LegalBusinessWorld Posts

Ecce Advocate - Reflections from Conversations in the Field of Legal Services Circa 2019

July 2, 2019

The backward-looking, risk averse approach to the law, which is so common in corporate America, doesn’t work in the Internet Century, when business evolves at a pace that is several orders of magnitude faster than the pace of legal change. A smart creative-fueled business that is trying to innovate will be lucky to be right 50 percent of the time, which can be a problem for a lawyer whose risk tolerance is in the single digits.” [1] 

 

Five years since the publication of this critical observation, this sentiment remains a common refrain from clients and consumers of legal services.  Gone are the good old days when there was a steady and straightforward world and economic order, progressing in a gradual, predictable direction, where specialization and knowledge are the key to success.

 

Pain Points

A common journey of an in-house legal department - Upon joining company, a GC discovers that every department has its own way to sign a contract.  Documents are filed but lacks a system, and contracts frequently are missing, let alone having a basis to enforce performance such as special payment terms and expiration.  Contract review was merely part of the process for meeting requirements for invoice or payment purposes.  No RASIC arrangement exists between business and legal silos, and lawyers do not know what the contracts are about beyond general business and boilerplate terms.  IP system barely exists, and the products development function regularly defaults into grey area in freedom of practice exercise.  Business and even HR activities freely receive third party information that may be trade secrets, while the company fails to protect its own IPR.

 

Once Legal managed to institute processes like contract management, IP, employment from interview to exit, and the business knows what Legal does, the work load increases with the industry and economic growth while compliance becomes more complex and consequential.  Some GCs manage the function by improving processes, and some implement automation.  However, most approach from the perspective of legal tasks only, and adoption remains anemic even within the legal silo.  Most legal departments struggle to assess and ground their effort-impact analysis.  Rarely do GCs get their wish to throw more people at problems and routine work.

 

As senior GCs start to yield their roles to successors, the struggle with some of the previously set up processes returns as people turnover heads north while institutional memory walks out the door with employee departures and contractor changes.

 

Department slides further down the path to be another cost center.

 

More with less – For many GCs, being seen as a contributor to glamorous projects like M&A, major financing, and helping the company to overcome existential disputes and avoid business interruption is more worthy than controlling costs.  Numerous heads of legal function still bristle at the “help” from purchasing departments in managing outside legal spend.  However when business model revolutions, digital disruptions, compliance avalanche converge on a less popular corporate sector, legal departments can only count themselves among the fortunate if they can maintain their headcounts and focus on hammering the outside counsel on fees.  New vocabulary for lawyers include AFA (alternative fee arrangements), In-sourcing, LPO (legal process outsourcing), ALS (alternative legal service).  Many service providers like Bodhala wield AI to help clients to “rationalize” law firm bills. 

 

Law firms revenue may be back up but baseline realization rate may not be.  The “willingness of a firm to accept a discount from its standard rates” remain elastic, especially among “Top Rate Growth firms and Top Demand Growth firms.” [2] The changing value proposition away from the business model of selling hours is a part of this current, but ultimately the issue is rooted in the gap between business and law (more on this later under “Underlying, Deeper Issues”).

 

Customer satisfaction - Costs down can be viewed as a customer satisfaction problem as well as an issue of efficiency.  Personality stereotype aside, lawyers may sometime be seen as just practicing law and not solving business problems.  When the former Google senior executives describe the average corporate lawyer as backward looking, the issue seems to be about doing more to anticipate change and going beyond approaching new issues under the current legal system.  While most lawyers may appear singularly focused on risks, and failing to move from risk-biased anecdotes and to data that informs on a bigger picture, the real problem is they have been casted to manage risks which somehow are uncoupled from related opportunities.

 

Some are starting to prioritize with tools like importance-urgency matrix and effort-impact matrix to manage customer relations and resource.  However most legal functions continue to be the department to remedy problems and facilitate deals but not a go-to resource for business transformative, demand driven, strategic initiatives.  The challenge in matching effort to impact is like spinning legal wheels but not getting into gear with rest of the business organization.  While all this is happening, in the age of continuous communication, practicing law by email, messaging and whatsapp/wechat on the fly and delivering instant advice is aggravated by pressures to keep external cost down or maintain internal efficiency. 

