Comment: The barriers to technology investment
We speak to four senior technology and innovation leaders about the partnership model and the ‘real’ barriers to investment
In November I spoke at a conference of senior corporate counsel where I strongly recommended that instead of asking their legal advisers ‘how are you innovating’ they ask ‘how are you creating an environment in which innovation can survive and thrive’ – for me, that isn’t the partnership model, or, for that matter, any practice that uses the billable hour, which by its nature rewards inefficiency.
But how do those involved at the coal face see the partnership model when it comes to investing in new technology?
While no-one would argue that the model would be first choice for any technologist, here are four law firm heads giving their inside views on the real barriers to investment.
Bas Boris Visser, global head of innovation and change, Clifford Chance
“Obviously, the partnership model isn’t the one you’d have invented to invest in new technology. The starting point is a complicated one. At the same time, in real life experience, the appetite of the firm to invest in technology and new ways of working and innovation in best delivery practices is very good considering that difficult starting point.
“The flexibility we have today to do things like setting up our legal tech venture Clifford Chance Applied Solutions Ltd is evidence that the firm is prepared to make a substantial investment in technology and new business models where the return is more longer term rather than expecting an immediate return.
“Typically, law firms look at short term income but here people have accepted that if the current owners want to leave the firm in a better shape than they found it we need to invest in new ways of working and technology. We’ve invested a lot and we are convinced that the way forward is to create the right combination of our current unique selling points like eg outstanding legal expertise, proven experience in highly complex matter, global reach and deep longstanding client relationships with a superior way of service delivery where we always find the right resource for the right work whether that is legal technology, legal project management, data management, our service delivery centres or a highly experienced partner.
”Clients are increasingly vocal about the changes they expect and increasingly team up to get more value out of the firm. They are helping each other to get better value – organisations such as CLOC are very powerful. In the past, the clients operated more on their own but that is often not the case now and they are understandably more demanding. Legal departments are being held accountable for risk and face cost pressures and more and more legal operations roles exist. We need to help our clients deal with these challenges and create more value for them.
“Our best delivery programme is transforming the way we work now and this is where we invest most. We need to make sure we also invest in those areas which are further out and where it is harder to define the benefits.
“In the area of legal tech solutions I sometimes wonder if the clients sufficiently benefit from the great opportunity that technology offers. The reality is that clients sometimes find it difficult to see the value of certain technologies. The benefits of a certain app need to be very substantial for it to justify a client going through a lengthy cybersecurity protocol and other adoption procedures. With innovation levels up substantially across the board in the legal sectors clients are now also being offered such a wide variety of tech solutions from their law firms and this makes it quite confusing for clients and that stands in the way of wider adoption of technology on transactions. So as providers of legal services we need to collaborate much more to come to more standardisation around our technology offering. The tech solution is not the differentiator. It is a more cost efficient and better process that it can result in. We need to make sure that the client actually benefits from the great opportunity that technology brings.
“Related to these adoption stumbling blocks we will see much more consolidation in the legal tech market and I expect that for every application type only a relatively limited number of dominant players will remain over time. We will move to a model where rather than looking at point solutions (so due diligence in an M&A transaction or the closing checklist on a financing deal) we will move to the redesigning of end -to-end of transactions. Not just make some of the process better but the entire experience. The technology companies will want to play their part in this process and will look at what different type of tech solutions can be used on one transaction type and then try to make sure that they can offer as many of these solutions from one integrated technology platform. Such integrated technology platform will help us a lot when it comes to redesigning end to end transactions and it will drive adoption of legal tech by clients and legal service providers. It will enable us to run transactions much more efficiently and better which will result in more value for clients and optimising the way of working for our people.”
Haig Tyler, chief information officer, Herbert Smith Freehills
“The idea of the partnership blocking investment is a very negative way of looking at it. I have been in legal for over seven years so can’t say I’m new anymore but more of my career has been spent outside of legal and I wouldn’t say the partnership model (around investment) is different to the public sector or any corporation.
