Lawtech 29th June 2012

Lets face it, it’s just not going to happen in this industry. If you’re pumping someone with corporate hospitality and they’re not the ones paying the bills from their own pocket, they might just tell you that they’re happy with the service you provide. But ask the average guy on the street or the average business owner -­‐ the customer, the person that pays the bills from their own pocket that allows us to employ our staff and keep our doors open. Ask them -­‐ what do you think? And they’ll tell you that they hate lawyers.

We have to wake up to the fact that customers and yes they are customers, not clients, hate lawyers. And we have to face the fact that we haven’t done a good job of making it easy for our customers to engage and do business with us.

So what’s wrong with this industry? Get a few lawyers together in private with a few drinks and they’ll admit to themselves what the problems are:

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- Customers don’t like paying by the hour
- They don’t like the high prices we charge
- They don’t like the lack of transparency
- They don’t like the fact that lawyers speak a different language to the customer
- They don’t like the location of our offices
- They don’t like the inconvenient opening hours
- And most of all they don’t like the poor customer service they receive

But this isn’t a problem because this is exactly what the Legal Services Act is going to sort out, the introduction of non-­‐lawyers into the industry is going to bring new ideas and fresh thinking.

Its going to bring in much needed disruption and innovation that we need to take us forward just has we have seen in other sectors that have deregulated like the optician’s market.

So six months after the Legal Services Act allowed law firms to file for alternative business structures, what has actually happened? We’ve seen hundreds of applications for ABS’s and the first big surprise has been that a large number of applications for ABS’s have been from sole practitioners who have filed for an ABS so that they can reduce their tax bill, this is

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something that no one foresaw. They’ve done this not because they want to change the way they deliver legal services to their customers, but because they want to share ownership with their spouses to save tax.

But the biggest surprise has been with the exception possibly of Riverview Law, there has been a complete and utter lack of any innovation, disruption or new business models.
There has however been a spate of rebranding going on of existing law firms with new logos, new tag lines and new websites with nice pictures of partners, but everyone it seems is in denial about what customers hate about law firms and nobody wants to tackle the one thing that is holding back this industry - and that is a wholesale change of the the business model. Everyone knows what the problem is, but no one has the guts to tackle it.

And I don’t think that people from within the industry are going to be able to make the changes needed to win in the long term. They simply don’t have the vision or the courage to make the required changes. So they’ll carry on adjusting the window dressing

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when it’s the foundations that really need some attention.

What about the flood of money coming onto the industry from the likes of private equity? Well, if you look carefully there really hasn’t been much money backing new ideas. The only thing that they’ve been interested in is -­‐ the personal injury market. Since most of these guys are ex-­‐accountants or bankers, the only thing they really understand are spreadsheets and business plans. They feel much more comfortable in investing in an existing business that they can touch and feel and the personal injury market is probably the easiest in the legal market to understand so I can see why they have been attracted to it. But show them anything that is innovative and that does not exist today that requires imagination and its beyond them.
They need to understand that a business plan is simply a collection of unproven assumptions with a revenue plan composed overwhelmingly of guesses often blessed by an investor and that no business plan survives first contact with a customer. And yet investors take more comfort reading this fictional document than listening to someone with a really good idea.

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Until we learn to invest in great ideas and not fictional spreadsheets then we will forever wonder why this country cant produce great startups like the Americans. It’s no accident that we haven’t got a single UK Internet company in the global top 100.

So is innovation and disruption ever going to come? You better believe it. It will eventually come because this market is too big and too valuable for entrepreneurs to ignore, but the innovators are going to come from outside of the industry, its not the lawyers that are going to do the innovating.

But if you think you are safe because you have lots of loyal customers then I would say to you that your customers are only loyal right up to the second that somebody else offers them a better service or a better deal. Then they’ll leave you without even saying goodbye. And it doesn’t matter if your customers have signed contracts because if someone is offering them a better service or price, as soon as the contract expires then your customers will leave you one by one, that’s just how business works. Ask Clinton cards, HMV, Waterstones, Blockbusters and Kodak, or you could ask Blackberry or Nokia. All of these companies didn’t respond to the low cost innovators in their markets and they paid the price.

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We’ve got a great business model with our unique online and retail proposition and people assume that we must have spent lots of time on market research and focus groups to fine-­‐tune our proposition. You’d be wrong, we spent no time at all, we didn’t ask a single customer or looked at any market research. Entrepreneurs have an ability to become the customer and put themselves in the customers shoes and ask a simple question “if I where a customer, what would I want.” The power of empathy is one of the greatest gifts we all possess.

I have to laugh sometimes when I see law firms quoting market research about what customers want or what their intentions will be, why? You are all intelligent people, have you lost the ability to put yourselves in your customers shoes, do you not know what problems and challenges your friends and relatives go through in their daily lives. It’s not that difficult to work out. Market research is for insecure middle managers that need to justify their decisions. Its ok to listen to customers to find out what their concerns and challenges are but you must never ask them for their opinion to help you build your proposition, as Henry Ford famously once said “if I had asked customers what they wanted, they’d would have told me they wanted a faster horse and cart”.

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What should the new model look like, well it’s not my place to do the hard work for you and tell you, but I can tell you some of the components. Reduce complexity, don’t sell law -­‐ sell solutions to customers actual problems, make your prices affordable, teach everyone in your company to talk in a language that your customers will understand, be totally transparent and make loyalty dramatically easier than disloyalty.

The good news is that so far nobody has delivered anything disruptive and that means that it’s all to play for.

I’m sorry Quality Solicitors and I’m sorry the Co-­‐Op law but its not just about a brand, the winners are going to be the companies that can deliver a truly disruptive model that makes legal services truly affordable and more accessible to the masses, whoever can do that will be the winners.

Thank you for listening.

Speech by Ajaz Ahmed, founder of Freeserve and co-founder of Legal365, at Lawtech 29th June 2012