Future timeline: The restructuring of the global legal services industry

By Ross Dawson on May 2, 2016 | Permalink

George Beaton | Ross Dawson

This article first appeared on Remaking Law Firms

Here’s the first evidence based on projections of market share showing why BigLaw firms must start remaking their business model now. And by implication, the consequences of not doing so.

Where the market shares of the major players in the legal services industry are headed in the next 10 years makes a major and urgent case for traditional commercial and corporate law firms to act sooner rather than later.

This report sets out the research underpinning our conclusion that firms based on the BigLaw business model must start remaking now. Later publications will explore differences between regions and speculate how the different types of legal services provider will fare over coming years.

Research scope

In collaboration with Ross Dawson of Future Exploration Network beaton has analysed the B2B sector of law, i.e. clients and providers of commercial and corporate legal services in five regions of the world: Australia, Canada, England & Wales, US and Western Europe.

The law firms we have studied are all based on the BigLaw business model, the indicia and implications of which are explained here and in Remaking Law Firms: Why & How (published in March 2016).

Research method’

Our research combined identification of mega-forces with scenarios to assess the impact of the forces on the five major types of legal services provider over the next 10 years.

The shares of revenue refer to income to the traditional and remade BigLaw firms, the NewLaw firms and the Standalone automated providers. In the case of Client in-house legal services the measure is the cost of these services to their parent corporations and excludes spend on outside counsel.

Shares of revenue, as defined above, are shown in the charts below in three 5 year periods: From Now to 2020 | 2020 to 2025 | Beyond 2025. The shares are estimated projections, not precise forecasts, charted to show the temporal trends and regional differences.

We drew on the insights of 21 invited thought-leaders and practitioners in the five regions and warmly acknowledge their contributions in the footnote. We accept responsibility for the conclusions.

Types of legal services provider

Building on the taxonomy in ‘Fresh thinking on the evolving BigLaw–NewLaw taxonomy‘ (January 2015) and Remaking Law Firms (March 2016) we examined these five types of legal services provider:

  1. Traditional law firms based on partnership, lawyer-centricty, leverage, and input-based pricing (known as BigLaw numbering at least 100,000 in the five regions) .
  2. Remade law firms (probably better expressed as BigLaw firms in the process of being remade such as Allen & Overy and Seyfarth Shaw – both of which are featured in Remaking Law Firms).
  3. NewLaw firms based on a quite different business model to BigLaw (read these posts for a deeper understanding of the range of NewLaw providers such Elevate, Conduit (recently acquired by Deloitte), and LOD).
  4. Standalone automated legal services (based on information technology and artificial intelligence such as Lex Machina and KIM).
  5. Legal departments rendering a wide range of legal services to their owner corporation.

Mega-forces

Our study has identified five mega-forces that will drive the supply and demand sides of the legal service markets over the coming 10+ years. These forces are shaping the nature and volume of clients’ needs and how these needs will be met.

  • Hyper-competition. Hyper-competition will cause changes in industry structure, including clearer delineation of strategic groups and proliferation in the number and type of legal services providers, and intensifying supply-side competitive dynamics.
  • De-regulation. De-regulation will progressively reduce, even remove, restrictions on almost all aspects of the ownership of providers and the ways in which legal services are delivered.
  • Client transformation. The speed and intensity with which clients transform the ways in which they meet their legal needs will occur more rapidly than most anticipate.
  • Exponential technology. The impact of technology as a substitute, not just a complement, for lawyers’ services will be more dramatic than most predict.
  • BigLaw firm inertia. In the main BigLaw firms will be slow to develop the capabilities in change management and innovation that are needed to remain profitable in the conditions expected after 2025.

The sum of the % share of each type of provider in each period (Now–2020, etc) is 100. In other words, changes in the height of the columns represent gains or losses for each type over the three time periods.

Outcomes

The outcome for each type of provider in a region depends on its starting point in Now–2020 and the speed and intensity with which the mega-forces affect all players that region.

Click on the images below to see full size.
BigLawKaleidoscope-1BigLawKaleidoscope-2
BigLawKaleidoscope-3BigLawKaleidoscope-4
BigLawKaleidoscope-5

Why BigLaw firms must start remaking

In commenting on the charts our focus in this report is primarily on the impact on Traditional BigLaw and Remade BigLaw firms.

