There are many who would argue that economics is a science, with some even confusing the E in STEM subjects as economics – actually it’s engineering. This makes sense because building things seems more ‘real’ than trying to figure out the future with economics.
When it comes to the law, economics has cast its shadow across the profession in recent years; but, when it comes to the future, it’s up to lawyers, not economists, to address the issue of supply and demand in our profession.
I was recently reading research by the Melbourne Law School about the state of the of the legal market in Australia and I was not surprised to read that demand for our services has declined.
The report identified there is little doubt that the Australian legal market is in the mature phase of the life cycle with declining demand, increased price-based competition and significant pressure on operating margins.
This is no new revelation to me as my work advising lawyers on their costing model fairly much confirms these trends. So, unless we can alter our traditional business model then perhaps the manner in which lawyers have done business for centuries could be at threat and may collapse.
The modern commercial market moves rapidly. Technology is driving disruption in almost every market and if we think this disruption which has impacted these other markets will not affect our profession, then I suspect many of us will be in for more than large surprise.
So where are the future disruptors in the profession?
Occupancy – technology allows an office to be anywhere and the need for an agile and effective firm places a huge question mark over the need for high occupancy costs the profession has paid in the past.
Labour – the rapid change of Australian labour structures means there is greater flexibility now within the profession to arrange a staff model that addresses the peaks and troughs of our labour need.
New Lawyers – the modern millennial lawyer has a different attitude to hours as they prefer to work towards outcomes; and, they are demanding greater flexibility with the hours they are required to provide. This could mean a new and competitive billing model may need to be considered.
New Clients – the modern client is now more informed through the use of technology and they want easy access to the law at a price that is competitive, which allows satisfactory billing arrangements. If one firm can’t provide it, then feel assured another will.
Intellectual Property – the competitive edge of our information assets we have enjoyed in the past has been usurped by technology. What was specialist knowledge once is now readily available.
Increased competition – is driving changes to the business model where dependence on one area of law is now a luxury many firms can’t afford; there are greater demands on getting paid on time; and, because of growth in supply via competition, skills are being spread too thinly.
Marketing – firms are showing signs of adapting the marketing model, initially developed by personal injury specialists, but we now see the concept expanding as firms begin to realise they need to tell their story to compete more effectively. Gone are the days of traditional revenue channels providing adequate growth with savvy firms now building more diverse channels through effective marketing.
The market is changing, requiring the profession to question current methods and systems thus seeking a clear competitive advantage – not only to attract clients, but to also attract staff and sourcing other consulting and alliance arrangements.
As the Melbourne Law School report concluded – quality people will seek out quality firms which are well led and have a coherent strategy. Firms that don’t make the grade will simply fragment or fold. This means firms should consider outperforming the competition by having more agility, discipline, execution, cultural cohesion, diversity and true collaboration.
Economics states that as supply increases demand and price decrease – unless we consider remodelling our offering and business model.
Something to think about.