212MTAMount Durham University Bachelor's Diploma in Technology
Non-Lawyer Ownership & The QS Business Model
1. Will Quality Solicitors’s Business Model Disrupt the
Market for Legal Services in the United States?
Business, Law, and Innovation April 18, 2012
Presenters:
Robbie Carman
Brian Peterson
Professor:
Adam Dell
2. Overview
1. The Concept: A National Brand for Legal Services
2. A Newfound Market Opportunity
3. Breaking Down Quality Solicitors’s Business Model
4. Will Quality Solicitors’s Business Model Disrupt the Market for
Legal Services in the United States?
5. Conclusion
3. The Concept: A National Brand for Legal Services
The Traditional Model
• People that need
“Lottery” • Lawyers
lawyers
• Ask friends/family
• Yellow book
• Google
But who? $$$
4. The Concept: A National Brand for Legal Services
A New Model
Connect to
• People that Brand • Lawyers
need lawyers • Familiar and
trusted entity
But who? $$$
5. The Concept: A National Brand for Legal Services
What Can Branding Do for You?
“You can have all the facts and figures, all the
supporting evidence, all the endorsements that
you want, but if at the end of the day you
don’t command trust, you won’t get
anywhere”
Niall Fitzgerald (2001)
Former Chairman Unilever;
Thompson Reuters
6. The Concept: A National Brand for Legal Services
In January
2009, Concerto
Marketing and Research
Now completed a study
into the benefits and
drivers of brand trust.
The study surveyed 1000
North Americans from
Consider this… Research Now’s panel of
online respondents
7. The Concept: A National Brand for Legal Services
The study found that when people
trust a brand…
8. The Concept: A National Brand for Legal Services
83%
…will recommend
it to other people1
1. http://www.business2012.com/2012/02/build-trust-in-your-brand/
9. The Concept: A National Brand for Legal Services
82%
…will use its
products
& services
frequently1
1. http://www.business2012.com/2012/02/build-trust-in-your-brand/
10. The Concept: A National Brand for Legal Services
78%
…will look to it first for the
things they want1
1. http://www.business2012.com/2012/02/build-trust-in-your-brand/
11. The Concept: A National Brand for Legal Services
50%
…will pay more for
its products and services1
1. http://www.business2012.com/2012/02/build-trust-in-your-brand/
12. A Newfound Market Opportunity
The Legal Services Industry in the U.K.
BIG FRAGMENTED
U.K. Legal Services
Market1 Approx. 10,000 firms2
Vast majority < 25 solicitors2
£11,890,000,000
£13,110,000,000 Survey: 72% U.K. partners
believe “substantial”
consolidation necessary3
Top 50 Law Firms
The Rest
1. http://www.law.com/jsp/law/article.jsp?id=1202504293111&UK_Top__Law_Firms_Post_Best_Growth_Figures_Since_
2. http://www.palamon.com/press/index.php?read=73
3. http://www.legalweek.com/legal-week/analysis/2159583/partners-believe-fragmented-legal-industry-set-intense-merger-
run
13. A Newfound Market Opportunity
New Legal Ethics Rules
Lawyers prohibited from
forming partnerships with
non-lawyers
Old Non-lawyers cannot have
Rules ownership interest in law
firm Managers and
See ABA Model Rule 5.4
entrepreneurs with
business expertise
Non-lawyers can own up can now “run” law
to 25% of law firms1
Legal Expressly authorize
firms
Services creation of “Alternative
Act of Business Structures1
2007
1. http://www.sra.org.uk/abs/
14. A Newfound Market Opportunity
What does this mean for the consumer?
Better
Lawyers
Managers
Outside
Technology
Capital
Greater
Access
15. Analysis of Quality Solicitors’s Business Model
Unit Economics
High Low
Specialized
Services
Client’s Perception of Client’s Price
Client-Tailored Sensitivity
Matter’s Importance Services
Standardized
Low High
IMPORTANT: Perceived Value ≠ Profitability
•Simple task, efficiently delivered many times = $$$$$$
•Complex task, inefficiently delivered one time = (-$$$$)
16. Analysis of Quality Solicitors’s Business Model
Unit Economics
Law firms can be cash cows because once a certain threshold is
passed additional revenue can be generated very cheaply
Break-Even Point
Gross Revenue
Profits
Other Overhead
Compensation
& Benefits
Hours Billed
17. Analysis of Quality Solicitors’s Business Model
Unit Economics
Unit Economics Estimates Assumptions
QS’s ROI = 25% Revenue
– Generates £ 250m per year – £1,250,000 per firm, annually (av.)
