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In just a couple of decades Kodak went from absolute dominance in the American photography market to completely disappearing because of its stubborn refusal to acknowledge its changing market. The rise of digital photography took Kodak from $2.5 billion in profits in 1999 to filing for bankruptcy in 2012. A new report from Georgetown Law’s Center for the Study of the Legal Profession warns that the same fate could be awaiting BigLaw firms that stubbornly refuse to change in the face of a shifting legal services landscape. The “story of the demise of Kodak is an important cautionary tale for law firms in the current market environment," cautions the report. The report goes on to say:
Since 2008, the market for law firm services has changed in significant and permanent ways. … Clients today are more willing than ever before to disaggregate matters, combining the services of several different service providers in order to achieve increased efficiencies. They are more open than ever before to utilizing non-traditional service providers (including non-law firms) to provide a wide range of services previously obtained almost exclusively from law firms. And clients are far more likely today to retain work in-house, bringing their outside counsel in only where needed to supply specialized expertise or to handle matters on a discrete project-by-project basis.
Law firms have responded to these changed market conditions in largely passive and reactive ways. In the face of client insistence, most firms have taken steps to improve their budgeting capacities for client matters, adopted financial systems to facilitate alternative fee arrangements, accommodated the outsourcing of certain functions (like document review and e-discovery), and implemented some processes for project management. To date, however, very few firms have been willing to engage proactively in the consideration or implementation of the kinds of operational changes that would be required to respond effectively to the changed expectations of their clients.
That BigLaw is reticent to change is not very surprising to anyone who has worked in the industry. Firms are generally run by lawyers who are, on the whole, very conservative in nature. The qualities that make one a good attorney—conservative, methodical, detail-oriented—are often the absolute last qualities that you’d want in a business leader. And yet most large law firms are run largely by their most successful attorneys. This has led firms to basically do nothing in the face of stagnant demand, lower realization, and loss of market-share to in-house counsel and non-firm service providers (like the Big 4 accounting firms in some legal markets). BigLaw needs innovation and forward-thinking leadership to avoid the same fate as Kodak. You can read the whole report here.
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