Convergence: Thinking About the 21st Century and How it Will Unfold for Law Firms Over the Coming De

The year 2010 finds us in the final year of the first decade of the third millennium - in the western calendar at any rate. One thing is abundantly clear: the future is not what it used to be. If there ever was a time when one could rely heavily on forecasts in crafting strategy, then that time is past. Today's leaders of law firms need to be able to juggle simultaneously three seemingly incompatible goals:

1. to define and execute a strategy in order to sustain and maximize the value that the firm delivers to its owners into the future, based on the capabilities and resources that it has and that it can reasonably achieve or realize;
2. to ensure that the firm is agile, robust and resilient enough not only to withstand unexpected and unforeseen changes in the market but to capitalize upon them; and
3. to deliver sufficient short-term profitability to be able to meet owner expectations and compete effectively for talent.

Never before has this been more difficult, nor the way forward so uncertain. Change has always been with us. It is not change but our reaction to it that defines its effect on our firms. This holds as true today as then. Different today, even from the 20th Century in which most of us developed our world-view, is the pace and scope and the level of complexity of the change. As we emerge from the worst recession in (for most) living memory, the realignments taking place in the world seem akin to an earthquake. In its aftermath, assumptions upon which we have based the business models of our firms lie in ruins. Almost as a knee-jerk to drive performance harder, many compensation systems are being overhauled radically. Client relationships are evolving rapidly as client demands reach new heights and fees come under pressure at exactly the time that many kinds of matters become more complex and sophisticated. Other kinds of matters, previously profitable, have become commodities or even disappeared. Alternative fee arrangements are nearing a tipping point that makes the survival of the billable hour as the primary billing model most unlikely over a five to ten year timeframe. Firms that have never before thought of globalization in the context of their own business models are being challenged by this reality too. How will all this unfold over the next few years? What does a prudent law firm managing partner or executive director need to do? What should be discarded? What should be kept unchanged?

In this turbulent 21st Century, it is critical for many law firm leaders to rethink radically their roles in their firms, and especially how they and their firms approach strategy. A clear sense of direction is imperative. As in the popular CBS TV series Survivor, strategy is a matter of "outplaying" and "outlasting" (and yes, sometimes even "outwitting") one's competitors for as long as the firm is in business. It is critical for today's leaders to get really good at "thinking strategically," every single day. Strategy is no longer something that can be adequately dealt with as a periodic event. It must become an ongoing process in the firm. It is also everybody's responsibility, rather than something that can be left to an individual or a committee.

This article is intended to provoke law firm leaders into challenging the way that they think about strategy and the future of their firms, by exploring some of the changes that are taking place in the world and how they might unfold, especially in western law firms.

Shifting global economic and socio-political landscapes

With hindsight, it is clear that the current global crisis did not emerge solely from the housing bubble that developed in the USA and some European countries. It built up over decades. We need to consider how the world will be different in coming years, once this crisis subsides, before we can begin to think about how our strategies need to adapt.

It is clear that the global economic and socio-political landscape has changed fundamentally since 2005. The dynamics that have changed may be relatively subtle and unapparent at present, but are likely to manifest themselves more obviously in coming years.

New business models for law practice ownership and management

As law firms worldwide experiment with new business models, some seemingly attractive initiatives will fail and may even drag firms down with them. If others do yield real advantage, they will evolve and spread through the market. They will then join the other vectors that are causing the way that legal services are delivered to clients to evolve away from the business models to which we are accustomed.

Some new business practices that firms are already discussing and in some cases executing include:

• making "C-level" non-lawyer executives into shareholders, so fundamentally altering the relationship between lawyers and "non-lawyers" in most firms;
• the development of multi-disciplinary practices to provide a wider range of services to clients;
• securing equity finance either through listing on a stock exchange or through private equity, to fund growth either geographically or through recruitment incentives to attract talent; and
• exit strategies for existing owners wishing to capitalize their investments.