– Spends £200m per year to generate • # of Locations in 2011 = 2001
that revenue • Enterprise-wide gross revenue = £ 250m1
This Number Will Go Up Costs
– Marketing costs will decrease as – Compensation = 50% of costs2
brand gains notoriety • Total salary spend = £ 500,000
– Efficiency will increase over time - Associate = £ 50,0003
- Partner = £ 100,0003
– Large pent up demand the “little
- Average office has 6 associates and 2
guys” under utilize legal services partners
1. http://www.legalweek.com/legal-week/news/2131113/law-firm-innovation-award-qualitysolicitors
2. Stephen Mayerson, Making Sense of Law Firms, pg 418 (2006).
3. http://www.law.com/jsp/tal/PubArticleTAL.jsp?id=1202489360193
18. Analysis of Quality Solicitors’s Business Model
Recruiting Law Firms
Client
What Network Feedback
does QS
look for?
Reputation
Firm must commit to highest level
What of customer service
must law On average, commit 5% of all
firms revenue to QS1
commit?
1. http://www.lawgazette.co.uk/news/private-equity-takes-stake-qs
19. Analysis of Quality Solicitors’s Business Model
The Competition
Corporate Legal Services
like…
Franchise-type Brands Online Legal Networks
like… like…
Small Big Law Firms
Practitioners like…
like…
20. Analysis of Quality Solicitors’s Business Model
Competitive Advantages
Consumer peace of mind
Brand Power “One less choice we have to make” 1
Internal training department with emphasis on “soft”
Economies of skills
Scale Huge marketing advantage giving unparalleled access
to untapped markets
Gain control of consumer trust and confidence
First Mover Switching costs – late entrants must invest extra
Advantage resources to attract away from trusted brand
1. http://blog.qualitysolicitors.com/2012/02/06/and-theyre-off-the-race-to-capture-the-consumer-is-finally-underway/
21. Analysis of Quality Solicitors’s Business Model
Competitive Advantages
Service Brand
Visibility
Innovations Strength
Market
Prominence
(Dominance?)
22. Analysis of Quality Solicitors’s Business Model
Network Effects
Number of Users
Indirect
Network
Direct
Effect
Network
Effects
Consumer QS Market Complementary
Trust/Ratings Share Services
Positive
Feedback
Loop
Number of advertisers &
partners
23. Analysis of Quality Solicitors’s Business Model
Technology - Yelponomics1
As we might
expect, higher ratings
leads to higher
reservations
Additionally, more
reviews, not taking into
account ratings, leads
to more reservations.
Why?
1 http://blog.launchcopilot.com/2011/04/25/yelponomics-what-really-drives-yelp-reservations/
24. Analysis of Quality Solicitors’s Business Model
Technology – Web Enabled Document Assembly
Powered By: Answer Questions Client Pays A
Online Fixed Price
Attorney Reviews
Pre-existing
Document
26. Analysis of Quality Solicitors’s Business Model
Turning Heads
Last fall, Quality Solicitors secured
investment from European private
equity firm, Palamon Capital Partners.
While the exact amount was kept
confidential, Palamon’s investments
usually range from €10m to €80m.1
Palamon €1.1bn funds under management1
Capital Experience operating in fragmented professional services
Partners markets (specifically, dentistry and financial services)1
Overview
1. http://www.legalweek.com/legal-week/blog-post/2118742/qualitysolicitors-secures-private-equity-backing-deal-silence-
critics
27. Will the QS Business Model Disrupt the Market for
Legal Services in the United States?
Catching the Next Wave of Innovation
Clayton M. Christensen Vijay Govindarajan
• Harvard Business School • Dartmouth – Tuck School of
• Disruptive Innovation Theory Business
• Reverse Innovation Theory
28. Will the QS Business Model Disrupt the Market for
Legal Services in the United States?
