While an anathema to some in the legal profession, productization and commoditization of legal knowledge continues to march over the horizon toward us.
While an anathema to some in the legal profession, productization and commoditization of legal knowledge continues to march over the horizon toward us. The benefits and changes are perhaps better understood when explained with a rustic farming analogy, helping to improve understanding of service automation among legal firms.
To farm or not to farm
In the 1997 non-fiction classic “Guns, Germs and Steel: The Fates of Human Societies”, author Jared Diamond described our transition from hunter-gatherer to farming society, and how that shift is considered a cornerstone of geopolitical dominance.
As Diamond puts it, “one of the consequences of a settled existence [farming society] is that it permits (them) to store food surpluses” and “stored food is essential for feeding non-food-producing specialists.”
These specialists were chiefs or kings, soldiers, architects, painters and other key figures in reaching an enlightened society. It can be said that the switch from hunting to farming ultimately allowed for more complex political units, culture and art, and military prowess. That same shift is now evident in the legal world, with equal riches at stake.
Productization and commoditization
First, let us make the comparison easy by swapping fruits and seeds with legal knowledge. In a similar fashion as fruits and seeds, legal knowledge will be commoditized (a), and the corporate legal services embedding this knowledge can be productized (b). These expensive words can be defined as follows:
(a) Commoditization: “the action or process of treating something as a mere commodity”. In farming societies, seeds themselves became abundant and bore limited inherent value. The real work came from cultivating and growing them. For lawyers, this means legal knowledge itself will have less inherent value, but the delivery model used to serve clients will only increase in value. The value for clients will be determined by the process through which a lawyer makes knowledge understandable and actionable.
(b) Productization: “offering and delivering a good in a standardized and repeatable way to a specifically defined audience, incurring a predictable number of costs”. Productization has several very clear value propositions:
- Nonlinear growth: productized offerings scale better by reducing resource dependency. The same solution can be sold to multiple customers with minimum time spent on customization. Simply put you can hunt an animal only once, while the milk from cows can nourish for years to come.
- Reduced customer acquisition and servicing cost: a standardized product significantly reduces the time and money spent in finding clients, and administrative processes such as client onboarding and obtaining client information.
- Specialization: as mentioned ‘stored food is essential for feeding non-food-producing specialists’. A more standardized offering enables lawyers to dig deeper into their subject matter. And more than that – Taylor Wessing Germany has already instated a dedicated team creating digital products to sell commoditized legal knowledge to clients. The same is happening at Deloitte UK and in the US.
- Predictability: One of the greatest challenges facing senior and managing partners at law firms is ensuring regular, predictable revenue given their uniquely high fixed monthly costs (fee earner salaries). Just as farmers got to know the time it takes to grow a seed and about crop yields over the seasons, decreasing uncertainty, lawyers can quickly establish the benefits of standardization and commoditization. Where it works, they can make hay, or, where it does not succeed, they can quickly pivot to better opportunities.
Billable hours, irrigation and domestication
Although it is easy to see the merits of a productized offering, there are a few hurdles to overcome within most law firms.
First, the billable hour model remains an inhibitor for non-linear growth. Still ‘a necessary evil’ for many law firms, it serves as the foundation of their financial structure. When revenue is directly linked to time spent on an activity, it is difficult to incentivize investment in time-saving technologies, however productization can break the innovation barrier as its economic fruits become increasingly apparent.
Second, technological advancement is required to make productization feasible without substantial IT costs. Templated documents are a starting point, but offer only a glimpse of the true solution. Technology such as BRYTER’s no-code service automation platform enables lawyers to model their legal knowledge into the software itself, the 21st century version of the plow and the irrigation system that make productization truly viable.
Finally, while our ancestors could always opt to stop eating a fruit that was hard to domesticate, lawyers do not have this option. Some legal services have very individualized components that will never be repeated. An important part of the challenge at hand is determining which use cases can be turned into productized services.
When considering the service automation landscape described above, we distinguish low-to-high productization potential based on the complexity of reasoning and the frequency of requests. The borders around the grey zones will continue to move, just as the borders of empires built from farming societies fluctuated before.
As with any societal or business evolution, there are many nuances like the grey zones above. Eager law firms rush to build or adopt new solutions, most wait to see what happens, while some cling to their old ways. With the rise of legal tech and commoditization of knowledge, a clear challenge is that during these disruptive times, there is less time to respond and adapt before the legal hunter gatherer becomes an outlier relic in a digital legal society.