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Episode 96
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Practice Management and Business Skills
No Longer Disruptive: NewLaw or Alternative Legal Service?
Law as stated: 18 August 2023
What is this?
This episode was published and is accurate as at this date.
Nat Parbhu of Aspen Legal joins David in Curiosity to hone in on the state of the NewLaw market. Touching on whether disruption is still a marker of NewLaw providers and whether alternative legal services is a more appropriate term.
Practice Management and Business Skills| What area(s) of law does this episode consider? | Returning to NewLaw. |
| Why is this topic relevant? | NewLaw is a global trend that has been revolutionising the legal industry by combining innovative models, processes, and tools with traditional legal services. However, as a concept NewLaw is quite difficult to pin down. Fairfax Associates, a US-based consulting firm, identified four general categories of NewLaw services: Legal Technology and Artificial Intelligence; Legal Managed Services; On Demand Resources and Staffing; and Adjacent Advisory Consulting Businesses. The mix of these different categories between different NewLaw firms can be quite remarkable. One might focus on adjacent advisory work and another on legal technology. |
| What are the main points? |
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| What are the practical takeaways? |
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| Show notes | Fairfax Associates, The Rise of NewLaw (2020) Thomson Reuters, Alternative Legal Services Providers 2023 (2023) |
David Turner = DT; Nat Parbhu = NP; Ross Davis = RD
| 00:00:00 | DT: | Hello and welcome to Hearsay The Legal Podcast, a CPD podcast that allows Australian lawyers to earn their CPD points on the go and at a time that suits them. I’m your host David Turner. Hearsay The Legal Podcast is proudly supported by Lext Australia. Lext’s mission is to improve user experiences in the law and legal services and Hearsay The Legal Podcast is how we’re improving the experience of CPD. If you’re a regular listener to Hearsay, you might remember that in our last season we looked at one NewLaw model. NewLaw being an innovative approach to the models, processes and tools of legal services. Well, today we’re talking about another kind of NewLaw model. Last season we talked about how NewLaw is quite a difficult concept to pin down. Fairfax Associates, a US-based consulting firm, identified four general categories of NewLaw services. One; legal technology and AI – one that I’m sure lots of our listeners are talking about at the moment. Two; legal managed services. Three; on-demand resources and staffing. And four; adjacent advisory consulting businesses. Sort of the non-legal professional services that a lawyer might also provide. Now these different definitions of what NewLaw might mean and the different ways that different NewLaw firms might approach the concept can be quite remarkable. One firm might focus on adjacent advisory work. Another might focus on a technology-led approach. Joining us today to share his insights on NewLaw as a concept and how he’s put it into practice is Nat Parbu, a co-founder director of Aspen Legal. And Nat, you began your career in private practice in New Zealand and in London, transitioned to some in-house roles in leading teams in Africa and Asia – I’d love to talk to you about that today – but you are probably most well known for your work in NewLaw startup lexvoco. You were a co-founder of that business in New Zealand. Nat, thanks so much for joining me today on Hearsay. |
| NP: | Thanks for having me, David. Looking forward to the chat coming up over the next hour or so. | |
| DT: | Now I have given a little bit of an introduction to your career, lexvoco, working all around the world, New Zealand, Africa, Asia. Tell us a little bit about what you’re doing. | |
| 00:02:19 | NP: | Without wanting to make the story too long, I guess I came to the law as a second career. I went straight to law school from high school, dropped out part way through and had a career in snow skiing – which was my first big love and is still an overriding passion. And so I guess the relevance of that to today’s conversation is that via that career, I got to work all over the world, ski resorts in places like Chile, Switzerland, Canada, Japan, the US. So then when I came back to law school and looked at starting my legal career, I’d had some different experiences and dealt with people across all different levels of society and workplace culture, I would say relative to a lot of the other graduates coming out of law school. And I think that helped set me up for a slightly different perspective on what a legal career might look like. That being said, it’s easy to say that now in hindsight, at the time I went onto a graduate program into a Big Law firm in New Zealand, I was in a commercial litigation team and I went down the usual route of working for big corporate clients, seeing parts of their matters only and working pretty long hours. I tired of that pretty quickly, went off travelling again for another year or two, the end of which I ended up in a law firm in London doing commercial litigation again. One of my largest clients was a multinational listed in both London and New York and I ended up doing pretty much all of their litigation work across Africa – 40 odd jurisdictions, very diverse problems, very diverse cultures, very diverse issues. The one common theme through all of them, emerging markets, regulatory issues, rule of law, struggling at times and different background jurisdictions, some French based, some Belgian based, some UK based. |
| DT: | Of course you don’t really think about that, about practising in Africa that it’s not uniformly going to be a common law system, in fact likely going to have many artefacts of a civil law system. | |
| NP: | I think that’s right. We like to say, or those of us who worked in Africa at that time, you look at a map of Africa and the lines on the map are drawn by Western powers and often bear no resemblance to the realities on the ground where the sort of demographics are often governed by tribal entities as opposed to strict national boundaries. | |
| 00:04:28 | DT: | Yeah, absolutely. And so after your work in Africa, your client – that was the client that you were doing work with – did you end up working in house for them? |
| NP: | So I was doing the litigation around Africa. They asked me to come into a secondment into their team, which I was really looking forward to. I ended up never leaving so they took me on as a permanent employee. I spent the next eight or nine years working all around Africa for them, following which I moved with them to Asia, where I ran a Southeast Asian legal team out of Singapore. So different geographies, very similar issues and challenges. | |
| DT: | That old chestnut of poaching the external lawyer with the secondment. You can’t even be mad, can you? Because you’re not allowed to get mad at the client for that. | |
| NP: | No, and with our current business at Aspen, we often experience the same sort of issues with our secondees. And quite frankly, it’s a vote of confidence in the job you’ve done for your clients and for your lawyers. The lawyers want to join the new employer. The clients want your lawyer, which means they’re obviously happy with them. Everyone’s happy. There’s no point standing in the way. And quite often your former secondees become your new client. So it’s pretty much a mutually beneficial relationship. | |
