By viewing law as a commodity, I learnt about the “value” of lawyers
When you start a new business, in one way or another, you are selling a commodity — i.e something that can be bought and sold out in the market. Being in the business of selling legal services, I started to think about what legal services means as commodity, and how much it is worth.
Back when I was working in a BigLaw firm, it was very clear what I as an individual lawyer was selling — time. And the client paid based on the amount of time I spent on their matter, multiplied by my charge-out rate.
Fixed-fee = time is just an input cost
For our business, we decided to do everything on a fixed-fee basis. Taking this approach meant that I’m not just selling time. Time is certainly a factor, but only one of many factors that go into producing legal services. I had to dig deeper and look at this from the client’s perspective in order to get to the bottom of the value underpinning legal services.
An example I always think about is this — if I were to buy a car, I’m not going to base my purchasing decision on the number of hours spent by the factory worker in an assembly plant, and how much that worker was being paid per hour. Yes, I will accept that, if certain conditions meant that it takes longer for the worker to assemble the car and the wage cost goes up, then the car might cost more. But as a consumer, I ultimately look at the price of the whole car and how much “value” I get out of it. To put it another way, I started viewing time as simply an input cost.
“Legal expertise” is the real value
If not time, then what are lawyers selling? Going back to first principles, I started to think about what we as lawyers have that non-lawyers don’t. For example, the ability to review documents, interpret legal information, and spotting issues based on our knowledge and experience as lawyers. Or knowing how the law works from a process perspective, whether it be for incorporating a company, registering a trademark, or going through the court system. A good lawyer will then use those skills and experiences to provide commercially useful advice.
Advancement in technology has certainly allowed the provision of legal services to require less time and resources. For example, the application of machine learning technology to document review has made due diligence and e-discovery more efficient. Legal information is also becoming more accessible, as example clauses and template documents are now available with one Google search.
What hasn’t changed, however, is the value a lawyer provides by packaging all of this and applying his or her expertise to the specific situation a client is facing. That, in my mind, is the essence of “legal expertise”, which only comes from the years a lawyer spends studying the law and practising as a lawyer. It just so happens that the available technology of the day can reduce the level of legal expertise required to deliver certain legal services.
Some day we might have a situation where technology completely replaces legal expertise. But we don’t yet have the technology to fully replace human experts (see this article which provides a good snapshot of where we are in terms of advances in AI and the like). Until that day, there’s still some work for us to do as lawyers!
Cheaper is smarter, not lower quality
The value a client extracts from legal services is therefore tied to the level of legal expertise they receive, which should ultimately determine the price they pay.
Conceptualising the legal market in this way, the different tiers of legal services makes more sense, as each tier provides a very different value proposition. At the top end, the clients are paying based on how much time a lawyer spends because (in theory) the value they’re getting reflects the time an expert lawyer spends diagnosing the situation and providing tailored advice.
At the more commoditised end of the market, which is where a lot of NewLaw activity is happening, often people assume that this is some sort of lower quality alternative. However, that is certainly not the case. It’s not that cheaper means lower quality legal expertise (because let’s face it, no one wants a 3 out of 5 stars lawyer). Instead, you can reduce costs by assembling the same quality legal expertise in a smarter and more efficient manner.
The ideal consumer of commoditised legal services understands that technology and well-designed processes allow legal expertise to be deployed in a more streamlined and scalable fashion. They benefit from the associated cost-savings and, as a result, are happy to accept new ways of receiving legal services.
