1. LEGAL SERVICES INNOVATION
Richard Moorhead
Director, Centre for Ethics and Law, Professor of Law and Professional Ethics
r.moorhead@ucl.ac.uk

2. OVERVIEW
CELs and me
Is there a paradigm shift underway in
law?
The UK case
You can’t systemise me?
Where this goes beyond efficiency/cost

3. ISN’T INNOVATION…

4. …THAT AWKWARD MOMENT

5. CHANGING RELATIONSHIPS
WINMARK LOOKING GLASS REPORTS
 cost reduction;
 changes in pricing models; and
 the development of mutually beneficial relationships.
 shifting work to lower cost resources;
 improving value and predictability from external firms; and
 using technology to increase availability of legal experts.
 corporate procurement specialists
 value-based and performance-based compensation.

6. A PERMANENT
REVOLUTION?

7. IT’S THE RECESSION
STUPID…
Or is it?

8. THE PARADIGM SHIFT
HENDERSON AND ZAHORSKY, ABA J, 2011
 PP shrinkage is not just recessional
 Market growth slower than historic levels and (even) less evenly distributed
 Movement of jobs outside of PP and in-house
 Associates' paths upward fade
 Profits per partner and staff leverage problems.
 Technology swallows billable hour
 International competition hits (margins and market share?)
 A more sophisticated corporate client with vast knowledge available at the click of
a mouse.

9. WHAT STARTS ON THE PERIPHERY….

10. TYMETRIX…
 Founded in Hartford in 1994
 In 1995, developed task-based billing system.
 1997 delivered online e-billing.
 2000 automated compliance checks.
 2001 online matter management solutions.
 2002 ranked first in Deloitte & Touche’s Fast 50 in Connecticut and #72 in Deloitte’s Fast 500
Tech Companies in North America.
 2003 acquired by the global information services company Wolters Kluwer. (€3.6bn, 18,500
employees)
 Later TyMetrix opened its London office, the first outside North America. The first non-North
American client was the global energy giant BP.
 2004 an end-to-end enterprise legal management platform with e-billing, matter and case
management, document management, budgeting and analysis, and reporting solutions.

11. IT’S THE RECESSION, STUPID?
 US Lawyer headcount peaked in?
 2004
 And what else happened?

12. HENDERSON AND ZAHORSKY, 2011

13. THE DECLINE OF PRIVATE PRACTICE?
HENDERSON, 2012

14. NOVUS LAW
 operates 22 hours a day.
 electronic document review for large-scale litigation and corporate due diligence for
large businesses.
 delivery of “a virtually error-free work product on time and within budget”
 “via intricate, metric-driven work process certified by Underwriters Laboratories”.
 They do not practice law

15.  Since 2007, revenue-per-lawyer figures have been trending sideways or down for
the majority of the Am Law 100. …a sharp break from historical patterns

16. EXAMPLES OF LESS TEMPORARY SHIFTS
 Some Fortune 500 companies have adopted the presumption that all legal work
will be done in-house.
 General Electric's legal department
 lawyers in India supervised by in-house lawyers in the U.S.
 Cisco Systems
 a Web-based knowledge management system that
 captures email conversations, facilitates secure communication with experts, and
documents answers to frequently asked questions - all to boost in-house productivity
and cut the law department's expenses.

17. AND THE UK…?

18. LB100 THE AGE OF TURBULENCE
 Cobbetts, which went into administration in March, posted a profit per equity
partner (PEP) increase of 16% in its last-ever LB100 appearance
 Top 100 UK law firms revenue and profits up by 8% (£19.1bn and £5.8bn)
 Headcount up by 10% to 61,299
 RPL is down by 2% to £312,000
 PPL, likewise, has fallen by 2% to £95,000.
 PEP has dropped 4% to £622,000.
 The losers– there isn’t the work, there’s too many lawyers
 GCs – you have to change

