As I read it, 60% of us concede that LPOs have a business model with which conventional law-firms-as-we-know-them cannot compete effectively: We either have to build our own LPOs (half of that group) or give up (the other half). These are eye-opening numbers which, I respectfully submit, would have been unthinkable even half a dozen years ago. Speaking of LPO’s, permit me to restate a projection I saw late last year, courtesy of a Magic Circle firm’s internal study:

• Total global LPO revenue 2011 (most recent reported year): US $640-million
• Projected for 2014: $4-billion
• Compound annual growth rate: 85%

A CAGR of 85% is petri dish territory; this is astonishing growth. Pretend they’re over-optimistic (over-pessimistic?) by half and that it will be only a 40% CAGR; it would still be nearly $2-billion next year. And I vividly recall the CEO of one such market-leading LPO telling me that “for every $1.00 in revenue we get, BigLaw loses $3.00.” So that’s a dent of somewhere between $6 and $12-billion.

Now, to the comments. Here are some highlights (quoted verbatim) that I took away, with my thoughts as appropriate:

• The bonus question seems a bit too broadly phrased; it seems likely that some law firms (e.g. top-end boutiques) will be able to glide along nicely by sticking to their current model, albeit tweaked a bit when necessary. By contrast, those firms outside this charmed group will really begin to struggle as their business model falls apart at the seams for all the reasons you set out in Growth is Dead, and it’s not clear to me that they have any realistic prospect of re-inventing themselves. [This posits what I’ve called the “Hollow Middle,” which forecasts very challenging times for firms not delivering utterly superb top-of-market service (think Audi/BMW, or even Ferrari/Bentley) or else unquestioned value for money (think H&M or Zara)–Bruce.]
• I don’t think any of the answers to the last question really capture my view. Law firms’ response will depend on how they are positioned and which market segments they serve. There will be room for high-end advisory services which can evolve from the existing model of delivering legal services, but there will also be volume plays for lower complexity work where LPO, technology and process will form part of successful business models
• I do believe law firms can fight back (not sure they “will be able to,” but they “can” if they want to) and that it won’t be by honing their conventional model. I’m not sure, though, that law firms will only be able to fight back by creating their own captive LPOs. There will be lots and lots of trial and error on this score (can be through a combination of captive LPOs, in-house R&D, shifts to non-legal project managers, etc.) but the one thing that is clear is that the only firms that will make it intact will be those with the most progressive-minded management (and partner base, since they, too, need to support and get with the program). “Innovate or Die” could never be truer than it is now with the legal profession. [This is indeed the key challenge I see: the difference between “can” and “will be able to.”–Bruce.]
• Culture within big firms will be a barrier to change. If you want real innovation then you have to do it outside of the walls of a large law firm and start with a clean slate and hire people committed to the new vision. You will never get the majority of the partners in a large law firm to commit to serious change. As the rise of LPOs will be gradual, the level of urgency for change will not be sufficiently felt to implement radical change within law firms. [This is the “boiling frog” metaphor—Bruce.]
• Law firm clients will continue to demand change to a model in which they believe they are paying excessive amounts for juniors undertaking work of limited value. However, clients and LPO firms alike, NEED the risk assurance and advisory expertise of established law firm brands. Established law firm partnerships are, by nature, short-termist in thinking / reward structure. The future is a global superset (a la consultancies) who can provide the expertise PLUS process efficiencies, together with niche sector-oriented specialty firm branded operations. Fascinating times. [Brand recognition strikes again—always a very durable model, but query how many firms can benefit from it?—Bruce.]
• This survey pits good vs. evil. The more likely future is that there will be hugely profitable law firm partnerships and there will be very successful non-traditional models as well. The question isn’t which model is going to win – it’s knowing where to be standing as this market changes. [Basically could not agree more, but the limitations of 2-minute, 5-question surveys are apparent—Bruce.]
• It really friggin’ sucks to be a young lawyer right now. [Heartbreaking. True. May the Force be with you, dearest reader—Bruce.]
• Lawyers are stumbling toward the recognition — forced on them by the most sophisticated clients — that clients need big and sophisticated firms only for the big and sophisticated transactions and the big and sophisticated litigation. Clients may also want big firms for large volumes of repetitive work, but those firms don’t need to be sophisticated, only big. The run-of-the-mill big firms priced themselves out of the market for repetitive work, the stuff that isn’t exciting but that comes in volume and pays the bills, by charging for it as if it were sophisticated work. Law firms that can deliver volume efficiently are getting that work, and BigLaw isn’t going to get it back, because a Wall Street BigLaw firm can’t be Saks and Sears under the same roof. [“Can’t be Saks and Sears under the same roof” is hard to argue with, no? Yet we all know there’s demand in the market—healthy demand—for both Saks and Sears. This commenter may be trying to tell us something about the virtues of strategic clarity, discipline, and the power of being able to say “no.”–Bruce]
• Asking law firm lawyers about the future of legal services is like asking dinosaurs about whether those pesky little mammals might ever amount to anything. It’s all happening elsewhere, and by the time those at law firms perk up it’s pretty much going to be over. Law firm lawyers won’t go away any more than big lizards have, but the new world coming will not be the one they have dominated.

So what do I conclude?

If we can prevail by “honing” what we do, I have yet to see much concrete movement in that direction. This is the interesting part of Growth Is Dead: Now What? That is to say, the “Now What?” part.

You can draw your own conclusions from our readers’ invaluable comments in full, which you can read here.