News & Termine

28.09.2016

Five Lessons Learned in Customer-Facing Legal Tech

After many years of first being non-existent and then going relatively unnoticed, legal tech has newly emerged in Europe as one of the hottest startup categories. This development happened astonishingly in the course of just a few months.

Because legal tech as a category is so young, it is still largely seen as the lump sum of something to do with legal and tech. In reality, the field is extremely wide and varied. It ranges from practice management software to document generation to document analysis to automated case processing to pattern recognition to marketplaces to ecommerce. Most of these areas have very little in common. Their business models, markets, sales channels, and technological requirements are fundamentally different, and so is the experience and skill set required to successfully establish companies in the respective areas. Just like in other, more established, areas of digital business, it is just a matter of time until the initial excitement over the newfound playground subsides and more differentiated views on the opportunities will set in. Personally, I can only report on the customer-facing facets of legal tech. My focus so far has been to make legal services available digitally to the mass market of small to mid-sized companies and private individuals. I have no experience in practice management or the more tech-heavy areas of the field.

Upon closer inspection, the field I am working in is surprisingly similar to other digital businesses in the consumer space, such as e-commerce and marketplaces. Selling legal services through the internet is of course not quite the same as selling pots and pans. There are regulatory hurdles, there are highly particular needs and mindsets on both sides of market, and recognizing as well as leveraging those factors requires rare combinations of skill sets within the team. To complicate matters further, unlike kitchen gadgets, it is still a new online market category in Europe, with no legacy of learnings and best practices. All of these factors are major contributors to the fact that none of the big digital players have ventured there before.

Many learnings however are ubiquitous in any customer-facing legal tech venture I am familiar with. Here are my top 5:

5. Do not listen to lawyers.


Successful online customer experiences are based around three essential principles: Catchiness, brevity, and ease. This is what users have come to expect, and it is the determining factor in whether or not users will become customers. Lawyers think and act in the opposite way. The vast majority of lawyers have a business model based on complexity and lack of transparency. Many also have a personal propensity towards academic discourse, wordiness, and a certain sense of status, which is why they became lawyers in the first place.

So while it is of course crucial to bring legal expertise on board, do not listen to lawyers when it comes to developing your product. You will end up with lots of disclaimers and no customers. Instead, follow digital industry best practices and stick to the advice of the most experienced ecommerce or marketplace optimization professionals you can find.

4. Demand does not equal demand.


There is huge unmet demand for legal services out there in the European market. Studies claim that due to lack of transparency on price and quality, nearly 70% of people and businesses do not currently purchase legal services, even though they need them and are willing to pay for them. This giant market potential of about € 15 billion/year in Germany alone is one of the main reasons for the current surge of interest in this "last digital frontier".

However, demand in the market does not always equal demand online. Keep in mind that this is a centuries old industry heavily laden with preconceptions and deeply ingrained behavior on both ends of the market. People may search for legal topics online, but this does not automatically mean they expect to be able to purchase something online. Unlike in established market categories, people searching the web with an educational mindset will not necessarily switch to a purchasing mindset just because they see your ad or interact with your marketing content. You will need much smarter and more demanding strategies than to simply throw some AdWords and blog articles out there.

3. Legal is emotional.


Seasoned managers - and even more so lawyers - typically see legal tasks as something utilitarian. From their perspective, legal needs are a basic fact of life. Legal stuff comes up and needs to be dealt with. Those tasks are mostly annoying and disruptive, sometimes even interesting for academic or competitive reasons. In any case such tasks are perceived as something that qualified professionals need to work on in order to resolve them adequately, just like any other daily business.

But managers and lawyers are a niche target group. The vast majority of small business operators, entrepreneurs, and private individuals have a completely different take on legal issues. For them, legal is something unusual and unfamiliar. Most importantly, it is almost always associated with fundamental and even existential topics and emotions. For entrepreneurs, forming their legal entity or filing their trademark is not just an administrative act. It is a significant step towards fulfilling their life’s dream. If someone wants their living or last will drafted, it is essentially about facing death and keeping the family covered. If you want those people to become your customers, you will need to adequately mirror those very strong emotional needs in all of your marketing and product communications. Otherwise you will find yourself in a product/market mismatch.

2. Awareness and perception are everything.


This one may seem like an almost painful cliché. Regardless, it is sobering to see how often this is forgotten among both entrepreneurs and investors. As mentioned above, digital legal offerings do not yet enjoy any significant organic demand. If people are not aware of the existence of something, they are not going to search for it on the internet, unless they are of particularly adventurous minds. The only feasible way to deal with this dilemma is to create awareness. Which of course can be a long, rocky, and expensive journey.

To complicate matters, having created awareness for the offerings, they are scrutinized against ingrained expectations and behaviors. In other words, all the analog criteria for selecting a lawyer (such as trustworthiness, respectability, approachability, among many others) will come into play. Keep in mind that demand and product are highly fraught with emotional needs. At the same time, if those conventional criteria are not adequately translated and incorporated into a well performing e-commerce customer journey, your efforts are not going to lead anywhere. In the customer-facing digital business world, everything is based on immediate perceptions and split-second decisions. Only a tiny proportion of potential customers would take the time to really read and research. Balancing those conflicting requirements is a tightrope act, requiring highly skilled and experienced teams. Unlike in a few other digital business fields, being eager and full of good intentions will not be enough if you want to really ramp up.

1. Startup is startup.


Finally and most importantly, there are very well established and widely accessible startup best practices out there. Those best practices are basically the playbook of how to run truly innovative companies, and especially early stage startups. Almost any successful startup religiously works with them. This is not the place for any level of detail on such concepts, so I am just mentioning lean and agile MVP approaches, Scrum or Kanban, and KPI-driven development.

Legal tech startups are not any different from other startups. What worked for them will work for legal tech. And because legal tech startups navigate particularly complex waters, sticking with proven best practices is even more mandatory than it already is for any startup. It provides structure and stability that allows the team to truly focus on mastering the product and the market, as opposed to wasting time on finding and establishing organizational processes that actually work. All of this is already out there, in what must be hundreds of books and blogs, and other people have already made all the mistakes that you shouldn't repeat. So unless you have bottomless sources of funding and want to pursue legal tech entrepreneurship as a hobby, stick very closely with generally accepted startup best practices. Resist the urge of tweaking them because you think that your case is something special.


About the author: Dr. Daniel Biene CEO and co-founder of Legalbase.

Dr. Daniel Biene, legalBase

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