The New Economy and the Virtual Law Firm of the Future
Introduction
Change in Structure of the Legal Profession
Time
Place and Space
Shifting Tasks to Low Cost Labor
Tangibility
Disintermediation: Unbundling Legal Services
Targeted Marketing
Examples of Law Firms With A Presence on the NET
Introduction
One would not use farm models to manage a factory economy, and
one shouldn't use factory models to manage an information economy. One hallmark of the new
economy is the need to define business in terms of customers' changing needs. Defining a
law firm from the producers' —the lawyer's— point of view is simply no longer
workable and will have vast implications for the practice of law and the structure of law
firms. Information technology enables an organization to differentiate itself along
several critical dimensions: 1) time; 2) space; 3) matter; 4) substitution of
electronically-based information service for high-priced labor; 5) elimination of
intermediaries through direct contact with the customer; and 6) customization of product
or service to the particular needs of the single individual.
The rise of information technology within the legal profession
will have unanticipated consequences as the technology shifts from being the servant of
our wishes to master of our destiny. The technology may soon escape lawyer’s control,
change their routines, challenge the inefficiencies they enjoy as well as create
opportunities for new forms of law firms and law practice.
Change in Industry Structure;
There is ample evidence that the legal industry is ripe for change
and restructuring. According to Peter F. Drucker there are four early indicators that are
near-certain warnings that a major industry is about to undergo major structural change:
- The most reliable and the most easily spotted of these indicators is
rapid growth of an industry.
- The way it perceives and services it's market is likely to have
become inappropriate.
- The convergence of technologies that were previously seen as
distinctly separate.
- An industry is ripe for basic structural change if the way in which
it does business is changing rapidly.
All of these indicators are now present in the legal profession.
Peter Drucker's perceptions about structural industry change are uncanny:
During the past year, large law firms continued
to contract, hiring of recent law school graduates continued to decline, and several major
law firms throughout the country failed. These trends continue to accelerate. This
precipitous action is a harbinger of the major contraction that the profession will soon
undergo within its various sectors.
The emerging technology now makes possible the
creation of a law firm which offers legal services that exploits the benefits of new
information technology and uses those benefits to create an explicitly competitive
strategy. In the new economy, enterprises that incorporate the benefits of advanced
information technology will have a major competitive advantage of those that do not.
Time
Consumers need products and services any time (i.e. in their time
frame, not the providers). Producers who deliver their products and services in real-time
relative to their competitors, will have a decided advantage. Operating in real-time means
no lag time between identification and fulfillment of the need.
Place and Distance
"Any product that is information based, whether in the form of
sound, image, words, or data, can probably be adapted to any time, any place delivery. As
Stanley Davis has accurately written:
Low Cost Labor Base
Stanley Davis has also written:
Tangibility
Increasingly the intangible component of
products and services is increasing at the expense of the tangible component. What usually
gives a product or service value, is its information content - its intangible aspect. The
higher the knowledge content the more valuable the product is to the consumer or client.
Intangibility makes it difficult to locate
the producer of the product or service in time or space. The increasingly important
factory of the future is represented by the software factory. This is only partly because
it is in the central field of the new economy, information processing. More important, it
is "because it represents the research, design, development, engineering,
manufacturing, distribution, marketing, sales, service, and administration of
intangibles., the increasing economic value of no-matter." The factory of
intangibles, is the more likely candidate for the organizational model of the future.
Intermediaries: Unbundling Legal Services
As our economy has become complex, the number of intermediaries in
the chain between the consumer and the goods or services to be consumed has increased,
each supposedly adding value by their contribution along the way. Disintermediation
consists of any direct transaction or exchange of goods and services that bypasses a
middleman, professional, specialist, or institution that is normally involved in such a
transaction. The more intermediary a job or business is, the more vulnerable it is to
disintermediation. The lawyer is the classic intermediary, acting as a broker, between the
individual or corporation and our legal system. In every sector of our economy,
disintermediation is creating major business opportunities by reducing the value-added
chain to its most efficient number. Mail-order is one of the fastest growing sectors in
retailing. Videocasette recorders are disintermediating television and movie theaters.
HMO's are a disintermediating agent in health care. And do-it-yourself is
disintermediating a host of fields.
Disintermediation is also having an impact on the professions.
Vocationally, intermediation is synonymous with overspecialization. Disintermediary
livelihoods can be described as activities that cut across the narrowness and
over-specialization of law, medicine, and education. The paralegal profession is
disintermediary because it provides the option of a less specialized professional which is
appropriate to the problem to be solved. "There are times when you need a doctor and
times when you go to the drugstore and get an aspirin...It is the same with lawyers."
claims Arnold S. Goldstein, a Boston attorney with Meyers, Goldstein & Kosberg who has
written several self-help law books.
Service economies are reacting and adjusting to having too many
intermediaries. Every intermediation adds costs that are passed on to the consumer.
Eliminating intermediation is one of the key ways to being the least-cost producer. The
more intermediary a job or business is, the more vulnerable it is to
disintermediation." The lawyer is the classic intermediary. Eliminate the lawyer in
its traditional form and the cost of the legal product can be reduced dramatically.
Because the lawyer cannot be eliminated from the legal transaction without major
regulatory reform, which is unlikely, it becomes critical to design law firms where the
lawyer's role is optimized without introducing diseconomies of scale.
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