The $6 Million Question for Legal Supply Chains

We can rebuild it. We have the technology.

A challenge confronts our industry: we must rethink the way in which we deliver legal services. We need to get better. We need to get faster. And, yes, we need to get cheaper. In our effort to achieve those results, we have all tried a number of different tactics.

For example, the industry has been talking and writing for some time now about the “disaggregation” of legal services. It has become a part of our lexicon — the subject of seminar topics and law review articles. Let’s take a moment, however, and consider what we really mean by “disaggregation” and why, standing alone, the concept does not achieve maximum results.

Decompose before disaggregating

Simply put, disaggregation describes how legal services are bought and sold. The concept applies at the supply chain level, and speaks to the significant changes to the mix of participants in the legal services market. Technology companies, LPOs and other alternative service providers create more options for buyers to break apart (and rebuild) the network of service providers.

Law departments now have more options when choosing partners to serve as extensions to the in-house team in their mission to fulfill the legal needs of the company.

The hope is that by sending one part of the service chain to one provider and another to a second provider, the overall cost will be reduced without an adverse impact on quality.

If the analysis stops there, however, the result is likely to be less than optimal. Why? The problem is simply the fact that, if we are to work better and faster, the pieces cannot just be disassembled. They have to be reassembled into a new whole that operates more effectively. We tend to forget that changing one part of the way we deliver legal services can have an impact on other components.

This means we need to understand not just the way services are bought and sold but how they operate and interact with each other.

To see how that disaggregation affects the whole delivery of legal services, we need to zoom in and out to examine the supply chain at different resolutions. If we are going to reassemble the pieces, then we equally need to focus on the processes that comprise the overall delivery of legal services.

This is what we mean by decomposition — a much more granular view of how legal work is actually performed. If we look at the provision of legal services as a collection of processes, with each process as a basic unit of work, we can identify distinct component parts to analyze: to assess for a different approach. whereas decomposition deals more directly with how legal work is performed.

Decomposition essentially demands that we look at each step in a legal workflow and ask whether all of the steps are necessary; whether the steps are in the optimal sequence; whether the right resources are tasked with each step; whether the right tools are deployed; and whether the overall cost of completing that process is tenable for the value provided to the end-user of services. Most importantly, we have to ask how the various processes will work together once reassembled into a new whole.

The disaggregation of the supply chain is an important step but it is only one step. The goal of the endeavor should be to create a better, stronger, and faster version of what existed before. If we are to achieve that result, we need to think about each component part and to decide whether we should upgrade or replace certain parts. However, there is also a need to look at the whole in a new a different way: how are the component parts, old and new, working together? What can we do to reduce friction and eliminate duplication across the various components?

Don’t forget the human element

With all due deference to those who believe that we are on the cusp of being replaced by robots, I cling to the belief that the provision of legal services is a fundamentally human endeavor. Until the date of singularity, the key parts in the provision of legal services involve people.

Thus, decomposition, if it is to be successful, requires an advanced commitment to human-centered design.

This does not mean that legal services are solely rooted in the province of people with a law degree. The challenge of building a better, faster, stronger value stream demands that we finally begin to rethink — in a material way — the optimal role of the lawyers in the provision of legal services.

The continuing diversification of roles across the legal services landscape presents a much broader pool of talent from which clients can choose. New roles include interdisciplinary talent that combine traditional legal training with a focus on technology or on legal operations. In other cases, talent diversification requires the full integration of new professionals with domain expertise in their own right and functional specialization in the legal industry. This group has expanded far beyond the more traditional para-professionals to include process engineers, technology architects, project managers, among others.

While I do not believe we are on the verge of being replaced by robots, I do confess that, in many cases, the decomposition of legal work also heavily features the deployment of new technology by all players in the chain (in-house, incumbent law firms and new entrants). While many technology advancements will enable existing players to do their jobs better and faster, others will displace existing tasks or specializations. While these “bionic” components are often shiny and exciting, our experience tells us that your mileage may vary.

We tend to overlook an important point.

Enabling technology, for example, often requires lawyers to perform their work differently. That very notion can be distasteful to lawyers who tend to prize independence and autonomy. Simply creating a technology solution without consideration of the changes in behavior required from the users — particularly when those users are lawyers — lowers the odds of the solution being effective.

Simply put, technology solutions require change management, to influence how the entire legal team thinks and behaves. In some cases, roles must be redefined and entire teams reconfigured.

Lessons in empathy from history

Let’s look at one example.

OCR technology, improved data handling, and advances in natural language processing are already displacing human effort and inputs. Within the traditional firm, the rise of such technology spurred the growth of new specializations for lawyers and other team members. While legal practice grew around issues of electronically stored information, e-discovery and information governance, some of this work shifted away from core litigation teams, for both lawyers and the paraprofessionals supporting them.

In the case of managed document review, these tech advances were key factors in the launch and growth of new service and business models. Ultimately, managed document review moved much of this work out of law firms to a new and different breed of service provider. In this example, decomposition of the work around document review led to the disaggregation of the legal supply chain around litigation needs.

From the standpoint of the buyer, this makes perfect economic sense. The growth of the LPO market over the years is testament to that fact. The disaggregation of the supply chain around M&A needs serves as an earlier illustration; companies long ago figured out the huge cost of due diligence and moved that part of the deal to lower-cost service providers. As in many other industries, power continues to shift to buyers from sellers — and it’s the buyer’s perspective that must inform service model innovation.

From the standpoint of law firms, these trends can be scary, and for individual practitioners, the fear of displacement (by new technologies or by new competitors) can be visceral. Subconsciously, these fears can feed into general aversion to change, including receptiveness to new tools and new approaches. This reaction, in turn, makes adoption even more difficult.

Those who would undertake the task of deconstructing legal services would do well to recognize this likely result — and take the time to deal with the inherent change management issues. It helps to practice empathy, not only with the buyer of services demanding greater value, but also with the many perspectives that reside within existing structures of legal organizations.

As the changes to the legal services market accelerate in pace, the question to ask is not whether newly disaggregated supply chain merely costs less. The real six million dollar question is whether, when reassembled, the new supply chain is truly better, faster, stronger.

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