| DT: | I was going to say it tends to work out that your former lawyer does like to instruct you if they’re left on good terms. I certainly saw that a lot. Working in the insolvency area, you often saw lawyers at the large firms moving to roles in the banks and subsequently their former firms, if they weren’t on the panel already, would soon join the panel. Now, after that role, you were a founder of lexvoco in New Zealand. | |
| 00:05:56 | NP: | I transitioned back to Australia for, I guess, family reasons. Young children didn’t really suit being on a plane every week and not being home. I’d never lived or practised in Australia previously. I picked up a contract role at BP where I spent my first year in Australia, following which I moved into the NewLawyer area with lexvoco. |
| DT: | And I suppose a lot of our listeners will have heard of lexvoco and probably will have heard of LOD, which later acquired lexvoco. For those who haven’t heard of it, give us a little bit of elevator pitch for how it worked. | |
| NP: | I think lexvoco was a brilliant business. It was founded by Anthony Wright. The way he looked at business was providing a better client-based solution as well as an alternative career path for lawyers. And I think a lot of what lexvoco embodied and stood for, we’ve tried to take on at Aspen Legal as well. lexvoco provided more holistic services than Aspen does. At Aspen we concentrate purely on secondments to corporate clients and then we run what we call our law firm slash advisory business. And I use that advisory piece because we don’t see ourselves as a traditional law firm in any sense whatsoever. We’re very much experienced in-house lawyers providing bespoke in-house services to corporate clients. TIP: We’ll leave a link to the Fairfax Insights report on the Rise of NewLaw in the show notes. That report finds that “a key characteristic of successful New Law models is service delivery that is designed from the perspective of the client”. According to Fairfax, this requires; first understanding the client’s definition of success and then rethinking and reimagining core processes and solutions. It’s not really one size fits all, there’s no simple problem-solution model. Nat’s going to expand on these issues throughout this episode. | |
| DT: | And let’s talk about Aspen Legal. By the way, when you said that you’d come to law as a second career, I don’t know what the first career I was expecting was going to be, but I didn’t expect it was going to be as a snow skier. But I guess that makes sense for the name of the firm. Is that the kind of reference? | |
| 00:08:03 | NP: | I think my co-founders would like to think that’s a complete coincidence, but sometimes you can lead the horse to water but you can’t make it drink from the trough. |
| DT: | I’ll take from that that it’s a yes, but you don’t have to say it. Now at the top of the episode I talked about this categorisation of NewLaw by a US consulting firm called Fairfax Associates. Those categories were managed services, on-demand resources and staffing, a bit like what lexvoco did, adjacent advisory consulting, a bit like you’ve described. Aspen Legal provides that broader advisory piece than just strictly advising on isolated or discrete legal matters, and legal technology. Do you think that categorisation is kind of an accurate or a complete categorisation of what NewLaw really means? Because it is a very difficult term to pin down. And I suppose you could look at your own work at Aspen Legal the way you define NewLaw there as maybe a lens through which you answer that. | |
| NP: | NewLaw is a very sort of amorphous concept and it’s constantly changing and evolving. What I would say is that I’d largely agree with the categorisations made by Fairfax. It’s more a perception issue in that Fairfax looks at it from a very narrow, private practice, Big Law firm viewpoint. And I say that for example because one of their four categories is adjacent services, which are all non-legal services. We would say the adjacent services piece, sitting outside managed legal services, encompasses what was previously regarded as traditional law firm advice. And Aspen Legal, that’s one of the two areas of NewLaw. Aspen Legal is resourceful and advises clients on. And we would say it’s a very broad mix of legal assistance combined with pragmatic business and commercial advisory skills. And I think that’s an area where some of the Big Law firms haven’t quite caught on yet. | |
| DT: | In that they’re still looking at the services they provide through that narrower lens, that adjacent advisory services is kind of over there and the full breadth and the value that can provide to a client isn’t really fully realised yet. | |
| 00:10:10 | NP: | I think that’s right. I think they see legal services as sitting within what’s called old law for now. And NewLaw only encompasses adjacent services, which excludes legal services of any kind. |
| DT: | I see what you mean. Yeah, their perspective on it is; “oh well that’s all the stuff that sits around legal practice”. It’s not a substitute for the traditional model. | |
| NP: | Yeah, and the realities of working in business and in the real world is that these things are not completely separate. And they’re inextricably intertwined and you can’t actually pull them apart. And part of that is I think the reason why the concept of NewLaw has been so well received by the client base – because they are now receiving a more bespoke and tailored product for what they actually require from their service providers. | |
| DT: | Yeah, absolutely. It’s funny you mention that term old law, right? Because I think my definition of NewLaw, the kind of internal heuristic I use is just as a comparator. NewLaw is not old law. Whatever it is, it’s not the kind of traditional structure of the highly leveraged billable hour based model. It might well involve charging by the hour. I think we often are very quick to denigrate the billable hour and talk about how it’s got to go. And there’s definitely plenty of engagements where it needs to, but it has its place in some client engagements I suppose. But whatever NewLaw is, it doesn’t fit that typical mold of what a Big Law firm looks like. | |
| 00:11:35 | NP: | I think that’s right. And I think part of it comes back to how you look at this. I was very lucky early on in my legal career to be sent into emerging markets where the technical aspect of law was not a priority compared to solving real life issues on the ground. And in a way that was compliant, given my client who became my employer was listed in both London and New York and subject to all of that regulatory scrutiny that comes with that. But dealing with that in a way that often did not fit with the on the ground environment where business practices were such that were not going to be acceptable to corporate regulators in the US or in the UK. And having to try and come up with some pragmatic solutions to how we would deal with these issues in order to keep the business going. And it taught me really early on in my legal career the importance of understanding risk and having informed conversations about risk in order to decide what the – it’s not even the correct path of action – but what you thought may well turn out to be the best course of action was going forward. And understanding what the risks were and how you could mitigate them and to what extent you could. But it was never a case of being able to eliminate any risk 100% and that was just not the nature of working in those environments. And I think my view on business generally is it’s impossible to run a business, a profitable business. without taking any risks whatsoever because if that was the case everyone would be doing it. |
