What did ‘innovation’ mean in 2016 in the legal sector?
It was a year of machine learning for contract analysis – all Magic Circle firms acquired some kind of solution in the space. The really interesting thing is that “radical” (aka disruptive) innovation is driving incremental innovations in law firms – they have not adopted fully the use of cloud-based solutions but are already “jumping” on machine learning for due diligence purposes that in turn are cloud based. The second phenomena of 2016 is clients’ innovation – they are innovating and asking what law firms are doing in the space. They are asking about AI/machine learning, blockchain, and document automation. While AI/machine learning has become a reality for most law firms, there’s a lot of talk about blockchain, although it is not obvious how much is actually happening in practice. It has a huge appeal because it is a big disruptor for financial clients and smart contracts might be a game changer on how contracts are created, negotiated, executed and analysed. But as I mentioned, disruptive innovation (AI) is driving incremental innovation in areas like information security, cloud adoption and generally allows law firms to use the latest technologies that are already used by clients.
Why are financial institutions so far ahead in tech innovation?
The primary difference is that technology and more specifically information is a key differentiator in the financial services industry. Those that can get to better information more quickly and have the ability to execute on it quickly potentially have a competitive advantage: something Nobel Prize Winner Joseph Stiglitz calls “information asymmetry”. The second difference is that venture capital investment in fintech versus legaltech is on a different scale altogether. As Citi executives are saying, they “.. might become dumb pipes” and if they do not invest fintech start ups might eat their “lunch”. That is the reason why we are seeing staggering investments in the financial industry, eg JP Morgan only this year invested $4bn just in new technology (according to the Wall Street Journal). My personal view is that financial clients’ innovation agenda will drive legal firms’ innovation. If major clients in the financial sector are doing deals and the legal sector becomes the bottle neck in processing those deals, the legal sector will be forced to adopt new technology.
Why did you select Kira Systems?
Our objective is to extend our legal expertise and knowledge with a system that no one can replicate. We are achieving that by teaching Kira ourselves and therefore maintaining IP rights and extending our inhouse expertise to the system itself. So Kira is not only an efficiency play for us but a strategic play, where we can create additional value for our clients, partners, lawyers and the firm as a whole.
What attitude and approach is being taken to machine learning more generally in Freshfields?
At FBD it is not about AI necessarily but how can AI create additional value for our clients, our partners, lawyers and the firm as a whole. We are serious about AI and embedding it into the core of how we operate and provide legal services. This is, again, not only about achieving efficiencies but looking at what kind of services and offerings we can provide with machine learning that previously we were not able to do (because it is humanly impossible). For example, with Kira we can now go much deeper into document analysis and provide insights that we were previously not able to, so it opens up a different set of opportunities.
What other technologies are you working with?
We are looking at any technology that might significantly change how FBD operates or provides legal services to our clients. They include expert systems, blockchain, smart contracts, semantic web technologies, extra-smart document creation and all of them combined in a smart way to provide innovative ways of providing services end-to-end. We are even advising major financial clients on the legal aspects of using blockchain and smart contracts, in themselves disruptive for machine learning and AI.
What work are you doing with legal tech startups?
We are actively participating in the start-up community; Freshfields participated, presented and sponsored Legal Geek’s start-up conference earlier this year with the intention to be close to the start up community and potentially collaborate with them. For that purpose, we organised “Dragons-Den” type five minute pitches from individuals and start-ups to two of our top partners – Simeon Rudin and Richard Lister. A couple of interesting proposals came out of it that we are following up or trying to actively support. For us AI/machine learning introduces a change of ethos: it is not only about us as single firm but has wider implications for the legaltech community, socio-eco system and society at large. This is not limited to startups but also legal aid (we are working with Hackney Law Community Centre to develop innovative solutions that they might use.