Repackage the Future of Law
Andy Daws is Vice President, North America at Riverview Law, widely considered to be one of the world’s most innovative firms. He compared notes with Andrew Benedict-Nelson of Insight Labs about the the future of legal practices.
Andrew Benedict-Nelson: For those who aren’t familiar with it, tell me about the Riverview model.
Andy Daws: I should begin by explaining a bit about where we came from. Riverview was born out of an advisory services business in the UK, AdviserPlus, which continues to flourish in its own right and is providing HR and employment advice to a large number of global organizations. Not being a law firm, the service scope dictated that when issues required legal advice, we’d hand-off to their in-house or third-party lawyers. But this created a problem, because the lawyers weren’t able to provide the same degree of efficiency, transparency and MI that the client was used to. So they came to us and asked if we could find a way to handle legal services as well. It was a nice problem to have.
Around that time, we were approached by a number of law firms in the UK who had become aware of some of the technology and other processes that we had developed in-house, and wanted to know if they could license it or if we could partner in some way. Then on top of all that there was the Legal Services Act in the UK, which changed the rules for ownership and was clearly going to be a catalyst for change in the industry and create opportunities for new entrants.
Taking all these factors into account, it was kind of a no-brainer to enter this space. We considered whether to do it within AdviserPlus, whether to partner with an existing firm or even to buy one, but we ultimately decided to build from the ground up. We had the luxury of going out to customers and asking, “What do you actually want in legal services?” Then we looked at what kind of structure to wrap around that, the type of people we needed and the technology required to underpin it. It took a couple of years to organize, and we finally launched in 2012.
Andrew Benedict-Nelson: I feel like I have the story of the deal, but let’s say I’m a shopper in the legal services store pulling different firms off the shelf and checking out what’s in the box. From that point of view, how are you different?
Andy Daws: One of the motifs we increasingly use is the “DNA” of the organization. Riverview has the DNA of a professional outsourcer as opposed to the DNA of a traditional law firm. You can view it from a number of perspectives. For example, in terms of the business model it’s about company versus partnership, management versus ownership, outputs and fixed-fee versus inputs and hourly billing.
One of the first things we found out in our conversations with the marketplace was that people wanted to get rid of this “billable hour” nonsense and the uncertainty that comes with it. They wanted predictability of fees as well as quality. So that different kind of DNA is in everything we do, whether it’s our business model, core skills, approach to marketing and business development, R&D, culture, and so forth.
Andrew Benedict-Nelson: I like the DNA metaphor because it gives us a way to talk about the industry as a whole. Where else do you see parts of your genome cropping up in law firms or legal service companies?
Andy Daws: To be honest, we don’t really see it in other law firms. It’s very difficult, because in law firms the traditional partnership structure mitigates against meaningful change. It’s difficult for them to even change their stationery! You’ve probably heard of the book The Innovator’s Dilemma by Clayton Christensen. Many people have been talking about this in the legal industry lately — in most firms, the existing resources, processes and priorities are so deeply embedded into the organization that it is almost impossible to reconfigure them to compete with industry disruptors. It would be to the advantage of those firms to adopt a piece of new DNA, but structurally they can’t achieve it.
So where we do see similarities are in entities that don’t have that construct, which means you have to talk about the legal services industry more broadly. There are examples out there of organizations who can demonstrate aspects of what I’m talking about, but they still tend to be more limited in their approach and in certain verticals. I’d suggest we’re more horizontally aligned in the sense that these characteristics, behaviors and values are woven throughout everything we do, which I don’t really see anywhere else out there at the moment. But I think this will become an increasingly common idea, that the firm is a business like any other, that you can apply many of the same business school ideas to law that you do to enterprise.
Andrew Benedict-Nelson: I’d like to talk about pricing now. When you approach a market with a radically different price structure, you learn something about what people value. You folks have been running this kind of experiment on legal services for a few years now… what have you learned about what people do and don’t value in the legal market?
Andy Daws: It comes down to predictability of cost and quality, and a client-focused value proposition. Clients feel as if they have been held ransom by the traditional partnership model and the billable hour. What we discovered fairly quickly is that they jumped at a model that was built around their needs, that’s more predictable and in some ways really offers greater quality and value, because we have been able to use technology and do some other things differently in a way that most firms don’t or frankly can’t.