Disruptive Innovation Theory1
1. Seeing What’s Next: Using Theories of Innovation To Predict Industry Change, Clayton M. Christensen
29. Will the QS Business Model Disrupt the Market for
Legal Services in the United States?
The Motivation/Ability Framework and Regulations1
Motivation Determined By:
•Market Size/Growth
High
•Competition Looking
The
•Economics of Opportunity For A
•Business Model Hotbed
•Industry Attractiveness
Target
Motivation
Government Levers:
•Taxes
•Competitive Policy Looking
•Rate Regulation The
For
Dilemma
Money
Low
Ability Determined By:
•Resource Availability
•Market Access Low High
Government Levers: Ability
•Standards = Legal Ethics Rules
1. Seeing What’s Next: Using Theories of Innovation To Predict Industry Change, Clayton M. Christensen
30. Will the QS Business Model Disrupt the Market for
Legal Services in the United States?
Application to the Legal Services Market
QSWill Unlock The Huge Potential Of An Underserved Market With Low
Expectations
– Must be cost-conscious
– Must be high quality but it’s easier to do simple things well
– QS brand gains high visibility gains big market share in “low tier market”
The US Will Change Its Ethics Rules
– If UK ABS firms are successful then US firms will want in more pressure to change
rules
– As experience builds and technology advances ABS firms will move up the chain of
customers
Eureka! = Disruption
– Eventually ABS firms will figure out how to do complex work far more cheaply than high
priced incumbents
31. Will the QS Business Model Disrupt the Market for
Legal Services in the United States?
Amplifying Weak Signals
The Small Things that Indicate Big Changes
– ABA Heavily Considering Allowing ABS1
– Jacoby & Meyers Sue State of New York
Challenge Constitutionality Of No Non-lawyer
Investment Rule2
– North Carolina Senator, Fletcher Hartsell Proposes
A Bill That Would Allow Minority Non-lawyer Ownership (49%)3
– Many Large Law Firm Partners Unaware of Changes or Unconvinced That They
Will Have Any Effect On Them
1. ABA, Issues Paper Concerning Alternative Business Structures, April 5, 2011
2. http://www.lawcrossing.com/article/7527/NY-Court-Upholds-Ban-on-Non-Lawyer-Investment-in-Law-Firms/
3. http://www.abajournal.com/news/article/nc_lawyer_and_lawmaker_introduces_bill_that_would/
32. Will the QS Business Model Disrupt the Market for Legal
Services in the United States?
Conclusion
- European countries now allow
Outward non-attorney ownership/investment
in law firms1
Pressure
-Globalization of legal services
industry1
- Increasingly Expansive and
Complex Regulation of Private
Conduct = Greater Demand for
Legal Services by Normal People1 Inward
- Lack of Access to Good Attorneys Pressure
Due to Cost1
- Lack of Knowledge About Which
Attorneys Are Good1
1. http://www.nytimes.com/2011/10/29/business/selling-pieces-of-law-firms-to-investors.htm
Hinweis der Redaktion
When talking about the concept, be sure to throw in the buzz word “value” or “value proposition”
Strong brands, especially in the professional services arenas, are valuable because provide customers with a level of trust. The concept of trust may seem warm and fuzzy, but it delivers cold, hard results for businesses and brands.
Need to photoshop umbrella
Compare to U.S. legal market: $235bil
Lawyers2you – another franchise type model Highstreetlawyer – network of law firmsThe co-operative – franchise type model QS – right now the biggest, biggest marketing budget, celebrity endorsed (see marketing). First mover advantage
“Loose” or “indirect” network effects: the service is not inherently more valuable (cf. fax machines), but customer confidence and bandwagon effects start doing work.
Why? Could be that large number of reviews indicates trust and popularity, but there’s something else going on. Yelp SEO -Searching “fried chicken” in Yelp will bring up only restaurants with reviews where “fried chicken” was mentioned in their Yelp reviews. Every Yelp review adds content to your page, adding keywords that improve your search performance. Does your restaurant offer great fried chicken but nobody Yelped about it? Bummer. Your restaurant won’t show up in the Yelp search results when someone searches “fried chicken.” This concept also applies to terms like “romantic restaurant,” “best restaurant,” etc.More reviews means more content. More content means more people find you. More people finding you means more reservations.
Asked big firm senior associate about this, they were not even aware it existed