Disruptive innovation: the Christensen thesis hits law schools and legal services

A guest post by Professor Roger Smith, who blogs on the use of technology to advance access to justice

Smith: Technology is transforming the practice of law not abolishing it

A report from the Christensen Institute for Disruptive Innovation (by Michele Pistone and Micheal Horn) warns that law schools in the US are “in crisis” and doomed unless they must respond positively to the “disruption of the traditional model for the provision of legal services”.

This applies ideas derived from the work of Professor Clayton Christensen about disruptive innovation – understandably popular in technology circles – to the legal education sector.

The report relishes the coming of Armageddon by a sector whose financial viability it says will soon be choked off by the transformation of the legal market. Regulation may prop up the status quo for some time but, ultimately, there will be a day of reckoning: “If existing schools and legal educators do not heed the lessons from disruptive innovations… then others will.”

How does this thesis stack up from the other side of the Atlantic?

Understanding the context

The institute has a distinct position from which it bases its research. In its own words, “it is a non-profit, non-partisan think tank dedicated to improving the world through disruptive innovation. Founded on the theories of Harvard professor Clayton Christensen, the institute offers a unique framework for understanding many of society’s most pressing issues around education, healthcare, and economic prosperity”.

Professor Christensen is well known for his promotion of the idea of disruptive innovation: “The theory of disruptive innovation explains why it is so difficult for organisations to sustain success over time. In business, companies tend to innovate faster than their customers’ needs evolve. They do so because introducing improvements to what they offer—what we call sustaining innovations—is what has historically helped them succeed.

“By launching more sophisticated products, they can charge higher prices to their most demanding customers and thereby achieve greater profitability. As a result, most companies tend to overshoot the performance needs of their customers by introducing services that are too expensive, sophisticated, or complicated and, at the same time, unwittingly open the door to disruptive innovations at the bottom of the market.

“A disruptive innovation gains traction by initially offering simple, more affordable, or more convenient products or services to non-consumers—people for whom the alternative is nothing.”

Sitting comfortably?

The standard example is Kodak, once the market leader in the photo market, that missed the opportunities of digital developments and went bust. The report uses another example – Borders, which initially thought it could use Amazon to supplement its shop sales, and lost out big time.

For a Brit, this is a particularly intriguing example because at the present time the nearest UK equivalent, Waterstones, is having considerable success exactly as “an icon of the ‘comfy chair revolution’—prioritising the in-person experience”, for which the report pillories Borders.

This hints at some of the controversy behind Professor Christensen’s fluently expressed ideas and for which he was rather entertainingly taken to task in a whack job by historian Jill Lepore in an article in the New Yorker entitled ‘The Disruption Machine: what the gospel of innovation gets wrong’.

She took apart some of the professor’s examples of his thesis, claiming they were selective, handpicked case studies – “a notoriously weak foundation on which to build a theory”. She particularly challenged the idea that “the theory of disruption is meant to be predictive”.

She concluded: “Disruptive innovation is a theory about why businesses fail. It’s not more than that. It doesn’t explain change. It’s not a law of nature. It’s an artifact of history, an idea, forged in time; it’s the manufacture of a moment of upsetting and edgy uncertainty. Transfixed by change, it’s blind to continuity. It makes a very poor prophet.”

Impact of disruption

It helps to have some of this background in mind when considering this report. Its analysis of the market disruption of the legal services industry is surely correct.

It says: “Disruptions are bringing about at least three significant changes in the market for legal services. First, they are directly attacking the necessity for expensive customised solutions and bringing more standardised, systematised, and, in some instances, commoditised offerings to the market.

“Second, technological innovations are allowing lawyers within traditional law offices to boost their productivity, thereby making it possible to perform the same amount of work with fewer lawyers—an efficiency innovation for law firms. These technological developments are pressuring lawyers throughout the spectrum for legal services: from low-end solo practitioners to big law firms.

“And, finally, the same technological developments are also breaking down the traditional rationale—the protection of the public—for granting lawyers a monopoly on the practice of law.”

The report correctly identifies the potential impact of artificial intelligence and machine learning, and that this will be “most pronounced in the demand for entry-level lawyers”.

This, in turn, will, of course, impact on the legal education market. For those concerned with theory, it is not entirely clear that this is the effect of disruptive innovation. It is certainly the consequence of technological innovation but surely its deployment is not from new upstarts but from the old providers who are leading the charge. There is no major commercial firm in London that does not have an AI tie-up of some kind.

Whatever dispute on the theory, the practical effects cannot really be in dispute. Change is lessening the ‘attractiveness’ of a legal qualification and law schools need to respond. The report notes that US law school applications are down 40% since 2005 and, worse, the attraction of the qualification for the best-qualified graduates is also slipping.

Law schools are scrambling to catch up but there is a major need to respond by moving much more teaching online to using competencies, learning outcomes and assessments in a modern educational away and to shift to modularisation as a way of building up new courses with greater flexibility.

Key in all this will be the American Bar Association, which as regulator controls the market. The report notes its halting accepting of forms of limited practice qualification and suggests that this may be one element of a more diverse way forward.

Transformation, not abolition

The broad brush of this approach must surely be right but the detail invites some thought. A particular problem in England and Wales is the high cost of qualification through a mandatory one-year legal practice course (LPC) plus control by the profession of the number of training places.

The regulatory response by the Solicitors Regulation Authority (SRA) has been to develop ideas, now being refined, for the replacement of the LPC by an old-style profession-wide ‘sudden death’ examination without specific educational requirements. That really would disrupt the current market for legal training and education.

Interestingly, it would not actually have much effect on the major law schools in England and Wales, which have historically turned up their noses at professional training and never went down the clinical road that has so dominated in the US.

The professional legal training market is largely located in universities which are, with one or two exceptions, not among the core ‘Russell Group’ traditional providers of basic law degrees.

An increasingly large share is taken by two providers – the University of Law and BPP Law School – which are not traditional universities at all. This emphasises a point that is relevant to the Christensen report. The impact of technological innovation of law schools both at undergraduate level and professional training may have three elements:

First, overall numbers on the professional courses may drop off as a result of regulatory change and career perception.

Second, this effect may dent the economic viability of some existing professional training providers, who would be well advised to look to technology to open up flexibility and lower cost. The report is right to emphasise the opportunities and, domestically, the SRA proposals may well bring in innovators.

Third, the top-regarded law departments (both at academic and professional levels) may well survive completely unscathed.

Technology is transforming the practice of law not abolishing it. Complex commercial transactions and complicated issues of public law will always need high-quality, well-trained lawyers. We may just not need so many overall.

But the big commercial firms will still want well-qualified entrants, albeit maybe in smaller numbers. Indeed, this is a problem for the SRA’s plans because employers may regard its qualification as less important than other education and training – offering a false hope of wider access to the legal profession.

Innovation is definitely disruptive but its effects may be more complex than simply the failing of existing institutions. Professor Lepore may be onto something.

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