We’ve found that the dialogue moves increasingly away from “inputs” — the conversation most people have with a traditional firm about “how many hours is this going to take?” — and shifts to “outputs.” It’s more about figuring out what value the client attributes to the outcome in any particular matter. Of course there are situations where the value the client attributes to the outcome does not track at all to the number of hours the project takes to cover. That’s the way the world works in any other market too. So this lets us approach matters much more in the way that clients approach them.
Andrew Benedict-Nelson: I think something interesting happened there. Normally people talk about these pricing models in terms of incentives. This is where you get all the nightmare stories about “churn” — firms have an incentive to bill clients for more hours, and so they find ways to do that. But those stories have always lacked a certain credibility to me, because I think most lawyers actually do want to solve problems for their clients, and at some point they can’t do that if they’re being intentionally inefficient. This changes the terms of the argument — it’s more about communication than incentives.
Here’s what I mean. Everyone dream is to get off a plane in New York and get in a cab and say, “Take me to Carnegie Hall!” And I feel like in the legal industry we’ve somehow regressed to the point where clients are getting in the cab and have a detailed discussion with the driver about all the different ways they could get to Carnegie Hall, when the cab driver really just wants to step on it and do his thing. He’ll get there sooner if he can just get going and doesn’t have to argue with you about his funny shortcuts.
So what really interests me is that you may be talking about how we improve the quality of thinking and communication in the interaction between a client and a law firm, not just price. Does that sound right?
Andy Daws: Absolutely. I like the taxi analogy. I think many clients in the legal industry feel as if they are hopping in the cab and saying, “Take me to Carnegie Hall!” and they end up on the scenic route. Like it or not, we’re driving the wrong behaviors when we charge by the hour. We all know from psychology that you get what you measure and what you reward. If you measure billable hours and reward based on billable hours, you’re going to get that in droves. So we hope that the Riverview taxi is one where clients hop in, tell us where they want to go, and can be confident they’ll get the outcome they want because everyone’s interests are aligned. We’ve established up front what the value of the journey is to you and we’ve already agreed the fare, so it’s a waste of our time to take you around the houses.
There was a report out earlier this year that showed that some clients were turning against alternative billing, including things like fixed price, mainly out of cynicism. After trying them out, they discovered that the price ends up being more or less the same, sometimes even more because many firms add a healthy margin for error to make sure they’re no worse off. The problem is that many of these firms, even if they don’t bill by the hour, still have all the structures that were built to take advantage of billing by the hour. They’re running with high overheads in remarkably fragile financial ecosystems.
To go back to the analogy, I recently hopped in a cab at the Chicago airport to take me to a conference in the city. Before we set off the driver told me that the main route was really busy, so he offered to take me on a longer alternative route for a fixed fare of $50. I had no idea whether $50 was a reasonable fare or not and I had no idea whether he had my best interests at heart — my innate suspicion said probably not. So I told him we could do it if he also ran the meter, so if it turned out to be less than $50, I could pay that. He ran the meter and it turned out he was right. We had to use the measurement to establish trust.
So I think that has been the position of many clients in the past few years as more firms have embraced alternative fee structures. They want to know that they are actually saving money; they need to establish that this is being done in a way that is actually in their best interest.
Andrew Benedict-Nelson: I’m not sure that would really work. I’m not sure you can actually deliver all the benefits of being free of the billable hour if you’re running the meter secretly, though I understand the advantages of showing the client different ways to arrive at the price.
Andy Daws: That’s true. At Riverview, we certainly don’t do the things that other firms do, asking lawyers to clock their time in five- or six-minute increments. For lawyers who do come here from those firms, they acknowledge how it changes their behavior. They’re free to focus on the overall quality and output. They find it liberating to actually do what’s best for the client.
Andrew Benedict-Nelson: Let’s talk about location. You’re here in the United States developing a transatlantic practice for Riverview.
Andy Daws: Yes. We’re not actually practicing in the US yet. We have a hub in New York because some of our team had existing clients in the States and because we saw an opportunity for US clients who need access to the English legal system. But the intention is very much that we will grow and practice internationally. The regulatory framework over here is markedly different in terms of ownership, so we are working out the most appropriate way to offer services Stateside, looking forward to the time when those regulations will change. They’ll undoubtedly change so that American firms can compete with other large international firms.
