Michael Torpey knows that from experience. As a practitioner in the 1990s, he spotted an opportunity after the U.S. Congress passed a new law designed to limit frivolous securities lawsuits. It required the first plaintiff filing a securities class action to publish a notice informing potential class members of their right to move to be named lead plaintiff.
“I figured out then that I [knew] where all the cases were being filed around the country,” Torpey said during his keynote address at the CBA’s Law Firm Leadership Conference this month in Toronto. Most of the securities litigators at the time were in New York and San Francisco, he explained. So he prepared an information package for everybody that got sued, paid some visits to some of the targeted companies, and volunteered his time to assess their case. “For the next two or three years, I got 50 percent of the cases that were filed in the whole U.S,” he said. Apparently, nobody else had thought of doing that, until a couple of years later, when “everybody had thought of it.”
“I had an advantage that went away,” says Torpey, now the managing partner at Orrick, Herrington & Sutcliffe in San Francisco, named by the Financial Times as the most innovative law firm in North America in 2016 and 2017. There’s a lesson in that for law firms, he adds. “If your innovation is good, you get a little bit of edge for a little while. And if it’s not good, even though you spent a lot of money and nobody is following it, well you’re out of luck.”
If your innovation is good, you get a little bit of edge for a little while.
Of course, there is always a measure of gambling – and chance – when it comes to innovation. But it can’t be ignored, because so much of it is driven by the clients, said Torpey. In 1997, there were roughly 7,600 domestic companies listed on U.S. stock exchanges. That figure dropped to around 3,600 in 2017, in large part because of industry concentration throughout the economy.
Looking ahead, Torpey notes the following trends as the ones too watch for as law firms aiming to respond to what’s happening on the ground.
Law firm consolidation
“There used to be three times as many law firms in the US as there are now,” says Torpey, whose own firm has grown into the home of some 1400 lawyers and 350 partners worldwide. “That’s a lot and that’s not possible unless you’re looking at a global stage, and you have the advantage of the ability to communicate with those people.”
Law firms once consisted of partners, associates and support staff. Today, much of the work is being disaggregated, and firms are coming around to bringing in different types of professionals – CTOs, chief practice officers, pricing officers, you name it.
“Clients are ravenous for speed,” says Torpey. “Because their life is moving very fast.” He expects the demand for speed only to increase. “The thing that allows you to be fast is technology.”
It’s all about the industry
“Clients are more focused on industry.” If a client is operating in the mining industry, it knows that its competitors are facing similar legal problems. The question law firms must answer is whether they know the industry well enough to share tips on what’s happening out there in that industry, says Torpey. “There’s increasing demand for industry knowledge. They want to know that you are delivering value to them.”
A select few firms don’t feel it. And there are a few practice areas that don’t. For everyone else, it is the key pressure point for law firms as their clients demand legal services “better, cheaper, faster,” says Torpey. “This has already caused disaggregation of the work.” What’s more, clients have gotten very sophisticated at analyzing their billing. “Clients have tools that you only wish you knew how to use,” says Torpey.
Relationships matter again
“There was a time when expertise mattered the most.,” says Torpey. “A decade ago, it was all about who was the right person. “Today, if you have a panel relationship and you have the expertise, your chances of holding the matter are much better.”
The emergence of strategy
Law firms didn’t use to have a strategy until the late 1990s when the focus turned to growth and expanding geographically. But law firms weren’t trying to figure out how to differentiate themselves in the marketplace, says Torpey. ”Law firms are starting to have a strategy and take action based on that strategy.” He points to the example of Vinson & Elkins – historically a Houston-based oil & gas firm that is purposefully shifting to focus private equity work. Torpey’s firm, Orrick, is focused on the tech, energy and finance sectors. “If you don’t have a strategy you’ll have a hard time differentiating yourself in the market.”
Legal and business conflicts
It’s no secret that law firm merger can create conflicts of interest. There are also limits to representing two businesses competing for the same space. “Business conflicts are limiting growth,” says Torpey. “I predict it will cause the growth in the size of law firms to slow down.”
Law firms are rethinking their approach to office space, from introducing open concept to shared and modular workspaces. There’s no good reason for lawyers to have offices as big as they are given the amount of time they are not spending in them, says Torpey. “Most people, don’t really need their space.” However, he acknowledges there has been resistance to scaling down. Mentoring associates and maintaining culture is an issue. “Associates need face time.”
It a tool primarily aimed at the banks. “But you can easily imagine ways smart contracts will dis-intermediate the lawyers as well.”
Contract review, legal research, predictive analytics. It all spells “faster, better, cheaper,” which is why AI will have a major impact in adding value for the clients. “The more time you spend on added value, the more likely you are to succeed as a lawyer and the more likely you are to whether the storm of innovation.”
Consider how legislation surrounding autonomous vehicles is lagging so far behind the technology. “The regulatory side of all this is way behind what is actually happening,” says Torpey. The same goes for fintech, and other industries where technology is evolving faster than regulators can keep up. “The ability to be innovative and cutting edge in regulatory law is going to be an important thing to have.
Customer relations management
There are companies today that will sell you a CRM program that can tell you anytime someone in the firm has talked to someone on the client side. “This is potentially a big change,” says Torpey. “How valuable is that? It’s possible we’ll see a cultural shift toward more collaboration among partners.”