Distinguishing Commoditization from Standardization

Paul Lippe, the driving force behind Legal OnRamp, writes a blog for the ABA Journal. The most recent post, available here, is entitled “What Aspects of Legal Services Are Most Likely to Get Standardized?” Here’s the bit that caught my eye:

Standardization is not the same as “commoditization,” that great bugaboo of lawyers (I’m not sure what ‘commoditization” is, and I’m pretty sure no one else does, either). By making basic things simpler, standardization opens up more room for insight, for service, for specialization. Being the guy who switches the train from one gauge to another, or the folks who run the currency exchange offices in airports, are roles of dubious value.

Although Paul dismisses the notion of commoditization, I routinely invoke it in my writings and in seminars, and I expect that I’ll continue to do so. Here’s why:

Standardization has a role to play in contract drafting. I’m in the habit of saying that my book A Manual of Style for Contract Drafting contains guidelines for contract language. Guidelines, standards—same thing.

Applying standards to contract language has the disintermediating effect that Paul sees as a consequence of standardization. You’d have less haggling over confusing provisions, so doing deals would take less employee time and require less input from outside counsel. And you’d likely have fewer disputes and so would have less need for litigators and the rest of the dispute-resolution machinery.

But standardization would leave unchanged how you go about drafting contracts, as drafts would still be cobbled together from precedent and tweaked to reflect the transaction at hand. The process would still be a bespoke one—labor-intensive, with the quality of the result depending on the skill of the drafter.

An alternative to the traditional process is now available—document assembly. It allows you to draft contracts not by copying and pasting from precedent but by answering an online questionnaire. In completing the questionnaire, you supply factual information and, after consulting guidance, select from among alternative deal terms. The system then compiles and adjusts preloaded contact language, presenting the user with a completed first draft. In effect, you’re retaining control of the important stuff—choosing the deal terms—and getting the related verbiage off the shelf. The preloaded language could be compiled by the user’s organization or by a specialized vendor.

So, if you need a draft confidentiality agreement, you could prepare your own or could hire someone else to create one for you. But are you sure that the resulting draft would address appropriately all issues that should be addressed? Would it use clear language? How much would it cost? And how quickly could it be prepared? Taking these different parameters into account, it’s likely that the result of taking the bespoke approach to drafting a confidentiality agreement would range from mediocre to wretched.

Or you could instead subscribe to Koncision’s confidentiality-agreement template. After an initial learning curve, you’d be able to speedily complete the questionnaire, and you’d be assured of addressing, at a minimal cost, all reasonably standard issues in state-of-the-art language.

That’s how commoditization works. It builds on, but goes well beyond, standardization.