By Pim Betist.
Technology has changed the way we listen to music, consume entertainment, rent cars, travel and hold meetings. Algorithms and artificial intelligence are taking boring, repetitive work off our hands. Although the world around us is making this shift, the legal field still hasn’t embraced the automation of legal documents. Yet the technology to automate documents has been around since 1967. Why, then, is the legal industry still lagging behind?
Imagine, for a minute, that you are a taxi driver, and most of your trips are shuttling passengers between the city center and the airport. A tunnel is built between these two destinations, halving the distance. Would you be inclined to use the tunnel?
Assuming the amount of trips stays roughly the same and that you charge per mile, using the tunnel would cut a significant chunk out of your income. Not a great prospect.
To avoid this, you and other taxi drivers could work together and boycott the tunnel. If all taxi drivers cooperate, you could all keep your revenues more or less unchanged.
You might be tempted, though, to say one thing to your fellow drivers but do another, because if you start secretly using the tunnel, your number of clients will increase enough to make up for the shorter rides. However, other taxi drivers could start secretly using the tunnel as well; the ones who don’t will soon find themselves with very few fares. In this case, all the taxi drivers would end up using the tunnel to stay competitive.
As you may have recognized, the dilemma illustrated here is the prisoner’s dilemma, a case analysis that shows why two completely rational individuals might not cooperate even if it appears that it is in their best interests to do so. Collectively boycotting the tunnel is in your best interest. But chances are that you will not, because if only one taxi driver breaks the deal and uses the tunnel, the rest will suffer disproportionately, assuming most clients will choose the faster and cheaper option.
Although this thought experiment might sound somewhat fictitious to you, we see a similar dilemma unfold when it comes to document automation in the legal sector. Document automation, like the tunnel in our taxi example, shortens the time needed to serve a client. The technology for document automation has been around for decades and yet it is still not widely used in the legal sector. Are law firms behaving like the boycotting taxi drivers?
When we asked law firms why they don’t use document automation, most of the answers fell in one or more of the following categories:
The software is too expensive.
The software is not user friendly.
It can only be used for a limited set of standard legal documents.
Price and user-friendliness are obviously valid concerns, but as more competitors are entering the field, the price, time and effort needed to turn a template into an automated document are all dropping. In theory, this should trigger major growth in take up, but this has not been the case.
This leaves only the argument that merely a handful of standard documents can be automated. If this is the case, why didn’t law firms move on and automated this limited set? And, as for the more complex documents, isn’t 80% of the text in more complex documents still standard? Lawyers could simply generate the first draft of a document automatically and do the remaining complex part by hand. ‘First movers’ are already doing this, and according to Thomson Reuters, it is saving them up to 82% of their time per document. What’s holding all the other law firms back?
The real issue at hand is that lawyers have been trained to focus on billable hours.
Drafting a legal document for a specific situation and getting paid for it by the hour is one thing, but drafting one that covers all situations requires a significant time investment, and this time is non-billable: every lawyer’s biggest enemy.
So how is this going to play out? Will law firms eventually dare to make the time investment and embrace the technology? Of course they will. Nobody likes copying and pasting from existing templates. To revisit our taxi analogy, more and more law firms are starting to “use the forbidden tunnel”. They are charging fixed fees for documents they produce in minutes, and they are making healthy margins doing so. Some are taking it even further and selling documents through online portals, sometimes combined with a subscription fee for added services. New players are entering the market with platforms that generate leads for legal services by selling the documents for very low prices or even giving them away for free. The first movers pool is not big enough for the hold-out law firms to really feel it in their wallets, but they eventually will if they don’t start taking that tunnel soon themselves.
The 30 minute rule
As we’ve seen in so many industries, technology adoption always starts out slow. But at a certain point, it picks up and grows exponentially. We believe that the tipping point for document automation will occur once the average time to automate a document drops to under 30 minutes. Here’s why: Most documents take between two to four hours to produce by copying and pasting from templates. If lawyers need to invest double that time to automate a document, the majority of them will simply not find the time to do it. If, however, it drops to 30 minutes, they will feel comfortable enough to invest the non-billable time. It used to take roughly one day to automate a document. It is now down to about two hours. It won’t be that long before technology makes it possible to chip away that last hour and a half. And when that happens, law firms better be ready to change.
About the Author
After a short corporate career with Heineken and Royal Dutch Shell Pim Betist (42) started his life as an entrepreneur in 2006 with SellaBand; the world’s first crowdfunding platform with a reward based model. SellaBand raised over 2.5 mio dollars from over 50.000 music fans to enable unsigned artists to record albums. He went on to set up a similar platform in Africa under the label Africa Unsigned, featuring the best artistes from the continent.
His interest in developing start-ups and coaching young entrepreneurs led him to co-found startup agency Ripplestarters, Ready2Scale; a network of high potential growth companies and crowdlending platform for Scale-Ups Voordegroei.
Since 2015 he dedicates all of his time and energy to improving the way legal documents are created and distributed with docbldr. Pim Betist was listed as one of the top 25 most creative entrepreneurs in The Netherlands by Management Team. He lives with his wife and stepson in Amsterdam.