Will the Digital Age Wipe Out Law Firms?

According to Forbes, law firms need to leave the past behind and adapt to the digital age. Since the economy tanked in 2008, many firms have struggled to maintain the level of prestige and power they once enjoyed. The introduction of new legal service providers, increased outsourcing, abysmal billing rates, and other changes in the field have contributed to new challenges for firms. Digital business models, as well as marketing technologies and data analytics, have created new incentives for firms to change their ways—or else risk being left behind.

Firms measure their success by the billable hour, revenue per partner, and profits per partner. These are the center of the law firm model. Many consulting firms and accounting firms have switched to flat fee arrangements, but such set ups are rare in law firms. Although clients are able to see just how many hours were spent on their case, many have become frustrated with the emphasis on billable hours, since it seems to prioritize time over value or results. Such models may also cause tension between partners at firms, who may compete with one another over handling cases. However, law firm rankings are published and performance metrics are evaluated by hour and headcount.
 
New legal services providers who implemented flat fee and lower rate services have reaped the benefits. Some companies that provide e-discovery, document review, agency work, legal research, patent services, and other such legal tasks have become competitive, and many have collaborated with law firms. Therefore, corporations are able to pick and choose which services they want, and from which provider—which has increased competition among firms.
 
Many say that firms “let the crisis go to waste.” Instead of adapting, they missed the growing importance of technology and digital business models. While other legal service providers created new service models and technology solutions, firms laid off attorneys and staff and rehired new ones in the recession. By 2012, the market had changed—a new group of competitors off-shored their teams, replaced certain tasks with technology, and strengthened their marketing technologies through social media channels that were backed up by data analytics.
 
A majority of firms have been slow to adopt even the most basic technologies, such as CRM systems. In a 2015 survey conducted by Ackert Advisory, 70% of firms have a CRM system, but not all actually use them. In fact, just 7.3 percent of these firms actually have strong usage of the CR systems. In other fields, CRM is a standard marketing platform that is essential to growth and client relations.
 
Marketing processes and staffing have also seemingly fallen by the wayside. A 2015 Greentarget and Zeughauser Group survey questioned over 200 in-house counsel and top law firm marketers. LinkedIn and Twitter-based content was ranked fifth among content channels. Additionally, roughly two-thirds of law firm marketers did not have plans or were not sure about any plans for creating innovative ways to share their knowledge. Sixty percent did not have a single individual assigned to oversee the firm’s content marketing strategy.
 
Of course, firms know that digital business models and new technologies are important for success. It’s getting these into place that is the issue. A 2015 PWC survey showed that while 80 percent of firms stated they understood the importance of a digital strategy, just 23 percent actually had one in place.
 
In a 2015 MyCase study, firms revealed that their primary focus was on updating their websites, and moving to a paperless office, LawTechnologyToday.org reported. Many marketers and designers recommend that websites be updated every two to three years to remain current. It is also key to make a website mobile friendly, as most Internet traffic is from cell phones and tablets. Additionally, firms reported investing in practice management software and moving their firms to the cloud.
 
Many firms may underestimate just how much time they will save by switching to a digital model. For example, LawTechnologyToday.org added that the typical office worker makes 61 trips to the fax machine, printer, and copier every week. Additionally, the site estimates that every misfiled document costs firms $125 in lost productivity, an average equivalent of four weeks per year.
 
For firms who want to remain relevant and continue building their brands, they must begin the transformation. In fact, since law school graduates and associate attorneys use social media frequently, firms who demonstrate strong digital strategies may be seen as desirable employers. Additionally, the growing number of tech startups will also remain interested in law firms who understand their business models and appear digitally savvy.
 
For firms that are beginning the adventure of digital transformation, they should focus on three areas. First, they must reexamine their internal tools and systems to create connectivity and drive useful data and insights on their clients to understand where the growth in the firm comes from. Next, firms must create new processes, invest in marketing solutions, and hire marketers to create attractive content and share it on social media and the Internet. Lastly, firms must look closely at which of their services can be digitized to reduce costs—or, they may examine whether certain services can be enhanced by technology to improve client experiences. Doing so will certainly increase the odds of survival for firms that may be resistant to change.
 

• See Law Firms Are Working Like It’s 1995 for more information.

 
Source: Forbes

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