Alternative Legal Services Models; Virtual Offices
NEW MODELS OF NEGOTIS
In our last article we refer to the challenges faced today by traditional legal service providers. Since that publication, the trend we described has been gaining a presence in the media in a way that we clearly had not expected. Indeed, the interest and proliferation of articles that reflect the matters and questions we raised on that occasion is a fact. Thus, publications in The Atlantic, The Lawyerist, ABA Journal, Harvard Business Review, to name only some, have collected and deepened the restrictions of the highly leveraged structures of traditional legal studies, assessing the emergence of alternative service providers that have imbued industry with dynamism.
On this occasion, we will go into some of the elements of one of the business models that particularly draws our attention and that has inspired in certain aspects the formation of Alster Legal, we refer to the concept of "virtual office."
As we advanced in our first article, one of the main problems facing traditional legal studies is related to the misguided conviction that faggy offices and high-end infrastructure are determining elements when potential customers make the decision to hire. Indeed, it seems common that the large law enforcement offices seek to be located in state-of-the-art buildings, in the best neighborhoods of each city and that they involve large investments in furniture, technology and administrative support. However, we believe that the current conditions of the economy, the growing interest of shareholders in requiring the management of companies to achieve the real maximization of their benefits and the incremental questioning of how resources within companies are used, are conditions that clearly allow to question that the characteristics of those legal studies are now good inducers of conduct for decision-making. In fact, the estimate that high infrastructure costs are necessary for the delivery of a good level of service is an obvious conceptual error with respect to the result sought by target-oriented customers.
In this way, new business models that focus on cost efficiency and operational optimization are now clearly attractive. These models are "disruptive innovations," which implies, in the words of Harvard Business School Professor Clayton Christensen, that they are competitors who when they enter the market are seen by the predominant actors as lower quality products, until through progressive adaptations they end up displacing other products or even complete segments of the industry that did not have the adaptive capacity. In this line, Christensen points out that these service providers deliver to their customers what they really need and do not offer beyond. Thus, if a traditional legal study offers its customers a "Cadillac" being that it needs only a "Ford," alternative service providers offer the "Ford," of high quality and with prices very much in line with the customer's availability of payment, while traditional legal studies continue to offer the "Cadillac" as it is what they know how to do and do not feel comfortable or simply do not have the structures that allow them to offer the "Ford."
This reality brings a real risk to traditional business models, especially if those offices simply choose not to pay attention or to ignore the challenges presented by the market, convinced that the classic way they have been providing the service will continue to deliver high benefits. This restriction on innovation is due to a scientific approach and is clearly an answer to the question of why there are no major changes in industry, particularly in jurisdictions such as Chilena, Peruana or Colombiana. The effect is called by the Nobel, Dan Kahneman, as the "Heuristic Availability," that is, the fact that we naturally care about giving greater weight to known information and seek to discount and minimize alternative explanations based on information that we do not know or have failed to collect.
However, the response of those who innovate in legal services is due to the existence of professional entrepreneurs who have observed gaps in supply and who also find in applied technologies and differentiated methodologies a real source of opportunity and business.
THE VALUE PROPOSAL
The value proposal of these alternative models is simple, if a traditional study offers that glamour and luxury already described, innovative providers do not have these elements to deliver more cost-effective and much more solution-oriented solutions, which allows them to be up to 50% cheaper than their peers, but without sacrificing quality.
The question arises as to why quality is not diminished by a price drop, however the answer is not sophisticated. Basically, those who join these organizations have already lived the experience of the major studies, have already known the real needs of the companies and, consequently, are empathic with those who finally decide to hire them. In addition, many of them are experienced professionals and the same collaborative platforms to which they join require a minimum of years of appropriate expertise and expertise. In this sense, the same participants in these models tend to self-regulation and sociativity motivated by the common benefit and the delivery of the appropriate quality standard to the customers who choose them.
The development of technology contributes to this development, as it is no longer necessary to have a large library, exclusive servers, large spaces where all must meet, it is not necessary to be located in a privileged location, because today you can access customer files from anywhere, you can send emails from any location and you can hold remote meetings from anywhere in the world. Thus, the existence of cloud-based platforms and technologies that do not sacrifice information security allow for the creation of communication networks that have little to envy the large law enforcement office. Moreover, much of the administrative work, such as accounting, communications and other similar aspects, is easily outsourced at convenient prices.
As David Goldenberg, founder of VLP Partners (one of the precursors in the concept of virtual offices) correctly points out in an interview for the International Legal Technology Association, technology has raised competition to a different level, that is, that of virtual environments as opposed to traditional environments of interaction. This explains with examples as simple as the fact that today, when you need to make a conference with a client or you need to answer a question, even with a co-worker, you do it by e-mail, Skype, IM or phone. That's the way many lawyers practice their profession, regardless of the size of the office they work in or the place they do it from, and it's even a reality in the traditional offices themselves.