Exponential advances in technology

There are two schools of thought about the ultimate impact of technology on law firm management. The first holds that technology will never be more than a support tool for lawyers. The second holds that technology will fundamentally displace lawyers from many of the services that they currently provide. The first view is myopic; technology has moved far beyond being just a means of producing documents faster, managing the firm's finances more effectively, storing and improving access to data, and communicating faster. The trend towards fundamental transformation is inexorable...and exponential.

With proven internet speeds already exceeding the equivalent of 60 DVDs per second, bandwidth is not likely to be a limitation for much longer. Data security is also already at a point where advancing this as an unavoidable limitation is a little dubious.

Computers continue to double in power every 18 to 24 months at no increase in cost, a trend that has held for half a century and is described in the so-called Moores Law.

Enormously increased bandwidth will also go a long way to addressing the preference of clients to deal with humans rather than machines. Holographic video-conferencing tools such as Cisco's ‘Telepresence' are early indicators of how this trend might unfold. Automatic translation will give people the ability to communicate in whatever language they choose. Web 2.0 tools such as social networking are making it far easier for people to communicate and platforms like Legal OnRamp are at the cutting edge of this in the legal profession.

The pace of change in legal services has been traditionally (and often proudly) described as "glacial." Technology could radically change that. But governance practices in most law firms are not suited to dealing with disruptive change. Again, this offers as many opportunities as threats for those firms with strategic acuity and the ability to develop the resilience and agility to thrive on such change.

Emergence of a global market for legal services

Frankly, it would be surprising if a single global market for a wide range of legal services did not develop over the coming five to ten years at most. Protectionist jurisdictional barriers may persist stubbornly in some markets, but for the most part they will have been inexorably eroded by the market's ability to source goods and services anywhere in the world through the Internet. Markets abhor artificial barriers. They circumvent them whenever this is of economic benefit and achievable. Legal services are not immune from this.

World Trade Organization initiatives against unfair trade practices and trade barriers in services are also a pressure that has hardly even begun to exert itself. We have seen over the past decades how trade barriers in products have been steadily eroded. Why not too in services, including legal services? International standardization of legal terminology and commercial legislation, too, will accelerate this.

Convergence

The point, when considering these vectors impacting the legal profession, is that they cannot be viewed in isolation of each other. In order even to begin to understand their implications for law firm strategy and management in the next few years, one has to consider what their combined impact is likely to be, acting in concert with each other.

This concept, called "convergence," is an essential element of making strategic sense of the future. Yet legal practitioners often ignore it because it is, in practice, so difficult and imprecise to apply. The result is that strategy is crafted on the basis of superficial and often incorrect deductions.

It is senseless to ask what the impact of alternative business structures in England and Wales might have on law firm management practices, without asking what their impact might be when considered together with exponential growth in technology, emergence of a global market in legal servicesand the changes in the global economic and socio-political landscape, all acting simultaneously and in concert. This leads to a far more complex discussion but,

almost inevitably, to a different set of conclusions from when the issues are considered in isolation.

Conclusion

The purpose of this article has been not so much to try to provide a forecast of what the future legal profession will be like, as to discuss a few key drivers and provide a framework for how law firm leaders need to think about them and, more importantly, how they impact their strategy. I hope that the point is made that it is dangerous to think too simplistically about these drivers, or (especially) to try to think about them in isolation of their interrelated impacts on each other. Most importantly, I hope the point has been driven home that these are issues that firms ignore at their peril.

Balancing all these long-term issues with the intense demands of challenging economic priorities is perhaps the most difficult task for law firm leaders today. In my experience, the only way is to create a culture where strategic conversations are a constant undercurrent, and where important information is readily communicated within the firm, to those that need to know it. §

Robert Millard is senior strategy manager at a prominent global law firm and may be contacted at robertfmillard@mac.com. This article is an abridged version of a longer work. The full article can be found at http://www.edge.ai/Edge-International-1547572.html.