| DT: | Yeah, that’s right. I think that’s a refreshing approach to risk to hear from a lawyer, I think. Because we talked about this on the show before that we’re not the only profession that deals with risk. Lots of professions deal with risk. Project managers, engineers. But a lot of other professions are much more comfortable accepting risks. There’s lots of different ways you can manage risks. Lawyers like to eliminate them. You can mitigate them. You can accept them. You can just say; “well, that’s a risk, right? Accept that the consequences of that may come about”. But of course, risk exists in finance too. And like you say, you can’t really run a successful business that produces returns more than the risk-free rate unless you take some risk. Otherwise everyone would be doing it. | |
| NP: | Yeah, that’s right, David. I completely agree. And the thing about risk is that sometimes you can have the most informed conversation and agree mitigations and it still goes wrong. And so risk is never about getting it right every time. And part of developing your career as a lawyer and becoming more experienced is learning from your mistakes. And you would hope eventually with the benefit of experience that you have a far greater strike rate on successful decisions on risk than ones that go wrong. But there are also cases where you can look at the problem in front of the business as much as you want. And then an intervening factor that you’ve never even considered will come to play. And that’s just the nature of doing business. And I guess when you’re working in emerging markets, there are far more of those factors that you might not have foreseen. Or even if you have thought about them. For example, weather events, political change, war. These are things that are outside the control of the businesses. Yet to operate in those environments, they have to accept those risks and try and be on top of what they will do should they crystallise at any point. | |
| DT: | It’s really interesting. It sounds like your work in Africa and Asia has given you this perspective that for you, and I guess for Aspen as well in terms of the services that it provides, NewLaw means redefining the scope of the services rather than the method of delivering them necessarily. In that I suppose last season we talked to Demetrio Zema at Law Squared and we talked about NewLaw in the concept of pricing models. Or the culture within a firm. The kind of settings that can be adjusted to change the way legal services are delivered. Both for the lawyer and for the client. I suppose what you’re describing is the scope or the definition of what a legal service is can be redefined. | |
| 00:15:35 | NP: | I think that’s right. I think pricing models for a client, culture within a legal services business are very important factors. I guess we would say at Aspen Legal, if you talk about NewLaw, our overriding definition of NewLaw is providing a service to the client which is as lined up as possible with what the client actually wants and or needs. And sometimes what they need is different from what they want and it’s your job as an advisor, an external advisor, to get that point across to them. |
| DT: | It’s having a much deeper understanding I suppose of the value that you’re providing to the business in the sense that you’re not there to fulfill a scope, deliver a letter of advice. You’re trying to understand the business at a more strategic level. Strategically a little bit trite but understand it at a more strategic level so that you can actually contribute to that strategy. | |
| NP: | When I worked in private practice on a number of occasions I’ve heard us say, whether to our clients or otherwise, we rarely understand our clients’ businesses. And I’m sure I’m certainly not unique in this. You then move in-house and for a client that I’ve been working with externally for over 12 months and you get into the in-house business and you realise you actually don’t have a clue about your client, how it does business, how it makes money, what its real issues are. And so that’s the “what” of the business. But there’s also the how. And I vividly remember my first day in-house having moved from the rarefied atmosphere of my own office in London, where I had a trainee who would be at my beck and call all day. My first day sitting as a senior legal advisor in corporate HQ in London and a senior marketing executive from the Africa team walked up to me and had a question for me and I said “yeah okay I’ll look into that”. And looked down and looked up again 20 seconds later to find he hadn’t moved and his assumption was he was going to stand there until I gave him the answer. And I realised that this was a totally different way of business. This is how business actually worked, where you don’t have the luxury always of time to sit back, look at your research, have a look at the textbooks, ring up a few other people, see what they say and then respond. The business needs sometimes dictate; “we need an answer and we need it now”. The why of the answer and what sits behind it is sometimes really and quite often really not important. It’s more about what is the course of action we should take now. And with that comes accountability. You have to be accountable for the advice you’re giving and the decisions you make. And that does not sit well with all lawyers. A lot of lawyers don’t like to do that. They like to be experts within parameters and so that they are never caught by surprise when they have a question asked or the phone rings or an email comes in. So I would say, depending on the type of corporate environment you’re in as an in-house lawyer, it’s not suited to everybody. | |
| DT: | Absolutely. I guess that’s looking at the scope of your responsibility, the scope of your work as extending to the decision. One of those phrases that we love to use in private practice; “oh, it matters for the client”, it matters for you, what you do with this advice. | |
| 00:18:39 | NP: | Well that’s right and that’s the difference about being in-house, you are the client effectively. And I still hear in-house teams referring to their internal clients and to me that’s artificial language because you should be buying into this as part of the business. You need to be integrated into that business as seamlessly as possible and the decisions that are made by the business, to a certain extent, made by you as well. |
| DT: | Can you give us a bit of an example, either from your time working in-house in those emerging markets or at Aspen where you’ve assisted a client with a decision in the business and that work has kind of gone beyond what our listeners might typically think of as traditional legal services. | |
