For most of the time period between the conclusion of the global financial crisis and the recent coronavirus pandemic, growth in the legal industry had been modest at best. Until the 12 months trailing the COVID-19 outbreak, demand had consistently failed to exceed five percent year-over-year growth over the past decade, with several years seeing negative growth, most recently in 2016.
These trends are not visited on all firms equally, however. Generally speaking, the largest 50 firms have tended to outperform smaller firms. This can be ascribed to several factors. More and more work moved in house during the past decade, but the higher-value, more sophisticated work that larger firms often handle remained with outside firms. Also, the billing rates of larger firm attorneys seen more dramatic inflation over the past decade. Just as important, the financial wherewithal of larger firms has enabled some of them to invest heavily in technology— like artificial intelligence, robotic process automation and matter management platforms—that will play a greater and greater role in the future.
This last factor anticipates what I believe will be the single-greatest influencer over the next decade for law firm growth. Many of the technologies at the forefront of this evolution have been around for several years already, but the key will be how quickly and effectively these technologies are operationalized. Technology has and will continue to drive the evolution of the law firm, both in terms of opening up new kinds of products and services and redesigning how work is done.
Alternative Fee Arrangements & Portfolio Pricing
The common theme to a lot of the newer technologies is the ability to handle and assimilate large data sets. Where this impacts law firms most powerfully is in their ability to comprehend complex, multi- faceted assignments and provide clients with the relative certainty of fixed fees. To be sure, this approach requires firms to share some of the risk of matter management, but it also provides the opportunity for firms to benefit from expert legal project management, something that is mostly marginalized in the billable-hour paradigm. Like most things in life, the more you do something, the better you get at it, and AFAs are no different. Law firms that take the plunge and aggressively seek to structure AFAs will gain invaluable experience with them and will leave slower competitors behind.
Machine Learning and Process Automation
This technology is as potentially transformative as any under discussion. With it, law firms can create new products and service models that lean on technology to sift through staggering amounts of data, exerting cost control over projects that were expensive and time-consuming. For example, Husch Blackwell has debuted two recent products that greatly reduce the legal expense associated with two very different challenges. The Clery Compliance Toolset employs process automation to vastly decrease the time investment and chance for human error for the higher education industry’s compliance efforts in reporting on-campus crime. Similarly, our Return-to- Work policy generator is able to quickly and inexpensively develop tailored policies for companies that are reoccupying their worksites in the wake of the coronavirus pandemic. In both cases legal counsel is still needed, but the starting point is well ahead of where the project would begin without the technology.
With the right tools and infrastructure in place, any project that requires the review of copious amounts of information and data—say, contract reviews or legal holds—becomes less daunting. For instance, in a 2018 article, Missouri Lawyers Weekly profiled Husch Blackwell’s use of Kira, an artificial-intelligence tool, reporting that “In 2018—the first full year of usage at Husch— approximately 100 associates and paralegals used Kira to process 26,000 documents on 30 client projects of different sizes, Wasson said. In addition, the firm also has “trained” Kira to recognize 50 provisions that are common to Husch clients.”
Just as important for firms, these kinds of technological solutions are scalable. If a practice- area team had the bandwidth for a handful of these of assignments in the past, the same team can take on many more. While fewer hours are required per assignment, the attorney time expended shifts up the value scale.
Matter Management Platforms
It is now possible for law firms to provide clients with real-time data on the matters the firm handle. This would include the current status of matters, hours expended, and fees billed against budget, among other things. These client platforms are the result of firms leveraging newer technology infrastructure for website development and accounting/matter management and can greatly improve transparency. For law firms that excel at project management, that transparency is one of the best client development tools available, providing a real-world example of how the law firm actually collaborates, communicates and performs.
Scaling the Future
As the old cliché goes, necessity is the mother of invention, and some law firms have felt the necessity to innovate more urgently than others. Many of the larger law firms lag in technology development and deployment precisely because of their current, brand-based success; however, as you move down the AmLaw 200 list, the level of urgency changes, as does the cost-benefit analyses for investing in technology.
And make no mistake, the investment required to be an innovator is not insignificant. First, the technology itself can be expensive, particularly if bought off the shelf, but even off-the- shelf solutions require further refinement and development. Without the professional human capital infrastructure (or investment) needed—legal project management, information technology, process design, change management, etc.—it is very difficult, if not impossible, to develop a meaningful platform that differentiates one firm from another. The ‘secret sauce’ of legal technology and client collaboration is the lawyers and business professionals behind the automation.
In thinking of the future, scale is the key. Some of the examples mentioned above are simply out of reach for some smaller firms and corporate legal departments. Indeed, much of the consolidation in the legal industry is driven as much by a desire to scale technology investments as the desire to reach new markets or gain new practices. Future innovation in the legal industry is likely to thrive in the resulting sweet spot—from firms that are large enough to make the needed investment, but small enough and hungry enough to understand that these technologies hold the competitive advantage they have been seeking.
Based in Kansas City, Kevin Bielawski is the Director of Legal Operations at Husch Blackwell LLP.