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18 de JUNIO de 2015

Eric Chin, Associate de Beaton Capital and author of the neologism “New Law”:
“The legal profession is evolving from the profession of law to the business of law paradigm.”


Versión en castellano

Eric Chin is an Associate at Beaton Capital who works closely with senior management in law and accounting firms on strategy, M&A and business model innovation engagements across Australia, New Zealand, Hong Kong, Singapore and other markets in the Asia-Pacific region.

He introduced the ‘NewLaw’ neologism as the business model antithesis of traditional law firms which has since been adopted by the industry and Twittersphere. An astute student of the professions, he has written on this subject in the Australasian Law Management Journal, Global Legal Post, Managing Partner Magazine, Asia Law Portal and an ebook titled ‘NewLaw New Rules’.

Eric recently keynoted at Law Institute of Victoria’s 2015 Conference of Council on disruptive innovation in the legal industry and presented at The Conference Board’s Asia Pacific Chief Legal Officers Council on the future of legal services.

Eric, in an article on the Beaton Capital blog you created the distinction between Big Law and New Law. How do you define New Law and a New Law firm?

We were first inspired to create the ‘NewLaw’ neologism after Mark Harris, the founder of Axiom stated in an interview with Bloomberg Law in July 2013 that “part of the challenge of innovating and creating a new category is that there is no vocabulary to support that and there is no satisfying label yet”. At Beaton Capital we have now come to define NewLaw as the business model antithesis of the traditional law firm. In other words we differentiate the two through a business model lens.

I should first explain that ‘BigLaw’, is not about big law firms, it’s a description of the business model used by most law firms today. In traditional law firm business models, the lawyers play extensive role in winning work (through promotion of personal brands), doing work (focus on legal excellence requires top legal talent that incurs high fixed costs) and governing the firm (only lawyers have access to ownership and therefore share of profit).

In contrast, the NewLaw firm business model epitomises the efficient division of labour where professional sales personnel are in charge of winning work (notice that NewLaw firms are not branded by the founder’s surname). While lawyers do the work (focus on commercial relevance requiring business savvy talent) and are hired on a flexible basis, only incurring a cost when they are producing. NewLaw firms are usually corporately owned, introducing non-lawyer shareholders that bring with them diverse perspectives.

As NewLaw is an emerging topic there are many different types still emerging, we have seen 4 main categories of NewLaw firms, namely:

1.      Dispersed legal talent providers: Examples include Axiom, Conduit, AdventBalance, Bespoke Law, Keystone Law, Riverview Law, Plexus and Hive Legal

2.      Legal process outsourcers: Examples include Elevate Services, Exigent, Pangea3, CPA Global and Integrion

3.      Legal document providers: Examples include LegalZoom, Rocket Lawyer and LawPath

4.      Artificial intelligence providers: Examples include Judicata, Ravel, Lex Machina and ROSS

Many Big Law firms have read your article and the e-book by George Beaton. Have they reacted in some way?

We have seen varied responses from the big law contingent. One of the most public response we have received is from Peter Kalis of K&L Gates (you can read his response here: From my perspective, having worked in the legal profession for the last six years, I have seen the boardroom agenda of law firms changing from consolidation, globalisation (as we saw the creation of Dentons, Hogan Lovells, Norton Rose Fulbright, etc), Asia (as we saw Mallesons Stephen Jaques becoming King & Wood Mallesons), rise of the general counsel (as clients assert their buying power on law firms) and now disruptive innovation in the form of NewLaw firms.

Law firm leaders and general counsel alike, are curious about the emergence of NewLaw firms and its implications. We have been invited to talk about this topic as a way to shed light to the wider partnership these trends engulfing the profession. The managing partner of a $billion law firm told us the biggest challenge for law firm leaders is to bring the outside world into the firm, looking at what competitors are doing and how clients are changing. In many ways, we at Beaton Capital as students of the legal profession provide that independent voice on this topic.

There are quite a few firms that have fully adopted New Law in their company structure and service delivery. Which firms would you recommend as a model?

Yes we have seen the emergence increased adoption of NewLaw model in servicing the traditional law firms’ highly sophisticated clients.

We saw the dispersed talent model of Lawyers on Demand from Berwin Leighton Paisner as the early mover in 2007, then Eversheds Agile from Eversheds in 2011. In 2013, Pinsent Masons launched Vario, followed by Allen & Overy’s Peerpoint. Most recently Simmons & Simons launched Adaptive while in Australia Corrs Chambers Westgarth in Australia launched Orbit and Addleshaw Goddard is reportedly launching its equivalent.

We have also seen law firms launching their own onshore and offshore outsourcing facilities with Manchester being the main onshore destination and Belfast and Glasgow being the main offshore destinations for UK firms.