 

Discontent throughout ranks - After 150% effort and seeing work-life imbalance slip but only barely holding on to status quo frustrate many lawyers.  This is especially among more junior lawyers, perceived as being outside the core team and cast in the role as the brakes to the engine, under resourced police, “department of no,” but not senior enough to be invited earlier on to shape an issue or as the “conscience of the company.”  Tilling the land with true grit, juniors can only be “glad to have a job,” and even some seniors have expressed private feeling that this is “just a job.” 

 

Responses

The human wave strategy – Facing increasingly complex and fast changing world and compounded with new and complex regulations driven by but still lagging behind an increasingly political world, a common reflex is to throw more people at problems and work harder!  Although the reasons for law firms and large legal departments equating success with the size of their organizations are different, both ultimately are grounded on values based on input rather than output or outcome for clients.

 

Cut costs – As illustrated above, legal market communication is already full of AFA, LPI (legal process insourcing), LPO, and ALS providers.  Some of these offerings try to find a way around the headcount restriction, but with limited success.  As the journey of business process outsourcing or BPO has demonstrated, productivity gains will eventually taper.  Even the gains under Moore’s Law do.

 

“Do less law” [3] - We have been hearing this call, perhaps a cousin of the Lean concept on doing only the right things.  This should be distinguished from managing client’s expectation on what certain legal actions and resulting costs may fetch.  An analogy would be an international law firm, acting for an emerging market client in an acquisition, ending up not getting paid for half of the hours billed because the M&A process was basically left running unsupervised by the client. This is not uncommon as the lack of an experienced VP for Legal leads to insufficient guidance for the law firm which went on to perform according to its perfection standard, one that the client actually did not want to pay for.

 

So lawyers should triage more frequently with clients, perhaps along the line of the approach to legal function described in How Google Works from which the quote that initiated this article is drawn.  Calling this “Horseback Law,” the authors prescribe for lawyers to avoid the need always 

 

“to dismount and spend weeks writing a fifty-page legal brief… of all the things that could possibly go wrong and what would happen if they did.  In the early stages of a new project, the analysis won’t be 100 percent correct anyway. In those situations, it isn’t the lawyer’s job to cover every possible angle in detail; it’s his job to look into an unforeseeable future and provide educated, quick guidance to the business leaders making the decisions.”

 

And then move on. 

 

Yet “do less law” certainly does not mean “don’t do any law.”  The question that “horseback law” begs is which legal tasks should be on the menu and the level of legal scrutiny to apply?

 

LegalTech – This term certainly conjures the common scene of users shopping for off-the-shelf, undiscerning or quick solutions.  A popular product would be to automate knowledge management or KM, offering laws, regulations, and document templates such as contract management at the fingertips.  While some services are based on machine learning, e.g., e-discovery, prediction of case outcomes in domains like IP or the Supreme Court of the U.S., or rationalization of legal bills like bodhala.com, most products are still built upon expert systems as machine learning in the legal field requires, among others, time, effort to train the algorithms and capital.

 

Most LegalTech remains focused on the efficiency of legal tasks.  Some even go beyond cost management to offer throughput value proposition e.g., contracts reviewed, number of filings, deals negotiated and closed, disputes outcomes.  Thus far, there are few real solutions with output driven value propositions.

 

Benchmarking – By far the most common response, though it can at best be the starting point of a response.  But benchmarking itself is not a strategy.  Safety among the herd may reduce liability at the legal issues level, but rarely a competitive advantage at the legal function level.  

Benchmarking with peers does not always delve sufficiently into why and why not, in part due to confidentiality considerations, and yields only stereotype generalities.  It rarely informs on successful business strategies which by definition fits a unique business model that cannot be copied or challenged in the short term.  

Indeed the trending consensus often ends up doing nothing which is the most dangerous path in today’s era of disruptive, accelerating change.

