The legal industry is haunted by the clients: demanding digital transformation, new delivery models and alternative fee arrangements. Unfortunately, there seems to be a fatal disconnect between law firms and their clients as more and more companies decide to bring legal work inhouse and lawyers suffer from low levels of trust. The Hague Institute for Innovation of Law even estimated that: “Each year, 1 billion people have a new justice problem. Of the severest ones, a mere 18% is completely resolved.” That is proof of a severe problem with access to justice, but it is also evidence that there is enormous untapped potential in the legal industry.
Simultaneously, the concept of client-centricity is becoming more and more important. The era of shareholder primacy and short-term investments is over and the internet continues to hand over enormous amounts of power to the consumer.
It has improved the clients' access to justice as they can find contract templates, chatbots and information about legal matters themselves. They can also acquire knowledge about different law firms and easily match the prices against each other which have enhanced their power and increased competition. If they want to find alternatives, they can buy the services more or less regardless of location. That is an enormous improvement of consumer rights, and it has only created more awareness among legal clients that they can demand more from the law firms. As Mark Cohen writes in his brilliant Essays on Legal Transformation law firms “will be measured by results, not profit-per-partner” in the client-centric age.
This overall background analysis is one of the reasons we have published our vision for the future of law firms: the fluid law firm. We introduced it in Forum Magazine in June, followed up in Legal Tech Weekly and last month we finally published The Manifesto of the Fluid Law Firm in which we conclude that law firms must embrace the concept of fluidity to meet the new demands for client-centricity. They must value inclusion over segregation, be less protective of their knowledge and re-arrange themselves in more radical formations. Instead of being closed entities with solidified boundaries, law firms should strategize for externalization, engage in collaborative ecosystems and replace their entrenched walls with flexible membranes that can absorb and extract talent and resources more seamlessly.
So how could that work in practice? A great place to start would be to engage actively in the legal tech-ecosystem. So let us take a closer look at how law firms can benefit from that.
External innovation and the fast-follower myth.
Client-faced legal tech products are excellent vehicles to become more client-centric. The right tools enable law firms to be more transparent, streamline their communication and deliver more holistic services. Such client-centric tools will also enable law firms to deliver new business models such as subscriptions or fixed price deliveries that are in demand every day these days.
However, most of the innovation initiatives in the legal industry are currently focused on internal innovation. Many law firms look to optimize their internal processes with contract drafters to review tools. Such tools are amazing and they can bring huge benefits to any law firms, but they do no affect the client-relation significantly. Their service will at best be same-for-less instead of more-for-less.
Consequently, we suggest that law firms focus their efforts on client-facing tools and in that process adopt a more client-driven approach to innovation. Lawyers will not be able to figure out what clients want if they do not start engaging them in the processes. Therefore, law firms should invite clients to co-create, test and evaluate legal tech products. If the clients are part of that process, they will automatically take ownership of the innovation and in this way law firms can forge stronger bonds with the client and thereby increase client loyalty.
In some parts of the legal industry, there is still an assumption that it is better to wait for the technologies to mature and the legal tech market to converge.
Some lawyers justify their passive approach by perceiving themselves as fast followers or smart seconds because they want to avoid wasting money by betting on the wrong solution. These lawyers are missing the chance to gain a competitive advantage since the “holy grail” of legal tech is probably never going to come around. And to be frank, if the markets would suddenly converge around a single legal platform, the followers probably would not be around long enough to find it.
As noted in this article, digital innovation is not about choosing one solution and then sticking to it forever. It is about testing multiple tools, compare them and find out what works. Law firms should be first movers and fast followers simultaneously. They should test new products, discard the bad ones, implement the good ones and always look for upgrades. To find the best in class solutions, law firms must engage the clients who are eventually going to be the judges of the final product. But it also requires a strong bond to the legal tech industry to stay aware of what is on the market.
The tech ecosystem
We do not suggest that every law firm should pursue all strategies of fluidity, and it is also important to mention that the fluid law firm is not some fixed concept. It is a broad variety of externalization strategies and elements that can be applied in different practice areas and jurisdictions depending on the specific competition conditions.
However, one thing is for sure. Any successful law firm of the future will need to have a comprehensive tech-stack to always be able to offer their clients the best technologies available. Law firms must, therefore, engage with developers, product managers and designers to stay on top of the market. They must collaborate with the digital providers and legal tech entrepreneurs, and they can even form partnerships with digital consultants to make sure the really have state of the art available.
One way to get closer and open up to the legal tech providers is to offer them free office spaces at the law firm. Establishing a legal tech lab in the law firm will shorten the distance between the lawyers and the developers and thereby enable them to seamlessly bounce ideas around. The lawyers will enhance their tech-literacy and gather the required knowledge while legal tech providers will get valuable insights to the everyday work of a lawyer. Less ambitious initiatives could be to establish legal tech labs or legal tech hubs. A great example is the Legal Tech Hub Vienna where seven of the largest Austrian law firms have chosen to collaborate with five promising legal tech products in order to gain a better understanding of the market and affect the legal tech products in a direction that is useful to them.
An even less demanding and yet beneficial model is hosting and participating in frequent events such as legal hackathons, demo-showing days and technology conferences. Initiatives such as Legal Hackers or Tech Academy are also brilliant ways to engage with the developers and younger generations of lawyers at the same time and in that way develop a large pool of talent to recruit from.
In general, law firms should be better at engaging in collaborations with the legal tech-scene and their clients to find new digital products and technologies, test different solutions and always be looking to optimize. A fluid law firm would thus be both a first mover and a fast follower excelling in client-driven external innovation with a client-centric output.
About the Authors Niels Martin Brøchner is founder and CEO of the Danish legal tech company Contractbook. He was recently awarded one of the most promising young businesses talents in Denmark and has a strong voice in the Nordic legal tech community where he often participates in debates about innovation in the legal industry.
Anders Spile is client executive advisor in Contractbook. He also has hands-on experience as to what it takes to develop an innovation strategy and implement legal tech solutions in larger law firms.