19. LB100 THE AGE OF TURBULENCE
 Cobbetts, which went into administration in March, posted a profit per equity
partner (PEP) increase of 16% in its last-ever LB100 appearance
 Top 100 UK law firms revenue and profits up by 8% (£19.1bn and £5.8bn)
 Headcount up by 10% to 61,299
 RPL is down by 2% to £312,000
 PPL, likewise, has fallen by 2% to £95,000.
 PEP has dropped 4% to £622,000.
 The losers– there isn’t the work, there’s too many lawyers
 GCs – you have to change

20. TURNOVER TRENDS
LAW SOCIETY, 2013, FROM ONS DATA

21. LB100 – 2004 TURNING POINT?

22. LB100 – 2004 TURNING POINT?

23. LB100 – 2004 TURNING POINT?

24. THE RISE OF IN-HOUSE

25. MORE BUSINESSES WITH IHLS
AND BIGGER TEAMS
 number of solicitor PC-holders employed in commerce and industry increased by
183% since 2000
 the number of head offices of businesses employing PC holders increased 93% in
the same period
(Law Society Annual Statistics Reports).

26. IS INNOVATION HAPPENING?

27. FIRM RESPONSES
 Cost Management/Headcount
 Response to metrics - Firms are making efforts to rationalise and
consolidate systems to enable better management information
 Firms are increasingly focussed on better matter management analysis and
more rigorous pricing approaches
 More interested in ABSs??
 Diversification in influence? More Non-Exec, Non-L equity

28. SUSSKIND’S FIVE STAGES

29. LPO
LACITY AND WILLCOCKS, “LEGAL PROCESS OUTSOURCING: LPO PROVIDER LANDSCAPE” (2012)

30. LACITY AND WILLCOCKS PREDICT…
 LPO providers will move up the value chain
 New engagement models will emerge
 The shape of enterprise legal functions will increasingly move from pyramids to
diamond
 Enterprise legal functions will reduce the number of law firm partners and
increase bundled legal services
 Significant M&A and strategic alliance activity will fuel provider growth and
capabilities

31. CHANGING NATURE OF RELATIONSHIPS

32. SHINE ON YOU CRAZY…

33. WHERE DOES THAT LEAVE
US?

34. MICHAEL PORTER, 5 FORCES MODEL
(2008) THE FIVE COMPETITIVE FORCES THAT SHAPE STRATEGY, HARVARD BUSINESS REVIEW, JANUARY 2008.

35. RIVERVIEW LAW: THE CASE FOR
INSURGENCY…

36. WHAT DO ESTABLISHED PLAYERS HAVE…?
 Size
 Experience
 Personnel
 Information
 A merger strategy
 A cost reduction strategy

37. RIVERVIEW’S MODEL?
 Fixed Fees
 More flexible expertise model
 Collaboration, information and insight

38. YOU CAN’T SYSTEMISE ME…
Without making me miserable, or unemployed, or cheaper, or less effective

39. THE JESUS MOMENT
THIS BOOK MAY SAVE YOUR LIFE

40. MEDICAL FALLIBILITY
GOROVITZ AND MACINTYRE
 “Necessary fallibility”—things beyond our capacity.
 Ignorance - we may err because science has given us only a partial
understanding of the world and how it works.
 Ineptitude - he knowledge exists, yet we fail to apply it correctly.
 Complexity - science has filled in enough knowledge to make ineptitude as
much our struggle as ignorance.

41. AVIATORS
 The test pilots made their list simple, brief, and to the point—short enough to fit
on an index card, with step-by-step checks for takeoff, flight, landing, and taxiing.
It had the kind of stuff that all pilots know to do. They check that the brakes are
released, that the instruments are set, that the door and windows are closed, that
the elevator controls are unlocked—dumb stuff. You wouldn’t think it would make
that much difference. But with the checklist in hand, the pilots went on to fly the
Model 299 a total of 1.8 million miles without one accident
 Memory
 The tendency to skip under pressure
 A bridge to higher performance

42. THIS MAY SAVE YOUR LIFE
Pre-line insertion checklist. Doctors must:
(1) wash their hands with soap,
(2) clean the patient’s skin with chlorhexidine
antiseptic,
(3) put sterile drapes over the entire patient,
(4) wear a mask, hat, sterile gown, and gloves, and
(5) put a sterile dressing over the insertion site once
the line is in. Check, check, check, check, check.

