The legal profession is being disrupted by new players and technology, but law firm Gilbert + Tobin has taken a creative approach to the challenge. Its COO, Sam Nickless, is future-proofing the group by embracing disruption and turning it to the firm’s advantage.
By Michelle Lindsay
In recent years, Australia’s prestigious law firms have been left reeling as cost-conscious clients and intensifying competition erode their margins and market dominance.
The surge of digital change that has swept through other professions in recent years is now being felt in the hallowed halls of the legal profession, where success is measured in billable hours, a corner office, and a fast-track to partnership.
Low-cost outsourcers are making inroads into the high-volume work that once generated a reliable cash stream for many legal firms. Meanwhile, a new generation of high-tech disruptors has found new ways to service clients faster and at lower cost. Looking ahead, technology including artificial intelligence (AI) and self-executing blockchain “smart contracts” could see work that previously needed a trained lawyer completed without any human intervention.
Some established legal firms are responding creatively, turning these new and evolving threats into opportunities. Among them is Gilbert + Tobin (G+T).
Understanding the threat to the legal profession
Sam Nickless joined G+T as chief operating officer in 2015. His mission? To future-proof the company by tackling disruption head on.
“One of my first tasks was to do a strategic review of the legal industry – what was going on and what the challenges and opportunities were. There was a clear sense that new business models and ways of doing things would cause significant disruption for the industry,” says Nickless.
He saw that the so-called NewLaw disruptors, including a local start-up called LegalVision, were focused on lower-value, higher-volume transactional activities, that could be done faster and cheaper by applying standard processes and digital automation. This included tasks such as preparing wills, reviewing loan documents, or even conducting first-round reviews of documents in a due diligence exercise.
“This type of work has probably traditionally been seen by most law firms as a low-value area, but LegalVision was offering a lower cost solution than other providers, with better service, and a better marketing machine behind it,” he explains.
Nickless acknowledges this type of transactional work fell outside G+T’s main focus, with the firm inclined to seek out more complex work.
“The expertise at G+T is well suited to transactions or events in the life of a business that are more one-off and require a bespoke solution to be developed – such as a major acquisition or divestment, or a dispute or a regulatory issue that arises,” he says.
“These can be high value because there is a lot of money at stake; but even with smaller dollar amounts, it might require a solution or a structure or an answer to a tricky legal question that hasn’t been seen before.”
However, it was clear to Nickless these new groups were laying groundwork that could see them lay claim to a greater scope of work in the future.
“Like any industry, we believed that disruption would tend to move up the market from the lower value types of work – then up towards the higher value, where the bulk of our business lay.
“This could see a new type of provider becoming very competent at the lower value work, but then developing the capability to say to their clients – ‘Why don’t you give us a go at something a bit more complex?’ Perhaps doing simple document review could turn into running the A$5 million bolt-on acquisition.”
Coming the full career circle
Nickless studied economics and law at the University of Adelaide, before winning a Rhodes Scholarship and completing a Bachelor of Civil Law degree at the University of Oxford.
Despite his strong background in the law, Nickless chose a different route, taking a position as a consultant at McKinsey & Company and kicking off a career in strategy and innovation.
“I left the path of being a lawyer early on to go to McKinsey, and ended up spending about 10 years there. I might have thought – ‘I’ll do this for a couple of years and then I can go back to the law’ – but that didn’t really happen. Instead, I stayed at McKinsey and went down a commercial path.”
He next moved to an in-house strategy role at National Australia Bank (NAB), in the cards and personal loans areas, before becoming business transformation director at Aristocrat, as it developed online gaming and lotteries technology. However, his first real experience of disruption in a sector came while he was running a turnaround program for property group GPT.
“For a business with large retail and office investments, we were looking at what the emergence of online shopping and distribution would mean for retailers in a mall business. Similarly, in our office buildings, where companies are embracing different working styles – being more flexible and using less space – that creates some changes to the way in which tenants want to buy office space.”
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The role provided a good grounding in the effects of disruption on a stable and mature industry – and how to respond.
“The thinking was: the pattern’s changing, so we need to look at what that means for our investment structure and the sort of offerings we have to have.”
When Nickless was contacted by a recruiter about the role at G+T, returning to the law was not high on his agenda.
“My initial reaction was – ‘No, that sounds boring!’,” Nickless confesses. “To his credit, [the recruiter] said, ‘Just come and have a chat. This firm is different – I promise it won’t be boring.’”
After meeting G+T’s managing partner, Danny Gilbert, Nickless quickly changed his mind.
“Danny painted a vision for wanting to do things differently from a normal law firm that was compelling. I realised it was a lot more interesting than I expected in terms of the disruption that was occurring, the challenges that the industry was facing, and some of the opportunities particularly around technology and new business models.
“I guess it was an interesting thing to come full circle, to have started out on a legal career, have left it, and then 20 years later come back to it.”
