Overview of economic forces currently impacting the market for legal services. Includes transition from one-to-one to one-to-many legal products and solutions. Challenge for profession is to lagging legal productivity. Requires investment in multidisciplinary human capital combined with the creation of new business models.

1. The Future of Legal Services
William D. Henderson
Professor, Indiana University Maurer School of Law
Editor, Legal Evolution
Co-Founder, Institute for the Future of Law Practice
Presented to
North Carolina State Bar
Committee to Study Regulatory Reform
July 27, 2020

2. 86% 76%of low-income Americans
with a civil legal problem
receive inadequate or no
legal help
of all civil cases in state
courts have at least one
self-represented litigant
2=2The typical small firm
lawyer spends almost as
much time per day looking
for legal work (2.0 hours)
as performing legal work
(2.3 hours)
Lawyers and law firms are
caught in a pattern of
“consensual neglect” where
no one takes responsibility for
the industry’s bleak statistics
LEGAL SERVICES CORPORATION,
THE JUSTICE GAP (2017)
NATIONAL CONFERENCE OF STATE
COURTS, THE LANDSCAPE OF CIVIL
LITIGATION IN STATE COURTS (2015)
CLIO, LEGAL TRENDS REPORT (2017)
THOMSON REUTERS, REPORT ON THE
STATE OF THE LEGAL MARKET (2018)

3. Our industry is evolving
ONE-TO-ONE CONSULTATIVE
ONE-TO-MANY PRODUCTS
AND SERVICES
Uncomfortable disjunction
Missing key skills & business models

4. Ethics rules shape
and constraint legal market
• Rule 5.4 – who can own and invest
• Rule 5.5 – who can do the work
• Rules 7.2-7.3 – constraint marketing efforts

5. Susskind’s five stages of Evolution
Bespoke Standardized Systematized Packaged Commoditized
One-to-One One-to-Many
Practical Law Company
was pure standardization.
Sold to Thomson Reuters
in 2013 for $450M.
$1-5M profits per
partner for large
firms, but static.
Much work going
in-house.
PeopleLaw sector
on decline.
Multidisciplinary Teams
• Information technology
• Systems engineering
• Finance
• Marketing
• Project management
• Consulting
• Law
New Business Models
• Need sources of capital
• Increased risk tolerance
• Highly specialized talent that
collaborates across domains
• Regulatory barriers
• Complex technical sales (L2L)
• Mass marketing (L2C)
critical need for leadership
Source: Richard Susskind, Tomorrow’s Lawyers (1st ed. 2012)

6. Two Market
Segments

7. Chicago Lawyers
I
Chicago Lawyers
II

8. $70 Billion
Indviduals
(n =325 million)
$70 Billion
Individuals
(n = 325 million)
$220 Billion
Businesses & Organizations
(n = 6 million)
$184 Billion
Small, Medium, Large
Businesses
(n = 5.9 million)
$36 Billion
Fortune 500
(n = 500)
$0 $50 $100 $150 $200 $250
$290 Billion US Legal Market
Estimate of Current U.S. Legal Services
Market
Based 2012 Economic Census data adjusted upward based on growth in U.S. GDP

9. 2007 2012
% of Law Office Revenue by Type of Client
© Legal Evolution PBCSource: US Census Bureau Economic Survey (2007, 2012)

10. SMALL FIRM LAWYERS SERVING PEOPLE
ARE STRUGGLING TO EARN A LIVING .
$260/
Hour
2.3
Hours
1.9
Hours
1.6
Hours
$422/
Day
2017 Clio Legal Trends Report
What went into the 2017 Legal Trends Report?
1,026,038 matters
10,981,286.13 hours billed
$2,562,864,876.43 in billables
8 award-winning data scientists
29% of 8
Hours
82% of Hours
Worked
86% of Hours
Billed
Hourly Rate Hours Billed Collected Income

11. STATE COURTS ARE IN MELTDOWN –
GLUTTED WITH SELF-REPRESENTED LITIGANTS.
NCSC The Landscape of Civil Litigation
in State Courts
“The picture of civil litigation that emerges from the
Landscape dataset confirms the longstanding criticism that
the civil justice system takes too long and costs too much.”
$2,441 $5,424 75%
median judgment average judgment of cases had at least
one self-reported
party

12. Source: data from the Annual Reports of the Illinois Courts, graph generated by Legal Evolution PBC
633,659
791,412
429,649
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Civil Case Filings in the Illinois Circuit Courts
Total Cases Filed 2-year Moving Avg.