| NP: | A couple of examples spring to mind. One is around. we were looking to buy probably the largest state-owned asset left from the government of an African country and there was an issue with where the proceeds, the purchase of that asset would ultimately end up as opposed to in the government’s coffers for the benefit of the people of that country or some or all of it ending up elsewhere for the benefit of a much narrower group of people. And again, that’s a risk and you need to conduct the appropriate due diligence. but at the end of the day, you can’t be responsible for the actual outcomes of what happens as long as you’ve looked into that. Discussed it as a business, the risk around how this might end up, how you can mitigate those risks. But at the end of the day, you’re not the regulator. And you have to make a decision based on how you think this should end up, how you think it will end up and go with that. But you don’t get the benefit of hindsight to be able to look into actually trace those funds, see where they end up, see if your decision was right or not right and those are quite difficult decisions at the time. | |
| DT: | It’s almost political or quasi-regulatory advice. | |
| NP: | I see it also as a big part of corporate responsibility as well in terms of what kind of business you want to be involved in. And we’re seeing that now coming into Australia with a much greater emphasis with all the new, for example, modern slavery legislation where the corporates are being encouraged to not only just take their suppliers’ word for it, but actually start conducting DD and audits into their supply chain and their suppliers’ businesses to actually start digging around and actually substantiating some of the answers they’re getting around whether these are responsible organisations to be doing business with. | |
| DT: | Yeah, absolutely. And I suppose greenwashing is a big part of that at the moment as well, that kind of specious claims of sustainability. It sounds like what you’re describing is that sometimes that’s described as being the kind of ethical compass for the business that you’re in-house in or being an ethical compass for the client. It’s a really hard role to fulfil unless you do understand the business really intimately. | |
| 00:21:31 | NP: | That’s right. Often we’ll refer to as the moral compass of the business. There’s a lot of literature, a lot of resources around the lawyer’s role and are you the internal regulator for the business? Are you the policemen for the business or are you just there to help the business? I think we could spend hours talking about the ethical responsibilities on both sides of the coin on that. But I think you have – as an in-house lawyer – you’re in a privileged position in that you have access to a lot of information, a lot of data that many other functions in the business don’t have. You see across the breadth of the business and I think, in general, you are much better informed to help the business make the right decisions in those regards. |
| DT: | It’s reminding me of a conversation I had with another guest recently. We had another listener on the show, Bernard Hill, a former Air Force lawyer. He was telling us a story about prosecuting potential a safety breach by a group of pilots. There was some footage of that safety breach which when he was prosecuting, the squadron that they were a part of mysteriously couldn’t find. But they were able to find it a couple of years later for the air safety part of the Air Force. And he was explaining that the problem there was that they saw the lawyers as the internal regulator, the people there to prosecute, the people there to get them in trouble. They saw the air safety people as the people there to keep them safe. That really got me thinking about the role of in-house lawyers, the role of lawyers generally, I suppose. Do you want to be seen as the policeman, which I think a lot of general counsel, in-house counsel often give themselves that role, think of themselves in that way, or are you the moral compass? Are you there to be candid with? Are you there to keep the business safe? Because you do get much better access to information when you’re fulfilling that role. | |
| 00:23:22 | NP: | My personal view is that the in-house legal team are not there to be the policemen for the business. I think you have a key role to play as part of the moral compass of the business, and I think it’s somewhere in between. Because there are circumstances where you need to hold the line and advise against a course of business, notwithstanding that it may affect sales revenues, profitability, because it is genuinely the wrong thing to do. Whether because it’s just short term and there will be a longer term consequence when the executives who are making that decision are no longer in the company to be accountable for it, or whether from an ethical or legal standpoint, it’s clearly just wrong. And I think when it’s wrong from a legal standpoint, it’s much easier to simply say no, and it’s easier to provide those justifications. But, you know, like most in-house lawyers, you’ve heard the terms sales destruction division and brands destruction… |
| DT: | … department of no… | |
| NP: | labelled about, and I think if you can set up an in-house team in a great way, and you can integrate your lawyers into the business, so not so that they sit as a separate function, and that they can be remunerated and incentivised along with the division they sit in, is one way of perhaps getting around that, but then when you have that situation, you need to be careful that you don’t have the situation where the gamekeeper turns into the poacher as well. Yeah, it’s a difficult balance to find. | |
| DT: | Absolutely. But one I suppose that is really important for Aspen, because it sounds like your approach to NewLaw is taking what you and your team have learnt as in-house lawyers, and whether on the kind of on-demand resourcing side or the side of your full-time lawyers, you’re expanding the scope of the services that your lawyers can provide to fulfil those roles within a business, the ones that might traditionally be fulfilled by in-house lawyers. So for some of our listeners who might be trying to implement a similar sort of approach, who are trying to deepen their relationship with their clients, expand the kind of work that they’re doing with their clients, what are some of the challenges to adopting that sort of approach? | |
| 00:25:24 | NP: | If there was an overriding ethos at Aspen Legal, we would say it’s to be key business partners. So to do that you need to be able to understand the business and to be commercial. Now those things sound easy. How are you going to do that when you go in-house? How do you understand the business you’re working in? Depending on the kind of business it is, let’s just say for example it’s a manufacturing business, get to the manufacturing sites to the extent you can, talk to people on the factory floor, understand the supply chain, where are the source materials coming from, understand what happens downstream when the finished product leaves the factory, how do sales and distribution work, are you using third-party logistics, are you using agents to sell, what are your sales channels? All of those things are critical. If you’re working in a logistics business, go and ride in the trucks. I did some work with an ASX100 company in the waste industry. It was enlightening to go out at five in the morning and pick up garbage bins and then you understand the issues that the drivers have and these are issues that multiplied thousands of times, pervade back through the business. What do you do when you’ve got to clear commercial bins in an alley in Melbourne and you can’t get down there because it’s blocked and your truck won’t fit? You’re contracted to pick up those bins, how do you deal with that issue? Cars that are parked where they shouldn’t be, you hit a vehicle, how do you deal with that? You need to understand how the business works and makes money in order to be able to advise it as best that you can. |
