Introduction
Artificial intelligence (AI) has slowly but surely begun to affect almost every sector across the globe, bringing with it huge disruption and opportunity. Despite attracting some of the most talented and ambitious people, the legal sector is renowned for its resistance to change and it has made no exception for AI. But external forces have in recent years made it increasingly difficult to ignore. Artificial intelligence has changed consumer behaviour within the legal sector, and ways of working and living for law professionals. This has led to clients demanding more sophisticated ways to solve their legal problems at lower prices. And law professionals to expect less from their employers (and by that we mean fewer hours and fewer menial tasks). As a result, the last decade has seen numerous law firms invest in artificial intelligence out of fear of their clients moving lucrative work inhouse and their most talented people being attracted elsewhere, thereby giving rise to “legal tech”.
“By far the greatest danger of artificial intelligence is that people conclude too early that they understand it” – Eliezer Yudkowsky
What is legal tech?
Artificial intelligence is a type of technology that mimics the perception, learning, problem-solving, and decision-making skills of the human. Legal tech comprises of artificial intelligence technology that completes manual legal tasks. This type of technology mimics the intelligent skills that humans possess, such as understanding natural language, recognising patterns and learning from experience. As a result, it can do tasks such as document review and contract drafting.
However, legal tech does not just complete those tasks. It does so at a higher accuracy rate, significantly faster, and at a lower cost. For example, instead of spending hours reviewing documents, articial intelligence does that within seconds, allowing law firms to provide their services to clients at a much quicker rate.
Nonetheless, legal tech does not replace lawyers altogether. A study conducted by McKinsey Global Institute found that 23% of an average lawyer’s job can be replaced by AI, and that figure was well over 50% for paralegals. Lawyers will be required to guide the machines, ensure the end product is valid, and most importantly, communicate with clients. Their roles will shift to become more interactive with technological applications in their given field thereby providing more work and revenue streams.
Effect on the legal sector
To ensure that the implementation of legal technology into practices brings benefits, it is important to address the firm’s assets and capabilities. The following are some of the sections that are vital to the success of the legal tech implementation.
Organisational restructure toward the future. Legal tech has speeded up manual legal practice. Kira Systems (an artificial intelligence software) reduces the time spent on due diligence by up to 60%. This gain time enables law firms to shift their focus to higher-skilled tasks. Junior lawyers, for example, traditionally completed menial tasks that are now replaced by artificial intelligence, allowing them to now work alongside seniors. Successful innovators can use this opportunity to restructure into a leaner organisation and upskill their personnel, thereby enabling the provision of high-quality services.
Asset restructure toward the future. Asset restructuring supports the commercialisation of this type of innovation. Successful innovators may, for example, establish separate subsidiary units. Through these, firms can employ different management structures, methods of operation and corporate culture in separate units. This enables the successful operation of each unit whilst supporting the overall business operations. Some have already done this. Examples include a Magic Circle law firm Freshfields Bruckhaus Deringer establishing the Freshfields Lab in Berlin, which develops technology-based solutions.
Innovate service offering. Traditionally, law firms operated a “legal advisory” model whereby they offered customised advice to clients. With legal tech, the range of services widens, with the possibility of offering fixed services. These may include contract automation or due diligence done by a computer. This provides an opportunity for a multidisciplinary offering approach which includes both customised and non-customised service, thus fulfilling the demands of clients.
Reflect the costs. With fixed services come fixed prices. JPMorgan, for example, used an AI-powered computer “COIN” to replace 360,000 billable hours of lawyer work. This enables law firms to provide total costs to clients before completing any work, thus instilling certainty. It is therefore unsurprising to see the effect of legal tech on law firms’ pricing models. As with service offering, mixed-basis pricing models may become the new normal.
Strike a balance. As more information becomes available and clients demand better services with less costs, it is vital for law firms to innovate. Nevertheless, innovators should strike the right balance between customised and non-customised advice, and billable hours and fixed prices. The law is constantly evolving, and with some issues still having no precedent, clients are in need of expertise as much as they are in need of reduced prices.
Conclusion
Legal tech is changing the way lawyers work, how law firms operate and what clients use and pay for legal services. No longer should lawyers spend hours reviewing documents and passing on their high hourly charges to clients. Nevertheless, law firms have only just started to innovate in a sector renowned for its conservative approach to business. Guidance is vital to ensure that their business structures, operations and models are adjusted correctly. Without it, law firms risk not benefitting from their investment in legal tech.
