Will Gen AI be the death of the billable hour? How should we be training staff to use technology now? And what does Clio’s $900m investment mean for end users? At ClioCon 2024, Legal IT Insider’s editor Caroline Hill sat down with a number of Clio executives for conversations about the changes impacting the legal sector and end users.
From Clio’s employees all running on stage whooping and cheering, to existential conversations with executives around the future of the legal sector, my first ClioCon really stood out (in a good way) among user conferences, and at times had the feeling of a cult rather than a legal technology gathering.
In a world where we are constantly banging a drum about putting culture before tech, Clio’s CEO and founder Jack Newton and his team embody the messaging, building a $3bn company that is something of a 101 in putting your staff and customers first. Sure, the whooping and running on stage as the conference opens and closes is practiced. In fact, practiced three times I hear, because everyone was half asleep at 6am. But if you asked me for my biggest ClioCon takeaway, it would be that as an industry we need to do better at focusing on people and culture, particularly amid the tech overwhelm we are all feeling.
For updates on the Clio platform, including its Gen AI assistant Duo, see my article HERE from the keynote with Newton.
Below are some of the key takeaways from my other executive briefings, where we discussed whether the billable hour really will be killed by Gen AI and what that means for timekeeping and profitability; how legal tech training needs to change (and why); and the significance of Clio having growth equity funding (as opposed to private equity) in terms of its longer term ambitions.
Au revoir, billable hour?
From a picture of a gravestone in Newton’s keynote to statistics in Clio’s Legal Trends Report showing that up to three quarters of billable time can be automated once Gen AI is used in earnest, the topic that we have spoken about for years (and years) was front of mind at ClioCon this year.
The Trends report was led by lawyer-in-residence Joshua Lenon. Speaking to Legal IT Insider, Lenon said: “In 2023 Goldman Sachs published a paper where they said that 44% of legal work activities can be automated and 40% of legal employment might be considered redundant. We have looked at these numbers to decide what it means for law firms.”
Goldman analysed data from the O*NET Database, which contains hundreds of standardised occupation-specific descriptions for almost 1,000 occupations in the US. Lenon and his team used a large language model to assess the work activities in the O*NET Database that are applicable to the practice of law. They used this LLM to determine to what extent each activity could be automated with AI. Then, looking at seven million anonymised time sheet entries, they worked out what percentage of billable tasks could be automated.
The perhaps shocking conclusion is that nearly three quarters of a firm’s billable tasks are potentially exposed to automation by AI. The work done by certain roles is more ‘automatable’ – 81% of the work performed by administrative assistants has potential for automation. 57% of hourly work performed by lawyers has automation potential. Tasks that are the most automatable include documenting and recording information; getting information; and analysing data or information. Consultation and advice is much harder to automate.
All the ethics opinions on this subject say that you can’t continue to charge clients for three hours if a task takes one hour using AI. If you move to a flat fee model, however, you can charge for the value they receive, not just the time it took.
While Lenon isn’t quite as convinced as some that the billable hour will disappear entirely, he says: “The percentage of revenue coming from flat fees is growing and more complex matters are being charged for a flat fee. The certainty of flat fees is something that you can build into your strategy. Also, if you give me something faster and of a higher quality I will pay extra.”
Learning and development needs to change
Also talking about how law firms need to adapt was Kerry O’Brien, senior manager of learning and development at Clio. “I’ve been in learning and development for 15 years I’ve never seen a change like this,” O’Brien said. Law firms, he says, need to be strategic about AI training and throw out the concept of carrot and stick.
Humans aren’t wired to like change and when it comes to AI, the fear factor around it can make them actively resistant. O’Brien is a big believer in Kurt Lewin’s three-stage model of change management, which says you need to ‘unfreeze’ people before changing behaviour and then refreezing that in place. “As leader we often think of carrots and sticks,” he said, “but the first thing you have to do is disabuse people of their fear: ‘we are not using AI to replace you, we are giving you a free assistant.’”
Firms need to reward and celebrate users’ natural curiosity and achievements, sharing stories about things that have been done well.
O’Brien said: “It can be really helpful to break AI down into buckets of what you need to know, and what you need to do. For some things, there are lots of courses out there, so don’t spend all your time putting together a workshop; that’s not going to help anybody. There are lots of courses and lots of vendors to help you.
“The doing bit is where you want to spend your time and effort. Nobody ever learned a skill without having a safe-to-fail environment to practice under the eye of someone who has an idea of what they are doing. So that’s where you want to have a space to say, ‘hey let’s come together and talk about a cool AI moment.’ Make it a part of your normal rhythms, so you can say ‘hey, take a look at how Caroline used Duo to summarise this document,’ and celebrate those things. How did Caroline do it? What prompted you to think of it? Turn that into a peer learning opportunity and create a safe to fail environment to practise in.” Beyond that, it’s about reenforcing the behaviour you want and need to see until it sticks.
Clio Updates
Investing for growth
In July this year Clio announced that it has raised $900m and brought on board new investors. But what does that mean for end users and will it mean price increases that we have seen in some other instances where vendors bring on board more investment?
According to chief financial officer Curt Sigfstead, the answer is no.
Clio was valued at $3bn and so the $900m investment is minority investment, plus there is no one dominant investor. Sigfstead says: “You have companies that are owned by private equity and they have characteristics that are typically different to us. We have a growth mindset: we don’t have any debt and we have a lot more latitude when it comes to how we serve our customers and what products we develop.
“Jack talks about a 100 year company, not a five-year return for private equity, which is typically the length of their investment. We can take a much longer perspective.”
Single system of record
Speaking to Nick Anderson, senior vice president of customer success at Clio, both Clio’s small and mid-market customers are now driven by the appeal of moving to Clio’s single, multi-product, platform. “We have 1,000 mid-market customers now and they want a unified platform rather than 68 different technologies and providers,” he said. “They want a single system of record and not to have lots of different software with lots of different integrations.”
One of the appeals to mid-market firms, says Anderson, is Clio’s partner network – there were just shy of 100 partners at the conference alone.
“It enables you to operate off a single platform. If you have to establish integrations that is an extra burden. Our partnerships help us scale, just like Salesforce leveraging its partner ecosystem. We just signed one of our largest customers in the last month and we’re seeing lots of traction in the mid-market, which is a good affirmation of the investment we’re making.”
UK and EMEA Growth
Last but not least, it’s interesting to note that Clio is seeing significant UK and EMEA growth.
General manager of EMEA, Sarah Murphy, has been at Clio three years and says: “We’re seeing so much growth in the UK and Ireland, not just in our customer base but our team. We’re building up our team in the UK and really supporting people in the market.”
One of the attractions for North American customers is that Clio now has its own accounting product and that isn’t yet available in the UK but Murphy says: “We have over 200 partners and can integrate with a number of different accounting solutions so you really can build the platform you need.”
Conclusion
Clio is growing fast: the fact that the legal market has come round to having their practice management system in the cloud is much to do with that. It also has a transparent monthly subscription fee, doesn’t lock customers in, and its customers have clearly drunk the Clio cool aid. It helps that Clions, as Clio employees are called internally, are good people. Arguably, much of this should be table stakes. But as we all know, just because it ought to be so, doesn’t make it so.
If you want a deeper analysis of its tech stack, including a full breakdown of functionality, take a look at our PMS report HERE.