| DT: | In your experience are clients happy to have their advisors that embedded? Are they happy to show you the inner workings? | |
| NP: | I think if you’re an in-house lawyer and an employee, absolutely. I’ve found in my personal experience very rare that your employer would not want you to actually take the time to understand their business better, to enable you to provide better advice. I think it’s possibly a different answer when it comes to external providers. For a start, they’re not going to want to pay you to do that, despite the fact that it might actually help them. I think you might have more difficulty convincing of that. Secondly, I think if you’re an external, they often see you less as part of the business and more as potentially someone who might, maybe not necessarily report wrongdoing, but they look at you as someone who’s checking over them when, in their view, a check is not required. | |
| DT: | Yeah, I see. And so how do you replicate that level of deep understanding of the business then as an external provider? | |
| NP: | It’s very difficult and part of it is about the relationship you’ve built with that client over a number of years. And I’m fortunate, a large part of our client base at Aspen Legal, which is predominantly multinationals and ASX 100 clients, that a lot of them have been very loyal to myself and the other founders of Aspen and have followed us for 10 plus years. So we have very deep relationships with many of these businesses. So there’s really a level of trust there. And that trust, it doesn’t start on day one. It’s been built up over a period of time. | |
| DT: | So it’s really interesting because I guess when we use the term NewLaw, we’re often thinking about this new dynamic disruptive approach to practice, new entrance to the market taking a different approach. But that’s a very difficult value proposition to develop instantly. You’re able to provide that different scope of advice, that unique level of integration with the business because of a long relationship, because of the level of incumbency you have as a service provider. It’s an interesting kind of contradiction. Do you think NewLaw is still disruptive? Is it still the new entrant? Is it still the up and coming newly established law firm or does it mean something else now? | |
| 00:29:00 | NP: | At Aspen, the space we work in, we don’t like to call ourselves a NewLaw business. I think we would be quite happy – if a badge had to be given to us – we’re quite happy to sit in the alternative legal service provider space. TIP: Thomson Reuters and Georgetown Law’s Center on Ethics and the Legal Profession release a biennial report into the alternative legal service provider – or ALSP – market. The latest edition revealed “an evolving market in which the boundaries between alternative legal services providers, law firms, corporate law departments, and even technology and software firms are rapidly blurring.” That ALSP badge is worn proudly by many professional services providers across the market, and since the first report in 2015, the market has grown 145% – keeping in mind that this data is mostly US data with “some additions from Australia” and other comparable jurisdictions. And our view is that this is no longer about disruption. I think this kind of model, and I said earlier that it’s evolving and changing all the time, which it is. But the kind of model which is about bespoke service delivery, lined up as much as possible with what the client actually wants or needs, I don’t think that’s a new concept anymore, and it shouldn’t be. So I don’t really think it’s that disruptive anymore because I’m not quite sure who we’re disrupting, if they haven’t already been disrupted. And the concept of alternative legal service providers, it’s great because I think as a market, the bigger that market is and the more it’s growing, and there’s some statistics that it’s very difficult to measure, but some statistics show that it’s valued at $10 billion per annum these days. That’s no longer new. That’s a big chunk. You don’t get to $10 billion overnight. So to me that’s not new. And yes, it’s growing, and there’s a reason it’s growing. It’s because more and more corporates are understanding that perhaps they haven’t been getting quite as much as they could have got previously from their service providers. |
| DT: | I guess there’s often that perception, I suppose, that those large clients, the ones you’re describing, the ASX-listed clients, the really large companies for whom governance and brand reliability is really important, I think there was often a perception or an assumption that those clients really belonged to the large firms, really belonged to the big end of town. Are you finding that alternative legal service provider model is now more attractive to those larger institutional clients? | |
| 00:31:35 | NP: | Oh, without a doubt. And that’s not to say that they don’t use Big Law or the top end of town. There will always be a place for that. There’s always a place in a big M&A transaction where the board wants a brand on the transaction on the DD. And that’s exactly it. I think what the difference is, is that those large corporates are now more selective about how they resource particular legal requirements for the business. It’s no longer one size fits all. We only use our panel firms for everything, and that is it. You simply don’t need to be doing that, for example, if you have a capacity issue with BAU and you need someone to look at your supply agreements or your distribution agreements. And in fact, counter-intuitively, going to Big Law often leads you to a poor outcome for that kind of BAU work, because it’s not fit for purpose. You’re getting lawyers who have never worked in business advising on this. They’re incredibly risk averse. They apply the risk tolerance of their law firm, which is generally zero, as opposed to the client’s risk tolerance, which we’ve already discussed will never be zero. And there’s a slow turnaround time. You have a surprise on the bill at the end. So I think clients generally are far more selective about how they segment their service requirements, and that’s how they resource the legal services that they need. |
| DT: | It’s a bit like the approach to software as a service, I suppose, as an analogy. Twenty years ago, you might have picked a single monolithic software package for all of your business needs. And it had an email client, and it had a word processing software, it had presentation software, it had all of the tools that you needed, but it had to come in that one monolith. Now businesses tend to pick best in class or most well-suited in class to whatever it is that they need. They’ll take their mail client from this company, and they’ll take their word processing from this company, and they’ll take their document storage or their cloud storage from this other company and stitch everything together to get the best from each class. It’s a little bit like that. | |