  • The combination of Traditional BigLaw and Remade BigLaw firms loses share to other types of provider in all regions.
  • Remade BigLaw gains share at the expense of Traditional BigLaw, earliest and fastest in England & Wales.
  • Australia and UK are most similar with Remade BigLaw making the largest gains.
  • Client in-house legal departments gain the largest share by 2025 in the US.
  • Western Europe experiences the smallest changes in all types of provider.

Why this analysis is important and timely

Major structural change is occurring in the legal services industry. It’s most evident in common law jurisdictions.

The majority of traditional law firms are at risk of being overtaken by the tide of change. As a consequence they will suffer reduced capacity to invest in serving their clients and progressive falls in profitability – a vicious downward spiral.

A small number of pathfinder BigLaw firms are starting to demonstrate the advantages of remaking their business models.

The rise of alternative business models is inevitable as clients recognise the benefits of choice and exercise their sovereignty.

All these changes are typical of an industry entering life cycle maturity and, while novel in law, are well understood in other industries. The impact of the mega-forces can be successfully addressed in law – provided firms start now in earnest.

The messages in this post are primarily addressed to BigLaw firms and their clients, but they also have relevance for the other types of legal services provider, educators, regulators and professional societies.

Call to action

We invite your critical review of our findings and your comments on the implications. Please comment on the original post.

Note

Please note as we receive feedback this post will be modified and updated as a reference source for future publications and extension of the research.

Acknowledgement

Contributors from Australia, Canada, England & Wales, US and Western Europe shared their views with us. Many, especially from BigLaw firms, requested anonymity which we have respected.

Our thanks to Eva Bruch (Spain), Peter Carayiannis (Canada), Jeff Carr (US), Liam Brown (US) and Charles Christian (UK) for their generosity in contributing their views to this research. Ben Farrow assisted with the analysis and presentation of the findings.

The projections are the opinions of the authors. They do not represent averages or other measures of central tendency of the views of contributors.

George Beaton | Ross Dawson

The future of virtual reality… is video

By Andy Smith on July 6, 2015 | Permalink

The VR revolution is coming, and it’s not going to be what you expect. While VR gaming is considered to be the “tip of the spear” that will see the initial launch of mass-market devices like the Oculus Rift, the breakout application for the technology may not be gaming but video that allows you to look in any direction as the action unfolds around you in real time.

With GoPro’s recent acquisition of VR video company Kolor, it is clear that by the time that the Rift hits the market they will support a ready market for virtual reality video. In theory, the ability to naturally look around in a panoramic view sounds simple, but in practice it’s game-changing – as significant an advance to the medium of film as the move from black and white to color. (more…)

Virtual reality meets social media: what is Facebook’s endgame?

By Andy Smith on May 28, 2015 | Permalink

With Facebook’s acquisition of Oculus, the creators of the Oculus Rift Virtual Reality Headset, the general consensus is that Virtual Reality is about to be “the next big thing”. Major companies are starting to investigate the Oculus rift and ensure that when the wave breaks they won’t be caught unawares. Google is even reported to be working on a virtual-reality version of the Android OS.

But what is far less clear, is exactly what form mainstream virtual-reality will take, and how precisely Facebook will drive mass adoption of the platform, let alone monetize it. The Oculus Rift was originally aimed at mainstream video gamers, who were none too pleased to see their gaming platform co-opted by a company whose principal revenues are driven by advertising and metrics. (more…)

Thought leaders’ views on the future of professional service firms and their clients

By Jenna Owsianik on April 12, 2015 | Permalink

Professional services are a critical and fast-growing sector of the economy. It’s important for everyone, not just people in the industry, to think about their future and the forces that may influence them in the next decade.

