Game Changer

What is the true value of legal services?

That is not an academic or rhetorical question, but rather one whose answer could fundamentally change the way law firms price their services. The reason is that when it comes to pricing, most law firms play the Cost Game: the input to their pricing decisions is primarily the labor cost, reflected in the number of the billable hours.

But billable hours is often a weak proxy for value. The model can lead to misalignments between client interests and the firm’s interests. Furthermore, the number of hours that lawyers spend on a case may also decline significantly as soon as generative AI (GenAI) takes over a range of time-consuming tasks, regardless of how much value those tasks generate.

So how can the legal industry transition from entrenched hourly billing practices to more flexible pricing models that reflect the true value of services provided? The development of any pricing strategy starts with the answers to the questions of how you create and share measurable value, what drives that value, and how differentiated it is.

Then comes the selection of the pricing game that best fits the firm’s market. Could this be the Value Game for some firms and the Power Game for highly specialized firms? Only then does the question of the pricing model come into play.