 

Underlying, Deeper Issues

If the legal department is to do less law, what will its lawyers do?  One analytical lens is the journey from selling what one makes to making what sells.  But what have been the offerings in the market for legal services?  According to Jeffrey Carr, a former General Counsel of FMC Technologies, lawyers basically offer advocacy, counseling, content and process. [4]

 

Advocacy – representing the client’s interests in relationship to external parties, most commonly adversarial matters like litigation, government investigation, averting PR disasters; but also less immediately adversarial matters such as preventive compliance and internal assessment of complaints and potential risks.  Also under this category are transactions from bet-the-farm M&A to the smallest operational level transactions.

 

Counseling – advising the client on actions that favor long-term over short-term interests.  However, longer term considerations may apply to some daily and operational matters.  This need not, but may also involve deep, novel expertise in complex areas.  Often the counsel requires “judgment” to triage between or among options involving disparate stakeholders vested interests.

 

Content – providing information about legal issues, generally called legal advice and analysis, again of a wide variety - from the longer term, more complex topics to the mundane and commoditized.

 

Process – moving information from one place to another to create legal work product, typically either generating or analyzing contracts, or working through discovery in litigation or sifting through data and information in investigation.  But again it may surface in day-to-day transactions and commoditized information and legal forms, e.g., company secretarial routine activities.

 

There are, of course, activities that cut across the above, e.g., facilitating transactions, especially major M&A; or IP strategy like mapping freedom of practice across global markets. Services enhanced by negotiating skills are often incorporated in legal services like advocacy, facilitating transactions large or small.

 

While this may describe at a high level what clients have been buying, there is varying degrees of commoditization of the work but overall legal service providers are losing some pricing power.  The tug-of-war over pricing aside, activities that clients refuse to buy are spreading like wild fire through GCs’ terms of engaging outside providers and external legal spend “rationalization” services.  Much of this exercise are the natural results of the excess of the business model based on input, i.e., selling hours, but the principal operating paradigm is the concept of Lean, or do only the things that the customer will pay for, not just doing them more efficiently which remains the focus of a great deal of LegalTech today. 

 

For sure, many lawyers will not consider practicing law as a waste, but many clients certainly perceive some tasks as not adding value.  Yet both lawyers and clients know that some delivery and insight actually is in demand, and the value cannot be referenced in terms of input like time unit.  Indeed such insight or advice valued by the client often make the hours billed by other colleagues tolerable and worthy of being bundled together.

 

As the pressure builds to rationalize legal spend, the trick is to know what service the business truly values.  However clients often don’t know themselves.  This is not uncommon, just as one-hour photo minilabs and iPhones were not initially perceived as popular in market testing, let alone when there is a great gap between business and legal in terms of understanding each other.  Take for example the value of preventive practices -  the lack of measures on the benefits from cost avoidance under the short term focus in companies financial statements makes it almost impossible to take initiatives across functions.  With preventive law on limited demand, much less can be said about the legal function helping business to shape and execute its strategy or achieve transformation.

 

Despite the headwinds, lawyers do have a chance to elevate the legal function (and integrated value chain like law firms and other external service providers) to a strategic level while supporting operations in a way that delights clients.  Imagine requests from clients on what resources the department needs so that it can deliver more of something that is in demand?  However, the purposing of legal resources continue to chase after legal expertise and deepen the legal silo, and any efforts to improve people-process-technology dabble mainly to drive legal efficiencies rather than business efficacy.  While GCs may sit at the C-suite table, the legal function as a whole has not been considered strategic.

 

Limited to Downstream - One challenge that has been holding the legal function back is the deep-seated notion that equates its value proposition to remedial activities, e.g., disputes resolution.  As mentioned above, preventive initiatives have been poorly managed as initiatives although they can be pervasive in terms of contract negotiation and management if measurement of benefits can be in place.  Nevertheless, the remedial characterization is a serious drag on any hope to integral to business strategies and transformation.

 

To be fair, lawyers do have occasions to brag about helping business to execute strategies.  M&As and other investments can be strategic to a business although its track record has not demonstrated satisfactory odds as a successful strategy.  Also the legal function is involved more often to facilitate deal-making, closings and documentation rather than assessing early feasibilities, target selection, and more critically to plan and execute integration which is the graveyards of a majority of M&A strategies.