Andrew Benedict-Nelson: Can you tell me more about why you feel that’s certain?
Andy Daws: It comes down to being in a global market. The changes we’re seeing in the UK are in no way limited to the UK. You’re seeing similar changes in Australia, for instance. In both cases, the outcome is the opposite of what cynics were saying. They said that loosening rules on ownership of firms would put lawyers in untenable situations and create conflicts of interests between lawyers and clients. But the number of complaints against legal practitioners has actually gone down. It’s still in early days, but we’re confident that a more commercial approach to the delivery of legal services benefits clients.
It’s also spreading into Europe. We’re starting to see some major global players enter this market as a matter of investment. So it’s difficult to see how the US will stay out given the level of market demand.
The other side of this issue is access to justice. That was one of the major drivers for the Legal Services Act in the UK, and it’s an enormous problem here in the States as well. Without a doubt, one of the fastest ways to address that massive unmet need on a consumer level would be to provide a similar catalyst to competition and innovation in the US. I think the public outcry for that will be hard to ignore.
Based on what you folks have published, I know you are interested in the idea that some services will become very cheap or free. We’re also seeing that the Internet is going to make a lot of things available for free, so it will actually make sense for firms to give it away. We’re doing a lot of that with our online document library and advice pages for small-to-medium sized businesses. Potential clients can even pick up the phone and have their first call for free. If they get what they needed just from that call, it’s fine.
I think that’s increasingly the way the market is going to move, because of customer service as well as technology. Technology will automate a lot of these services and take the cost base away. It will be interesting to see how firms and regulators handle all of that.
Andrew Benedict-Nelson: I’m glad you’re also seeing what we’re seeing. I’d like to take a moment to interrogate “for free,” though. It’s an interesting phrase to apply to that first call or to your website, because it’s almost as if you put a big sign up over the supermarket that says, “Entrance for free today!” Of course no one needs to do that. Yet in the legal industry, it almost feels as if firms have been charging clients even for the time to search out their services. That makes no sense at all.
Andy Daws: I would go a little further. I would say that it’s more like you’re walking into the store for free and you also get an appetizer on us. If that satiates your appetite, that’s fine — we’ll see you if you’re more hungry in the future. You may have learned how much it would cost to come back for a full meal.
Andrew Benedict-Nelson: Once again, I think that what really matters here is the kind of cognitive process going on between the client and the firm. Let’s take the grocery store metaphor seriously. Now who does what you’re talking about, giving away appetizers? It’s not Wal-Mart — they assume that you already know what you want, a commodity, and you’re coming to Wal-Mart to get it at the lowest price. It’s the higher-end stores like Whole Foods or Trader Joe’s where they want you to spend more time in the store wandering around, discovering products that you didn’t know existed yet. That’s the message firms need to send to their clients, who usually don’t know what exactly it is they want from the law.
So let’s iterate. How would the legal industry look different if this were everyone’s experience when they call up a firm?
Andy Daws: It would look much more like every other professional service industry. I think the client is the winner. It’s a very different paradigm from the one that we’re in at the moment.
I think that in that world there would also be a reduced number of providers — market consolidation would occur. We’re seeing that in the UK already, partly because of the Legal Services Act, partly because of other factors. …
Andrew Benedict-Nelson: And what about citizens’ experience of the legal system as a whole?
Andy Daws: It will be much more accessible. Much as we go to Amazon for our online shopping and to Netflix for our movies, similarly strong brands will emerge for consumer legal services. The shroud of mystery will be taken off. I think lawyers have very much encouraged this view that the law is a dark art. Businesses realized that is not the case sometime ago — the wraps were off. And the wraps are starting to come off now for the consumer as well. They’re starting to see legal advice as a simple information exchange, much as they’d have with their doctor or their vet or even their carpet cleaner. It’s about taking away all that mystery from the process, as well as making it financially more accessible. It’s taking the fear away from going to a lawyer to get what you need and having confidence that it will be priced appropriately.
Think about Amazon’s latest innovation with the Kindle Fire HDX, the “Mayday” feature where you can instantly call up a live technical support agent on your screen for free. Ultimately, I believe something like that is going to happen in law. I think the consumer will press a button on their touchscreen or glasses or whatever it might be and you get a real-time lawyer. Maybe you pay ten bucks a month to have that feature.
