As staid and conservative lawyers and their profession may seem, it is undeniable that change is a part of their world. The change that has confronted the legal profession since the collapse of 2008 has garnered a lot of press, but lawyers and their firms have had to adjust to an altering world for a lot longer than just the past seven years. Even so, most would agree that the economic turmoil of 2008 has been followed by a more demanding client base, the advancement of alternative service providers and increased competition, including from clients.
Recent attention has been directed to non-financially driven developments that suggest a future in which the delivery of legal services will change further, perhaps dramatically so. Data analytics in litigation is being touted as a tool that will make litigation outcomes more certain. Algorithms are being used to write articles, which mean that a new communication medium may supplant some of the work that lawyers currently do. “Ross” has been introduced to the legal world and while arguably not much to look at, he (or she?) is an artificially intelligent attorney that does legal research. And the “Uberization” of law firms is also being sighted on the horizon. If these developments don’t actually take hold, other innovations certainly will come in their wake to impact lawyers and law firms.
The coming law firm revolution (or latest evolution) means, to one group of commentators, more technology and fewer lawyers. For some smaller firms, it will allow them to “punch above their weight.” In the case of other firms, possibly not. At least one bar leader has warned her colleagues to “get an edge on artificial intelligence.” Do all these advances threaten the future of law firms, as we know them? For law firms that are prepared to meet these changes head on, the answer is “no.” Other law firms that insist on “whistling past the graveyard” will find the future much more difficult.
Artificial intelligence, algorithm based communications, data analytics and Uberization are groundbreaking in any industry and certainly could be in the labor-intensive business of law. With the advent of these changes (or ones that prove more effective), law firms should be prepared for at least five consequences:
Clients Will Compete With Firms Even More. Since 2008, more clients have built up their in-house legal staffs to do the more commoditized work previously performed by outside counsel. New technologies will reduce barriers to entry and accelerate this trend. New tools will render the currently complex more routine and clients will compete with law firms more than ever.
Legal Work Will Be Less Labor Intensive Thus Undermining the Value of the Billable Hour. The new tools will drive efficiency unseen previously. Firms that base their economies on hourly rates may find it difficult to generate sufficient hours to support their financial model. Firms of the future will need to migrate to a financial model that generates revenue outside the billable hour.
Firm Investment Must Be Reallocated. 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 interpret. An incoming associate class may give way, at least partially, to an incoming tech class (some my be trained as lawyers).
Pricing Legal Services Will Become More Important. A by-product of increased efficiency and reallocation of resources at law firms will be the need to price services based on product and results delivered. Pricing will need to adequately blend certainty and client results, return on investment for the firm, and positioning against competition (other firms and in-house) in order to thrive.
Human Resource Management Will Change. Human resource management will rely more heavily on contract lawyers (or their equivalent) and short-term utilization of outside services. Whether the legal profession becomes truly “uberized” is subject to debate, but the underpinnings of the Uber model will drive the profession away from long-term personnel decisions and towards managing fluctuating demand by short-term hires.
Law firms with a healthy respect for and curiosity about innovation will adapt as these or other new changes take root. Firms that fear change will struggle. Which path will your firm take?