How would you price a highly tech-leveraged service?
I haven’t yet met a lawyer who responds, ‘Oh, that’s easy. You just …’
It seems like a pretty difficult, messy problem.
Recently I joined up with the Victorian Society for Computers and the Law and 20 intrepid lawyers to really dive into this problem. The aim wasn’t to come up with a solution in the hour we had (ha!) but rather to start picking apart what the problem actually was.
So, What's Your Problem?
We used a problem reframing approach modified from Thomas Wedell-Wedellsborg’s fabulous book, What’s Your Problem? (HBR Press, 2020). The author’s central insight is that we need to look at the way we frame, or formulate, a problem in order to see if it is the right problem to solve. He encourages people to take their initial formulation of a problem, then follow a process of
- Seeing who’s involved – ALL the stakeholders
- Look for what’s missing from the current framing of the problem
- Articulate and then rethink the goal – why are we doing this?
- Examine the bright spots – where similar instances have not been a problem, or you’ve handled it well
- Look in the mirror – think about your own contribution to the problem
- Take their perspective – check out what your stakeholders think and
- Reformulate your better problem – and keep checking and adapting it as you pursue your solutions.
In preparation for the session, Daniel Yim from VSCL approached a number of Australian tech vendors for brief descriptions of their product – and a big thank you to Deeligence, DDLoop (both due diligence tools), Lext Playbooks (playbook automation) and Mary Technology (chronology assembly) for this. We built a scenario around Lext Playbooks involving a law practice that does a lot of high-volume lease review work for small-medium retail chain clients, reviewing leases according to a playbook developed over some years by the law practice. The initial problem formulation was,
‘The AI tool has great potential to speed up our services without loss of quality. I am concerned that we will have to reduce our staff and lower our pricing model, which could impact our revenue. We also need to convince our clients that the playbook and process (our intellectual property) are valuable, that the technology increases the value of our services.’
We picked apart the problem and saw that there were a lot of assumptions that needed questioning: Do you need to reduce your staff, or should their roles change? Are there unseen elements to the playbook that the staff contribute and that you don’t appreciate? What does the client think they are getting from you now, and will they necessarily think technology requires a reduction? Will it actually cost less to provide your services (or might it cost more)? What are the other factors in the services you provide apart from the lease reviews that are important to the client but may not be obvious to you?
The way the discussions proceeded revealed significantly different approaches between lawyers, with some taking a strong ‘bottom line’ approach, and others being more focused on understanding the full package of what their clients get from their lawyers and how that might impact on the pricing of the services. I think that was the central insight for me – that a lawyer really needs to understand how their clients perceive the value of their services (something which lawyers don’t get to decide). In any case like this, a lawyer needs to consider everyone else involved in the problem, talk with their clients and validate the assumptions they are making before they make such a significant change. We are used to dealing with legal problems – mainly by their nature narrow and particular. A broad, messy problem requires quite a different approach.
Technology highlights the existing problem
Pricing legal services is a particularly difficult problem, even before you throw strong technology into the mix.
For consumers, legal services are one of the most complex purchases they can make. They have a big problem that they need help with. Their helper – the lawyer – ideally provides them with understanding, support, wisdom, advice, information to inform their decisions, clear documents to present their position, skilful dealing with their adversary, advocacy and process management – all underpinned with technical expertise and experience.
The nature of the client makes a huge difference. A large commercial client is more focused on ROI and has a much better understanding of comparative price and value. The consumer client, on the other hand, judges the value of the overall price by mainly emotional factors. Did the lawyer solve my problem – even if it wasn’t the solution I first envisaged? Did I feel I was in the hands of an expert who looked after me? Did they keep me informed? Did I feel my problem was an important priority for them? All of those emotional factors are the difference with someone who regards you as good value and someone who complains about you.
And all of that is usually packed into an hourly rate. The overall price is dependent on how much time the lawyer spends on the service. Ironically, if the lawyer was able to do the service faster and more smoothly with the use of technology, the client would like the purchase even better – but they might justifiably baulk when seeing up front an hourly rate that would properly reflect the value of the service.
On the supply side, the lawyer needs to consider their financial needs – covering off on all their costs and making a reasonable profit, how comparatively valuable and desirable their service offering is, how efficiently they can deliver it, how they spend their time earning fees and running their business. Then there’s all the regulatory factors – can they make a reasonable estimate, are their costs fair and reasonable, are their services provided in an ethical, client-first way … and so on.
Finally, the market itself can be quite opaque – unfortunately there is very little information about the overall price of conducting a particular type of legal service.
Lateral-thinking, Optimistic and Client First
It seems to me that whatever the pricing method of the future becomes, time will have to play a smaller part in the overall picture. I am confident that there is a way forward with this problem – and it’s going to be lawyers who think laterally, optimistically and who put the client first, who will solve it.
