Small Law, Big Changes: The Coming Disruption in the Legal Industry

There is virtually no piece of the economy that operates exactly the same way that it did 80 years ago, but in law the business model hasn't changed even though the economics of law are changing in a fundamental way. The billable hour is still profitable from a transactional perspective, but from a strategic perspective, in today's economy, that profitability has begun to erode. That's because our economy has fundamentally transformed into a service economy that is based on leverage and scale.

Today, an individual can create a podcast or a bit of code, and it has the potential to scale to millions of people. With the help of technology and a more flexible approach to the profession, that kind of leverage can also be brought to much of the legal work attorneys do.

Commoditization Is an Opportunity

While the work we do as lawyers is very important, the vast majority of it has been done before, and done competently. As lawyers, we need to be much more efficient at learning from and deploying the work product that we and others have created. One reason our profession has stuck with the billable hour for so long is our attraction to the idea that what we do as lawyers is "bespoke" or "custom," when in fact it mostly isn't. Obviously there will be complex litigation involving very large corporations with deep pockets where price is no object, and where the legal arguments that emerge are novel and even innovative. There will also be the rare client who requires a custom will or trust, but that's not what 99% of legal work is about.

Commoditization of legal work can be a good thing. Historically, vast fortunes have been created in commodities, from oil to tulips to timber to precious metals — even smartphones — by producing repetitively at scale. Lawyers can also build their work product at large scale, and lawyers inevitably will once the profitability of such a business model is realized.

Economic reality dictates that attorneys will expand markets and lower the cost of the goods delivered by employing tools, strategies and technologies that allow leverage of legal knowledge efficiently. It happened in modern media, it will happen in the legal industry, and ultimately it will allow us to get a bigger piece of the economic pie.

Pay Only for What You Need

Embracing a business commodity paradigm will require us to rethink how we deliver our services. Lawyers can do a much better job of leveraging technology to draw upon a collective knowledge base. This is beginning to happen with artificial intelligence in areas like contract automation, but there are also individual lawyers creating niches for themselves using the intellectual capital accumulated over time.

Specialization will be an important part of the new commoditization model. While general practitioners are a critical part of the profession and will remain so, the market can no longer support learning on the clients' dime when a specialist is available to produce a particular document. Instead, the legal industry can develop tools that make it easy to bring that general practitioner together with the specialist who can produce the document quickly and competently — to their mutual benefit and to the benefit of the client.

For example, a solo or small firm can find a handful of lawyers to work with on a regular basis — say, a young lawyer to write memos, a mid-level litigator to do discovery, an experienced real estate specialist and so on. Online marketplaces such as LAWCLERK offer a network of freelancers specializing in a range of practice areas. These specialists produce better work faster, and yet the firm or solo practitioner doesn't have to pay them to work full-time.

That's what innovation looks like, even as the lawyers' fiduciary obligations remain intact and the client's best interests are served.

Restoring Faith in the Justice System

The belief that disputes can be resolved, that justice can be attained for all, is in serious jeopardy. The cost structure of the profession needs to change so that supply and demand is back in balance. The legal profession should empower lawyers to be entrepreneurs and experiment without fear of violating the rules. New business models can make the distribution of legal services more efficient and lower the overall cost of legal services to consumers, and that will be a big step toward restoring faith in the system and putting the legal industry on a more sustainable path.

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Rinky S. Parwani is managing attorney with a general practice at Parwani Law in Tampa, FL. Greg Garman is a co-founder and CEO of LAWCLERK and a founding member of Garman Turner Gordon in Las Vegas with a focus on financial restructuring and business reorganization. This article also appeared in Daily Business Review, an ALM sibling of Accounting and Financial Planning for Law Firms.