| NP: | I think that’s a great analogy, and you see with those software products, as opposed to, as you said, years gone by where it was one overriding solution, now you have much more segmentized products. They all have to be built in such a way that they can integrate with different classes of products, different brands of products, with plugins. Otherwise, if you’re just trying to get the client to buy everything from you, you’re not really compatible with all of the other solutions that are potentially on the market. that the client might find fits 80% of its business better than you. | |
| DT: | And so I guess to strain the analogy, does that mean that as a NewLaw provider, as someone who’s providing the best in class for a particular requirement of the business, you need to be a good integrator with the other service providers that they have? | |
| NP: | I think that’s right, and what I would say as well is that one of our guiding strategies at Aspen is not to try to be all things to all people. There are some things that we are very good at, and there are some things that we know will never be our focus and it will never be our strong point, and we don’t concentrate on those at all. And I think you need to be very transparent with your clients about what it is that you can offer and what it is that you can’t. | |
| DT: | It’s a real temptation though, isn’t it? When I practiced in a boutique law firm, we had a particular specialization. You develop a good relationship with a client, then they ask you something that sits outside of that area and you feel like; “well, I have a great relationship with this client, they’re my client. I should be able to solve any problem for them. Maybe I’ll just have a go at this employment issue or have a go at this environmental law issue or something”. But of course, it’s always been my experience anyway that if you can connect them to the right specialist, that’s actually a better service. And you can manage that service behind the scenes, you can white-label that advice, you can deliver that on your letterhead having obtained that advice elsewhere, but connecting them with the best in class can be a demonstration of the level of value that you provide rather than just trying to do it. | |
| 00:35:28 | NP: | I think that’s right and I think the situation you talked about, the overriding fear is always if you introduce them to someone else, they’ll take all our work away from us as well. They’re going to be competition. So part of that is realizing your strengths and weaknesses. Part of it is having great relationships with other service providers, providing slightly different services from your own, who you can work together with, cross-refer work too, that you trust, have a similar ethos to you, and also being confident in the quality of the work in your space that you do for those clients and that that in itself should be enough to keep them coming back to you. And look in our secondments business, we try and distinguish ourselves by having built a sort of boutique, high-quality brand. It’s not a labour hire brand. We’re not trying to fit square pegs into circles. It’s not just about making the dollar at all cost. And I think clients get that. And when a client has an opportunity and you having looked through your network and you say; “I’m sorry, we actually don’t have people with the right expertise and crucially the right fit for your business available on the basis that you want them”, clients actually respect you for that decision because you’re not simply just looking at them as a cash cow. |
| DT: | Yeah, absolutely. And tell me a little bit more about the secondments business because there are some other on-demand resource secondee businesses in the market. How does Aspen Legal differentiate? | |
| NP: | So at the heart of everything we do, particularly on the secondment side, we would say we’re a human-centrant business. And so that works on both the supply side, which is our secondee lawyers, and the demand side, which is our client base. We’ve talked about understanding your client’s businesses, building up a level of trust over a number of years to the point of they come to you because they trust you to provide a good solution for their resourcing issue if they’re looking for a secondee. On the supply side, a lot of the lawyers we work with have followed both myself and the other founders of Aspen Legal from a number of previous legal secondment businesses. So a lot of them we’ve worked with for a long time and there’s a reason they choose to continue to work with us regardless of the brand we’re working under previously. It’s also about understanding what your lawyers’ strengths and weaknesses are from both a technical perspective but also crucially, I think, for businesses, a cultural and fit perspective. And being really honest and upfront with both the lawyer and the client about what they’re looking for and what you can give them. | |
| DT: | Let’s talk about the role of technology in achieving some of the things that you’ve described because, as I mentioned at the top of the episode, it’s one of those categories that Fairfax describes as one of these canonical NewLaw categories. And often we do see that businesses that describe themselves as NewLaw firms tend to have some technology-led or technology-enabled service offering. Tell us a bit about how technology enables what you’re doing at Aspen, either on the law firm side or the secondment side. | |
| 00:38:27 | NP: | Look, Aspen, all of our systems are cloud-based, but not for an instant would we say we are a technology-leading company. We are very much a boutique business and we don’t have a scale to the extent necessary to bring in some of these adaptive strategies and adaptive tools. Saying that, obviously the marketplace is changing massively at the moment. AI in some form or other is here to stay. In theory, Aspen believes in anything that will save us time and enable us to do things more efficiently. But we are certainly not out there trying to offer some kind of legal operation services to clients where we can advise them on best-in-class technology products or anything along those lines. There are many other great service providers in the market who do precisely that. And as I said, we like to play in the space that we feel we’re market leaders and that we’re comfortable with, which is mainly advisory services and legal secondments. For the stage that business has evolved to today, we struggle to find better solutions for what we’re doing than Microsoft SharePoint for file storage. We play around a bit with Toggl for timekeeping to the extent that timekeeping is still relevant these days. But really I would not categorise Aspen as a market leader in adopting new technology. |
| DT: | It’s not synonymous with NewLaw for you. You don’t have to be adopting some sort of technology-focused way of delivering your services. | |
| NP: | That’s right. And I think new and better technology works best when you have massive scale in the market and you’re in a part of the market that has that volume. And Aspen is simply not in those spaces at the moment. | |