13. Legal
Complexity
1990 2020 2050
Experience and
Perception
Economic
Growth
Complexity
© Legal Evolution PBC

14. Search for
substitutes to
deal with cost and
quality
Reality
Rise of the
Large Firms
Higher
profits
© Legal Evolution PBC
Legal
Complexity
1990 2020 2050
Experience and
Perception
Economic
Growth
Complexity

15. Reality
© Legal Evolution PBC
Legal
Complexity
1990 2020 2050
Experience and
Perception
Economic
Growth
Data, process,
technology
Division of labor,
specialization
Complexity

16. 32.4%
54.9%
203.3%
-25%
0%
25%
50%
75%
100%
125%
150%
175%
200%
225%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
% CHANGE IN NUMBER OF EMPLOYED LAWYERS
BY PRACTICE SETTING, 1997 TO 2018
Law Firms Government In-House

17. © Legal Evolution PBC

18. Source: Alan Bryan, Senior Associate General Counsel - Legal Operations and
Outside Counsel Management, Wal-Mart Stores, Inc.
18 Legal Evolution PBC

19. Document Automation
Document Analysis Workflow
Tools
Communication & Collaboration
Document Management
Transaction Management
Time & Billing
Security & Compliance
Business
Intelligence
Case Management
eDiscovery
Legal Research
Smart Contracts
Proliferation of Legal Tech Point Solutions

20. Impact on Entry-Level Private Practice Jobs
Number of Entry-Level Jobs in Private Practice by Law Firm Size
Data Source: NALP
© Legal Evolution PBC
4,745 5,193 5,156
3,750
2,856 3,636 3,980 3,952 4,007 4,238 4,606 4,773
8,829
5,873
7,037
5,556
-
5,000
10,000
15,000
20,000
25,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
500+ lawyers in firm 11 to 500 1-10 lawyers

21. 27,756
46,776
33,432 *
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Year of Graduation
Number of Law Graduates from ABA-Accredited Law Schools, 1973 to 2020
Static Learning → Poor Job Prospects → Massive Decline in Enrollment

22. 36%
26%
19%
13%
52%
64%
70%
74%
12% 10% 11% 13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1980 1991 2000 2005
Less than 35. 35 to 64 65 or older
Demographics of Licensed Bar

23. Lagging Legal
Productivity and
“Cost Disease”

24. 1997 Dodge Caravan
2003 VW Passat
2014 Honda Accord

25. “Human ingenuity has devised ways
to reduce the labor necessary to
produce an automobile, but no one
has succeeded in decreasing the
human effort expended at a live
performance of a 45-minute
Schubert quartet to much below a
total of 3 man-hours.”
-- William J. Baumol & William G. Bowen, Performing Arts: The
Economic Dilemma (1966)

26. Source: Data from U.S. Bureau of Labor Statistics, calculations by Legal Evolution PBC
218.49
334.48
609.10
373.17
50.00
150.00
250.00
350.00
450.00
550.00
650.00
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Cost of Legal Services, Medical Care, and College Tuition vs CPI-U
1986 to 2016
CPI-U Legal Services Medical Care College Tuition
1986 = 100

28. Source: Data from U.S. Bureau of Labor Statistics, calculations by Legal Evolution PBC
334.5
218.5
0.435%
0.245%
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
0.80%
0.90%
1.00%
1.10%
1.20%
1.30%
1.40%
1.50%
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Legal Services Compared to Overall CPI-U, 1986 to 2016
Relative Importance of Legal Services in CPI Basket
Legal Services Overall CPI-U CPI-U Relative Importance of Legal Services

