Is digital transformation really happening in law firms?

Posted: 25 February 2019
By: Neota Logic

Law is probably the second oldest profession, rooted in tradition and inherently conservative when it comes to embracing change. While the world around us is unrecognisable from fifty or a hundred years ago, the legal profession has remained remarkably unchanged in many ways.

So, lawyers could be forgiven for thinking that

terms like digital transformation, automation and Artificial Intelligence are things that other people need to think about. Management consultants McKinsey & Co appear to support this theory, when it reported last year that the legal and professional services sector has one of the lowest adoption rates of emerging technologies of any sector that it monitors. Yet at the same time, Financial Services, Telecommunications, Energy and Automotive have some of the highest adoption rates.

If this is a true reflection of where things stand (and the findings were built off a survey of 10,000 companies worldwide), then surely we have to ask the question of lawyers; “if your clients are innovating faster than you, then what future will they allow you to have?”

It is important to reflect on the nature of digital transformation today. Technology is not replacing physical manpower as in the industrial revolution, but rather activities that have always relied on the strong – white collar – intellectual abilities of human beings. Even just a short time ago there was no option but to have a human carry out the majority of client-facing tasks in a law firm. Electronic discovery, contract review, process automation and expert systems however are doing away with this for the first time. And we should be honest, there are a great number of repetitive, tedious, tasks that could easily and more cost effectively be done by technology. The economic advantages for customers who can pay less for the same quality of service, and for law firms that can complete work more cheaply, and indeed more accurately, makes change inevitable.

An established example of transformation is electronic discovery – a worldwide industry now worth in excess of $60bn. It is interesting to note that this industry comprises of very few law firm incumbents. Rather the explosion started from a number of tech start-ups and new service entrants who did not exist just a few years ago. Early digital transformation of legal services has therefore come about from the outside rather than new thinking from the within the established law firm market.

The risk for law firms is that this pattern of change coming from outside the industry is repeated as new forms of technology aimed at automating the very core of legal services delivery become available, putting traditional law firms in the grave unnecessarily.

Enough of the pessimism though. My recent experience is that law firms are well aware of the opportunities presented by automation and innovation is happening in many ways. First, there are the incubator programmes that have sprung up including Mishcon de Reya’s MDR Labs, Allen and Overy’s FUSE and Slaughter and May’s Fintech Accelerator. These are proving a fantastic and collaborative approach to hot-house many exciting ideas and get them focused on solving real life issues in the sector today. Some law firms have taken a different route to innovation and invested directly into technology companies. Two examples spring to mind – Luminance and ThoughtRiver being the most recent. We are also seeing a number of law firms using Ai automation platforms such as Neota Logic to transform their in-house services and offer new subscription-based services to complement their existing legal service offer. In all areas, the rate of transformation is picking up.

Digital transformation is definitely happening in law firms, despite what McKinsey’s dispiriting chart may suggest. I have witnessed strong examples of innovation starting to happen in the large law firms, some great ideas from smaller companies building their own digital services and exciting new tech innovators entering the sector with completely fresh eyes. This is a vibrant melting pot. However, it still hasn’t, quite, broken into mainstream thinking for many lawyers, who are still grappling with the consequences of change. To come back to my earlier question – what future will law firms’ customers allow the sector to have if they can’t keep up? The only way to answer this question satisfactorily is to get ahead of the customer and meet their expectations before they know what their expectations are. Lawyers need to continue embrace the change – wherever it takes them.

 

 

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