Complacency and arrogance produce blind spots that delay a response and leave incumbents vulnerable.

I was reading a recent McKinsey report which I wanted to share with you in part because it is totally applicable to Big Law/Organizations and Solos.  And if you really think about it, it’s playing out as we speak.  You connect the dots:

When low-cost competitors appear, one of the toughest decisions facing executives in companies with premium products and brands is whether to respond. Should the company or business unit adjust its strategy to meet the low-cost threat or should it continue business as usual, with no change in strategy or tactics?

As these established companies attempt to define the nature and magnitude of the challenge, they often underestimate it. Sometimes executives are so focused on their traditional competitors, they don’t even recognize the threat developing from low-cost rivals. What executive isn’t familiar with the case of the low-cost airline Ryanair and its hugely successful entry into the European market at the expense of the region’s traditional carriers? Likewise, were the world’s leading telecommunications companies too busy competing with one another to recognize the threat from the Chinese low-cost competitor Huawei, now a leader in fixed-line networks, mobile-telecommunications networks, and Internet switches? Then there was Vizio, a little-known LCD TV supplier that overtook the premium brands in five years to become the North American market leader in large-format TVs. Complacency and arrogance produce blind spots that delay a response and leave incumbents vulnerable.

But our study of low-cost competitors suggests that they also build momentum in slower-moving and more subtle ways—factors that established players might do well to pay closer attention to. At times, low-cost challengers build their presence stealthily by competing in undeveloped segments of a market. Or they can narrow capability gaps by tapping the look, feel, and suppliers of bigger rivals. In other cases, competition between low-cost entrants can produce unintended second-level effects that escape the notice of incumbents until it’s too late to prevent a severe erosion of their market position.

As more solos appear in the market place  fighting for their own livelihoods and presenting viable less expensive alternatives for clients (not necessarily less profitable) and do so more quickly through the use of technology, collaboration, effective use of social media and competitive intelligence available for free on the internet, they will slowly and then more quickly chip away at the market share of big law firms.  It’s inevitable.

This marketplace is presenting opportunities never really available before because of client demand for lower costs without sacrificing quality (although there are clients comfortable with ‘good enough’) and available low-cost tools for solos to provide these services without sacrificing ethics or professionalism.  Big Law has never faced this type of competition before from both colleagues they never really considered competition and clients who are fed up.  And because slow-moving large law firms can’t adjust their corporate philosophies about billable hours, social media and more fast enough even if they wanted to,  solos have a striking competitive edge.

As a result of the dramatically lower prices that companies such as easyJet, Ryanair, and Southwest Airlines have brought to the air travel market, customers have quietly adopted new forms of behavior that in turn rewrite the rules of the market. More people in Europe take weekend breaks in countries that are farther afield; before the rise of the low-cost airlines, these passengers would have traveled locally or regionally. Many workers in one part of Europe take advantage of job opportunities hundreds of miles away. Some doctors who live in continental Europe have part-time practices in the United Kingdom to help meet a practitioner shortage in certain regions. Even people with relatively low incomes, such as construction workers, “commute” between their homes and families in central and eastern Europe and their jobs in western and northern Europe.* As prices fall and new kinds of behavior are established, growth accelerates rapidly.

As more lawyers go home to go to work, establish virtual law offices, utilize SKYPE and other web-based communications to work with clients thereby not limiting their geographic reach AND clients get accustomed to this approach, new kinds of client behavior emerges as do client expectations.  They are choosing how they want to do business with their lawyer and with these changes, the practice of law will never be same. These progressive law firms in partnership with their clients will redefine how business is done. Then what happens to the old model and those who refuse to change?

Some low-cost competitors rise more quickly than premium players anticipate by finding clever ways to overcome capability gaps.

When a solo practitioner can answer the capability gap, the silent inhibitor most clients have because of the solo status or years out, many new solos will have conquered a major hurdle.  It’s not done through fudging experience or claiming skills not had or claiming to be a larger organization than you are.  That’s fraud.  It is, however, done by answering the unspoken question about how your solo status may affect their representation, the use of technology to streamline the practice and keep costs down, your availability because of technology,  co-counsel relationships and other steps you have taken to ensure your client’s representation is not compromised.

Some call this the commoditization of  legal services.  But is it really?  Or is it just a fundamental shift in how legal business is being conducted because of technology and the changing needs of the clients?  Is the legal practitioner being devalued? I don’t think so.  One still needs legal advice no matter how you slice it.  Good legal advice is where the money will always be.  Interpretation of the laws, strong, intelligent advocating for a position can’t be duplicated by filling out a form on line or having the lay person represent themselves.

And this is also why there could be room for the ‘freemium ‘ model in law.

Developing this kind of model can cause clients to become heavily reliant on a particular firm’s expertise and act to generate more bespoke work with higher margins, as clients come to the firm with more complex legal issues.

Lawyers in the future will be paid not to produce ‘boiler plate’ but only when they add their intellectual rigour to a project. As a profession we are going to have to get paid when we add value, not when we have a pen in our hand.

If you believe (as you should) it is the advice and counsel which is really your stock in trade and where your value lies, then you won’t be afraid to provide standardized forms even for free to potential clients while appropriately disclaiming those forms as legal advice.

You should not be afraid to provide handbooks on what to expect from the court system in a landlord/tenant dispute.  Or a personal injury case. Or a DUI. Or a standard no asset, childless estate plan with a list of things one must consider and the consequences of not doing so.

80% of what a client needs to know about what the law says is available on the internet.  What separates one lawyer from the next and where the money is made is in the remaining 20% – effective and individualized counsel on how the law applies to the particular client’s case.

What do you think?