Your recent book “The Disruption Dilemma” examines how disruption can destroy even the best managed corporations. The case studies in your book – the mobile phone industry disrupted by Apple, Blockbuster’s store-based video business disrupted Netflix – show that disruption is not a single phenomenon, and that there’s no single strategy for dealing with it. The case studies involving Fujifilm and Canon show that not all firms need to end up like Blockbuster. The main challenge, however, is that a disruptive product may initially be of inferior quality to existing products, making it difficult for an established firm to offer the disruptive product to its customers. This leads to a dilemma for incumbent firms, and to opportunities for outsiders.
Q: Are law firms threatened by disruption?
A: Law firms should recall the mobile phone industry. Incumbent cellphone-manufacturing firms were structured around the various components in the cell phone: antennas, screens, processors, compression technology, etc. They innovated, and excelled in each of the individual components. But Apple’s iPhone introduced a major change in architecture. Initially, the components in the iPhone weren’t as good as those of the incumbent phone makers. But the change in architecture led to a shift, a disruption from the demand side, which ultimately led to the demise of several major cellphone companies. Law firms should pay attention to this. A law firm’s “components” might be its various silos of legal specialties: IP law, M&A, competition law, litigation. Most law firms focus on excelling in their respective silos. The “architecture” may be how the legal services are knitted together for clients. I haven’t studied the legal business in detail, but one conclusion I could make is that firms with the best “components” do not always win out when there is a shift in architecture.
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