Are you ready for the lawtech transformation?

It’s no secret that technology is set to radically transform the legal sector. So what should firms be doing to harness the potential of emerging technologies - and avoid falling behind?

Lately there’s been a lot of talk about the potential for technological innovations in legal services, or “lawtech”, to revolutionise the way legal services are delivered and the way law firms operate. So far the impact has been relatively limited.

But that doesn’t mean we should discount the potential of technology to reshape the legal sector. We’ve seen in other industries that while technological change can be slow to take off, once it reaches critical mass it can have a genuinely transformative effect.

I recently caught up with consultant Ted Dwyer to discuss some of the remarkable innovations currently in the pipeline and how firms can respond to take advantage of them. A former solicitor, Ted Dwyer is now Director of Dwyer Consulting, providing specialist advice to legal services firms in Australia and around the world. He believes the Australian legal sector will be radically transformed by technology over the next decade, and that firms need to start adapting now.

Welcome to the age of machine learning

Dwyer says change is being driven by three key forces: the processing power of computing devices; their increasing sophistication; and the sheer volume of digital data now available.

Firstly, computers are developing exponentially, to the point where they will rapidly outpace human cognitive abilities. We are seeing the development of machines that will not just process knowledge, but actually create new knowledge.

Secondly, technology companies are producing increasingly complex algorithms, predictive modelling and data mining techniques to develop machines that think for themselves, rather than being programmed. This sophistication in how machines operate and interact has spread to legal processing technology which is constantly evolving.

Finally, as more people become connected online, a vast amount of digital data is becoming rapidly available to these increasingly powerful machines — data that humans simply don’t have the capacity to analyse. The ‘internet of things’ will accelerate how data is collected and used by machines.

According to Dwyer, these three trends will drive the rapid development of artificial intelligence in the legal sector, creating advanced legal processing technologies whose potential we are only just beginning to glimpse.

The challenge for law firms

The challenge posed to law firms is profound. Lawtech empowers in-house legal teams to manage more work themselves and allows non-lawyers to access legal knowledge and solutions in new ways. Dwyer argues that this means less work will be referred to external law firms, unless they change the way they do business.

To date, lawtech has only had a limited impact on Australian law firms — less because solutions are not available, than because law firms are still just starting to explore them. One reason for this slow rate of adoption is the healthy sense of scepticism that characterises the legal profession.

As we all know, lawyers are sceptical. They are trained both to respect precedent and to question everything. So it is unsurprising that even the most forward-thinking firms want to carefully weigh up the pros and cons, and understand the positive benefits of new technologies, before making a decision to adopt them for their own purposes.

But according to Dwyer, there is also a less positive force at play. He says legal practices tend to focus on shorter-term outcomes rather than the more distant future. Even in the best law firms, the strategic horizon has typically never stretched much more than 18 months to two years into the future. This short-term thinking means that many firms are not yet ready for the strategic challenges posed by lawtech.

That doesn’t mean lawyers aren’t sitting up and taking notice. Dwyer says a growing number of sophisticated firms and partners are beginning to invest in internal technology leaders, as well as partnering with external experts.

It is these firms that are likely to gain a competitive edge as the new technologies take hold.

Ted Dwyer, Dwyer Consulting
Harnessing the opportunities

One of the great attractions of technology is that it allows firms to automate time-consuming but comparatively low value activities, so that they can ensure their staff focus on areas where they can really make a difference.

We have already seen the power of automation in legal processing — making a significant difference for firms by undertaking enormous tasks in a relatively small amount of time. A familiar example is the rise of the e-discovery platform, now converging with the broader discipline of information governance, enabling firms to use IT to manage risk issues simply and efficiently.

Dwyer also cites the example of AI, a solution recently developed by a large technology company to manage patents in-house. AI has the ability to classify 50,000 patents in five hours, rapidly completing a volume of work which the company estimated would have taken a team of four lawyers about three years, at a cost of $US1.5 million.

The key message for legal practices seeking to harness the capabilities of new technologies is to re-examine the legal value chain and identify the links that can be automated and those that can’t. By carefully examining each step in your day to day legal process, you can pro-actively begin using automation and outsourcing to create new cost and process efficiencies, focusing your time and energy on your areas of greatest comparative advantage.

Becoming a firm of the future

Current lawtech is quickly taking over the work traditionally undertaken by more junior lawyers. The future will include AI that can do the work of senior lawyers. Dwyer estimates that by 2025 around three-quarters of all law work currently undertaken by lawyers will be managed or assisted by technology. But he emphasises that certain areas of law will always require high levels of human mediation, such as advocacy and negotiation.

In a future where more work is done in-house, Dwyer believes successful legal solution providers will re-position themselves with three distinct offerings: AI platforms; legal processing technology platforms; and expertise in specialist high-risk advice, negotiation and advocacy. He also believes that the traditional firm will evolve into a broader advisory practice, collaborating with other professions to provide multi-disciplinary solutions across law, finance, technology and business strategy.

Given the pace of development, Dwyer cautions against hesitation. Law firms need to start thinking about these issues now, as these tech solutions will start to emerge as real products for buyers of legal services within the next decade.

The bottom line is, as a legal practitioner you need to understand the technology, identify the key areas where you add value, and find ways to outsource or automate the rest. A change is coming - is your firm ready for it?

Ian Marshall, Macquarie Business Banking
Top three tips for law firms of the future

1. Review your strategy

Make sure you have a solid understanding of lawtech and how future buyers will use it, so you can develop an integrated vision for the future and a coordinated approach to using technology.

2. Build your capabilities

Whether you’re thinking of partnering with other businesses or investing in your firm, focus on enhancing your digital platforms and technology solutions.

3. Find the right people and train them

Your staff need to understand legal technology, its impact and application. This involves cultural change, not just new processes and platforms.

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