The famous American jurist Clarence Darrow once said, “The trouble with law is lawyers.” And, when it comes to changing the way lawyers and law firms operate, some of the speakers and panellists at the Legal Inno’ Tech Forum, which took place in Hong Kong in June, might agree with him.

According to keynote speaker Mitch Kowlaksi, “The current legal services delivery model is at the end of its natural lifecycle. And the only people who don’t know it are members of the legal profession.”

Despite an entrenched institutional inertia, things are changing within the legal profession. Panellist Nick Seddon, Director of Seddon And Co., believes that in Asia, those changes are being driven by the same pressures the rest of the world is facing.

“You can’t get away from the effects of globalisation. There are also talent issues, and clients who are demanding more for less,” he said.

He highlighted two other innovations that will have a marked effect on the legal landscape. The first being Artificial Intelligence (AI) and information technology. And the second, new entrants, such as boutique law firms breaking out of the bigger players.

“They may be names you’ve never heard of before, and follow a different business model, but they are staffed by fantastic people,” he said.

However, the issue that may be worrying the big law firms the most is the fact that the Big 4 accountants are getting back into law, and doing so with a vengeance. PwC is leading the charge, employing 2,500-3,000 lawyers globally. Another significant advantage for a Big 4 firm like PwC is footprint, with approximately 90 offices in a huge number of jurisdictions.

“It’s a worry for law firms, but a very nice alternative solution for clients,” said Seddon.

Millennials making their mark

Millennials are moving into the mainstream, with some already occupying senior positions at MNCs – firms that any law firm would be pleased to have as clients. But, according to Seddon, they engage with outside law firms very differently.

For example, recent research polling the most important issues of different demographics identified work ethic and respect as key drivers among the Baby Boom generation. Millennials, overwhelmingly preferred technology and pop-culture.

Fast-forward to today, and studies suggest that millennials are twice as likely to be influenced by a law firm’s social media presence than older CEOs, such as Baby Boomers.

“That means that more traditional firms with a less compelling social media presence could easily end up losing clients,” said Seddon.

The rules of regulation

Regulation is another hurdle legal firms in Asia Pacific must deal with. Regulatory bodies across Asia – which include the Law Society in Hong Kong, as well as the Ministry of Law in Singapore – are quite protectionist. That can make innovating within the legal industry difficult.

But, the biggest barrier to innovation probably isn’t governments, or even professional bodies. It’s the current law firm model.

For over a century, partners have been incentivized through a share of often very sizeable profits. Persuading them to accept less, and invest the balance in the long-term future of a business – an entity that they may longer be a partner in – isn’t the easiest proposition.

There are some examples of organizations taking a different approach, but not very many. In fact, you can count the number of law firms that have gone public and listed their shares on the market on the fingers of one hand, and still have a finger or two to spare.

“The challenge for the big law firms is to look at themselves. Break the mould they’ve fallen into, and then rebuild,” said Seddon.

Creativity is still key

Bill Novomisle, Founder and Chief Design Officer of In-Gear Legalytics, who also spoke at the forum, noted that much of the innovation and change is driven by clients taking advantage of their buying power.

“But, clients need to be careful what they ask for. If they just ask to drive down costs, that won’t necessarily lead to innovation. And law firms must be more creative,” he said.

He advocates switching the mind set to the tasks people perform. Then law becomes a process, which is the first step to achieving innovation.

That approach enables a firm to see things it couldn’t before. Like, where technology can help and how it can help. It can also see where something can add value. That value can include something that clients care about, or something that is essential for the smooth running of the business.

Once the process is mapped, the firm can look at look at how those things play within an organization and come up with ways to create efficiency gains.

Novomisle pointed out that it isn’t particularly useful for law firms working on a billable hours model, because efficiency gains impact top line figures. But, it is very useful for in-house counsel, with different economic incentives. And even more so for outside law firms looking for ways to differentiate themselves from competitors while at the same time improving their profit margins.

Tech firms taking the law into their own hands

The forum also revealed that some tech companies are innovating on their own, with well-known names like Tencent (with over 300 lawyers in China) and IBM becoming law firms in their own right.

Tencent creates innovative mobile apps. But, it is also creating an enormous amount of internal software to predict, analyse and make use of data. And its legal departments are doing that as well.

The same with IBM, which is talking about standardizing AI software and introducing it into the financial services industry to create a standard interpretation of regulation all over the world within five years.

These and other large businesses at the heart of the technology – and which also have tremendous in-house legal demands – will drive a lot of LegalTech developments.

Some things never change

The legal profession has always been based on people. Implementing technology can help to build more human connections with in-house business partners, and spend more time talking to them.

That’s probably even more important for the junior lawyers on the legal team. Rather than being stuck in an office crunching out mundane legal agreements – automatic tools are doing that – they can spend more time talking to clients, understanding what they need, and what kind of legal advice they can truly provide.

This article is a follow-up to the Legal Innovation and Tech Forum which took place in Hong Kong on June 8, 2017

Posted by Kirsty Dougan

Kirsty Dougan is Head of Asia at Axiom Law

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