By Kelly M. Brown
Abstract: The U.S. legal industry, a nearly $300 billion industry and one of the most profitable in the world, is experiencing fundamental change that is accelerating the need for top law firms to innovate. Relatively flat market demand for the corporate legal services of top law firms has many firms focused on “stealing” market share from competitor law firms and trying to move further up market to preserve high profit margins. Meanwhile, a new breed of competitors, to which most top law firms will likely pay little heed, is developing business models that could fundamentally change the client value proposition in the market and pose a disruptive threat. What many law firms may perilously fail to realize is that the client-oriented strategies these new rivals must pursue to effectively compete is what poses the biggest threat. The resulting client value proposition could relegate top firms to a smaller portion of the client relationship that could ultimately get funneled through and managed by the new rivals on behalf of corporate clients. In this study, I use Clayton Christensen’s disruptive model of Schumpeterian competition to examine how the seeds of disruptive innovation are taking root in the market for corporate legal services in the U.S. and what approaches top law firms will need to adopt to effectively compete. I also use scenario decision strategy to assess other possible paths of continued evolution in the market for corporate legal services in the U.S. and the potential implications for new rivals and incumbents.