By Helena Hallgarn.
The buzz around legal tech is huge these days. In the legal sector, two of the hottest topics are “Legal Tech” and “innovation”, or a combination of these. There are legal tech events, tech academies, innovation hubs, legal design initiatives, legal hackathons, innovation managers at law firms and a lot of articles on “New Law” being published. To me, as one who has been working with these issues for more than twenty years, this is really good news. For many years, the legal tech world has presented new ideas on how to modernise the legal sector. But how many changes have we actually seen so far? Most legal tech initiatives still centre on making lawyers more efficient in their legal work. And in Sweden, legal services are mainly delivered by law firms focused on the billable hour. Now it is time to combine technology and lawyers and develop new legal services. This is an opportunity for both established law firms and tech start-ups to move on from ideas to execution. In this article I would like to share my views to support this development.
Legal Tech and the Legal Services market
We can see the legal tech market booming with a vast amount of alternative technology solutions aimed at the legal sector. The Nordic Legal Tech Hub has created an overview of tech providers based in the Nordics:
When trying to summarise the state of the legal tech scene I would like to refer to the presentation by Roland Vogl (Executive Director at Codex, the Stanford Center for Legal Informatics) at the Bucerius Legal Tech Essentials (Bucerius Law School Summer Program in Legal Tech that was available online this summer). He explained how Alternative Legal Service Providers (ALSPs) have expanded their business from 8.4 billion dollars in 2015 to 10.7 billion dollars in 2017 and they are offering more and more sophisticated services for their clients. He found an increasing willingness to invest in legal tech with more and more legal tech solutions available outside of USA. On the negative side, this increased willingness has led to legal departments and law firms being overwhelmed with different kinds of legal tech offerings. He also commented on the resistance within law firms quoting the Altman Weil Flash Survey which found that “In 70 % of law firms, partners resist most change efforts”. The reason is that these partners do not believe that legal tech is essential for their business. Instead of looking at tech as an investment, many partners still see at it as an expense.
One of the internationally well-known ALSPs is UnitedLex. UnitedLex was launched in 2006, currently employs more than 3 000 lawyers, engineers, programmers and other high-skilled professionals and is now an established provider of legal services and a competitor to traditional law firms providing legal services to more than 25% of Global 500, 30% of Fortune 50, and 50% of Am Law 100 companies.
Amongst law firms we also see the development of new legal services. The UK based global law firm Allen & Overy has been working on developing new legal services during the past decade. They can now, beside their more traditional legal expertise, offer a broad range of new legal services in their “Advanced Delivery & Solutions” business.
How have all these new initiatives affected buyers of legal services in Sweden and many other European countries outside the UK? Well, not as much as could be expected. Most CEOs or in-house counsels in Sweden looking for legal support still focus on two options; they either turn to law firms or hire in-house lawyers when solving their legal issues. There are few obvious alternative legal services to choose from. And the business model for law firms is still focused around the billable hour.
At the same time, Swedish law firms seems to prosper. The Swedish weekly news magazine “Affärsvärlden” reported (April 2020) that the annual turnover for the 58 biggest law firms in Sweden 2019 amounted to USD 1,304 million, an increase by eight percent compared to 2018. The five biggest law firms with an aggregated turnover of USD 502 million in 2018, last year distributed dividends to their partners amounting to a total of USD 114 million according to the Swedish business newspaper “Dagens Industri” (10 September 2019). New law initiatives driven by digitalisation and legal tech still only have a tiny fraction of this market, thus posing no threat to the established law firms.
This was confirmed by Frida Pemer, docent and assistant professor at the Stockholm School of Economics, who summarised some take-aways from her international research project on digitalisation of expertise at the legal innovation event VQ Forum in October 2019. She analysed how different types of expertise have been affected by digitalisation based on the parameters process innovation and service innovation. She concluded that legal services are focusing on process innovation, not service innovation. This means that the focus is on changing their internal processes and not as yet focusing on changing their delivery of services or on the development of new services. The conclusion is that this phase of digitalisation is merely considered to be a “cost squeezer”. It is not disruptive.
