Disruptive Innovation in Legal Services

Volume 1 • Issue 2 • January 2015
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Axiom: An Innovator’s Journey

The rise of a groundbreaking legal staffing firm, from inception to profitability

How does an innovator gain footing in the change-resistant terrain of legal services? In the case study “Axiom: Getting Down to Business,” Harvard Law School professors Ashish Nanda and David B. Wilkins and Executive Director of the Case Development Initiative Lisa Rohrer present the climb of the groundbreaking legal staffing firm Axiom from inception to profitability.

Axiom founder Mark Harris, a University of Texas School of Law graduate, conceived of the idea of a legal services company with low overhead and a flat, partner-less structure while working as an associate at white-shoe firm Davis, Polk & Wardwell. With the help of Alec Guettel, a Stanford Business School graduate, Harris founded Axiom in 1999.

The early days were marked by ups and downs: months of work on a business plan produced an investor who offered startup financing, but clients willing to take a risk on a nontraditional legal provider were few. Although they’d started with plans to build a sophisticated client-facing technology infrastructure—hiring nearly two dozen employees for the purpose—they soon realized a tech-focused business wouldn’t sway risk-averse general counsel. “We needed a much more consultative, high-contact approach,” says Harris.

Switching gears, the firm honed its focus to a single market: financial information services. They had just a few month’s cash left in the bank when, in 2003, Axiom saw its first profitable year. A Forbes profile of the company a year later brought more attention. Meanwhile, the company prioritized attracting top-tier associates, many of whom say they value the opportunity for work-life balance its flexible employment terms offer.

The future certainly looks bright. Axiom’s 2012 revenue of $150 million would put it in the AmLaw 200—if it were a law firm. (It’s a corporation, meaning it cannot represent clients in court. It says it’s considering firm status in the United Kingdom.) Harris confidently predicts: “The decision makers will not … disrupt themselves, and law firms do not foster innovation. If law firms try to compete with us on price, we have a structural advantage over them.”

John Coates, research director for the Center on the Legal Profession and a professor at Harvard Law School who teaches this case study, agrees Axiom has seen “incredible growth.” In fact, in little more than a decade, he points out, it has seen “faster growth than any law firm in the history of the world.”

Should law firms adapt to compete with this innovator? Perhaps not. Coates makes three points regarding Axiom’s business model:

  • Axiom may simply be answering an unmet market need. “A lot of people view them as a competitor,” he says. “A better way of thinking about it is that they’re just a different kind of organizational participant in the legal services market, and they’re often not really taking dollars away from law firms. They’re just delivering a different kind of legal service most law firms wouldn’t be able to offer at all.”
  • There’s still room to grow, particularly at the high end. Axiom’s ability to create teams of technology experts, project managers, and lawyers focused on specific, often one-time occurrences, such as company spinoffs, Coates says, distinguishes it from both law firms and in-house legal departments. Over time, such teams develop experience and efficiency in specific legal areas that neither a firm nor general counsel can match—nor would want to, since there’s little business case for hiring for a one-time occurrence. “On the margin there are certainly going to be some matters that law firms would have been happy to take, so I’m not going to claim there’s no competition,” he demurs. “But I think it’s less than it might appear, and more of a market expansion.”
  • One thing Axiom may have to worry about? Its staffing model—which largely depends on discontented, experienced lawyers leaving big law. “In that way, they’re parasitic on law firms,” Coates notes. “Law firms are spending more time than they ever have trying to solve the challenges of work-life balance with their lawyers,” he says. If they do, Axiom’s once-clear value proposition may lose some of its luster.

Case Development Initiative

This feature, From the Classrooms, highlights cases from Harvard Law School’s Case Development Initiative, which uses interviews, data, and research to develop real-life descriptions of strategic and organizational issues law and other professional service firms face. Cases are not meant to provide definitive answers, but instead to show multiple points of view and highlight the complexities and ambiguities of particular situations. Case Development Initiative studies are used in a variety of settings, including in-house professional development programs, Harvard Law School’s Executive Education program, and law and business schools around the world. To find out more and order cases, see the Case Development Initiative website.

Case development at Harvard Law School is partially funded by a generous grant from Dechert LLP.

Disruptive Innovation in Legal Services Volume 1 • Issue 2 • January 2015

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