E-Commerce: Let's do it like this

Christopher Stoakes and Julian Boardman Weston, Directors of Sherwood PSF Consulting, highlight a process for identifying, evaluating and implementing e-commerce opportunities.

There comes a point in any innovation when it either takes off or it doesn't. The mobile phone took off in 1998 when the critical mass of users made it a worthwhile purchase for all of us. By contrast Betamax never happened for video and was overtaken by VHS; and for in-car entertainment the 8-track cartridge succumbed to the music cassette. With electronic commerce, there is no longer any doubt. It is here to stay and will be the principal channel to market in the future. Of course, this does not necessarily mean that the whole world will be turned on its head: a nuclear weapon is more effective than a bow and arrow but they both do the same thing. So there is always the risk that, in common with many innovations on the technological escalator, sophistication and expense go up but in practical terms you find yourself no further forward. E-commerce appears to promise more than that, but a healthy scepticism is still in order. This is why for law firms there are really two questions: what is the minimum we need to do to remain in the game (defensive); and - more expansively - how can we harness e-commerce to beat our competition (offensive)?

Your approach to either will be determined by your understanding of e-commerce. At its most basic, e-commerce is Internet-enabled communication. The first generation of e-commerce businesses, such as Amazon.com and lastminute.com, harness the Internet as their channel to market but in other respects are traditional: news footage of Amazon.com in action shows employees physically walking down aisles of books, taking them off shelves by hand and packing them to be posted. Before its recent demise into liquidation, Boo.com established physical offices around the world, notwithstanding its mission to be an e-commerce retailer. Here, e-commerce provides the front-end, but the business's internal processes remain surprisingly traditional. Similarly, a law firm may choose to have a website but otherwise remain unchanged. This would be a defensive move.

However, more ambitious firms may choose to exploit e-commerce to re-engineer some or all of their processes: both in the US and the UK virtual law firms have developed which, but for the net, could not otherwise function; Linklaters & Alliance uses the Internet to compile and deliver Blue Flag. These firms see e-commerce in offensive terms. As e-commerce develops and we all become more comfortable with it, these firms are likely to form the spearhead of the next generation of e-businesses.

Some benefits of successful e-commerce initiatives

low cost of e-delivery compared to shipping documents or travel to meetings (cost reduction no 1 - delivery and travel costs)

destruction of the old rule 'the further you are from us, the more it will cost to do the job'

widening of a law firm's market - in the e-world someone can buy e-deliverable services just as easily from Llandudno or Larnaca as they can from London EC

consequential competitiveness of law firms located in cheaper places (cost reduction no 2 - overheads)

speed of response

image: 'On the Internet no-one knows your (lack of) size or (in)significance' - the impressive e-shopfront is quicker and easier to create than a real one.

Step 1: what sort of e-commerce are you looking for?

It helps to establish a framework within which to slot different e-commerce applications. Take the basic two-by-two matrix set out in Figure 1 .

Figure 1

The four possibilities are:

e-easy - where part of a service is enabled by e-commerce, for instance bill payment or document delivery
e-redesigned - where the whole of a service is e-commerce enabled, for instance residential conveyancing or will production: here, all communication with the client (and other parties) is via the Internet
e-maginative - here, by way of example, a shipping practice provides, as part of its maritime casualty service, a Q&A facility that guides the client through the initial steps of disaster recovery
e-radical - here the service is entirely new and could not otherwise be developed or delivered without e-commerce; an example is Blue Flag, which is compiled and delivered over the Internet and provides hypertext links to show the underlying regulatory sources, including the firm's own legal opinions; it would be almost impossible to replicate this in hard copy alone.

The above progression - from e-easy through e-redesigned and e-maginative to e-radical - is in practice the way most firms will proceed. This allows a firm to explore the impact and benefits of e-commerce as applied to part, and then the whole, of an existing service; then to explore how e-commerce can be deployed to add a new aspect to an existing service; and, finally, to use e-commerce to develop and deliver an entirely new service. The first two are defensive; the latter two offensive.

Step 2: All or part of the service?

You need to identify existing services that lend themselves to being e-commerce enabled. How do you do this? You can apply two methodologies that may help.

The first, devised by David Maister, is called the 3 Es (Managing The Professional Service Firm, Free Press, 1993, p21). Essentially he says that all legal services are subject to attrition. They may start out as Expert, requiring a high level of expertise for which one can command premium fees but which it is difficult to leverage with large numbers of assistants or paralegals (e.g. tax). Over time they become Experience practices, requiring lawyers with a track record in the field but without being cutting-edge areas of specialisation, and which one can leverage with a greater ratio of assistants or paralegals to partners (e.g. private company acquisition and disposal). Eventually they become Efficiency practices, where legal expertise is low and leverage can be great (e.g. debt collection; residential conveyancing; defendant insurance personal injury). The point is that the more an area of practice in your firm falls at the Efficiency end of the spectrum, the more automated some of the component processes can be and the more scope there is for introducing e-commerce.