Why haven’t we seen more change?
Around 2000, when I attended several conferences about Knowledge Management (KM), I was impressed by all presentations of innovative projects. Over the years I have seen the passing of trends focused on trying to solve KM issues to support knowledge sharing within a company (with a focus on law firms). Projects such as implementing an intranet where all employees could share their information, implementing a KM database where all know-how could be collected and shared within the company, implementing a search engine making all the know-how within the company easy to find and share, implementing internal “yellow pages” to find the person with the best experience and knowledge internally, etc. They were impressive plans highlighting the great impact they would have on knowledge sharing within the company. After a while, I realised that all these projects never seemed to reach their potential and deliver the great impact that was expected. The reason for this could be because the lawyers did not want to learn how to use the new tool, they did not want to spend time on adding information into the database, the searches resulted into too many irrelevant responses and the experienced lawyers within the firm never felt any need to add information about their own knowledge into a database as they were busy working.
The ideas were great but the execution failed. Why? And why could this be of interest now? It is because today, I can see the same pattern when it comes to legal tech. We have loads of great ideas, a lot of interesting technologies and interesting solutions and we complain about lawyers who do not want to change and use these tech tools since they do not seem to want to change the way they work. There are too many ideas that do not reach their potential. Even though the KM projects described above had internal managers executing the projects, and the solutions were aimed at supporting their colleagues, their internal customers, they failed to understand the user’s behaviour and motive.
Working with KM, I soon realised it was possible to take some of those ideas and execute them differently by focusing much more on the execution, on the implementation phase, which I have experience from through working on many projects together with my current colleague Ann Björk.
When implementing a Knowledge Database, we focused much more on the structure of the information and adapted the search engine to better support the way a lawyer would like to find the know-how without any need for training. For example, we made it possible to do a search for “Business Transfer Agreement” and find such standard agreements and good examples but at the same time and in the same search result the user would also find other relevant documents and news related to the matter, for example employment related aspects of the transaction that the practitioner may not have been focused on. In this way we could support the lawyers working with that type of matter. Naturally this gave the lawyers an incentive to further use the Knowledge Database. Also, this meant that the lawyers started to contribute their own material, their own know-how, to the Knowledge Database, since they realised they could easier find their own material in there. The Knowledge Database then turned into the valuable platform for know-how within the firm.
When we wanted to implement an internal database with information about M&A deals, we realised how difficult it would be to try to collect that kind of information through some kind of “post-deal-summary” when everyone would be exhausted after finalising the deal. Instead, we focused on the lawyers’ ambition to get recognised in MergerMarket’s list of dealmakers. Lawyers were incentivised to send reports to MergerMarket about their deals so we implemented a support function to simplify these reports and at the same time avoid some of the pitfalls we found. In this way, lawyers preferred using our “DealTracker” to report a deal to MergerMarket. In the same time, we could collect that information in our database and build internal knowledge about the different deals handled by our lawyers. The result of this project – the “DealTracker” – was both better reporting to MergerMarket and a valuable internal knowledge base about deals done.
The point here is that the ideas do not need to be unique. The difficult part is the execution.
Collaboration is key
In order to execute innovative ideas, my advice is to discuss these ideas with other people and open up for collaboration with people having other skills and experiences. I must stress that collaboration is a business necessity. Lawyers need to team up with other kinds of experts to make joint efforts to execute on these ideas because one difficulty in legal tech is the combination of those two fields. A service delivered by software specialists might fail just because they don't understand the legal profession, how law firms operate. And legal professionals often lack the insight into the technology that is needed for the service to perform as desired.
The lecture from Alma Asay, a Legal Technologist, in the “Buceries Legal Tech essential” seminars was interesting to listen to. She openly shared the difficulties in developing a legal tech solution. She experienced difficulties in for example the collaboration between lawyers and technologists since they did not “speak the same language”. The lawyer needs to find professional technologists to discuss the ideas and find the right technology to build the legal tech. Both the lawyer and the technologist need to better understand each other. The lawyers need to work more thoroughly in specifying the functionality of the solution. Alma summarised it as “Technology providers can’t build ‘it’ if you don’t tell them what ‘it’ is.” But it is also important for the technologist to better describe the possibilities and limitations of the technology platform. That way they can easier speak to each other and collaborate in a more efficient way. Collaboration is the key since it is a long way from idea to execution.
