2018 Report on the State of the Legal Market: Law Firms Should be Thinking about the OODA Loop

Topics: Client Relations, Law Firm Profitability, Law Firms, Leadership, Legal Innovation, Midsize Law Firms Blog Posts, Surveys, Thomson Reuters


Like many observers of the legal market, I look forward every year to the 2018 Report on the State of the Legal Market produced by Thomson Reuters Peer Monitor and the Georgetown Law Center for the Study of the Legal Profession. Jim Jones and the folks from Georgetown always find an interesting and thought-provoking way to take the pulse of the legal market. And they put it in the context of invariably cogent themes.

This year’s allegory to the Maginot Line was no exception. The idea of erecting a defense to a perceived threat brought up another allegory for me as well. In self-defense training and military strategy, there is a popular concept known as the “OODA Loop,” which refers to the decision cycle of “Observe, Orient, Decide & Act”. Aside from being fun to say, it provides an insightful model by which to understand how a particular individual chooses to act in a given situation, or how you might act if faced with a similar scenario.

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The OODA loop is, essentially, a framework through which we work to understand what we observe and how we orient ourselves to those observations, decide how to respond, and ultimately act in response.

The progenitor of this concept, U.S. Air Force Colonel John Boyd, describes the second O, orient, as the most important factor in the analysis. How we orient ourselves to a situation is a function of our personal experiences, heritage, education, analytical skills and biases. Our orientation not only impacts what we decide to do, but even colors how we observe the situation from the outset.

In the discussion from the 2018 Report on the State of the Legal Market, it is easy to see the general pattern of the OODA Loop which many U.S. law firms are following. Much of how they are orienting themselves to the current market situation is a function of how they’ve done business for many years: relatively free from competition, valued for their legal expertise, and dependent on ever-increasing pay scales to support continued profitability. There is nothing inherently wrong or irrational with this orientation.

The problem arises as it influences how law firms observe the market around them. Indeed, there has been growing acknowledgement of the increasing challenge of corporate clients as competitors, as in-house legal departments bring more of their legal work within their own purview. But that acknowledgement has not led to much substantive change in the delivery of legal services. Chief legal officers give consistently low marks when asked to evaluate how serious their outside counsel are about changing their service delivery models, typically about 3 out of 10 according to the Altman Weil CLO survey. Yet, when asked why they don’t do more to change how they deliver services, law firm leaders often respond, “because my clients aren’t asking me to,” according to the Altman Weil Law Firms in Transition survey.

This inability to see the need for change absent a direct request is a function of observation influenced by orientation.

In the discussion from the 2018 Report on the State of the Legal Market, it is easy to see the general pattern of the OODA Loop which many U.S. law firms are following.

The increasing influence of alternative legal service providers (ALSPs) also presents a challenge to how law firms orient themselves to the market. Yet recognition of these threats remains low. As one example, in the most recent State of the U.S. Small Law Firm study from Thomson Reuters, fewer than 1-in-5 small law firms saw online or DIY legal providers like LegalZoom as a competitor. Here again we see the influence of orientation on observation.

But there are signs that this orientation is beginning to shift. ALSPs are increasingly a staple on the agendas for major industry conferences, and have gained near continuous coverage from a number of industry commentators. As a sign of the increasing focus being placed on the in-house lawyer as a key stakeholder in the legal services community — not just as a consumer but as a practitioner — we’ve seen the advent of groups like CLOC and the introduction of Thomson Reuters’ forthcoming State of the Corporate Law Department Report, due to be released later this month.

Any law firm that is serious about confronting the challenges ahead would do well to undertake an honest and comprehensive self-examination. Not just a typical SWOT analysis (Strengths, Weaknesses, Opportunities & Threats), but an examination of their orientation to the market in order to identify potential blind spots. As the old colloquialism goes, “It’s always the punch you don’t see coming that puts you down.”