April 8, 2023
Legal Tech's Big Data Perspective
Legal project management and data analysis, using AI to solve problems and boost efficiency, are crucial for the future of legal tech. Investing now will help law firms optimize processes, predict outcomes, and stay competitive

If you've heard some of my recent presentations - or perhaps been (un)fortunate enough to sit through a sales presentation of mine - you know that I think that legal project management ("LPM") and data analysis will be the future of legal technology.

In the industry, we are experiencing a heightened focus on solving a problem. That is a healthy sign: legal technology must inherently solve a problem for someone (something the we entrepreneurs dramatically love to call a 'pain').

We hear from our customers that a lot of legal tech solutions often seem to be designed by people outside of the industry and, thus, risk suffering from a lack of the necessary insight into workflows and how "things actually work" on the inside. This is often a reference to (1) the actual tasks performed; and (2) the impact on the business model, i.e. the final business case.

It's a good lesson for us legal tech entrepreneurs: stop - think about what problem we're solving. For example, if the law firm business model is based on time billables, is a solution that focuses on providing better overviews anything more than a nicety - unless we include more powerful process tools?

In the past month, we have been privileged to onboard users from multiple countries and industries in Europe - an expansion beyond our original Scandinavian roots. It has been incredibly interesting to see how the products have been received, especially the "value add-concepts" that we've been presenting.

It's particularly fun to see how the focus on finding the actual operational problem - like overviews - has been developing into having a more strategic perspective. One of the reasons may be that some solutions should not focus on reducing costs or time, like the approach usually would when solving cost center problems, but rather take a more business expanding approach.

During this process, I realised that we also need to elevate our legal tech solution to serve a higher and strategic purpose. But we also realised that this higher purpose is similar across borders.

Otherwise, we don't really solve a fully necessary problem.

The higher purpose - what it is and why it matters for law firms

Interestingly, most law firms we speak to do not believe that they have a general and urgent problem - for now. It is technically possible to do a lot of the things that legal technology does with manual processes... and when every hour is billed, then there's no need to rush it.

Then there's the employee retention, but there's still a plethora of young lawyers that want to work at law firms. With a little tweak, perhaps law firms will manage to retain their employees in the current business models. We see a lot of interesting trends in this area.

With the recent development in artificial intelligence, it's becoming clear to a lot of us in the legal technology industry that AI is growing from a fun gimmick to becoming a functional tool.

Unfortunately, I think a lot of people either over- or underestimate the impact that algorithms and artificial intelligence can have in the legal industry. While it may not be today, the ability to ask a computer to create draft legal documents will be a big step towards legal as a commodity. Just look at the simple legal documents and emails hashtag#ChatGPT can create already.

But it's not a good end product, I wouldn't trust it, you may say.

Correct, I agree - from the perspective of a legal expert (and for now). From that perspective, it may still need a human touch, but as a tool, it will prove to change the ways your clients think about legal services.

If a computer could get a client 85% percent of the way - and if that risk is acceptable to the client on a cost vs. risk basis - what do you think that many clients would choose?

Of course, I am not talking about big transactions or very specialised advice (yet), but for a lot of the simpler legal advice that is currently being outsourced, that's where the future is headed. The thing about this type of technology: it updates - and fast. There's already rumours about larger and more advanced documents being drafted - and reviewed.

However, I am not here to predict the end for lawyers. I truly don't believe in that! But according to Wolters Kluwer ("The Future Ready Lawyer", 2021) more than 90 percent of legal departments ask or plan to ask law firms about their technology use. Technology is becoming more important for clients - they are building their lives with it.

And thus, technology should also be important for you.

On the other hand, AI will not take our jobs as lawyers - but it will change the way clients will look at non-specialised legal services: as a commodity. The threshold for legal as a service will be higher, while the areas in which legal is steadily becoming a commodity will increase. Documents, agreements and basic advice. AI is not a competitor, but very quickly, AI will enable clients to be a competitor to law firms within a growing number of legal areas.

A survey about legal departments made by Apperio ("The legal spend landscape for 2022", 2022) supports this idea: "[...] 72% of respondents said the level of investment in legal tech would increase" over the next 12 months. "CFOs and other finance leaders are even more bullish on legal tech within their organization: 82% said spending on legal tech would grow in the next year compared with 67% of their peers in legal."

Sure, the aim is to be the trusted advisor, but when cost lowers and speed raises, we need to bring more value to the table (or suffer from higher cost pressure). Just look at what is being done with Harvey and the large international firm, Allen & Overy.

But it also presents an opportunity: if large parts of the legal value chain become commodities, this allows you to introduce scalability to law firms. Financial services are a great example of how that evolved.

The progress offers an enormous opportunity for any law firm to look past the next 2 or 3 years and directly into the future.

Imagine the value could be brought to the client, if the deliverable is more than the conclusions in reports, emails or memos. One of the primary key selling points will be how well the advice is presented, how easy it is to understand, and if whether the advisor had time to deep-dive on specific risk points. This requires a deeper and more specialised legal knowledge - but will also require lawyers so become more business savvy. The trusted advisor does not only provide legal services - or rather, legal services will include a practical and perhaps even tactical or strategic perspective.

What does that have to do with data?

Legal data will be the future of legal operations and services - because legal data will power these innovations. Imagine if law firms could take an average of all the last matters within a similar area and scope, define an average price and then optimise specific KPIs based on that data.

But not only that: what if the legal team always has access to updated and accurate data, such a templates, legislative developments, which in combination with the KPIs will enable the law firm to predict both revenue as well as legal risk and business outcomes.

How do you get that data? Use technology. Your tech tools may help you gather and use data. But that also means that legal tech developers should be aware of this need and help the law firms obtain and analyse this data.

All it takes is a small investment now. Maybe not in a specific tech tool (but if you do, buy Juristic) - but in the idea of using data. Whether you are in development or legal - or both - let your technology become the tools to generate future positioning and income streams.

That is the higher purpose of legal technology.