“One of the most important things we’ve been focusing on is engagement and alignment. Whatever it is we do, whatever initiative it is we’re working on, we have people who know the business or who are clients who are driving and wanting that change. One of the biggest door openers with any technology or digital activity is that it must have that buy in, but also alignment to solving a business problem or opening up a business opportunity. Getting that connection as high up as possible and aligning to the strategic initiatives of the firm is very important.
“Whatever we do is underpinned with an agile methodology. What is critical in any agile change and transformation is the product owner. This will be an accountable individual and business person who then feels they have their hands on the steering wheel. All of these things take time to achieve but we do that and do it well, which makes a huge difference to adoption.
“When I entered this industry, people said ‘you won’t get money to invest’ but I’ve not knowingly failed to get investment. We do have funding made available. Some is allocated. Some is more centralised.
“We introduced last year an executive level prioritisation activity which recognises the ability to change our direction with a nudge of the tiller. So, what we’ve done is ripple agile to the top. There are a number of members of the executive and practice leaders who help us make those decisions, and part of that is investment. Like most organisations we have a gradually evolving backlog of activity and regularly prioritising that enables us to say that prioritisation goes right to the top, which sends out a very strong signal.
”What’s positive is the level of engaged conversation among very senior people who wouldn’t normally be involved in these kinds of decisions.
“In terms of investment priorities, the security piece is very straightforward. There’s also a lot of security turbulence – when you think of the number times you have to update the software on phones and imagine then what that means for law firms’ big systems – it’s a huge challenge constantly happening in the background.
“There’s also an awful lot around AI. There is learned AI and then basic pattern matching, which computers have been doing for years: it’s hard to distinguish where the real value is. Still, there’s a tremendous amount of interest because it has such high promise but we’re all switched on to the fact that we have to give the tyres a good kick to work out if it does what it says it does.”
Jane Challoner, director of innovation and knowledge, CMS
“If you’d asked me about the impact of the partnership model on investment three years ago I would have been more down beat but it’s changing, and that’s for two reasons. First, because a few years ago when we were looking at what might be happening and the level of investment needed I would have assumed that it would be much higher. Secondly, the partners now see that this type of investment is table stakes for a future facing firm.
“When the legal tech boom started, we presumed that it would spiral much faster than it has and the level of investment required just to keep up, on top of existing costs like document automation and e-discovery, would go off the charts and there would be an issue over how we would finance it. But for the majority of law firms that requirement is not really there yet. There is lots going on, legal tech teams and new roles being recruited plus lots of engagement with the legal tech vendors for both pilots and roll outs but very little of this, to date, is on a scale that firms don’t have the wherewithal to finance – just as they have financed any other increasing operational spend over the years.
“At a practice group level, it can still be a challenge to tell senior partners that ‘we think we should support X technology or new approach” and get them to put it in their budget. Each market and jurisdiction has its own dynamics. But at the senior level at CMS, both our Chairman (Pierre-Sébastien Thill) and Executive Partner (Duncan Weston) couldn’t be more into tech if they tried. They, and our Executive Committee, are working on an aggressive Digital Strategy.”
“Sometimes it’s easier for the more senior partners to see things at a strategic level (they don’t always have the hours/work pressure of the younger partners) and they see that embracing technology for CMS isn’t an aspiration, it’s absolutely essential. On the other hand, the younger partners are quickly embracing tools that give them immediate benefits in their day to day work.
“Duncan Weston is firmly of the view that there will be further market consolidation and that a technology enabled business model will define who is in the global elite. Management enthusiasm and knowhow is absolutely vital to bring the rest of the partnership along.
“While we have a different model to other sectors, our strict approach to budgeting and investment means, when we do invest we have to think carefully about what we’re doing and why, whereas in other sectors where they don’t have the partnership constraint an awful lot of money can be wasted. Companies often have reserve pools and there’s an attitude of ‘ if I don’t spend it this year, I won’t get it next year’ . So, often they have relatively little to show for the money spent.