29. The “DIY” (Do-It-Yourself) Legal
Economy

30. A2J

34. DIAGNOSIS, INFO
& SELF-HELP
PARTY-TO-PARTY
NEGOTIATION
FACILITATION DECISION
Solution
Explorer
Online
discussion
Facilitated negotiation &
decision preparation
Adjudication
1 2 3 4
AutomationDispute Volumes

35. Seamless, Responsive Design

36. Participant Satisfaction
(to date)

37. Failed Storefront
Revolution

40. The Legal Profession has
problems.
Who do we talk to?

41. Courts
Primarily States
Mix of Appointed and
Elected Justices
Design and Functioning
of Legal System
Bar Associations
State and National
Advice & Expertise
Legislatures
Primarily States
Funding
Market Structure
Ethics Rules 5.4, 5.5, 5.6
System for Resolving
Disputes
Rules of Procedures
Legal Education
Requirements
Rules for Bar Admission
Simplified Model of
Legal Profession Regulation

42. Rule Makers versus Risk Takers (140) Legal Evolution, March 15, 2020
https://www.legalevolution.org/2020/03/rule-makers-versus-risk-takers-140/

43. Susskind’s five stages of Evolution
Bespoke Standardized Systematized Packaged Commoditized
One-to-One One-to-Many
Practical Law Company
was pure standardization.
Sold to Thomson Reuters
in 2013 for $450M.
$1-5M profits per
partner for large
firms, but static.
Much work going in-
house. PeopleLaw
sector on decline.
Multidisciplinary Teams
• Information technology
• Systems engineering
• Finance
• Marketing
• Project management
• Consulting
• Law
New Business Models
• Need sources of capital
• Increased risk tolerance
• Highly specialized talent that
collaborates across domains
• Regulatory barriers
• Complex technical sales (L2L)
• Mass marketing (L2C)
critical need for leadership
Source: Richard Susskind, Tomorrow’s Lawyers (1st ed. 2012)

44. 1 in 10US healthcare workers
have a medical degree 8 in 10US legal service workers
have a law degree

45. 18.4% 29.9% 33.5% 8.9% 9.3%
High School Diploma + On The Job Training
HIGH SCHOOL DIPLOMA +
ON THE JOB TRAINING
ASSOCIATES DEGREE BACHELORS DEGREE MASTERS OR
DOCTORATE
MD OR DO
DEGREE
Associates Degree Bachelors Degree
LP & LV Nurses 701,690
Medical Assistants 673,660
EMTs & Paramedics 257,210
Medical Records &Health Info Techs 208,650
Radiologic Technologists 205,590
Phlebotomists 125,280
Other Health Technologists 125,270
Surgical Technologists 110,160
Massage Therapists 105,160
Physical Therapy Assistants 94,250
Psychiatric Technicians 71,360
Diagnostic Medical Sonographers 71,130
Cardiovascular Technologists & Techs 56,560
Medical Transcriptionists 53,730
Occ. Therapy Assistants 42,660
MRI Technologists 38,540
Dietetic Techs 33,540
Other Healthcare Practitioners & Techs 32,680
Nuclear Medicine Technologists 18,810
Radiation Therapists 18,260
Therapists, All Other 11,950
Respiratory Therapy Techs 9,090
Healthcare workers occupy well-developed career paths along the entire educational spectrum.
Registered Nurses 2,951,960
Clinical Lab. Technologists Techs 321,220
Occ. Health & Safety Specialists 88,390
Athletic Trainers 26,890
Recreational Therapists 18,840
Occ. Health & Safety Tech. 18,020
Exercise Physiologists 6,740
Masters or Doctorate
Physical Therapists 228,600
Nurse Practitioners 179,650
Speech-Language Pathologists 146,900
Occupational Therapists 126,900
Physician Assistants 114,710
Nurse Anesthetists 43,520
Other Diagnosing Practitioners 36,680
Audiologists 13,300
Podiatrists 9,500
Orthotists and Prosthetists 8,830
Nurse Midwives 6,250
Genetic Counselors 2,640
MD or DO Degree
Physicians 954,000
Sources: Number of MDs or DOs from Federation of State
Medical Boards (2016); all other occupations from Bureau of
Labor Statistics (2018).
Nursing Assistants 1,450,960
Other Healthcare Sup Workers 88,990
Opticians, Dispensing 72,250
Psychiatric Aides 56,910
Medical Equipment Preparers 55,610
Ophthalmic Medical Technicians 52,890
Orderlies 50,100
Physical Therapist Aide 47,260
Occupational Therapy Aides 7,700
Hearing Aid Specialists 7,680

