A new year always provides a fresh perspective—a context for measuring progress or other movement. We are entering a new period that we all recognize has a beginning and an end, in which we can evaluate how competing and collaborating parties fare compared to each other and compared to our expectations.
For those who focus on legal service, I think there are three main issues to watch in the year ahead: (i) the financial performance of the BigLaw; (ii) the advance of technology; and (iii) the progress of “new entrants.” All three of the issues are foundational. BigLaw data is a proxy for the extent of change to the status quo. Technology and new entrants are the key agents for creating new ways of delivering legal service. Watching all three should be helpful in understanding the nature and pace of change actually under way.
We’ll soon get the annual download on the financial performance of BigLaw for the year 2014. And throughout the coming year we will get updates and insights from numerous sources. These reports offer very helpful information for all participants in legal service, especially those responsible for leading legal organizations.
At the most superficial level, the data is modestly interesting. It will confirm that BigLaw continues to generate very large annual revenue, and that average partner incomes continue to be very high. For 2014, the litigation practice areas were not as active as expected, but the transactional practice areas had, on average, a good year.
More interesting will be the specific details. While the averages may be up or down, which specific firms did well, which did not, and why? Did a small number of elite firms continue to pull away from the pack, and if so, why? And if so, what appear to be the emerging trends among the rest of the pack?
Where is market share moving among law firms? What trends can be detected about market preference in choosing some over others? Is there a measurable correlation between innovation and market share?
How much market share is moving away from BigLaw to smaller firms, or to in-house teams, or to new entrants? Why?
What does the data tell us about the career prospects within and beyond law firms? What are the emerging roles of law firm partners, associates, and other professionals? Where are the new jobs in the industry?
These are all issues we talk about and believe are changing. To the extent it is reliable (an important question), the data gives us insight as to what is actually happening.
The issue to watch here is adoption.
Much of the anticipated change in the delivery of legal service depends on technology. The promise of technology to enable work to be done better, faster, and cheaper.
New legal technology applications are being developed every day, supported by hundreds of millions of dollars of venture investment.
To what extent will the market of law firms, corporate law departments, governments, and new entrants actually adopt the new technologies to improve the way legal service is delivered? To date the pace of adoption has been slower than most would have expected. Until it accelerates, we will not see the full measure of change that is possible.
This year is an important one to watch on this front.
The most dynamic elements of the modern market of providers of legal service are the “new entrants,” new firms and businesses formed to pursue new opportunities. They are, by definition, formed to do things differently. That’s the point.
The new entrants have made steady progress in capturing market share in recent years, but it still does not amount to a very high percentage of the market in the aggregate.
There are several facets of this issue to watch. Do some new entrants emerge as genuinely significant factors in their own right? To date not many have. What roles in legal service do the new entrants address, from process design, to performance of tasks, to assisting others in harnessing technology, to anything else the imagination enables and the bar rules permit. And what aggregate share of the market do the new entrants capture?
To this last point, it is important to recognize that the “new entrants” are not necessarily “disruptors” in the sense that they challenge the traditional law firm and corporate department players. As often as not, they are collaborators, who seek to work hand-in-hand with others to achieve a better way forward.
I plan to track these developments and write about all of these subjects in my blog posts this year.