 

Lawyers find more success in the IPR field, e.g., mapping technology, integrating the freedom to practice in terms of patent, trade secrets with business strategy and offensive and defensive litigation.  Here, names like Apple, Samsung come up, and in terms of business transformation, Qualcomm.

 

Unfortunately, mostly lawyers do not work on the inside of major transactions, existential dispute resolutions or transformative IPR strategies all the time, and the average legal function will consider itself having earned its keep if it is considered to play a role in the company’s risk management.  Yet mere risk management may turn out to be a fool’s errand unless the risks are connected with related opportunities across businesses and corporate functions.  Risk management by itself is akin to trying to clap with one hand.

 

Hoping bright, shiny tech will avert threats -  It is in this light that Legaltech as a field has thus far failed to shine.  This is due in part to most offerings pay only lip service to the business organization, processes and underlying strategy.  Most products and projects revisit the common gap between tech vendors and law, on top of the gap between business and law.  Often tech providers are driven in part by the business model to sell software products based on off-the-shelf templates and designed for another organizations with minimal customization, sometimes starting with completely unsuitable configurations.  Also offerings are mainly concerned with lawyers’ tasks and address mostly cost down pressures, without the experience and knowhow to analyze whether certain legal tasks actually contribute to the business and solve specific client and customers problems.  No wonder some executives of the “horseback law” or “do less law” persuasion would wield the Lean concept to judge offerings with only what the customer will pay for.  It is a rare contract management package that would integrate contractual provisions into business strategy, operational metrics and KPIs like balance sheet hygiene, earnings and cash flow.  Few systems can reduce wastage in process across functional verticals.  Legaltech needs strategy and process analysis to build metrics to help clients to price legal risks and support decisions on risks and opportunities.

 

Even in a field that until recently still depends mostly on labor resources, some labor-capital/software balance is gaining acceptance, but adoption is still in embryonic stages.  Legal service pricing models other than recalcitrant input based ones (including shadow hourly pricing) also suppress a more balanced resource model.  Most law firms do not have the strategy, organizational and financial structure to invest in capital assets like software solutions.  Adjacent players with experience in a labor-capital mix such as the Big Four have yet to change the game in the legal sector.  

 

Indeed most tech efforts is a picture of the cart before the horse.  In addition to the gap between tech vendors and law mentioned above, vendors’ interest and buyers’ lack of appreciation of outcomes and process mapping being critical precursors to automation efforts further lessen the chance of success.  In this space, without a handle on people and process, there will be little technology adoption.

 

All these factors result in adoption rates no better than other corporate tech efforts, which is at best lacklustre.  It is no surprise that business management already takes a view that it is not the enterprise’s purpose to finance LegalTech development and would not devote resources for LegalTech.  Generally in LegalTech, publishers sell content; SAAS providers sell expert systems, but few vendors sell ML and other AI systems.  This is because it takes time and resources to train algorithms, one task at a time.  Relatively un-tethered to business strategy, and unguided by ultimate business outcomes, “Legal R&D” thus far has been seeking value propositions mostly for lawyers who trade in knowledge and information in an era when exploding information comes at a few clicks through search engines and channels that are user centric.

 

Decision Process Without Probability - In the spectrum of solutions, people-process-technology are table stakes.  Contract templates, now “smarter” in the form of expert systems and even AI, can be useful when the commercial ecosystem has been in an equilibrium or to serve as a checklist among less experienced stakeholders or in less sophisticated markets. However, calcified templates can also be overkill when what clients need is a designed suite of starting clauses with alternative language calibrated by business tools to support desirable combinations that allows deal-making. The use of templates sometimes requires too much customization and instead of being a “device” designed for the context, becomes a crude instrument counterproductive in the process. As the pace of business accelerates, and regulatory climate becomes more complex, templates regularly contribute to putting business in a perpetual catch-up mode as the facilitator lacks the strategic alignment to design a process to maintain evergreen templates suitable for market conditions. To be fair, such process excellence calls for organizational enablers for change management to overcome the gaps across silos. Addressing organizational scorecard issues requires leadership from the top, but all business units and functions, including legal, still need to be mindful of the organizational purpose of existence - to serve and sustain value propositions to customers.

