The Covid-19 crisis is driving long awaited change for firms and lawyers. They are having to adapt to new ways of working and adopt technology like never before. Chris Grant, LawTech Director at Barclays Eagle Labs, explains why the industry should embrace the progress that is being made right now.
The scale of change approaching the legal industry was laid bare last month by research conducted by the Law Society which revealed that thousands of high street and sole practitioner law firms may shut within six months as a result of the Covid-19 crisis. Cash flow pressures and lower fee income have put more than half of all the legal practices in England and Wales at risk, it found. Significant change to survive and succeed is required.
Law firms have been operating with the same business model for decades. Partners found a business and employ lawyers whose services are charged out by the hour. Profits are shared among the partners annually. It has been a sellers’ market, with expertise concentrated among a limited number of highly qualified professionals.
Technology trends were already shifting but Covid has accelerated the pace significantly. Technology is allowing legal processes to be approached in new and innovative ways. Law firms have been awake to this; after all, why pay someone to go through mountains of case law when a bot can do it in a fraction of the time and cost? Removing drudgery also helps retain the new generation of lawyers, with the Legal Executive Institute suggesting that: “working hard doesn’t bother the millennial attorney; inefficient or less-than-optimal work processes do.”1
The blinkered approach to innovation
So while partners have seen the opportunity to increase efficiencies and profits, many have failed to understand the true potential of technologies such as AI. Firms are focusing on how to streamline current processes rather than taking a step back and seeing if there is a better way to do things. And that’s a mistake. Because while some law firms tinker with technology, a seismic shift in the legal landscape is taking place, it will not be long before the practice of law comes under threat.
eSigning, for example, has been around for many years but the wider industry has failed to adopt it. There has been all of the intention but challenges which have to date proven too difficult to overcome. Covid has driven firms and clients to unite in trying to find an approach that would work when physical signing is no longer the easiest approach.
A truly innovative mind-set
LawTech startups are approaching the industry with an entirely client-centric view. They are starting with a blank canvas and considering the problems that clients face. They then look at how technology can solve those problems in a way that delivers value and satisfaction to the client. These solutions may include the involvement of a law firm, or they may not. What matters is that the client goes away happy. Most startups are focusing on solving specific problems but some are starting to think more widely.
These solutions, many of them driven by AI, will shift the power from the law firm to the client. Of course, there will still be many services that will require the skills of human lawyers, but the number of such services can only dwindle as the technology grows ever more advanced. This freeing up of lawyers’ time creates a tremendous opportunity to do more strategic and consultative work.
Lawyers know the market best, and coupling their insight and experience with the fresh approach of tech start-ups is a powerful combination. But it requires an acceptance by the partners that the billable hours model is not the only way to do business. They need to properly invest in innovation, including bringing in the right people to drive change and empowering them to build relationships with tech businesses.
Startups need to understand their customers
What does this mean for lawtech startups who are looking for investment or partnership from law firms? Above all it highlights the need to understand each firm and their true readiness for innovation.
Each will be at a different stage and while most will talk a good game there may only be a few who are ready to truly embrace a new approach. Whether that is a concern will depend on your product and the benefits it offers. Indeed, some products are built to service the current system and too much change could be a bad thing.
The in-house legal market is also key, with massive potential to give businesses greater power over how, and with whom, they conduct their legal affairs. Alternate Legal Service Providers are another expanding opportunity, and are often faster to adopt new technology than more established firms.
By understanding different firms’ attitudes, you can choose which ones to partner with, or can adjust your proposal so that it is not at odds with their level of innovation readiness.