R.I.P. Law Firm Business Model?
An op-ed piece entitled The Law Firm Business Model is Dying appeared yesterday on the Wall Street Journal’s website authored by Clifford Winston and Robert W. Crandall of the Brookings Institute.
Winston and Crandall are co-authors of the book, First Thing We Do, Let’s Deregulate All the Lawyers, which was published last year by Brookings and argues that the legal professional should be deregulated because it is a monopoly, charging prices for services that cannot be economically justified.
The crux of yesterday’s article is that the legal industry business model is unsustainable due to the fact that large clients are taking more work in-house to reduce costs and consumers are using DIY online legal services to achieve the same benefit.
The authors argue that “the rational response would be for new, low-cost legal firms to start up, and for incumbents to reduce costs and attract new clients by providing innovative services. But that is happening only to a limited extent because of state licensing requirements and American Bar Association (ABA) rules.”
The article has already generated 99 comments, on both sides of the argument. It makes for some interesting reading.
I have been teaching law firm marketing and business management to attorneys for years through state and local bar associations and our own Rainmaker Institute programs, including the Rainmaker Retreat. In a vast majority of these sessions, at least one attorney will always ask me why they don’t teach these business principles in law school.
As I have said many times, the legal profession is a business. If you make poor business decisions, you will fail, no matter how brilliant a legal strategist you may be. If you fail to provide value and effectively demonstrate the benefits to your target market of the services you provide, you will fail.
There is no question that the same forces that enabled Amazon to change the way we buy books and Apple to change the way we buy music are bringing about a similar evolution in the way consumers buy legal services.
The question to be answered now is, will law firms innovate or die?
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