 

Take Knowledge Management (or KM).  In an era where answers are often a few clicks away, people now focus on solving problems and making decisions.  In the legal space, familiar KM comes in the form of if-then-else predictions and related research.  The part of the process involving the base of the decision tree, sometimes performed repeatedly, should be automated.  But this will not come before sufficient legal information and documentation has been digitized and in a way native to search and analytical engines to organize them in a user friendly designed manner.  It goes without saying that regular information update, a continuing digital feed and design maintenance will realize sustainable KM.

 

While this sounds like destruction of “value” from legal service providers charging for repeated, formulaic work, considerations for bespoke work exist.  Quality control of overall delivery against changing circumstances needs general intelligence like a seasoned professional to identify and handle.  Even if we have automated most of these KM building block, a legal project manager will pass judgment on utilization of if-then implications in context of stakeholders and the organization.  This is especially when the law has not caught up with the reality which seems increasingly the norm.  The organization will also need to consider how to train junior lawyers, or “legal engineers” on how if-then-else applications of rules to facts before they take over from the seniors.

 

Lack of measurements and data – To manage risks in the context of opportunities, a measure of both is necessary.  We all know what is not measured does not get done.  If-then-else predictions will be useful if reliable probabilities are ascribed.  Some pricing of risks reminiscent of the insurance actuarial has been taking place in the legal sector; however, it is early days to account for arguments lost and won, judgments passed and penalties levied.  Legal probabilities analytics has yet to expand its ambit to connect with the business world to include cost avoided, reputation saved, time bought and even business won.  An important part of business considerations concerns insurance, and the actuarial work underlying insurance is the ancestor of data analytics today and will serve as a model for legal data analytics tomorrow. Equally importantly, for lawyers to stay as trusted counselor in the world of data today, long term considerations will likely be lost unless supported by data.

 

Multiple headwinds – On the demand side, the market does not believe in or regularly concern itself with root cause and solutions.  On the supply side, today most legal service providers are not incentivized to migrate from the input pricing business model.  In-house lawyers are also married to the people end of the people-process-technology spectrum as a measure of the legal function’s worth and prestige.  Management does not generally view Legal as an integral part of business and corporate strategy, and legal process management has yet to reach core business considerations as to serve as foundation of LegalTech.  Without sufficient appreciation of the legal-business divide and job to be done, technology providers cannot be said to have moved beyond the mainstay of selling off-the-shelf products to help lawyers to do more lawyering.

 

Underlying these headwinds lies change management.  In addition to putting some muscle to align stakeholders based on an overall corporate strategy, the exercise also requires a two-speed transformation – meeting the needs of today while actively preparing for tomorrow - by another analogy, changing the engines in mid flight.  This is no ordinary project, especially for a large organization with the current market to lose.  Although the business does undertake a certain level of risks to transform, the endgame of not changing the engines is certain.  As many seasoned executives will remind us, hoping to survive with the status quo is not a strategy.  If organizations and the world can take the leap across existential changes like the Big Bang, Y2K, and prospects like Brexit, legal functions can get on the flight of transformation with the rest of the enterprise.

 

Considerations for Business Leaders (Including Legal Sector Leaders)

Customer satisfaction beyond surveys and budgets - As cost management is just table stake, legal departments should approach clients value proposition beyond going through the motion of getting vague and top-of-mind annual surveys.  Mere cost down initiatives lead only to the bottom.  However, to be prepared to set a baseline with zero based budgeting principles will align the legal function’s raison d'être with business strategy.  To design and refresh a corporate legal strategy (CLS) that is integral to corporate and business strategies will be one way to find and connect with that reason.  A CLS will underpin contributions to operational excellence, and anchor people-process-technology initiatives and execution to strategic business outcomes.  While shorter term initiatives like number of contracts reviewed to facilitate sales are easy to aim for, it is long term initiatives that are difficult to be copied or overcome at least for quarters ahead that will bring sustainable competitive advantages for the enterprise, e.g., for the organization to keep up with industry transformation such as enabling transaction and dispute resolution mechanisms for massive volume, finding the sweet spot for users to serve each other while protecting a platform business model to achieve network effect and early mover advantage. 

