Lessons From the Rise of LegalZoom
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Yesterday I applied Clayton Christensen’s theory of disruptive innovation to Big Law. Basically, disruptive innovations start by eating up the low end of the market first, so high margin providers ignore the competition until it is too late. High margin providers are also often in a bad position to compete at the low end — lowering prices would cannibalize profitable business and they may lack the expertise to use the disruptive process.
LegalZoom and Rocket Lawyer are two examples of this phenomenon in the consumer market for legal services. LegalZoom started in 2001 and slowly built up name recognition, consumer confidence, and eventually revenues and profits, all with little initial resistance from bar associations or lawyers. Why? Because at first LegalZoom was not really competing with private lawyers. LegalZoom is the classic Christensen disruptive technology — it started by servicing the lowest margin part of the market and has gradually inched its way up.
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