To address this topic, Future Exploration Network and Beaton Capital recently ran the conference Clients and Firms of the Future: How to Compete, co-facilitated by Ross Dawson and George Beaton. The highly participatory event was an opportunity to learn from the foremost experts in the field. The main themes of the conference included the future of professional firms’ clients, the impact of digital technology on the industry, and future of business models and competition.
(more…)

Robots on the rampage: How autonomous weapons will reconfigure the ethics of warfare

By Vanessa Cartwright on March 30, 2015 | Permalink

Robot stare 640x427

The robot armies, artificial intelligence networks and cyborg assassins of science fiction continue to haunt the human imagination. But could they be the future of warfare? To some extent, the onslaught of robots appears inevitable within major militaries. The U.S. Defense Force could replace a quarter of its combat troops with robots by 2030. Using nearly autonomous and autonomous “warbots” capable of intelligent battlefield behaviors could potentially save soldiers’ lives and improve the efficiency of decision-making in war. But it could also bring a host of dangerous problems. (more…)

A thousand man years in a weekend: How the power of iteration may make artificial intelligence unbeatable

By Andy Smith on March 23, 2015 | Permalink

Technologist and real-world Tony Stark inspiration Elon Musk recently donated $10 million dollars to the Future of Life Institute to run a global research program focusing on Artificial Intelligence, specifically “keeping AI beneficial to humanity”.

But does Artificial Intelligence pose a genuine threat? There is a lot of hyperbole around AI, and in science fiction rebellious or malevolent AI is practically a whole sub-genre in and of itself. And while it’s easy to laugh off ridiculous scenarios like killer robots, the real threat that AI presents may not be to life and limb, but to economic stability and the unscrupulous wielding of artificial intelligence to disrupt markets and outpace human-driven innovation.

Avoiding the pitfalls of AI

Elon Musk was one among a number of prominent co-signers of an open letter that was also published by the Future of Life Institute. In it, they note:
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Multi-screen viewing and transmedia storytelling: How marketers will turn multiple device ownership into brand immersion

By Aaron Heinrich on April 30, 2014 | Permalink

There are two critical dynamics occurring today that will impact the way we consume and share content, and the way that content is presented: multi-screen viewing and transmedia storytelling. Both are challenging the entire concept of how we view “channels”, storytelling, and brand/consumer interactions.

Here are some insights that help make the point. A May 2012 study conducted by the IAB (Interactive Advertising Bureau) of nearly 2000 US consumers over the age of 18 found that “52% report that it’s somewhat or very likely that they’re using another device while watching television.” That percentage rose to 60% of smartphone users and 65% of tablet owners. So the more screens a person owns the more likely they’re using one or more of those while watching TV.
(more…)

Relaunch of Future Exploration Network

By Ross Dawson on November 18, 2013 | Permalink

We have recently completed a long-overdue relaunch of the website for Future Exploration Network. In many ways it is also a relaunch of the company.

Future Exploration Network was established in early 2006. The name says it all really: it is a network to explore the future.

Our first public venture was the Future of Media Summit 2006, the first conference ever held simultaneously in two continents, with live video and social media linking panel and audience conversations between Sydney and San Francisco, followed by other events around the future of work, organizations, and entrepreneurship.
(more…)

Launch of Map of the Decade, ExaTrends of the Decade, and the Zeitgeist for 2011

By Ross Dawson on December 14, 2010 | Permalink

It is traditional at the turn of the year to look forward at what is to come.

We have crystallized our thinking on the year ahead and the decade of the 2010s in a new 3-page visual landscape.

You can download the pdf of the framework by clicking on any of the images. The full text of the ExaTrends and the Zeitgeist themes is below.

Note on ExaTrends: Given the exponential pace of change of today we are far beyond a world of MegaTrends. Exa is the prefix meaning 10 to the power of 18, following Mega, Giga, Tera, and Peta. As such Exa is Mega cubed.

Map of the Decade: 2010s

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Infographic: Used mobile phones yield 1000 times more gold than gold ore

By Ross Dawson on June 25, 2010 | Permalink

A couple of weeks ago I flew to Perth to participate in a scenario planning project for a mining company. As I struck up conversation with the person next to me, it turned out we would both be presenting and contributing to the same workshop. I was kicking off the two-day workshop with a broad presentation on the future of business, while Damien Giurco, Research Director at University of Technology Sydney’s Institute for Sustainable Futures, would speak later on ‘Cities as the mines of the future’.
Damien showed me their excellent report Peak Minerals in Australia, which provides an in-depth analysis of the state and implications of peak minerals. One of the data points quoted in the report was fascinating: used mobile phones yield 1000 times as much gold as gold ore. I thought it was worth creating an infographic to bring the point home – click on the image to download a large version of the infographic.

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In short: make sure you recycle your mobile phone!