 

This may amount to redefining the scope of the legal function, for lawyers and the business. Taking the entire legal function and its supply chain, such as law firms, to the next and more strategic level requires organizational buy-in and alignment, nothing short of a change management exercise. Law department leaders must start to build a bench of T-shaped lawyers, including talent that can bridge the interim gap whether from the legal or the business side, such as corporate legal strategists. [5] The absence of a long-term talent strategy could be a major speed bump down the line for firms looking to gain a competitive advantage and fully benefit from larger-scale opportunities like AI. Early adopters need the right mix of talent to accelerate their progress. In the meantime, the legal staff must immerse into the daily activities of business stakeholders, from sales calls to supply chain operations, and explore angles for educating the business folks on relevant legal risks applicable to opportunities, but avoid slides full of quotes of the latest laws and regulations. The vision is a virtuous cycle in which the business comes to lawyers and ask what resource they need to deliver more of something the business needs.

 

From input to outcome and legal engineering – Lawyers have long been pricing their work in terms of inputs, i.e., time (whether actual or shadow) or full-time-equivalent headcounts, and the hour has arrived to focus on outputs beyond memos and court judgment - better connect legal tasks and process to business activities and outcomes.  But how to persuade clients and business colleagues to include the legal function as part of the business strategy and operations? Lawyers must give risks its due chance, i.e., pricing risks against opportunities, rather than just practicing law with zero risk tolerance.  Cooperate with businesses to tap into data relevant to risks assessment, design the legal function to be native in that data flow and analysis in order to provide risk adjusted values to business.

 

Bolstered by management tools – Part of the transformation of the legal function is to broaden problem solving skills of lawyers beyond the law.  Before rushing into problem solving skills seminars, leaders of the legal function needs to prepare the team.  This means to truly appreciate operations from end to end, keep up with the current strategy that underpins the business model, and master the strategy map to apply legal initiatives.  This is increasingly necessary as laws further lag behind dynamic markets and broader ecosystem such as social forces.  Another critical success factor is to upgrade the staff’s engagement to solve change management problems rather than stopping short of corporate politics gossips.

 

Problem solving - Lawyers are supposed to be skilled in stating issues, applying rules to relevant facts, analyzing the impact and recommending options.  However, most seem to find it difficult to go beyond the initial queries and are stuck in the simple Q&A stage and fighting fires in the backend of events and processes.  The legal function needs to be on the same page as the rest of the organization and extend beyond the legal analytic method to acquire problem solving skills such as defining and isolating a problem, structuring the analysis (to test causes and relationship to the problem and any externalities to keep in mind), formulating and testing hypotheses with validated assumptions, before jumping in to generate solutions.

This approach applies in more familiar territory where the trouble shooter has some ideas of what problems and contributing causes are.  However, where it is simply not clear what causes there might be, the legal function must borrow from the design thinking approach to solving problems.  This requires getting into the stakeholders’ perspective to sort out what the problem may be and experimenting with hypotheses generated from this exercise.  This will help to solve the problem for the client or at least isolating the cause if it is outside the scope of the legal function. 

 

To achieve desirable outcomes for the enterprise, the legal function also needs to learn to sell the solutions.  This is often the case in larger organizations with streamlined resource management across silos when the problem solver does not own the resources required to address an issue.  Lawyers will need to figure out how to help management to navigate organizational aspects of forming, adjusting and selling solutions.  The legal function can undertake these efforts only if it sees itself tasked by the business to take initiatives to solve what might have not been perceived as purely legal problems.  Indeed to accomplish these tasks, sometimes it may even get into the data needed before asking for permission first.

 

Legal process management and Continuous Improvement built upon CLS - Solving problems for the business can benefit from workflow process management, e.g., operations process mapping, implementing RASIC, 6 sigma and Lean (doing things right and doing the right things).  Connection to and feedback from the right business data will lead to a virtuous cycle of improvements.  However, why only stop at doing the right things, but also provide what the customer needs above all – support to formulate and execute business strategy.