43. TOO BASIC?
 Nurses observed docters. 1 in 3.
 Became compulsory for nurses to stop doctors
 Ten-day line-infection: rate went from 11 percent to zero.
 Saved
 43 infections
 8 deaths
 £2m
 In one hospital
 Went statewide: $175 million in costs and more than fifteen hundred lives saved

44. YEAH, BUT…
 You want people to make sure to get the stupid stuff right. Yet you also want to
leave room for craft and judgment and the ability to respond to unexpected
difficulties that arise along the way. The value of checklists for simple problems
seems self-evident. But can they help avert failure when the problems combine
everything from the simple to the complex?

45. GEWANDE ON COMPLEX PROBLEMS
 Submittal schedules and conflict lists (Building Projects)
 Let the leader decide or make the teams talk?
 Simple nudges towards communication:
 introductions and quick concerns/critical dangers (Surgery)
 “activation phenomenon” activate their sense of participation and responsibility and
their willingness to speak
 Key steps
 1 in 16 to 2 in 3 patients observed failure pre-acceptance of checklist
 Outcomes
 -36% complications, -47% deaths: rich and poor hospitals, western and other
 Teamwork, democratisation, satisfaction: staff turnover dropped from 23 to 7%

46. …STILL, ITS NOT LIKE LAW…
IS IT LIKE VENTURE CAPITALISM…?

47. COPING WITH COCAINE BRAIN
 Mohnish Pabrai, Pabrai Investment Funds
 Greed mode/cocaine brain/do the deal
 Logged his own and other errors (incl Buffet)
 Missed basics –e.g. over- understatement of profit/debt
 Systemised key steps: better decisions?
 Greater efficiency – quicker

48. G. H. SMART
“MANAGEMENT ASSESSMENT METHODS IN VENTURE CAPITAL: AN EMPIRICAL ANALYSIS OF
HUMAN CAPITAL VALUATION,” JOURNAL OF PRIVATE EQUITY 2, NO. 3 (1999): 29–45
 “Sponges” gathering information about their targets
 “Prosecutors” interrogated entrepreneurs aggressively, testing on
hypothetical situations.
 “Suitors” focused more on wooing people than on evaluating them.
 “Terminators” bought the best ideas, fired entrepreneurs they found to be
incompetent, and hired replacements.
 “Airline Captains.”
 Which ones produced the best return on investment? n=51

49. SO ENOUGH OF INEPTITUDE,
WHAT ABOUT IGNORANCE?

50. HOW VERY DARE YOU…
 Ignorance - we may err because science has given us only a partial understanding of the
world and how it works.
Big Data
It can’t beat expert judgments can it?
The Washington Project
Behavioural Law?
How do you measure value?
Do you know whether your contracts influence behaviour and allocate risk in optimal ways?
Compliance problem
A process and a powerpoint?
EY Know Your Trader

51. INNOVATION AS AN OPPORTUNITY?
 Information
 Reputation
 Investment
 Experimentation
 Failure

52. INNOVATION AS BEHAVIOURAL COACH
 Supporting negotiations?
Don Philbin (Picture it Settled)
 https://www.youtube.com/watch?v=1pt1c37jYYk
 Driving efficiency in contract review
Sol Irvine (at Reinvent Law)
http://reinventlawchannel.com/sol-irvinedata-driven-contracts/
 Or replacement: Online Dispute Resolution
 Colin Rule (at Reinvent Law)
 http://reinventlawchannel.com/online-dispute-resolution/

53. THE FINAL WORD
INNOVATION AS COLLABORATION
 General counsel should be careful, however, not to overplay their hands. Although
chief legal officers want their outside counsel to have shared risk or "skin in the
game," general counsel who meet their annual budget by pushing for discounted fees
are unlikely to get the best long-term results. The key to doing more with less is
innovation, often achieved by long-term relationships and shared information. This
requires mutual trust and a willingness to share risk over time.
 Henderson

54. LEGAL SERVICES INNOVATION
Richard Moorhead
Director, Centre for Ethics and Law, Professor of Law and Professional Ethics
r.moorhead@ucl.ac.uk