Business Lessons for Lawyers:Unbundling in Other Industries
This is an except including a checklist from my book Limited Scope Legal Services: Unbundling and the Self-Help Client, ABA LPM (2012):
The economy does not exist in a bubble and neither should legal professionals. There are lessons to be learned from looking at ways that
other industries have unbundled their services to create new or improved markets that adapted to changes in the global economy and the way
consumers exercise their purchasing power.
The Music Industry
More than a few people in the music industry initially questioned the unbundling of music. Traditionally, a music producer would bundle a musician’s less popular recordings with the one or two singles that were commercially popular and charge a higher fee for the entire catalog of records on a CD. When iTunes presented the concept of allowing the consumer to pick and choose whichever songs he or she wanted from the hits and the not-so-popular songs, it revolutionized the way that music is purchased.
Critics had to admit that it did not culminate in the downfall of the music industry or result in decreased sales. Instead, unbundling songs at a lower cost per purchase allowed the consumer to learn about the artists and their music offerings without making a large up-front investment in an entire album. If consumers liked the services, they would come back for the rest of the album, and the full album could always be downloaded from the iTunes store for the customers that wanted the entire recording.
Remember the days when you purchased an airline ticket and the costincluded more than just a seat on the plane? The airlines began unbundling their services around 2010. Customers who want to have their bags checked or prefer choice seating must pay extra fees. Travel insurance is another add-on. Charging only the base fee for the seat and then selling add-ons has resulted in increased profits for the airlines. While many customers see this form of unbundling as not actually resulting in lower costs but tacking on additional fees, others, including the airlines, see it as a way for customers to not have to pay for something they do not need.
Newspapers are part of another industry in which the Internet has changed the way that its product is purchased and consumed. A newspaper or other publication is a bundled product. Most consumers do not read through an entire newspaper but pick and choose the articles that interest them. Rather than read through a printed magazine produced by a single publisher and inevitably containing a number articles and advertisements that may not be of interest to the purchaser, readers may now turn to multiple blogs and subscribe to those with articles that meet their more narrow interests. This more narrow focus through unbundling also works to the benefit of advertisers who now have a better chance of spreading their message to a more tailored audience.
Until the growth of online media, the reader paid a single price for the entire bundled product even if half of it went unread. Now, the consumer is able to pick and choose the articles that are read and pay a price for access to the entire publication’s site as a subscriber or purchase single copies of an article or even access articles in an archive for individual purchase. The Internet has provided more choices to the consumer about where he or she receives the news. To keep its readers from getting their news from the growing number of free suppliers of media, such as news sites and blogs written by journalists, the newspapers have unbundled their services in order to survive.
Wireless and Internet providers are notorious for pushing their bundled packages as part of a marketing strategy to offer a variety
of choice and payment plans to their customers. These packages of bundled services are broken down for the consumers as separate prices if they
choose to purchase one or two services or all together for supposedly less expensive monthly costs. The different unbundled and bundled services
advertised as a la carte services of the company’s primary product, their mobile devices and hardware add-ons, allows them to compete with
each other on price and services. The concept of bundling packages gives them the opportunity to sell additional services that the consumer
might not have known about or planned on obtaining when shopping for a cell phone.
Lessons from Intuit and the Unbundling of Small Business and Personal Finance Services
The story of Intuit and its ingenious methods of unbundling serve as an excellent example for the legal industry. Intuit’s Quicken software, used by its customers for personal finance, became a huge success for the company. Building on the brand that it established from selling its Quicken product, Intuit was able to lead existing customers to its website where it provides links to its other products and services that the customers using its financial software might be interested in, such as financial consulting investing, mortgages, banking, credit cards, as well as access to online broker and other educational content from Intuit. Intuit for small business has created a website that provides everything a small business might need and all in an unbundled format so that it provides visitors to the sit with a variety of options and prices. Law firms may not be permitted to collect cookies and other user information from the visitors to its website for the purposes of identifying and targeting future needs. However, the Introduction lawyer may predict prospective client’s interests based on website analytics and design the site content to appeal to these areas and to provide unbundled services that fill a variety of legal needs that clients may have.
It is important to note that with the Intuit example comes the possibility that Intuit or other companies taking this unbundling approach to small business may easily become the next nonlawyer legal service provider adding legal documents and services to its list of unbundled products. For more discussion about the “branded network concept” of marketing legal services, see Chapter Eight in the book. Studying the techniques and strategies of an unbundling company such as Intuit is simply keeping an eye on an emerging business competitor.
[Note: “The value chains of scores of other industries will become ripe for unbundling. The logic is most compelling—and therefore likely to strike soonest—in information businesses where the cost of physical distribution is high: newspapers, ticket sales, insurance, financial information scientific publishing, software, and of course encyclopedias. But in any business whose physica value chain has been compromised for the sake of delivering
information, there is an opportunity to unbundle the two, creating a separate information business and allowing (or compelling) the physical one to be streamlined. All it will take to deconstruct a business is a competitor that focuses on the vulnerable sliver of information in its value chain.” from “Strategy and the New Economics of Information” by Evans, Philip B. and Wurster, Thomas S., Harvard Business Review (September 1997).]
Thinking About Restructuring Your Business to Unbundle?
A successful lawyer knows that the legal profession may play by its own set of rules and regulations, but it is not sitting in an isolated bubble. From time to time, it is good to take a multidisciplinary approach to reevaluating the strengths and weaknesses of a law practice by thinking more like a business owner than a trained lawyer. Answers to the basic questions that follow will differ for every law firm depending on the stage it is at now and its willingness to think outside of the box about how the firm delivers legal services, how it defines the practice of law, and how it operates its business to be competitive and to maximize profitability.
1. What is the true value of the legal services that the firm provides to clients? In the services offered, the value to the customer is _______________.
2. What current compromises does the firm make between the quality of legal services delivered and the firm’s ability to provide good customer service and affordable legal fees? Are there situations where the firm could increase customer service and improve communication and affordability without having to compromise on the quality of the legal services delivered?
3. What processes does the firm conduct with the client that could be unbundled? Consider more than just the standard handling of legal cases for clients and think about a holistic approach to the business, such as evaluating other client support or services the firm could provide that would make the client’s experience more positive.
4. In any of these processes of interacting with the client, are there ways that the operations involving information and tangible data might be streamlined either through using technology or re-creating new systems of organization and delivery?
5. To facilitate this, are there any new roles that may need to be created within the law firm? How might the firm fill that position or gain the necessary skills, or could part of the process be outsourced?
6. Would any of these new areas of focus in the business become liabilities instead of assets, and how would the firm prepare for that possibility and balance the risk?
To read more: Limited Scope Legal Services: Unbundling and the Self-Help Client, ABA LPM (2012):