| DT: | So like you were saying before, you really have to understand what service you provide, what you are best in class at, and focusing on that and understanding the value you’re bringing. | |
| 00:40:19 | NP: | Yeah, and to us everything comes back to relationships. And we really believe in the power of relationships. And relationships are best developed over time on a personal level, on a one-on-one basis. And I think whenever you try to scale that way of building clients or onboarding secondee lawyers, you lose that human element. And we believe, as I said earlier, that human centricity is at the heart of our business and is what’s differentiated for us. And if that means that we are unable to scale as fast as we might otherwise be able to, that’s completely fine with us because we think that kind of scaling may come at a cost to the quality of your business. |
| DT: | Yeah, absolutely. I guess it’s just a different approach, isn’t it? That there’s a tension there or a contradiction in that if you want to have that really deep relationship with a client, then it doesn’t make sense to serve many clients at scale, right? Similarly, if you want to serve many clients at scale, that’s fantastic, but you’re never going to have that deep relationship with the business. | |
| NP: | That’s right. And it goes back to not trying to be all things to all clients at the same time. | |
| DT: | Yeah, I think that’s really interesting. And I think that’s probably the takeaway from how diverse the meaning of NewLaw is, if it’s a useful term to define a part of the market, because it can mean very different things, very inconsistent things. | |
| NP: | What’s good about NewLaw is that it can be whatever you want it to be that was different from what was there previously. It encompasses a massive scope. | |
| DT: | Yeah. Now, you mentioned timesheets before. Let’s talk a bit about pricing models. You can’t have a NewLaw discussion without the pricing model discussion, even if we’ve had it before. Because I kind of go back and forth on this question around billable hours. I think the received wisdom now is billable hours are bad, they encourage inefficiency, they’re a poor measure of performance, they are unpredictable for the client, they promote all sorts of toxic workplace behaviours and bad culture. We should use fixed-fee pricing. But in some matters, and as a litigator, I think you probably appreciate this, fixed fees can be inflexible. Fixed fees can require you to fit a square peg into a round hole in terms of the scope. The scopes that you’re familiar with and the scopes that you appreciate, they can require you to think very rigidly about the outputs that you’re producing. So, tell me a little bit about how you think about pricing at Aspen and where you’re using fixed-fee or value-based pricing and where you’re using hourly rates. | |
| 00:42:55 | NP: | How Aspen Legal thinks about pricing is the worst thing that can ever happen is that the client gets a surprise with an invoice. And it’s amazing how often that did happen when I was in private practice in London and elsewhere. So before you even come to how you measure time or measure price, having clear conversations with clients around expectations, scope, delivery timeframes are the most critical elements. And we find when we have those, quite often the client wants a billable hour involved to some extent, maybe not as the be-all and end-all. So I think value-based pricing is a great phrase and I believe in it. And at the end of the day, if you provide value to your client and you’re able to encapsulate your estimate of what that value might be prior to being engaged, then there won’t be any surprises to the client and there won’t be any problems with billing. It’s a long time since I’ve been in private practice in Big Law, but unfortunately I did see on many occasions or here the conversation; “how much do you think we can bill the client for this? How much is this client going to wear? There’s a lot of meat on that bone. We want to bill as much as we can get away with without them complaining too much”. Those conversations have no place in delivering value to a client. So if you can agree with the client what they need, and yes, I take your point around, say for example, a big piece of litigation where who knows how it’s going to go, but break it down into modular pieces stage by stage and provide an estimate. And almost always when you do this anyway, the client’s going to expect the estimate to be based on some kind of time versus cost analysis, which is inevitably some kind of billable hour. You can come up with a solution that’s workable for both yourself and the client. The client wants value. You want to deliver value. You can then work back, is that a fixed fee? Is that a capped fee? How did you get to this? But I think what’s really incumbent, if the scope changes or if there are unforeseen factors that completely change the nature of the services you’re delivering to the client, how difficult is it to pick up the phone and have that conversation with the client so that there is no surprise when the invoice arrives? And I think, since I’ve been in the NewLaw business with both lexvoco and Aspen Legal, both of those entities have never had $1 of bad debt. And I think that says a lot about how we regard value for our clients. |
| DT: | Absolutely. And I love that you’ve got this focus on the customer’s experience of that pricing, right? Rather than saying; “oh, well, we don’t like the billable hour, billable hours unpopular, so we do value-based pricing”. I think value-based pricing makes a lot of sense when you understand the value from the outset, right? If you’ve got a transaction, for example, you understand the transaction value there and you can understand the value that you’re bringing as a broker in facilitating that transaction to occur. That’s a good example of a situation where a value-based pricing model might work, but when it’s difficult to understand the output, the value that you’re going to deliver, because it’s a highly uncertain piece of work, such as litigation, then it does make more sense to be led by the customer. What does the client want in terms of pricing? And I like that you, again, reframe that question around, well, what will the customer experience? They don’t want to get a surprise, however. the bill’s structured. They want to have some predictability around pricing. | |