Move to execution
The whole point here is that it's not the lack of ideas that keeps progress at bay. There are a lot of relevant “details” to handle when it comes to the development of new legal services based on technology in order to really change the market for legal services. The implementation of an idea that is both functional, usable and makes business sense is the difficult part of the equation. Steve Jobs, the iconic Apple founder, also commented on this when he said, "To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions."
In my view the best way to proceed to execution is to focus on the following steps:
1. Clearly define your target group for your business case
Having a “customer-centric view” is not only a buzz word but crucial when designing your solution. You should target your service to a specific customer group and focus on an understanding of their needs and incentives, including their willingness to pay for such service. This means trying to get a true understanding of their behaviour and motivation. If you want to make an impact on the market for legal services you ought to aim towards the profitable segment of business law, where the profitable bigger law firms are.
2. Find the right technology to build your solution
In many cases you find people interested in technology such as Blockchain or AI who want to build a solution based on that technology. It might work but it is the wrong starting point. You have to clearly define your solution and the functionality you expect from this solution before you proceed into deciding the right technology platform for this. In order to do so you should discuss this with technology experts such as system architects etc. Otherwise you might think you are building a Porsche but when looking further into the solution, you realise the motor is from a moped. It looks nice and shiny but will not perform as expected.
3. Focus on the user interaction when building the solution
There is a lot of interest in user interface and legal design. The problem, however, is that it is easy to focus on how the product looks, but in many cases this may be futile if the user interaction with the application does not deliver. The key here is an understanding of the difference between user interface (UI) and user experience (UX). Instead of focusing on the UI, the design of the solution should focus on the part that the user interacts with, i.e. the UX. If the behaviour and functionality of the product is not what the user expects, it doesn’t matter if it looks pretty. No matter how much lipstick you put on a pig, it is still a pig.
When I attended a course in User Interaction at Stockholm University several years ago, we were supposed to design the user interface of an ATM which would allow the user, naturally, to withdraw cash and also receive an account statement. Our natural response was to design two buttons representing these two alternative actions, but since 95-99 % of the activities at an ATM are related to cash withdrawal, we learned that we instead should focus on simplifying cash withdrawals by just clicking once on the amount asked for. When doing a rarer activity such as asking for an account statement, the user interaction could be slower with a need to click on extra buttons to receive that result.
All this could best be described by the creator/writer/start-up advisor Dain Miller who said, "UI is the saddle, the stirrups, and the reins. UX is the feeling you get being able to ride the horse."
There is an opportunity out there for both law firms and tech start-ups to move from developing and implementing technology tools that make lawyers more efficient, to focusing on developing new innovative legal services giving buyers of legal services a wider range of alternatives in handling their legal issues. We have the technology and the knowledge. We now need to proceed to combine technology and lawyers to develop these new legal services. There is great opportunity out there, especially in the profitable business law segment of the market.
But, effort should be put into the execution. Be sure to discuss your ideas with other people who can support you in your journey. Getting true feedback – not compliments - and integrating it into your development is crucial for success. The idea you start with might not be unique, but with advice, collaboration and customer feedback, you can create services that truly can modernise the legal profession. Take this opportunity - you can make a true impact on the market!
About the Author
With over 12 years’ experience in knowledge management (at the law firms Mannheimer Swartling, Vinge and Gernandt & Danielsson) and in total over 16 years’ experience from legal practice, Helena Hallgarn is one of the most experienced knowledge management professionals in Scandinavia.
She is also one of the pioneers in legal tech in Scandinavia having founded Virtual Intelligence VQ in 2010 together with her colleague Ann Björk. At Virtual Intelligence VQ they have been able to combine their legal knowledge with their IT skills to develop innovative IT tools for the legal sector. Their most well-established tool VQ Legal has, for example, truly changed the way company registration matters are being managed.