If Amazon ran a law firm, what would it look like?
Amazon is one of the largest companies in the world, and not for nothing. It practically invented online buying, along the way creating a customer-focused online sales empire.
Before Amazon, mundane purchases such as books involved a greater amount of risk on the buyer. Buyers had to compare prices, travel to stores, and there was very little information about products. Legal services are like this today — clients have very little insight into the price of legal services until they receive the bill, and have very little information to compare the quality of legal services.
I’m not suggesting that Amazon is going to get into the legal services market, and of course it has a terrific in-house legal team for its own legal matters. But if it set out to remake the law firm business model serving clients, in the way that it changed online purchasing, what innovations would it pursue?
Commoditized and Automated.
One big change that Amazon brought about was to identify first what items were commodities. Books were a natural start. Each new book is virtually identical, and buyers wouldn’t care whether they purchased from one store or another.
Most legal services are not commodities, but as Richard Susskind has famously observed, law firms frequently deliver commoditized legal services as bespoke, individual creations.
Amazon LLP would automate many law firm processes, and charge easy-to-understand, fixed fees for commodity work.
Amazon LLP would post its prices for commodity work, and its billable rates for non-commodity work. At the beginning of an engagement, it would tell clients a distribution of prices for similar engagements, with means and median prices identified. During the RFP process, the firm would identify factors that add to cost or complicate the matter.
I used to work in a superb large law firm, and I recognize that transparent pricing of legal services sounds naïve. But now I work in a company that consumes legal services, and I can affirm that mystery pricing is a major source of risk for clients of law firms. Clients would rather pay more than be subject to unknown, open-ended pricing.
Imagine for a second that you were purchasing a book on Amazon. You could buy from Amazon at a fixed price, or a re-seller, for a limitless mystery price you would only know after the purchase was complete. Buyers would never, ever purchase at the mystery price.
Or imagine that you went to a nice restaurant with lobster on the menu at a market price not listed on the menu. When you asked the server about the market price, he told you that the price would depend on the time it took the fisherman to pull it from the water, the price of fuel for transport, and the time it took the chef to prepare it — and that you would find the price at the end of the meal when you got the check. Zero diners would order the lobster, no matter how good it was.
Do we really expect sophisticated purchasers of legal services to continue to order the lobster at a limitless, unknown market price?
It’s hard to assess the price of legal services, but law firms have the most information about past engagements, and they are in the best position to price the risk of being wrong.
Amazon LLP would offer a fixed fee or a collar on prices with contingency pricing for events that create greater costs. The firm might under-estimate the costs of the engagement, or it might over-estimate the costs. But it would price the risk in the aggregate and include that cost in its fees.
The firm would incentivize efficiency from its legal professionals, push work to its lowest-cost and highest-efficiency provider. Efficiency would be its business model, because it would reap the financial benefits of automation and efficient work.
Data analysis has revolutionized finance, medicine, sports, and a thousand other industries. Amazon uses purchasing history and personalization to recommend purchases to sellers.
I have just finished editing a book about how data analytics will power the next generation of legal services (Data-Driven Law, forthcoming fall of 2018 from Taylor & Francis). Amazon LLP would use a combination of public data (like docket analytics from Docket Alarm) and private data, like the aggregate engagement history of the client and the aggregate history of similar clients, to anticipate legal needs and customize legal services to the specific needs of clients.
Amazon knows buyers better than they know themselves. And Amazon LLP would use data to understand clients better than many clients know theselves.
Amazon makes purchasing as simple as possible, and it’s constantly streamlining its process for buying. It’s no coincidence that one of Amazon’s earliest patents was for a “one-click” purchase.
Amazon LLP would make legal services similarly streamlined. It would take meetings whenever and wherever convenient for clients, especially on-site. The firm would submit bills with standardized, easy-to-understand service codes. It would return calls instantly. It would facilitate online invoicing and payment by credit card. It might even have a rewards program for high-volume clients. (Clio CEO Jack Newton calls these kinds of customer-friendly transactions “effortless,” which is a nice way to think about them.)
Clients would use Amazon LLP for all commoditized work because it would offer the clearest, lowest prices, and the most friction-free buying experience. (Jordan Furlong has a great discussion of these issues in his book Law Is A Buyer’s Market: Building A Client-First Law Firm.) They would use the firm for bespoke work because Amazon LLP would absorb risk, offer pricing that the company could budget, and because the firm would benchmark its success vs. other firms.
Potential not pedigree.
I imagine that Amazon LLP would hire differently to deliver a new generation of legal services. It would identify high-achieving lawyers, of course, but it would also attract and retain an all-star class of other legal professionals: law librarians, expert paralegals, project management, design, and yes, even stars in data science.
The firm would seek to develop, effectively manage, and promote from within. It would invest in the careers of all its professionals, and employee retention would be a key metric of its success, because the expertise of its team would be an important differentiator to clients.
Amazon LLP would continuously invest in its business processes. It would win more work because of its expertise, and would be more profitable because of its efficiency (billable hours work exactly the opposite way).
Amazon just announced that there are 100 million subscribers for Amazon Prime, its subscription service that offers faster delivery, free movie streaming, music and other services to members.
Amazon’s law firm would build a community of its subscribers, enabling them to learn from each other. It would offer additional legal services to subscribers — perhaps events, continuing legal education credits, books, or compliance services. (Littler is an example of a firm that does a terrific job of building a client community in just this way.) Its legal professionals might do office hours on site at client offices, offering free consulting services or a fixed number of hours of monthly data consulting.
Amazon LLP would likely make a separate business out of the aggregate, anonymized data from its engagements. Just like Amazon leased out its legion of cloud servers with Amazon Web Services (AWS), Amazon LLP might second out its people, processes, and data to its clients. The data exhaust from legal matters need not be waste — if properly anonymized and aggregated, it would be valuable, full of insights, and could be a second business line all unto itself.
Amazon Legal Services?
Although Amazon has a terrific in-house legal team, it does not run a law firm offering services to clients (at least, as of this writing). But many of the things that make Amazon a runaway success could also be a disruptive force for law firms.
Just as bricks-and-mortar sellers had a limited view of what they sold, so too do bricks-and-mortar law firms have a limited view of what constitutes legal services. If firms view their products as documents and hours, and insist on putting the risk on clients, they face the same risk of disruption as brick-and-mortar booksellers.
If Amazon applied its recipe for frictionless purchasing to legal services, clients would be delighted. The firm would dominate the market for legal services. Sophisticated consumers of legal services would hire Amazon LLP wherever it could.
Amazon does not run a law firm, at least not one that serves external clients. But the Corporate Legal Operations Consortium (CLOC) is increasing the efficiency of legal operations in corporate legal departments, and in 2016, in-house lawyers moved $4 billion of legal spend from outside counsel in house. (Instead of ordering the lobster, they cooked at home.)
And CLOC isn’t alone in trying to innovate in the delivery of legal services. It’s no surprise that the Big 4 accounting firms are trying to break into the market for legal services. And services such as Intuit, LegalZoom, Avvo, and DirectLaw are working to commoditize the most straightforward legal services for the benefit of consumers.
The old market for hourly legal service seems ripe for disruption. The major question is who will do it: corporate legal departments, accounting firms, direct service providers, or maybe law firms? The revolution may not come from Amazon Legal Services, but Amazon’s customer-focused innovation would be a great roadmap for firms that want to create the next generation of legal services.