| 00:46:25 | NP: | Ultimately, and I’m always surprised that it doesn’t always seem to be grass in the same way, we’re in a customer service business. We provide services to our customers. Without our customers, without our clients, we don’t have a business. You go to a restaurant, you might have the greatest meal in the world, but if the service is abysmal, you’re going to have a bad experience and you’re probably not going to go back. And that’s how I look at it. Yes, we have to provide top quality legal services, but in a way that the client would like them delivered at a cost that the client believes is value for what you’ve provided. And to me, that’s what’s new about NewLaw, is that overall, when I look at all these solutions and all the categories that Fairfax goes into, it’s all about providing a better client product. And whether that’s the nature of that advice, the type of that advice, or whether that’s the services that are integrated with commercial advice as well as purely legal advice, are you helping them make a decision, recommending a course of action, taking accountability for that, setting out risks, how that they might be mitigated, delivering that in a way that’s timely, along the timelines of what the client needs to enable them to make the right decision, and at a price, and in a format that is what the client wants. And it’s not a 15 page opinion, it’s not quoting cases or textbooks. I was at a mediation last week, and one of the parties on the other side was represented by a barrister. His opening at the mediation was an hour and 10 minutes. He read from textbooks, and by the time that opening had finished, and unfortunately he didn’t brook much interruption, the mediator didn’t really haul him into line. By the time the opening was finished, the mediation was effectively over because he had alienated the other parties so much, there was never going to be a resolution. It was just a stunning example of, you might be making, in your view, what are some great legal points, but you’re actually not providing value to your client for the service because they’re not going to get a settlement now, because you’ve alienated the counterparties. So trying to find a solution that’s fit for purpose, and is bespoke for what the client needs for that particular problem, is absolutely crucial at the right price and in the right timeframe. |
| DT: | I think that’s a great definition of NewLaw, that it’s really about the customer focus. Delivering the output that the customer wants, whether that’s the traditional service or a much broader scope, delivering the price that the customer wants, in terms of both value and predictability, whether that’s with a value-based pricing model or something more traditional, and delivering in the way that the customer wants, whether that’s a really technology-led, highly scalable model, or whether that’s a really customised, bespoke, relationship-focused model. On that, we’re nearly out of time today, and we’ve covered a whole range of topics, what NewLaw is, what it can be, pricing, service delivery, scope of work, the role of technology, and the role of having a really great relationship and a really great understanding of your client’s business. Before we finish, I wanted to ask you a question on behalf of our student listeners and our young lawyer listeners. For those of our listeners who are just joining the profession, thinking of joining the profession, have just started their career in the law, and they’re interested in this NewLaw thing, interested in maybe practising in a way that their colleagues who are doing their clerkships right now are not practising. What can they expect from a career in NewLaw? And I guess, what can they expect, not just today, but over a career? What can they expect 10 years into the future? | |
| 00:49:56 | NP: | Look, the legal profession’s been really beneficial to me, and it’s also been very enjoyable as a career. And if I look at how my career eventuated, compared to possibly what I thought it was when I signed up at law school, it’s turned out very different. And it’s changing now at a faster rate than ever before. A couple of observations, I guess. One is, when you’re starting off in your career, be a sponge. Learn as much as you can from people, whether you believe it and agree with it or not. But being able to take on board other people’s experiences and deciding whether that’s for you or not for you, or advice that they might give you, there’s no downside to that at all. And you can, like most things in life, you take away the good bits that resonate with you and you put the other stuff to one side. I’d also say that it’s a rapidly changing technological environment at the moment, and I think young people are far better suited to adapting to that than some sort of slightly older lawyers like myself, staying on top of all of that. And that doesn’t mean becoming an expert, but just understanding what tools are out there, how AI is changing, even practice management systems, which are evolving rapidly, is worthwhile. And then in terms of careers, there’s no replacement for having sound, technical-based legal skills. And you somehow need to acquire those at the outset of your career the best you can, whether that’s via a traditional law firm or by going straight into a corporate where there’s possibly a really helpful mentor in the legal team. Those are both great ways to acquire those skills. I’d suggest if you went into a law firm, you might acquire the technical skills better if you went into an in-house job. you’ll hopefully acquire the commercial, pragmatic business skills I’ve talked about and are slightly faster away. But once you’ve acquired those skills and you’re at the sort of four or five, six PQE level, I think the stigma of changing jobs and being a contract lawyer and being exposed to different industries and different employers is long gone. In fact, to the extent that it’s now beneficial to have had broad industry experience, to have worked for a number of different employers, across our client base, every company we look at, the legal function sits in a different place. from one end of the spectrum, you’ve got the sit on the corner and write the contracts and we’ll tell you when we need you. Or the other end of the spectrum, which is where the general counsel has a seat on the board and is the trusted corporate advisor and you’re involved in everything. And then there’s everything in between. So it’s not only where the legal function stands in that hierarchy, so the broader experience you have as a lawyer across client base, employer base, the better place you are to understand all of these things and to understand business. And I say I think that’s changed to the extent where not only now is that stigma gone, but it’s actually now almost looked at. if you stay too long with a single employer, you stand the risk. And whether that’s a law firm and you’re just in the corporate department, you’re just in the potential of being pigeonholed into a narrower space. And I think everything we’ve talked about today, David, around NewLaw, to me what’s critical to it is an integration of both legal skills and business and commercial skills as well. And what you don’t want to do is become pigeonholed. |
| DT: | Yeah, absolutely. Well, Nat, thank you so much for joining me today on Hearsay. | |
| NP: | Thanks for having me, David. | |
| 00:53:38 | RD: | As always, you’ve been listening to Hearsay the Legal Podcast. I’d like to thank today’s guest, Nat Parbhu, for being a part of it. As you well know, if you’re an Australian legal practitioner, you can claim one Continuing Professional Development point for listening to this episode. Whether an activity entitles you to claim a CPD unit is self-assessed, but we suggest this episode entitles you to claim a practice management and business skills unit. More information on claiming and tracking your points on Hearsay can be found on our website. Hearsay the Legal Podcast is, as always, brought to you by Lext Australia, a legal innovation company that makes the law easier to access and easier to practice, and that includes your CPD. Hearsay is recorded on the lands of the Gadigal People of the Eora nation and we would like to pay our respects to elders past and present. Thanks for listening and see you all on the next episode of Hearsay! |
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