An innovative solution to legal industry disruption
Tasked with protecting G+T from current and future disruption, Nickless wanted to find a way to minimise the impact while also gaining exposure to the low-value but high-growth activities being exploited by new players with new business models.
“In this environment, we took the theory that you’d want a strategy that gives you some exposure to this higher-growth market – as well as the ability to learn from that disruption as it comes into our part of the market.”
There were a number of potential responses: changing G+T’s business model, retreating into a specialist niche, developing new online platforms to automate simple activities, outsourcing – and potentially taking advantage of lower labour costs overseas – or partnering with a disruptor.
“We went through the process of deciding whether we would want to launch our own version. However, it became clear that just trying to get the incentives right to motivate people and create the right culture would be very hard when co-existing with a more traditional legal model.”
Instead, Nickless proposed an alternative approach: buying a 20 per cent stake in LegalVision for about A$4 million.
Nickless saw that despite having a business model that more closely resembled a software start-up, LegalVision’s main aim was like any other law firm’s – to provide quality legal advice to clients and help them execute transactions. The main appeal was the company’s success in providing cost-effective legal support to the under-serviced small-to-medium enterprise market.
“We saw they were getting very strong growth, growing the market at around 5 or 6 per cent a month – compared to kind of a traditional law firm market, which was relatively flat in terms of demand.”
While LegalVision wasn’t the only business G+T looked at, Nickless says it was the only one they felt comfortable partnering with.
“Looking at other start-up businesses in the market, none of them had anywhere near the same momentum. A couple of them were marketplace businesses that weren’t actually law firms; they just attracted customers in and then would refer them out to independent practitioners,” he says.
“We felt that there was no quality control on that, whereas LegalVision is a law firm and owns their customer experience end to end, from the first phone call or web visit through to getting the advice.”
Nickless spent time with LegalVision, getting to know how they worked.
“We were very impressed by their commitment to client service. And while they were very much focused on the low-cost, highly productive end of the market, there was also a real commitment there to legal quality. They had some good lawyers in there.”
As a final check, during the due diligence phase, Nickless arranged for mystery shoppers to test the service, and was happy with the results.
“We asked some of our top lawyers to look at it and get a sense of, ‘What do you think of this work?’. LegalVision passed that test, and then we got our partners excited about the idea of… having a stake in them.”
Working with the disruptor
Partnering with LegalVision has given G+T access to a market that previously it could not have serviced in an economical way, says Nickless.
“A big part of LegalVision’s business is delivering quality at an efficient price for small-to-medium businesses on the type of issues they deal with the most, such as starting up their business, contracting with others, securing premises, protecting their name and selling when that time comes.
“Increasingly, LegalVision is also taking on some of the high-volume work from enterprises that may have been previously done in-house, such as lease reviews or dealing with common regulatory queries.”
The partnership also allows G+T the scope to provide these lower-value services more cost-effectively to its existing clients.
“We have been able to expand some of the client relationships that we have,” Nickless explains. “For example, talking to them about solving parts of their in-house legal team’s problems that normally we wouldn’t be brought into because of our cost structure.
“With some specific clients, we have actually crafted solutions that combine G+T and LegalVision to deliver a solution that we wouldn’t have been able to come up with before – and that is in the best interests of the client.
“Sometimes that might mean G+T is taking a smaller share of that work because we’re sharing some of that with LegalVision. If we tried to hold it all to ourselves it would be uneconomic and the client wouldn’t have a solution.”
An uncertain future for the legal profession
Despite the level of change already facing the legal profession, Nickless believes the disruptive forces have only just begun.
“I think we’re at the early part. I think other industries have been hit and had disruptive forces for a lot longer than the legal industry has.
“Until a few years ago, there were lots of discussions out there in the press and the legal conference circuit, and the tone was all about: ‘Well, will this happen to law? It’s happening elsewhere, will this actually happen to law or are we different?’ And quite a few people were making the argument that, no, a top-tier law firm is quite different, and it won’t happen to us.
“I don’t think anyone’s making those arguments anymore. I think it’s kind of clear that the same forces will apply, but I think it’s quite early days. I think it’s only just getting started.”
Who are your favourite business thinkers?
Malcolm Gladwell, author of Blink and The Tipping Point
“I really like reading Malcolm Gladwell’s stuff. He has a very engaging way of putting together sociology and psychology with business.”
Michael Lewis, author of Moneyball
“I found Michael Lewis’s book Moneyball – about the use of data and facts in decision-making, told in the context of sport – was a real eye-opener.”
Clayton Christensen, professor at Harvard Business School and expert on disruptive innovation
“Clayton Christensen’s work on disruption and the dilemma for innovators continues to be incredibly relevant across many industries.”
Richard Susskind, author of Tomorrow’s Lawyers
“In the legal context, I follow closely what Professor Richard Susskind has to say – the legal industry is now just catching up with the predictions he made 20 years ago.”
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