It is hard to point to any one particular firm as the model. We believe law firms of the future are ones that will be able to resource its teams using a combination of the traditional law firm model, the dispersed talent model and the outsourcing facilities to match the clients’ servicing and budget needs.

New Law is also defined by alternative fee arrangements or fixed fees. Do clients push enough in order to establish fixed fees and price transparency?

Out of the global financial crisis, we saw large corporations scrutinising all their expense line item, this included the legal department; traditionally a sacred cow. The shift to a client’s market in the legal industry is most evident on the pricing front as clients start to exercise their buying power to negotiate better deals and greater transparency.

This of course led to two responses in the market, firstly traditional law firms would respond but only at the client’s prompt. Secondly the adoption rate of NewLaw firms would increase as they provided a viable alternative for legal departments..

Through the work we do for law firms, both large and small, we also have to recognise that the legal industry is made up of two major category of clients, firstly the large and highly sophisticated buyer and user of legal services who typically incur large and recurring legal expenses. This group of clients are at the forefront of changing the legal services industry by trying different ways (including adoption of NewLaw services) of servicing their legal needs. The second category of clients are relatively smaller organisations or private individuals who are generally price takers and are less likely to have the buying power to push enough to establish fixed fees and price transparency.

Within the New Law model you consider alternative financing. We've seen already quite a few firms on the stock market. Is this a durable trend or a desperate effort to stay competitive?

Access to alternative financing is a monumental change in the legal services industry.

While this first developed in Australia when Slater & Gordon listed on the stock exchange in 2007 which supercharged its growth as the largest plaintiff law firm in Australia and now in the UK. We have also seen IPOs of plaintiff law firm, Shine Lawyers and intellectual property specialist firm, Spruson & Ferguson. Access to capital allows law firms to invest in technology, processes and grow via acquisitions.

We see the listing of law firms on the stock market as the natural progression of the legal profession that is evolving from the profession of law to the business of law paradigm.

The technological evolution seems to accelerate changes in the industry. What do you think will a Law firm look like within 10 years?

Yes technological evolution and innovation have accelerated changes in this knowledge intensive industry. We have lived through the information technology outsourcing of the 1980s, then the business process outsourcing of the 1990s, followed by the knowledge process outsourcing of the 2000s which led to the creation of legal process outsourcing companies like Elevate Services, Exigent, Pangea3, CPA Global and Integrion. Now we are seeing the rise of crowdsourcing in the 2010s, with Axiom and its ilk being propelled onto the mainstream. We believe the 2020s will mark the emergence of artificial intelligence in the legal arena, noting IBM Watson is commercialising into specific industries, including law, after the success it has achieved in the medical industry

My colleague, Dr George Beaton is publishing another book in 2016 which prophesise that law firms in 2025 will have multiple business models as opposed to the monolithic model we now see at law firms.

The liberalization of the industry in Australia and in the UK has forced changes. What’s your judgment on this liberalization and do you think this is also a trend for other markets, especially in Europe?

The liberalisation has spawned innovation in the market. Take for instance Kent County Council’s Kent Legal Services, established by Geoff Wild as a separate legal services business that now sells services to more than 300 other public sector bodies in the UK. We are also witnessing the ongoing debate in Canada to liberalise and allow alternative business structures (ABS) to operate.

Unlike parts of Europe where tax accountants and lawyers are allowed to practice in multidisciplinary partnerships (MDPs), the introduction of ABS has make possible the re-entry of Big Four accounting firms as we saw PwC, EY and KPMG acquiring ABS licences in the UK. To our knowledge the Council of Bars and Law Societies of Europe looked into the introduction of ABS in 2009 but decided not to go ahead because regulating MDPs and legal disciplinary practices already required a delicate balancing of economic and non-economic interests.

Both the developments in Australia and the UK may point to reference points for Europe in the future and it will be interesting to see how Canada will progress their current investigation.


Finally, as a consultant to Law firms, where do you find major obstacles to change? Does the partner model fit into our modern and dynamic world?

Change management is a universal challenge for businesses, this is more pronounced in a partnership environment. The partnership model provides the best of both worlds, it creates a strong alignment of ownership, management and operators in the business through partners who lead teams.

The challenge is that forces of conservatism are strong in the partnership model, making it harder to change when consensus is required. In a parallel knowledge intensive industry, Dominic Barton the Global Managing Director of McKinsey & Company notes that disrupting his firm requires unyielding leadership in a partnership environment to bring corporate antibodies, that dispel big and often non-traditional ideas in the pursuit of profitability today, along the journey. This is the same challenge that law firm leaders have in change management in a partnership environment.





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