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Will AI and technology disrupt Law Firms?

“Many commentators claim that tech, especially Artificial Intelligence (AI), will do something to BigLaw. I disagree. It will more likely do something in it - incremental change…” - Ron Friedmann.

Media does seem to be all too hyped about emerging technologies, and their application in the legal industry. Just think, how many articles have you seen lately that included “AI” and “Law” in their headline?

Moreover, those headlines usually predict the demise of law. According to those sources, the raw computational power and cold algorithmical precision will destroy everything on its way to market domination. However, technology ALONE does not (yet) have the power to replace legal service professionals. I will elaborate below, but before that, let us see what disruption looks like in practice.

How exactly will tech disrupt the legal industry?

Ron argues (and provides some historical examples as well) that every piece of technology developed (and adopted) thus far ended as a support to service professionals. And I second his arguments. Also, I second Ron’s view that too many commentators are quick to foresee the disruption, yet, they provide no clarity on the way, nor the dynamic in which this is going to happen. And disruption is not that difficult to portray.

Especially since we have many past examples (e.g. the industrial revolutions) to analyze).

Matthew Burgess recently described on the LegalTrek Blog what disruption looks like, and what steps it usually takes before gaining the full momentum.

As you can see in that article:

  • Matthew correlated disruption with NewLaw players, NOT the technology ITSELF; and

  • Matthew illustrated a pathway that disruption takes, usually at the outskirts of the val- ue chain.

The disruption, contrary to the popular opinion, does not happen overnight. It starts at the bottom and displaces the incumbents at the market margins. Disrupting companies (not technologies) feed of the bottom until they grow enough to start pursuing more valuable work. They shrink the pie piece by piece for the incumbents. Incumbents are slow to move due to their legacies (e.g. attitude, procedures, size), and, until they make radical moves, they are doomed to be taken out of the market.This is a process that can take decades. For exam- ple, people talk about LegalZooms, and Rock- etlawyers. How many do actually know that LegalZoom actually started around the late nineties?

All that being said, I am not advocating that law firms should be in a standstill, since there is plenty of time. Quite the contrary - I urge law firms to move and transform their prac- tices so they can be ready to meet the future. My goal here was simply to portray the dis- ruption process in a nutshell. I do so here since I feel this is very frequently missed by all those articles that praised the AI, BigData, etc. as the sole destructors of the legal profes- sion.

Do law firms completely ignore tech-nology? Again, this is one of the main tropes in all the “run for the hills, the end is nigh” articles. However, there are examples and (at least) anecdotal evidence that law firms are using alternative legal providers and algorithms to

enhance the low-level work. For example, this article claims the lower-paid work handled by juniors is now almost entirely gone, and replaced by alternative service ven- dors, in the Am Law 100. The partners, arguably, focus mostly on the least price-sensi- tive work.

Further, Richard Burcher recently polled law firm partners during the latest Validatum Pricing Forum. Richard asked the following questions:

Though the sample is somewhat limited (the poll was held among the audience present at the event), it seems that it goes in line with Ron’s points of view. Law Firm partners are aware of what technology can do for them. And some of those are using the AI technology even now to restructure their operations.

Yes, some of the legal professionals will be replaced. And the chart suggests law firm partners believe so as well. But the displacement will focus on the low level work.

As always, technology is moving the needle. It helps us do more with less critical resources (time, human touch). But it does not remove the need for human judgement and support.

Will technology put lawyers out of business? I believe my view is already clear enough from all the arguments and examples given above. And I have recently answered this same question on Quora. No, technology, in its most nar- row sense, WILL NOT replace lawyers, or put law firms out of the business. Algorithms still do not have the capacity to render the services, even if able to answer complex questions. These still need to be managed by people. People still need to make judgements, and provide a supporting role around the service itself (e.g. estimate budgets, manage projects, etc.). Technology will certainly transform the legal service delivery process itself, but not remove lawyers entirely. What is happening now is that lower level legal staff gets displaced. This can easily be mitigated if only law schools recognize in time that lawyers nowadays need a broader perspective and skillset. Good news are that some schools do. However, Ron and me are not alone in this view. D. Casey Flaherty mentioned a few AI solutions during our recent Webinar: Is the Billable Hour Slowing Down Innovation, and he agrees those are still in the supporting role.

If tech will not disrupt legal industry, then why so much panic? When talking about technology and disruption in legal, some people take LegalZoom as a clear example of how tech already disrupts legal profession. But this argument is flawed, mostly because LegalZoom is not a piece of technology (nor it is really a technology company). Axiom Law, likewise, is not a tech company, and, arguably, are their use of tech is not on a high level at all. Axiom Law is a service company. Both Axiom and LegalZoom are what we today describe as Alternative Legal Service Providers, also know as the NewLaw. Now, the NewLaw has the potential AND the capacity to displace law firms, in a segment or even entirely. In fact, that is even happening right now as we speak (well, as you read, anyways). In my recent post Law Firms vs NewLaw: How to face the future of legal services? I gave a breakdown of the competitive landscape to law firms (see the point #3 in the article). This is one of the data charts I refer to when it comes to the competition (this one is from the Altman Weil 2016 Report “Law Firms in Transition”)

And while NewLaw displaces the BigLaw (and even puts more pressure on smaller law firms as well) does that mean NewLaw will abolish the need for legal service professionals? Absolutely not. Someone still needs to do the work. Right?

What is actually going on nowadays is the TECTONIC shift in terms of the business model. The old Pyramid model is going away, while the new model, the Rocket, starts to flourish. Please note on the chart below that Rocket is augmented by technology AND still em- ploys legal service professionals.

What can you expect to happen?

Finally, to conclude and to answer the start- ing question here:

  1. No, technology (i.e. algorithms) will not remove the need for legal service professionals, nor put law firms out of business. In fact, it will assist their work and make them much more agile;

  2. the NewLaw certainly has the pow- er to put law firms out of business, as it happens today, as illustrated above;

  3. the NewLaw will not remove the need for legal service professionals. Quite the contrary - it OUTSOURCES to lawyers and/or em- ploys them, in order to be able to have the work and intellectual power.

There is simply no reason to run for the hills just yet. Quite the contrary - law firm partners must remain with their feet firm on the ground, mind clear and open for the future. Examine the situation, understand what is coming, and find your spot in the new legal industry landscape.

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