46. And a vast network of credentialing bodies fill the gap between education and practice.

47. 20.7% 79.3%
ASSOCIATES DEGREE JD DEGREE
Associates Degree
Paralegals and Legal Assistants 309,940
All other Legal Support Workers 43,150
In legal services, there are only two career paths.
This is not enough for an efficient, cost-effective system.
JD Degree
Lawyers 1,352,027
Sources: Number of licensed, active lawyers from American
Bar Association (2019); paralegals, legal assistants, and other
legal support workers from the Bureau of Labor Statistics
(2018).

48. Law must become
multidisciplinary

49. EMERGING
Customize
Synthetic Biology
GROWTH
Specialize
Virtual Reality
MATURE
Standardize
Securities
SATURATED
Commoditize
Debt Collection
SPECIALTY
Intellectually Demanding
Frontier Work
Value-Oriented
COMMODITY
Well-Defined
Routine Work
Volume-Oriented
Bring Work In-
house?
LIFE CYCLE OF A PRACTICE AREA

50. EMERGING GROWTH MATURE SATURATED
Type 0 Innovation
Type 1 Innovation
LIFE CYCLE OF A PRACTICE AREA
Type 0: Adapting law to fit new social,
political, and economic complexities
Type 1: Improving the quality, cost, and
delivery of existing legal solutions

51. Type 1
Type 0

52. Bespoke
Commoditized
Type 0
Type 1Operational
SOPHISTICATED CORPORATE WORK

53. Type of
Professional (Y)
Lawyer
s
Allied
Professionals
Type of
Client
(X)
Individuals Small Business Middle Market Publicly held Global 500
Paralegal & support staff
Finance / Acct / IT
Marketing / Bus. Dev. /
Client Experience
Operations (experts in
process, PM, sourcing, cost
accounting, pricing)
Counsel
Associates
Partners
Software Engineers
Data Scientists
Staff Attorneys
AlliedProfessionals
HUMAN CAPITAL MAP FOR ONE-TO-MANY SOLUTIONS

54. (X)Individuals Small Business Middle Market Publicly held Global 500
AlliedProfessionalsLicensedLawyers
Type 0
Innovation
Type 1
Innovation
Range of foundational
knowledge
HUMAN CAPITAL MAP FOR ONE-TO-MANY SOLUTIONS
(Y)

55. Jason Barnwell
Started at:
-Heller Ehrman
-Cooley
Now at:
AGC of Modern Legal
Microsoft
MVL
Minimum Viable Lawyer is a Key Ingredient
Eric Wood
Started at:
-Cleary Gottlieb
-Chapman and Cutler
Now at:
Partner at Chapman
and Cutler
Alma Assay
Started at:
-Gibson Dunn
Now at:
“Recovering legaltech
entrepreneur”
Christian Lang
Started at:
-Davis Polk
Now at:
Head of Strategy at
Reynen Court

56. Technical
Problem
Adaptive
Challenge

57. Lodewijk Bonebakker
Chief Innovation Officer

58. Thank You!
@wihender
wihender@indiana.edu