The Triple Threat Facing Generalist Law Firms, Part 2: Legal Tech

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The introduction of LegalMation should be a cautionary tale.

With the haunting slogan “A Day’s Worth of Work in Two Minutes,” LegalMation uses IBM Watson artificial intelligence technology to automate litigation activity. Enter a complaint, confirm the nature of suit and the jurisdiction, and in about two minutes you get a draft answer and initial discovery requests.

Though its subject areas and jurisdictions remain limited, LegalMation has deals in place with Walmart, a national insurance company and two national employment boutiques.

In Legaltech, a Walmart associate general counsel estimated the product provided a 60 to 80 percent time savings. That’s great news for Walmart – less so for lawyers who bill by the hour.

A Larger Trend

In Consero’s 2020 Corporate Legal Operations Report, 79 percent of legal operations professionals said they planned to spend more on technology. That’s an increase from the 2019 survey, when 74 percent planned to up their tech spend.

Meanwhile, in Altman Weil’s 2020 Chief Legal Officer Survey, nearly one-third of CLOs said they planned to use in-house technology as a substitute for labor costs. And the events surrounding COVID-19 forced a higher comfort level with technology; in the same survey, respondents ranked greater use of technology as the second-most likely enduring change to legal departments after the pandemic ends. (No. 1? Remote work.)

To be sure, software is unlikely to replace lawyers altogether; legal minds are essential for strategy, and robots have yet to be admitted to the bar. However, technology’s impact on an industry dominated by the billable hour will be profound.

The Financial Times, for instance, reported that Allen & Overy created MarginMatrix, software that automates drafting of certain documents for banking clients. MarginMatrix reduces the time required to draft these documents from three hours to three minutes – a decrease in billable time of 98 percent.

The Financial Times cited a study by Deloitte that estimates legal tech could automate 114,000 jobs in the next two decades in the United Kingdom alone.

The Motivation

Sterling Miller, the former general counsel of Marketo, Inc., Sabre Corporation and Travelocity.com, made a compelling case for why law firm clients are turning to technology: In-house lawyers are incentivized to find the most efficient, lowest-cost way to do things. Many law firm lawyers are incentivized to do just the opposite.

Moreover, “technology doesn’t get tired, sleep in, call in sick, or take vacations, and it doesn’t need breaks for food or when nature calls,” he wrote for Thomson Reuters. “Technology just keeps working and working and working.”

And it works pretty darn well.

One study put artificial intelligence against 20 lawyers in contract review – specifically, in the accuracy of reviewing non-disclosure agreements. The AI achieved an accuracy level of 94 percent, compared to an average human accuracy level of 85 percent.

The underlying software, LawGeex, promises in-house legal departments they will close deals three times faster – and save 90 percent in costs. It lists eBay, Johnson & Johnson and PepsiCo as customers. (Taking another shot at traditional law firms, LawGeex offers on its website “A Practical Guide to Reducing External Spend with Automation.” You’re not paranoid if they’re really out to get you.)

What’s Vulnerable

What are the major areas where in-house lawyers are shifting resources to legal tech?

According to Miller:

  • E-discovery
  • Due diligence reviews
  • Contract preparation
  • Contract management
  • Legal spend/legal operations analysis
  • Litigation analysis
  • Fraud and compliance monitoring
  • Legal research

If you’re curious about what’s afoot in your given areas of expertise, take a look at Legaltech Hub, where you can search technology offerings by functionality, practice areas, compatibility with other software, target user and more.

What This Means for You

If a significant amount of your work is centered in similar, frequent processes, legal tech presents clear and present danger. While it’s true that legal tech cannot entirely replace human lawyers, it can absolutely absorb enough work to hurt your firm and your livelihood.

How can you robot-proof your practice? Here are three critical steps:

  • If you can define, develop and dominate a specific niche, you will evolve to a position where you are getting the strategic matters that require insight far beyond binary code. Marketing a niche law firm takes discipline, expertise and savvy communication, but it will yield long-term results.
  • Focus on your humanity. Invest in your personal relationships with your clients in a meaningful way. Substantive client feedback is a good start: Research from Acritas shows that only 16 percent of clients are invited to participate in formal client feedback in a given year. Those who do are, as a group, more satisfied and less likely to switch providers.
  • Put the robots to work for you. Bolster your own efficiency and profitability with the legal tech that’s out there now – or create your own. What are clients asking about repeatedly? What processes are you doing over and over again? What work do you complete using worksheets or templates or decision trees?

Husch Blackwell provides a strong example on this last point. Following the shutdowns prompted by COVID-19, the firm’s employment lawyers advised multiple clients on how to reopen their facilities. The firm ultimately compiled this knowledge into a COVID-19 & Return-to-Work Policy Generator, “an easy-to-use, affordable tool that enables businesses of all sizes to create return-to-work plans, customized to their operations without starting from scratch.”

Users complete a survey form that asks key questions about their facilities, and their answers generate a draft based on preprogrammed options. An employment lawyer reviews and finalizes the draft policy, then schedules a phone call to review and finalize it with the client.

What a boon this is for both sides of the relationship.

Clients get the predictability they crave from an unpredictable industry. Husch Blackwell states it will deliver a policy within two to four business days for a fee of $2,750 to $8,750, based on the size and complexity of the company. (Consider that 28 percent of clients say they avoid legal solutions because the final cost isn’t clear, according to Clio.) Every client also benefits from comprehensive and battle-tested research – no one is winging it.

Meanwhile, the firm has the opportunity to bolster its profitability and efficiency by leveraging this work product repeatedly. It also removes many barriers to cross-selling. Lawyers do not have to worry about the deskside manner of a product (nor of it stealing origination credit) – or refer a client to a peer they do not know. Moreover, it’s far more action-oriented to say “Our firm developed a policy generator that can help you,” versus “I think Jane Doe in Employment does that.”

In 2021 and beyond, the smart lawyers will get creative about using legal tech to make their work more cost-effective – and cement their positioning as efficient, strategic and indispensable advisors.

The not-so-smart lawyers? Perhaps they should start welcoming their new robot overlords.

Did you miss Part 1 in our series? Check out The Triple Threat Facing Generalist Law Firms, Part 1: Insourcing.

Coming up next: Part 3 – The Big Four, Not Just Accounting Anymore.

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