Using technology to compete with new entrants

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Posted by Arlene Adams, managing director and co-founder of Legal Futures Associate Peppermint Technology

Some of the largest companies on the planet didn’t exist 10 years ago. Facebook, Twitter, Google, Skype, eBay, Trip Advisor, Expedia and Amazon are all new entrants growing rapidly to displace traditional businesses. Despite the economic turmoil there is a rise in prominent new Internet companies building real, high-growth, high-margin, highly defensible businesses.

They all have one thing in common. They focus on transforming the customer experience and they use technology to make it happen. Increasingly we are seeing a trend emerge where the core intellectual property of a successful business is its software platform. The legal market is not immune to this trend, as we have seen from the recent revelations that US companies LegalZoom and Rocket Lawyer are to enter the UK market next year.

The advent of the Legal Services Act is one driver encouraging this trend in the legal services market. Even if alternative business structures (ABSs) don’t change the market, the fear they might will.

I already see a divide emerging amongst firms. There are firms who believe the Act will make no difference because you cannot commoditise a highly personal service. That’s what the board of many companies said in the 90s and many no longer exist. For the losers it wasn’t death by a big bang but a slow painful death by a thousand cuts.

On the other side are firms who are grasping the change in the market as an opportunity to get their business in shape. Smart firms recognise it makes good business to respond to the threat of ABSs even if they do not have the ‘tsunami impact’ some predict. By planning for the worst case, firms will only be stronger and more competitive.

Technology will play a massive role in the determining winners and losers. While the technology is not the answer itself, it is the enabler to make it possible. If you cut through the hype of technology suppliers, there are only two things that really matter. The first is the use of technology to transform your customer experience and the second is the use of technology to streamline your business and cut cost. Everything else is noise or detail.

Many firms mistake technology with commoditisation. I often hear firms state that technology will eradicate the ‘personal experience’ upon which they differentiate their service.

The reality is very different. High-value service industries, of which legal is one, have combined technology and human services to deliver a far greater personalised service. The idea that technology will de-personalise the service is at best a myth and in many instances just an excuse to do nothing.

Take the finance industry as an example. The use of technology enabled a highly personalised service 24/7. Finance customers have much more control of their finance decisions because they have the technology, collaboration tools and content to make more informed decisions. As a result customers are more satisfied with the service and banks have reduced costs significantly on the back of a self-service model.

Law firms should be asking the question, “why do customers need to visit an office?” The office will always have a place, especially in some areas of law, but it won’t be the norm.

Law firms, by the nature of their business, are process heavy. Where there is process there is always an opportunity for technology to automate tasks. Often firms do things a certain way because they always have. This makes it difficult to implement the automation of tasks because it involves taking people out of their comfort zone and handing over control to the technology.

By contrast many new entrants are in their comfort zone when it comes to the automation of tasks through technology. They are experts in doing things without human intervention.

Even if the concept of automation is uncomfortable, firms need to be conscious of it because automation is synonymous with the brave new world. If a new entrant can automate a process, and deliver certain tasks with 50% less people, then this will impact the cost of delivery. Price is a proven major influence on a client’s choice of firm, so automation matters.

Successful new entrants do not enter a market by re-creating what exists. They start by asking: “What does the customer want and how can I best deliver this?” Some firms also ask this question but the difference is new entrants have no legacy. The constraints and culture of an existing business is the biggest limitation to thinking radically about future service delivery. In the legal world the partner structure makes it even more difficult to get consensus for change.

I would suggest existing firms should not start the journey by asking: “How do we move our firm forward or compete with new entrants?” Instead they should ask: “If I were setting the business up today, without any legacy, what would I do to deliver what customers want in three years’ time?”

The firm that can answer this question, and build a plan towards it, will survive and thrive. The difference in question may seem subtle but the answer and strategy will be very different.

I believe the UK legal market will change significantly over the next three years. I expect some big brands, that don’t exist now, to be major players of the future. I also believe existing firms, that really focus on the customer experience and new ways of delivering a streamlined legal process, stand to be the biggest winners.

The question is how many existing firms will think and act differently and be prepared to build their business on a software platform?