Time to AdaptThe march of change and innovation in the legal services industry continues.  Last week it was reported that Baker Hostetler has licensed “Ross” for its bankruptcy group. Baker Hostetler’s decision to use the Ross Intelligence artificial intelligence product to perform some of the basic functions traditionally the role of associates is innovative and signals change.

Some of the industry’s change and innovation is even slaying a few sacred cows.  A recent article/post by Scott Forman about “unbundling” legal services notes the dramatic change to the “one-stop shopping” model that so many firms have sworn by for years.  Unbundling means giving up inefficient elements of a law firm’s practice or innovating that practice to obtain efficiency-all in the name of client service.

Change and innovation, whether by adopting artificial intelligence or unbundling services, should no longer be viewed as groundbreaking but as a must.  The 2016 report from the Georgetown Law Center for the Study of the Legal Profession notes the systemic change being experienced in today’s legal services market.  The report observes that clients control legal services like never before, law firms’ share of the legal services market is declining and clients are keeping more legal work and doing it in house.  Responding through innovation, whether by turning to artificial intelligence, an unbundling legal service, or taking other action, is essential to remaining relevant.

For law firms seeking to avoid obsolescence through innovation and change, at least five steps should be considered:

Make Innovation a Firm Wide Mandate.  Change at law firms is hard.  Many new timers and old timers alike will bristle at abandoning the tried and true approach to law in favor of a new way.  So before new ideas are proposed or change threatened, law firm leadership should spend significant time changing the culture through educating the ownership about the new normal and the dangers faced.  An educated ownership becomes an ally, a font of ideas and drives the firm towards a more client-centered approach to law practice.  Make the owners own the change.

Rethink the Economics.  In the future legal work will be less labor intensive and clients will expect results based on an economic model other than the billable hour.  Building a non-billable hour economic model that is client responsive yet profitable should not only be a goal but also an imperative.  Creatively pricing legal services will become more important.

Reallocate Firm Investment.  The march of technology has been felt for a long time.  In the future, firms will need to allocate budgets not only for more advanced systems, but also for personnel that will fill a quasi-legal role to generate data and analysis that lawyers can use.  An incoming associate class may give way, at least partially, to an incoming tech class of which only some may be trained as lawyers.  Young lawyers with a start up mentality motivated to think about better or more efficient ways to do things could prove very beneficial.

Change the Human Resource Management.  Even in a world that includes Ross, good people will still be needed to deliver good legal services.  But human resource management will rely more heavily on contract lawyers (or their equivalent) and short-term outside services.  Whether the legal profession becomes truly “uberized” is subject to debate, but the underpinnings of the Uber model and client expectations will move the profession away from long-term personnel decisions and towards managing fluctuating demand by short-term hires.

Diversify.  If alternative legal service providers are making inroads and taking market share, think about joining the trend. More than a few firms have taken this approach by segregating into other business units labor intensive activities like document production.  By doing so they have delivered lower cost services on commoditized work rather than see that work or the client go elsewhere.  For the most part, there is no reason a regular law firm cannot provide alternative legal services if well thought out.

Ross joining Baker Hostetler is not as revolutionary as it may seem.  For some time now client expectations of better value and efficiency from its lawyers has furthered innovation in a profession generally slow to change.  Is your firm keeping pace?