Some innovative law firms are leaning into the opportunities presented by new technologies. They recognise that clients are under pressure to spend less than before and that they are asking their lawyers to harness emerging technologies to reduce billable hours, as well as provide new additional forms of value.
However, these legal innovators, as well as the broader legal profession, should seek to learn from the experience of financial services firms—most of whom are now highly adept at adopting, implementing and developing compelling technology-augmented hybrid offerings.
Financial technology or fintech has moved well past being novel to now being a required part of a financial institution’s business model. Even the venerable Goldman Sachs recently launched an online savings account called Marcus and is planning a cash ISA and wealth management service. They have shed their elite image and even gone full “Google” with a customer-friendly image and simple design. Goldman now has more software engineers working for them than Facebook has employees.
The finance industry has always leveraged the capabilities of the day to seek an advantage over rivals or provide a compelling and superior service. However, over the past decade, as with other industries, simultaneous advancements in processing power, connectivity, and mobile technology has enabled new entrants to challenge incumbents on an unprecedented scale. This outside threat has in turn compelled traditional firms to respond at scale and thus, permanently reset the industry’s innovation culture.
What law firms should recognise is that fintech simply encompasses any effort to use technology to either focus on taking costs out of a service or provide entirely new ways to deliver a service. This can be through software automating a manual process or through leveraging data, or using AI to deliver improved, efficiency driven services.
It began with back-office improvements and then quickly evolved to include the consumer-facing. It has fundamentally transformed the financial sector—improving access, broader financial literacy as well as permanently bringing down the cost of service delivery. At one end, we have seen the previously unbanked gain access to retail banking, including lending services. At the other end, we have seen the emergence of crypto-currencies, such as bitcoin, which promise to challenge the importance of fiat currencies.
Similarly, legal tech can, and likely will, permanently transform the legal profession, as well as perhaps the role of lawyers in the judicial process. Massive processing power can reliably analyse in seconds all the case law that is being digitised.
This wider access and improved ability to parse language is much more available to smaller innovators who are able to design many new services which would traditionally require complex infrastructure. That will mean smaller firms will be able to compete with larger firms much more and the latter will need to think about their offering in order to charge as much and hold onto clients. It is likely that the cost of delivering legal services will fall dramatically, but it could also mean that many more activities can be offered to less well-off individuals which is not possible if all legal work remains unautomated.
Law firms should learn from the ideation process of fintechs that consider which types of work could be most addressed by automation and which areas are the most price-sensitive. As with banking to maximize what can be charged, clients must really feel the added value a service brings to them. This type of thinking will help uncover new ways a law firm can provide clients value, leveraging emerging technologies and applying it to its underutilised assets.
The latent power of innovative software can empower law firms to help clients transcend the limitations of the billable model, and price work with more certainty. If adopted by law firms, it will help them better align with clients and achieve optimum wealth creating outcomes which in turn will win more chargeable work.
In order to do this effectively, hey must: deconstruct their work processes; re-examine the underlying value they provide clients; leverage the technology enablers that are emerging; and, be able to reorder their cost structure whilst using alternative methods to reach: (a) higher quality and higher spending clients, or (b) many more clients who pay less.
The direction of travel is clear
As the legal sector is able to leverage new capabilities, and it gradually explores new, tech enabled methods of delivering services, the legal tech space is still developing and searching for its break-out killer app. However, there is an important and permanent shift across the sector—it is clear that technology will be an integral part of the delivery of legal services and the administration of justice.
Meanwhile, the financial services industry—deep into its adoption of fintech—will continue to path toward the digitisation of banking. Therefore, learning from previous endeavours, law firms seeking to use new technology in a bid to revolutionise their way of working, would be wise to consider applying the general approach that has been broadly effective in the finance sector.
Law firms should consider whether what they are offering best serves general counsels (GCs) in terms of value for money. Focusing on what outcomes GCs will pay for will help them make the right choices in terms of what technologies and charging models might mean the GC will choose them over the alternatives. And, the motivation is simply this: they get the rare chance to—in a world of shrinking budgets—to develop new ways to charge for their services and to develop new things to charge for.