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What can Ford teach lawyers?

by Larry Bridgesmith JD, CEO of Legal Alignment

What a legacy!

A century ago, Henry Ford ignited the kindling of an economic firestorm by introducing the assembly line to manufacturing.

Many years later when other US auto manufacturers were looking to the taxpayers to bail them out of their economic failure, Ford hunkered down and innovated its way out of potential bankruptcy.

The company chose a leader in Alan Mulally from another industry (aerospace) who was not inbred by the automotive industry to see with only a limited perspective how to navigate the shoals of economic distress.

Innovation from within an established industry and a highly institutionalized company is one of the most difficult business challenges. Clayton Christensen terms it the Innovators Dilemma. Very few businesses or economic entities are able to innovate disruptively because the inertia of the status quo and vested interests are virtually impossible to dislodge with creative innovation.

Perhaps Ford is doing it again.

Ford has recognized that the sharing and collaborative economy may make automobile ownership less likely in the future than it has been in the past. Following the lead of car sharing programs like Zipcar, Ford is implementinga car sharing program in six US cities and London this year. In announcing the program last week, Mark Fields (Mulally's successor) stated:

ext here.

People value access more than ownership.

We need to understand customers' concerns and make their lives easier.

Access more than ownership?!? That's heresy coming out of Detroit.

Wait, there's more! Bill Ford (Henry's great grandson) at the same session held in Palo Alto (rather than Detroit) added:

If we all collectively did nothing and we stayed with the current business model,

we could just end up being assemblers of other people’s stuff with a very low-margin,

high fixed-cost business. The company that figures out how to navigate this

could really actually end up raising margins and changing the business model

in a way that will be very healthy.

Is that the sound of grave spinning as Henry questions his progeny's sanity? No! Henry would not be more proud of his great-grandson who came up with a disruptive innovation in a similar fashion to his great-grandfather.

The reality is that autos owned by private individuals sit motionless 93% of the time they are owned . . . and being paid for with rapidly depreciating value. Would auto owners choose to share their vehicles and recover revenue when they are using their autos only 7% of the time? Ford thinks so. So does Audi, Mercedes and Toyota who already have implemented their own car sharing programs.

However, Uber and Airbnb have illustrated the exponential value of access over ownership. Both of these "Exponential Organizations" skyrocketed to multi-billion dollar valuations in industry sectors known for high overhead property ownership and slim profit margins. Uber serves millions of on demand riders daily around the globe without owning, maintaining or storing the taxicabs. Rather, Uber drivers have replaced taxicabs with vehicles of their own choice generating revenue instead of sitting idle. Airbnb serves millions of temporary lodgers each day without owning bedrooms, suites and vacation homes at a level of occupancy greater than Hilton Hotels and far more profitably.

 This sharing economy only applies to consumer goods like cars and hotel rooms, right?

Lawyers have been acutely aware of the "rent a lawyer" phenomenon known as Legal Process Outsourcing (LPO's) for more than a decade. Between bringing legal services inside their legal departments and using LPO's to outsource legal work in litigation, transactions and every other legal practice area, corporations are effectively shrinking the pool of available legal work being done by outside law firms, and at one half to one tenth the cost of outside lawyers' hourly rates.

Consumers have already found workarounds from the expense, inconvenience and loss of control over their matters when they hire lawyers to solve their problems. LegalZoom and RocketLawyerare the "lawyers of choice" for millions of individuals and businesses who can draft leases, start their LLC or create estates for themselves and their families and never pay a lawyer. As an Alternative Business Structure (ABS), LegalZoom now services lawyers in the UK at a fixed fee to help them provide legal support "better, faster and cheaper" than the lawyers could provide for their clients by themselves.

All of these economic developments impact the legal service industry as much as they do cab rides, temporary lodging and car sharing.

Mark Cohen authored an article in Bloomberg BNA this past week which connected these dots in Lawyers, Cabbies and Uber.

The sharing and collaborative economy disfavors ownership for on demand services and products in exchange for "better, faster and cheaper". Technologies are the common enabler in these disruptive industry innovations. Where processes are involved, technology does it better, faster and cheaper than humans can.

This is not a threat to lawyers. Technology support allows lawyers to practice more law and waste less time managing processes. E-discovery and legal project management are examples of legally related processes that can be more efficiently managed with supporting technology than with human endeavor . . . and more profitably.

As it was a century ago, Ford may be again teaching the world (including lawyers) what the future of economic success looks like.

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