ADVANTAGES OF THE VIRTUAL MODEL
Innovative models, promote the use of technology and remote work and also take over much of the usual reviews of traditional legal studies, that is, the balance between private and professional life, the requirement that to emerge and be profitable in the organization you must be a "rainmaker" (someone who must bring customers), the fact that you cannot set your own rates, the fact that in studies and companies you are subject to the criteria of the partners to define your continuity, and the fact that they allow to deliver to those who have expectations of undertaking tools and spaces where that spirit is rewarded and rewarded.
Many of these organizations reach the point of giving their partners or lawyers total discretion in the determination of rates, as the business models themselves align the interests and incentives of the partners or lawyers and that of the company. They also provide the advantage of enviable flexibility in defining fixed rates, monthly hours packages or other alternative and efficient collection modalities.
For their part, they provide unimaginable possibilities to provide partners with the opportunity to work from where they want and in the times they define, provided they are aligned with the objectives set by the organization and the goals defined in conjunction with the client.
VIRTUAL MODEL DISAPHY
However, it is relevant to consider that these business models also have disadvantages that require to be managed wisely. In fact, working from an indefinite space or even from home can bring problems. In this regard, we find it illustrative the position of Scott Goldsmith, a clinical professor in psychiatry at Weill Cornell Medical College, who refers to this matter pointed out that those working in the home or in undefined spaces inevitably fall into the multitask, making it difficult to focus on the task by dealing with the phone, computer, family and home or a noisy or dynamic environment. This is also complemented by the difficulty in this type of environment in defining the line between work and family life, often causing more stress, feeling guilty and a tradeoff between the two realities.
Moreover, according to Benjamin Lieber, founder of an essentially virtual platform, such as Potomac Law Group, the technology that fully replaces face-to-face interaction is not yet created. While technology has contributed to narrowing distances, there is no perfect formula for generating and replacing personal relationships and physical presence, which is obviously a challenge for these business models.
In the same sense, Todd Smithline, founder of another similar platform called Smithline PC, reflects on the subject by commenting that in his business model he initially offered his collaborators the possibility to work 2 to 3 times a month from home, but finally discovered that most of his collaborators preferred to work in the same place. Smithline points out: "It turns out that an office is a wonderful piece of technology. You can immediately know who's around you, you can check out how your collaborators are in moments and you better encourage the camaraderie."
This is further strengthened by MIT teacher Sherry Turkle, who is also the author of the book Reclaiming Conversation: The Power of Talk in the Digital Age. Turkle mentions that when matters become virtual, much of the serenity that can have a particular objective or work is lost, as there are many options of distraction, and also points out that without a physical space people do not generate conversations without agenda, humor and are difficult to generate ties of belonging, affecting responsibility finally. However, he also reflects that by understanding that these types of environments are a challenge, you can precisely implement techniques and provide tools that help mitigate these risks. An example in this line is precisely given by companies that have been defined as essentially virtual, have also defined physical meeting spaces, where lawyers who participate in these platforms can meet, can receive customers and also allow to support administrative and coordination positions, thus providing an adequate balance.
David Goldenberg, of VLP Partners, has mentioned in many interviews about this, that his strategy to address the defined problems has been to create a Virtual Cultural Committee that is particularly focused on generating the instances and implementing the mechanisms necessary for his lawyers to feel part of the same project and share knowledge, experiences and opportunities.
CONCLUSION
The new models are basically a response to market failures. First, traditional legal studies often fail to give their customers the desired balance between quality and price. Secondly, legal studies also fail to give lawyers the desired balance between time, money and satisfaction. So the entry of these models is an obvious reflection of an economically known conduct, segmentation aimed at covering the areas of demand that have not yet been covered.
Much of the key to the success of these models lies in the fact that their members are long-sighted, experienced and visualized on these platforms opportunities to be more cost-effective. However, they are people who, because of their qualities, knowledge and experience, could perfectly work in the great legal studies. In fact, one of the great virtues of these models lies in the possibility that lawyers working in the organization may be able to have margins of more than 50% of the income generated, a relationship that is obviously not generated in the case of lawyers employed by legal studies, where the maximum expected benefit will be collected by the members of that organization.
William Henderson, an expert in legal administration at Indiana University's Maurer School of Law, points out in this regard that one of his main observations in his multiple interviews with lawyers and legal studies is the fact that many partners in traditional legal studies are immersed in their own professional practices, all of which are obviously very lucrative, so very few observe and visualize the changes and trends that industry is experiencing. The main cause of such conduct is the predilection to maximize short-term benefits, which limits the possibility of identifying the real needs of customers and of enhancing the generation of differentiated value proposals.
We are of course of the view that legal studies will not disappear, however, if we believe that they experience threats from disruptive and distinctive competitors that will lead them to the need to adapt to a new environment and to incorporate elements of virtuality into their services or models.