“Despite the vast amount of noise in legal tech there are still some questions about what is really delivering value for law firms – what is moving the dial… One reason why law firms are not spending more is the relative immaturity of the tech and vendors available. Too many headline products are just interoperable point solutions that only work really well in English. This is an issue for the larger global firms. There’s also still a huge amount of innovation by press release.
“A fundamental problem with the various AI tools on offer is that we would love to have one clear winner so that the resource we invest is not at risk of being wasted. There are only so many things it’s going to do out of the box so you are going to have to pre-train the product – to do this well ideally you need a team that has worked with this type of tool. The firms that have made the most headway are those that have the most repetitive workstreams so it’s worth their while spending the time. “But often firms don’t have a sufficient volume or the use case that comes up doesn’t give us enough time to get the necessary training done. If there was one dominant product and it worked much better out of the box (and you didn’t worry that the vendor would go under or get bought up) we would be more likely to invest.
“The billable hour might have been an issue historically for tech investment centred on driving productivity but some of our practices and sectors now do very little purely on the billable hour. A lot of our legal tech focus has other client benefits beyond cost reduction e.g. it accelerates transaction time so you can do the deal faster. It may not be cheaper but the benefits the client cares about are doing the deal very quickly or with less risk. Workshare Transact, for example, allows you to reduce the risk of mistakes in a completion and you have a full bible ASAP. A solution like Lexis Draft lets you pick up minor errors. Our many legal apps give us a new way to provide advice at the point of need. These might not be earth shattering benefits but that they still really improve service delivery. Collaborative products are also really attractive to both clients and lawyers given the deluge of emails we all face and the swing to mobile working.
“Having your own ALSP is something I’m watching closely but some have flashed and fizzed. Where you have a really strong personality with a vision driving it or a particular use case it can work brilliantly but what happens when that person leaves or you have no real burning platform?”
Ben McGuire, innovation and business change director, Simmons & Simmons
“Blaming the partnership model for a lack of investment in technology is an oversimplification: there are many variables that make technology adoption tricky and effecting change is difficult for a number of reasons.
“One of the biggest barriers is the technology estate of law firms – it’s no secret that law firms haven’t invested a lot over the last 10 to 15 years so they have a bit of catching up to do. Some are more advanced than others, and while I would count Simmons amongst these, that remains a challenge for us.
”Coupled with that, a lot of the technology platforms on offer remain fairly immature. Also, they are point solutions and they are built based on assumptions of our estate and information that aren’t necessarily true, but also on assumptions of the way we work or the market we operate in that aren’t accurate – they don’t recognise the different levels of market and demand.
“The fact they are point solutions and don’t speak to each other means that interoperability sits with us, the buyer, and that’s a further barrier; not insurmountable but it slows the process. My team supports extremely complex transactions which require several technology solutions and the burden sits with the law firms of stitching platforms together. If those solutions are not capable of being easily integrated then that slows the process further.
“Blaming the partnership model assumes that partners do not wish to change their firms and the sector for the better – this is not my experience at all. The partners I work with want to deliver the best service possible to clients and totally recognise the requirement to change.
“An example of this is our service excellence program that has seen all our fee-earners across all our offices in the network undergoing training designed for their practice group and market to create standardisation in how we plan and scope and review work and the tools that allow them to do that. While this training was designed and its delivery supported by my team – it was led by partners.
“Law firms, clients and third party providers all share responsibility for effecting change and we need to collectively address the barriers to adoption and new ways of working in each of our organisations: for me the core of this debate is how we value legal services and the solution will be found here – we are wasting our time if we focus solely on a single structural aspect of our market, such as the partnership model, without looking at how we most effectively work together to create value.
“The partnership model does have an effect on the way we train and mentor and one thing we need to be wary of is continually creating new lawyers that are a facsimile of their mentors/supervisors: I work in innovation and change and I’m looking for new streams value, not just new skills, but people who think differently and have the freedom and tools to do so. That can be hard to effect after five years of training and partner supervision that is based solely on the incumbent populations’ experience.“
This article previously appeared in the January Orange Rag: http://www.legaltechnology.com/previous-issues/