 16 to 2 in 3 patients observed failure pre-acceptance of checklist  Outcomes  -36% complications, -47% deaths: rich and poor hospitals, western and other  Teamwork, democratisation, satisfaction: staff turnover dropped from 23 to 7%
  46. 46. …STILL, ITS NOT LIKE LAW… IS IT LIKE VENTURE CAPITALISM…?
  47. 47. COPING WITH COCAINE BRAIN  Mohnish Pabrai, Pabrai Investment Funds  Greed mode/cocaine brain/do the deal  Logged his own and other errors (incl Buffet)  Missed basics –e.g. over- understatement of profit/debt  Systemised key steps: better decisions?  Greater efficiency – quicker
  48. 48. G. H. SMART “MANAGEMENT ASSESSMENT METHODS IN VENTURE CAPITAL: AN EMPIRICAL ANALYSIS OF HUMAN CAPITAL VALUATION,” JOURNAL OF PRIVATE EQUITY 2, NO. 3 (1999): 29–45  “Sponges” gathering information about their targets  “Prosecutors” interrogated entrepreneurs aggressively, testing on hypothetical situations.  “Suitors” focused more on wooing people than on evaluating them.  “Terminators” bought the best ideas, fired entrepreneurs they found to be incompetent, and hired replacements.  “Airline Captains.”  Which ones produced the best return on investment? n=51
  49. 49. SO ENOUGH OF INEPTITUDE, WHAT ABOUT IGNORANCE?
  50. 50. HOW VERY DARE YOU…  Ignorance - we may err because science has given us only a partial understanding of the world and how it works. Big Data It can’t beat expert judgments can it? The Washington Project Behavioural Law? How do you measure value? Do you know whether your contracts influence behaviour and allocate risk in optimal ways? Compliance problem A process and a powerpoint? EY Know Your Trader
  51. 51. INNOVATION AS AN OPPORTUNITY?  Information  Reputation  Investment  Experimentation  Failure
  52. 52. INNOVATION AS BEHAVIOURAL COACH  Supporting negotiations? Don Philbin (Picture it Settled)  https://www.youtube.com/watch?v=1pt1c37jYYk  Driving efficiency in contract review Sol Irvine (at Reinvent Law) http://reinventlawchannel.com/sol-irvinedata-driven-contracts/  Or replacement: Online Dispute Resolution  Colin Rule (at Reinvent Law)  http://reinventlawchannel.com/online-dispute-resolution/
  53. 53. THE FINAL WORD INNOVATION AS COLLABORATION  General counsel should be careful, however, not to overplay their hands. Although chief legal officers want their outside counsel to have shared risk or "skin in the game," general counsel who meet their annual budget by pushing for discounted fees are unlikely to get the best long-term results. The key to doing more with less is innovation, often achieved by long-term relationships and shared information. This requires mutual trust and a willingness to share risk over time.  Henderson
  54. 54. LEGAL SERVICES INNOVATION Richard Moorhead Director, Centre for Ethics and Law, Professor of Law and Professional Ethics r.moorhead@ucl.ac.uk
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