 

Picture an e-commerce platform with an initiative to facilitate the maximum amount of successful, completed transactions.  A relevant CLS may be to minimize disputes and delays arising from uncertainties or confusing terms and conditions in the ecosystem.  The legal function can take the lead to reduce transactional frictions and enable handshakes and deal performance, in addition to protecting the e-commerce platform’s own interests.  It may also leverage emerging technologies such as blockchain among trusted parties to take the platform to the next level and legal-proof the design of the ecosystem based on relevant processes among parties and touchpoints.  This is the profile of a function that wins strategic competitiveness.  

 

Being an integral part of business (vs. just practicing law inside a business) – This needs not be a dilemma, and being more business savvy can enhance, rather than dilute, the ability to balance risks and opportunity.  Whether the compliance function should report to the board (ultimately the top organ in an enterprise) or to the legal department is a false choice.  An ignorant compliance function, albeit one with a “conscience,” is no more effective than one that is overly sympathetic with business objectives. 

 

There is no replacement to learn the language of business to craft legal devices and better connect them to business tasks and measures.  What all this is about is for the organization’s constituents to be thorough in an honest and meaningful conversation to assess the risks as part of its strategy.  This is just as lawyers learn to avoid drafting document full of Latin terms and ending up losing the attention of the stakeholders on even commercial terms and having clients throw contracts back.

 

Enabling LegalTech - While LegalTech still needs much time, effort and capital, the key ingredient to successful adoption is an orientation to outcomes and business benefit.  Not all benefits need to be in the short term as strategy by definition prevails in the mid to long term, but explorations must be guided by outcome orientated data and a worthwhile win.  That requires starting from business strategies and mapping today’s legal tasks with business processes and the changes needed to deliver those business outcomes.

 

Automating predictable/repeatable aspects of legal tasks to minimize lawyers being the slowest link in the organizational workflow is useful.  This will free up resources for the legal function to manoeuvre for the bigger wins.  Figuring out and negotiating improvements in work flows and process across silos will be the critical skills to acquire whether the project concerns existing business or a disruptive change.

 

As the laws are woefully incomplete relative to the dynamic ecosystem and behind today’s pace of change, the road is no longer certain and continuing reference to the past is dangerous.  Yet lawyers are still called upon to address If-then scenarios, whether in advisory, contracting, negotiating in disputes or transactions.  So what lawyers may do is to interpret legal intent and policies, to be integrated with a broad range of intelligence that is outside the legal vertical such as technological development, socioeconomic trends and developing political forces.  While information explosion and specialization adds to this challenge, availability of data analytics is keeping this within grasp.

 

To mine and curate data for efficacy, lawyers need to master the decisions that business need to undertake, beyond whether to sue or agree to a clause in a contract.  To migrate from practicing law by anecdotes, the legal function is to leverage data, build the analytical framework, derive the odds to price risks against opportunities, with a view to arrive at desired outcomes.  In other words, the data needs to help generate if-then predictions to fill out scenarios in decision trees to train algorithms.  The practice of law may evolve from being case based to include pattern based approaches.  Today this effort should start with leveraging corporate efforts in mining and cleaning data feeds.  Tomorrow legal engineers will design data pipelines that are digitally native.

 

To design and update sustainable data streams, the same CLS’s that enable legal functions to deploy people-process-technology to transform itself into a strategic function will be the core exercise to triage more valuable initiatives and supporting data feeds.  Legal R&D should proceed hand-in-hand with business experimenting with new products and value propositions, circumscribing commensurate risks and solutions to gain a sustainable, competitive advantage - something to keep as a trade secret rather than to share in benchmarking.

 

With CLS’s that are purposeful and strategic for business outcome, AI/ML algorithms, blockchain based solutions and possibilities for computable (smart) contracts will be designed to be deployed rather than as a solution looking for a problem.

