Law in Business: IT: Supermarket sweep

20 July 2006

Ever since Jack Clementi announced that he had no objection to the idea of ‘Tesco law’, the profession has been holding its breath. The idea of household brands such as banks, insurers or supermarkets providing legal advice direct to the public promised to turn around centuries of professional privilege.

And now years of speculation are becoming a reality. The proposed Legal Services Bill was hotly followed by news that the Co-operative Group is setting up its own legal services division, headed by key personnel who left RAC’s own trailblazing legal arm after its takeover by insurance giant Aviva. The venture is still in the planning stages but represents both a threat and an opportunity to law firms across the UK. Where will they fit into a legal landscape where it may be possible to buy conveyancing with a tin of beans?

Customer service is certainly the heart of the matter for Jonathan Gulli-ford, operations director for Co-operative Legal Services. He comments: "The fact is that we set up this company because our customers want it. Generally, today’s consumers are more comfortable with brands than they are with professionals. Today, giving customers 24-hour access to information and advice is a hugely important factor, and we, unlike most law firms, can deliver it."

Gulliford puts much of this situation down to a lack of visibility among private client firms. He adds: "The only recognisable law ‘brands’ in the UK are commercial and corporate firms aimed at bluechips looking for representation. Few people you stop on the street could name a law firm and, fundamentally, people trust what they know. This is why, when we did our customer research, respondents welcomed the idea of ‘Co-op law’."

Here Gulliford has identified a gap in the market which the current system has allowed to emerge. We live in the age of the supermarket but most law firms are still organised around ‘local shop’ principles. So how can they make the leap from local to national, and will they be able to compete with Tesco?

For many firms, however, the immediate answer is that they will not need to compete with legal supermarkets but they may need to work for them. Many argue that the profession will ‘split’, with complex, litigation-based work staying in specialist firms. Simpler, more process-led legal work such as convey-ancing, will writing and road traffic accident claims will be swallowed up by the big brands, as it suits their high volume, shareholder-led profit motives better.

Initially, however, legal services offered by big brands may well be ‘badged’ products bought in bulk for fixed prices from panels of solicitors along the same lines as already apply in the personal injury market. Here, places on lucrative panels will be highly coveted, but they will also require firms to prove their ability to operate profitably on a highly commoditised ‘sausage factory’ basis.

Many of the firms who already operate in similar areas seem to accept these changes and the opportunities and threats they offer. Take Bott & Co, for example: this Cheshire-based personal injury specialist was only founded in 2001, yet has already grown into a £5m business on the back of efficient processes, sustained investment in IT and a corporate-style management structure.

Managing partner David Bott accepts that service is the way forward. He comments: "The big consumer brands are businesses founded on customer service — this will naturally force the legal sector as a whole to up its game, which will benefit the client."

Furthermore, as a panel solicitor, Bott can also shed light on what these brands will require from suppliers if the ‘white label’ market comes into being. He adds: "Success is all about service and delivery. Big brands will expect firms to make their services friendly, approachable, accountable and available. This will mean everything from the setting up of 24-hour helplines to an explosion in IT investment.

"Even now, a critical factor in a firm winning a place on panels is the robustness of its IT systems. You have to demonstrate you have the capacity to deal with work efficiently, and impress companies which automated their business processes years ago."

Customer communication

In this vision of the future, IT forms a central plank of legal business strategy. Digital dictation, transcription outsourcing, online case management and client text messaging services are all there to ease the work’s passage through a firm and, just as importantly, communicate this progress to the customer.

Chris Murray is a partner at Halliwells, which since its recent merger with James Chapman has become a £62.5m Manchester giant. For him, white labelling is a stop-gap measure. He says: "For all the lip service paid to customer focus, big-brand law will be focused on volume business. Many firms may need then to turn a split between process-led and more involved litigation-heavy work in the profession to their advantage and concentrate on the more complex work the big brands will not or cannot deal with initially."

Murray also points to the potential pitfalls for firms of being dependent on a supermarket or life insurer for their source of work. He adds: "If ‘walk-in’ trade is largely absorbed by these big brands, then that will lead to private client firms essentially becoming ‘sup-pliers’ to them."

A longer-term effect of ‘Tesco law’ may also be that they ultimately employ more lawyers than independent law firms. Speaking again from the personal injury side of the argument, Laura Wilkin, best practice partner at Weightmans, another highly successful northwest-based firm, is sceptical. She comments: "Looking ahead, working in-house may offer greater flexibility, career opportunities or financial provision. However, as liability insurers are focused on reducing legal involvement through simplifying processes, it will be interesting to see whether we will see a situation where low-value claims are settled early and without litigation. Here the need for legal involvement would be largely supervisory with most work carried out by unqualified or junior staff."

Although few of the big brands expected to enter the market have made their intentions clear, there are signs they may be quietly buying into it. Several law firms are rumoured to have received funding from unspecified sources for expansion, and only time will tell whether ‘investment’ ultimately becomes a takeover. This would allow companies to speedily acquire legal expertise and functions, and the capital and integration expertise a brand the size of Tesco could muster would doubtless transform an already efficient law firm into an excellent process-led legal ‘factory’.

So what does the future hold for firms determined to stay independent of the big brands? Evidence suggests that the market for complex work will remain the profession’s province. However, the bulk of ‘bread and butter’ private client work may go elsewhere if firms do not invest significantly in improving customer service, building recognisable brands and automating their systems. Admit-tedly, it is unrealistic to expect most firms to compete directly with huge companies whose names touch consumers’ lives on a daily basis, but this is no reason why excellent legal brands cannot be built.

Equally, although the focus is on concerns that think nothing of spending £50m on an IT system, it must be remembered that such cost is often dictated by size. A forward-thinking law firm, with good management committed to making best use of IT can easily become a customer-focused organisation with a bright future. The crucial factor may well be in acting now before Tesco steals a march on the law in the same way it has on so many other areas of British business.

Richard Bate is general manager of Voicepath.
Author: Richard Bate
Source: Legal Week, July 2006