Andrew Benedict-Nelson: I think there’s something important to figure out with your Amazon analogy. The reason it made sense for Amazon to do what they did is that they have built an ecosystem where they stand to profit from every additional moment you spend bouncing around accessing content through their product. Apple is much the same — they need my iPhone experience to be flawless so I can buy more apps. The point is that they didn’t just sit down and say, “We need to build the world’s best customer service.” It’s integrated into their product and their business model in a really specific way.
So to get what you’re talking about with the law, you’d need to figure out the lineup of products and services that gets the “free lawyers inside.” You know that it has to be possible, because lawyers are essential for almost any complex activity in society. But you have to wonder who the Amazon of those transactions would be.
Andy Daws: Well, it could be Amazon.
Andrew Benedict-Nelson: Ha!
Andy Daws: I’m serious! Go forward a few years from now, and maybe your Amazon Prime membership includes not just two-day delivery and free movies, but access to a suite of consumer-focused advisory services. I don’t think that’s beyond the realm of possibility. There are premium credit cards where people pay $200 or $300 a year and get a suite of services like travel insurance or concierge service. You could imagine legal advice becoming a part of that. I think there will ultimately be many avenues like that.
Andrew Benedict-Nelson: The key thing is approaching it with a product design mindset. It’s figuring out where the consumer is at — that’s what’s relevant about the credit card example. For example, I’d be much more open to services delivered through my Southwest Airlines credit card than to buy travel insurance as part of a package deal when I’m checking out on their website. Presumably Southwest knows this about me and has some idea of where it fits into my worldview as a white upper middle class male born in the 1980s. They probably have a story about where it fits into my concept of myself as a supposedly solid consumer and citizen.
The point is that it’s more complex than “good marketing” or “good customer service.” It’s further up the stream than that. And I think figuring out all those aspects of product concept in relation to the law may be an extraordinarily difficult but also very rewarding task.
Andy Daws: Yes, but those conversations are happening. In the UK, some of the early movers in the Alternative Business Structures space were companies that had large, installed customer bases. If you’re The Co-operative with 5,000 stores and millions of customers with whom you have an existing relationship, why not move into legal services too? Why not give them access to that in a way that they’ve never had before? That’s exactly what they’re seeking to do with Co-operative Legal Services, of course, and recruiting 3,000 staff over the next five years to accomplish it.
One of the most recent groups to receive an Alternative Business Structure license in the UK is the Automobile Association, a trusted organization with a huge client base. It could leverage those relationships to offer something new to them. I think at a consumer level a lot of the innovation in the future will come from businesses like these, not from traditional law firms or even existing legal services providers. It will come from organizations whose primary business is something else entirely but who, like you were saying, will understand something about our story and what we value.
Andrew Benedict-Nelson: I’d like to ask you one more thing about geography. Companies like Apple are now basically treating legal jurisdictions like items in the supermarket. You can file taxes in Ireland for one part of your business and the Caymans for another. One idea we’ve been developing as part of Law2023 is that firms will need to develop a similar attitude in regards to their clients, one that imagines the client as choosing between jurisdictions rather than just trying to stick to the rules within one. What do you make of that in light of your experience with Riverview? Does that make sense?
Andy Daws: I think it does. Jurisdiction will not matter in the future to the extent that it does now. When you look at what’s happening in Europe, there’s an increasing drive towards horizontal regulation which seeks to break down barriers between jurisdictions and make it easier to play in a global economy. The EU is even asking whether lawyers need to be separately regulated, or whether it can apply the same horizontal principles to regulating the professions. So I think it could even go beyond the scenario you described there. It won’t just be firms saying to clients, “In what jurisdiction would you like to do that?” Over a longer period of time, I suspect more and more countries will be drawn into this melting pot, and jurisdiction will play a different role in the global marketplace. There are people who would strongly disagree with that, but I think that’s the direction in which we’re ultimately headed.
Andrew Benedict-Nelson: What I think you’re adding to the model is that observation that jurisdiction is getting weirder in any case. We had imagined a world in which companies and firms were able to navigate jurisdictions for maximum gain. But it sounds as if the idea of jurisdiction itself is going to develop a kind of M. C. Escher quality.