 

Summary

Although the era of digitization is already in its fourth decade, the legal sector seems to have only digitized documentation, communication and some knowledge management.  Although some in the profession recognize the potential of machine learning and other technology, lawyers have yet to work with clients and colleagues to mine and build the data pipelines to train algorithms to help business in the problem solving and decision making in the bigger picture.  Input based business model, the professional hesitance to explore on labor-capital continuity and other change management obstacles remain to be overcome.  Nevertheless, change is afoot, just not evenly distributed. [7] 

 

Quantification, organizational change, uncertain economics may not be what many lawyers went to law schools and sign up for.  Some may think they will retire by the time the first wave of transformation arrives.  But we should be measured by what we do with the time given to us.  Lawyers have been prized for judgment, experience and longer term views and zealous advocacy in some cultures, but these qualities are facing a different world in the age of data and changing economics and industries dynamics.  The legal profession should make what sells rather than just sell legal knowledge, derivative analysis and negotiated documentation, and getting to why is not enough when the times demand also asking why not.

 

Lawyers have been taught to spot issues beyond addressing the question asked, and legal function transformation should take the same approach.  The way to ground the transformation is to get to the reason of existence of the client organization as well as that of the legal service industry.  When many see tech, we should see strategy, business models, goals, outcomes, process, work flow, decision making and problem solving.

 

The journey of a strategic function is paved by strategy and execution, not cost control.  The spectrum from the bespoke to commoditized legal activities pictured by Richard Susskind describes an inevitable reality that will be common in a profession hitherto considered a bastion of human intelligence, but the digitization of knowledge will drive the legal sector to extend the bespoke side of the spectrum rather than rest on past laurels.

 

Notes

[1]  How Google Works (2014), E. Schmidt & J Rosenberg, section titled “Horseback Law.”

[2]  2019 Client Advisory, Citi Private Bank and Hildebrandt Consulting, p.6.

[3] See Ron Friedmann’s blogs:  https://prismlegal.com/to-reduce-legal-spend/ (2012); https://prismlegal.com/do-less-law-a-taxonomy-of-ideas/ (2015), quoting Peter Drucker “There is nothing so useless as doing efficiently that which should not be done at all.” 

[4] “The New Normal: The $60-Per-Hour Lawyer—Why Dewey Isn’t Ab-Normal” by Paul Lippe Mar 28, 2012, ABAJournal.com.

[5] “Finding the Right Corporate Legal Strategy,” R.C. Bird and D. Orozco, MIT Sloan Management Review, Fall 2014; see also a reference to legal strategists and engineers – who “design systems that balance risks [with opportunities] and improve transparency” in “Measure Twice, Cut Once: Solving the Legal Profession’s Biggest Problems Together”, V. Mary Abraham, aboveandbeyondkm.com, Aug. 30, 2016 (noting the keynote speaker, Dan Katz’s, reference to Paul Lippe’s insight on the three types of lawyers).

[6] See “The Right Way to Solve Complex Business Problems,” Harvard Business Review Ideacast, interview of Corey Phelps, December 04, 2018. 

[7] A saying often attributed to William Gibson (https://en.wikiquote.org/wiki/William_Gibson), and also Richard Susskind.

About the Author 

Kenny Tung is General Counsel at Lex Sigma Ltd., where, in addition to facilitating strategic projects and transactions, he served as the China advisor to a top U.S. PE fund, the Asia Pacific advisor to one of the world’s top auto components companies and provides support to other large and small enterprises in China.  Kenny also co-founded In-Gear Legalytics Ltd. to complement and serve providers, clients, developers and investors in the legal service value net.  Projects with law firms and corporate legal departments cover consulting, capability assessment, workshops to address longer term issues, but a common stream concerns the design and implementation corporate legal strategies.  In March 2019, Kenny started an additional role as the Senior Advisor to SSQ in Asia Pacific, facilitating business development and alliance for law firms and management of legal departments. Previously Mr Tung served as the Chief Legal Counsel of Geely Holding (during which time the department received the top award for Best Asian & South Pacific Legal Department 2014 by International Legal Alliance Summit) and before that as general counsel in the region at PepsiCo, Goodyear, Honeywell and Kodak where he fielded a vast variety of issues and projects and drove efficiency projects/practices.  In 1994, he came to China as a lawyer with Coudert Brothers and led major projects such as the Shanghai GM JV negotiation.

 

Born in Hong Kong to Shanghainese parents, Kenny received his bachelor and JD degrees from Columbia University and practiced in New York City before coming to China.

 

 

 

 

 

 

 

 

 

 

 

 

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