The second is value chain analysis. Here you take a service and break it down to pinpoint where in the process value (as perceived by the client) is added. These points are likely to reflect your competitive advantage in providing that service. To quote Stephen Mayson, - The value activities are the building blocks by which a firm creates a service that is valuable to its clients (Making Sense Of Law Firms, Blackstone Press, 1997, p76). Those parts of a service that are generic or commodity may lend themselves to being e-commerce enabled. Equally, if part of the value provided by your firm lies in its excellent client communications, e-commerce may enable you to add a further channel of communication so further increasing the value of that component of the service.

Figure 2 is an example of a synthesis of the 3 Es and value chain analysis applied to an imaginary service of acting for vendors of medium-sized unquoted businesses.

Figure 2

Figure 3 applies the 3 Es and value chain analysis to tax planning for a super-wealthy rock star with complex affairs.

Figure 3

Step 3: Identifying new services for e-commerce

So far we have been discussing e-commerce in defensive terms. Once you are comfortable with the approaches discussed so far, try harnessing them to create new, offensive e-commerce enabled services. Bear in mind that this is hard. The three necessary ingredients are:

a service offering
know-how
market/clients

You need all three. Be reassured this is just the same in the case of e-commerce as it is for identifying and introducing traditional legal services. You can get ideas for a new service offering from:

clients - are they asking for a particular service?
competitors and others - do some thorough research into what other firms are doing. Don't confine yourselves to your traditional competitors. Look, for instance, at bigger and smaller firms, foreign firms, non-law service businesses such as estate agencies, software suppliers and so on. You may not be able simply to copy - it may need some imagination to adapt.

You may know that Blue Flag was developed to enable Linklaters & Alliance to deal with routine questions posed by investment banks that were nevertheless time-consuming to research and answer and for which Linklaters could not recover the full cost. By developing an interactive database of securities regulation (which is updated and delivered over the Internet) the firm was able to turn this into a service that generated revenue and increased client satisfaction. Linklaters & Alliance has since gone on, not only to roll out the Blue Flag principle to other areas of practice, but - through Blue Flag Confirms - to develop a technology-based product that automates part of a bank's back office. In other words, Blue Flag has led Linklaters into areas a law firm would not have previously even considered lay within its business boundaries. You, too, can do the same.

Step 4: Planning and implementation

There is such a variety of services or parts of services which can be e-ed that it is impossible to give specific advice about each of them here. In our experience it is nearly always necessary to set up a multi-disciplinary team if a firm is trying to achieve something significant in an area involving changes to service delivery - and e-commerce is no exception. A typical team will include the partner sponsor, the IT director, the project manager someone from the marketing department and, if it is a client-facing service which is being changed, one or more front-line lawyers and support staff. Firms should be exceedingly wary about bringing in consultants to handle the whole job, however experienced they seem to be. It is your firm and you will have to live with what happens. Washing hands of responsibility for a vital service to outsiders such as contractors or consultants is never a good idea although there may be a place to co-opt one or more outside specialists to the team.

Of course, talk is cheap. It's implementation - turning ideas into action - that makes the difference. How to implement depends on which part of which service you are addressing and what you are going to do to it. We suggest:

identify how to e it
analyse the e-ing to be done in one of two ways: on a service by service basis or by taking a 'horizontal cut' (that is, identify an activity which is common to many services which can be e-ed in a similar way for all of them e.g. all bill payments)
appointing/identifying a partner level sponsor - one sponsor per service
appointing someone to project manage the e-ing
following normal project management procedures to plan and carry out the implementation

A note on types of technology

E-commerce was possible before the age of the world-wide web but it was more expensive and complicated.

Data communications were harder to set up and more expensive to use. Often they required a dedicated dial-up or leased line. Usually cost increased with distance.

Normally the 'buyer' needed to have dedicated software, which meant setting up, and training costs and payment of licence fees - multiplied by the number of online services which were being used.

There was no popular common standard for data interchange.

All this meant that only major business justified all the trouble and expense. Many law firms used electronic banking, which needed all those expensive features. Firms justified it on the basis of the high value of money being moved around.

For a law firm to make best of e-commerce it needs to overcome these disadvantages. Do it like this:

use the Internet - web or email - because data transfer is cheap
use normal web technology so that the other party can use a web-browser rather than special software
use Internet standards as they are so commonly used and understood
depending on the volume and type of business you may be able to use web-hosted services - that is, run the web-site and all the software using external web services and computers rather than creating a link into your computer in your own basement - or you may need to allow web access to your internal systems - e.g. web access to your case management systems.
in all cases, information security is an important issue - for client confidentiality, avoidance of fraud and to ensure non-interference with documents and transactions.

Christopher Stoakes and Julian Boardman Weston are both former partners in law firms. They are faculty members of the Centre for Law Firm Management at Nottingham Law School and Directors of Sherwood PSF Consulting. Chris specialises in strategy, marketing - and other - communications and facilitation and Julian in IT and knowledge management.
They can be reached at: tel: 0800 783 0467
e: mailto:julian@sherwoodpsfconsulting.com