Andy Daws: I think you’re right. And there are significant ramifications if that’s the way the industry moves. It will present some interesting challenges for the regulators, some of whom can’t even get their heads around non-lawyer ownership at the moment, let alone changes of this magnitude. We’ll likely see the emergence of some mega-firms at both the consumer and business level – new global brands. It will undoubtedly present some challenges for smaller firms who may struggle to compete, although perhaps some interesting networking opportunities for them, too. It will have a significant effect on the landscape over the next five or ten years.
Andrew Benedict-Nelson: Let’s talk about the “talent.” If you run these kinds of experiments in pricing and presentation long enough, you’re eventually going to need a different kind of lawyer. From Riverview’s point of view, are those people readily available? Are you looking for a different type of lawyer for your business model over the next ten years or so?
Andy Daws: That’s a really good question to ask. One luxury of building a new kind of firm from the ground up is that we could say, “What kind of people do we need to make this work?” So we have had a very significant focus on recruiting those types of people right from the beginning. We’ve been very clear from the start about what kind of organization we’re trying to build. We’ve also been open to recruiting folks that more traditional firms might not. We’ve asked questions like, “How do you handle change? How do you feel about adapting to new technology?” We’ve asked whether they’re team players — many lawyers at traditional firms are siloed. Collaboration is a core competency that we’re not going to compromise on.
So to your question, are these folks in good supply? No, they’re not ten a penny. We work hard to find people who fit the organizational culture and values. Diversity is important to us, but there’s a common core …
Andrew Benedict-Nelson: One thing we’ve been wondering about a lot is how a capacity for innovation could be built into firms — we’ve been calling it “the R&D department.” Does something like that exist within Riverview? If not, how would you imagine cobbling a law firm’s R&D department together?
Andy Daws: Within Riverview, there is a group of people whose responsibilities include R&D and innovation. There is a formal construct in some sense. But we see their role also to facilitate conversations where anybody and everybody in the business can have input. For example, we recognize that new team members who have been here for just a few weeks can actually offer a lot of insight. They have a fresh perspective on what we’re doing and can ask, “Well wait, couldn’t we also do this?” or “Why do we do it that way?” We encourage everybody to be a part of that conversation about how we could do better, so that R&D and innovation just becomes part of our DNA.
The bigger question, and probably the one you’re really asking, is how existing law firms do that. I tend to take Christensen’s view… they can give out the right job titles and even create a function around it, but their embedded resources, processes and priorities will more often than not strangulate it. I believe their best chance would be to create a Skunkworks.
Andrew Benedict-Nelson: What might that look like in the context of a traditional firm?
Andy Daws: If it’s impossible for them to reinvent efficiently from within, then the wise ones will create an autonomous unit, throwing in a mixture of some of the best people from their current organization as well as some very smart business-minded people. It would be a sort of lifeboat from the mothership. These firms are like the proverbial oil tanker unable to turn in time. There is too much momentum, too much entrenchment. So you would need people who have the freedom to respond to changing conditions.
We’re seeing it in some of the traditional firms in the UK where the signs of damage on the oil tanker are already evident but the lifeboats are doing well. For much smaller firms, it’s potentially less of an issue — they’re more able to change direction if that’s what they want to do. The question is whether they really want to do it.
Andrew Benedict-Nelson: When you look out at all the things that are being discussed in the legal innovation category, what is something that you think a group like ours absolutely must pay attention to, maybe something underappreciated?
Andy Daws: Having the luxury of seeing things from the perspective of two different countries, I think it’s interesting how discussions about innovation are taking place on both sides of the Pond, but they’re coming from different angles. In the UK, a lot of these conversations are around structure and business models — the Legal Services Act was the catalyst. On this side of the Pond, there is far more emphasis on technology. We are starting to see some very material developments in artificial intelligence, machine learning, and other innovations that will make a major difference in years to come. So in the US, the importance of business models is perhaps underestimated; in the UK, all of the attention being given to business models has meant that there is less of a conversation about technology.
So I think the future would be a real combination of the two of those. The people who are able to combine those two discussions will be the winners.
Andrew Benedict-Nelson: It makes you want to play “Mad Libs” with those two factors of regulation and technology. You want to throw up all the possible combinations of changes in the rules and changes in tech and see how they might interact, because that’s the really interesting thing… as well as the thing that’s most difficult to test for.
Andy Daws: It would be great. I think we’ll be able to see many of those combinations before too long.