Are Law Firms Adopting Technology and Innovation, and If Not, Why Not?
Technology and innovation go hand in hand, but is every business sector as quick to get on board?
When you think about sectors that utilise technology and adopt new innovations, the legal sector probably isn’t the first one that comes to mind. Operations, logistics, retail, recruitment, even banking are all breaking new ground with their customers and clients by moving with the times.
It’s not as easy to see or classify with legal services. Law firms and legal services typically conjure up traditional, client-facing, sign-here-on-the-dotted-line-in-person types of images for the average person.
When most people think about needing legal help or advice, they often take it to be quite formal, face to face, and even intimidating in some cases. We expect to go to an office and that there will be mounds of paperwork, with post-its designating what needs to be completed along with plenty of in-person discussion and statements.
Basically, our image of legal services is pretty old school, because that’s how it’s always been and continues to be portrayed even in media.
But a new study by the University of Oxford reports that there has been a sea change since COVID which has seen a number of firms embrace technology and innovation in numbers like never before.
How is technology and innovation in legal services (referred to hereafter as LawTech) being implemented? What are the risks and benefits for the users of legal services? And what are the barriers for firms who aren’t as willing to use what is available to them?
What is technology and what is innovation?
First, let’s define these two terms as they would apply to legal services by way of example.
Technology would best be described as the use of automating documents, using chatbots, artificial intelligence, and interactive websites or portals. Many of these things can speed up the processes and automate many of the mundane aspects of legal processes with clients.
A few examples of how technology can benefit legal services includes putting the onus on the client to complete documents, use electronic signatures, auto-verify their identity online, as well as respond to notifications about when these things are required in a timeline. They can also then check the status of their case and see updates on due processes. All of these things can reduce time spent on phone calls, chasing up messages and document completion, and reduce emails which have to be better for the firm.
Innovations can be defined as a product innovation such as improving existing services or creating a new one. It could be a delivery innovation and how that service is executed, or marketing innovation. Most of these things require new technology to do so.
BigLaw versus PeopleLaw
Second, we must look at the market split, because they operate in different spheres with different resources available to them
It might sound straightforward to say, but BigLaw are corporate client-facing firms, and PeopleLaw refers to the individual and SME sector.
There are some big differences in how these two types of services can benefit from LawTech, and the study makes a case for how technology and innovation could seriously lower costs for the PeopleLaw sector in terms of delivery of services and access for the client.
In fact, PeopleLaw firms cited that the biggest barriers to adopting new technology and innovations were lack of financial capital, regulatory uncertainty, and lack of staff expertise to assess and implement new systems, processes, and IT.
So, What Happened During COVID?
According to the report, 56% of all firms improved or increased the use of existing technology, 50% changed ways of delivering service, and 35% introduced new technology all within the year of the pandemic onset.
What was interesting is that 90% of the respondents said the changes would be permanent and they would not be going back to the pre-pandemic setup. Most firms increased or improved on tech than sourcing new tech, and innovation improvements were overwhelmingly directed towards delivery rather than marketing or product.
Still, 17% of the respondents in the study did nothing differently.
What did the firms use their improved or increased use of existing tech for? The majority are using it to manage and process work (51%), interact with clients (48%) and attract new clients (28%).
What tech are firms currently using? It comes as no surprise that videoconferencing was the majority percentage at 86% followed by cloud storage (66%), practice management software (62%), legal research software (50%), and e-verification/e-signature software (37%). However, none of these things sound particularly dynamic or really push the boat out.
The tech that could really benefit firms is being under-utilised at present, with only 24% using model documents and templates on their website, 10% using an interactive website to generate legal docs in response to client input, 15% using portals for client matter status updates, and 6% using chatbots.
Approximately 20% of firms claim that they are planning on using those under-utilised tech categories that aren’t already.
But the vast majority have no plans on adopting some of the most useful tech that could streamline a lot of those processes. Those non-adopters said that the reasons their firms would not be using any LawTech were that it wasn’t a strategic priority (47%), lack of capital (50%), lack of consumer appetite (50%), and lack of staff expertise (42%).
What are the perceived risks to LawTech?
Again, the study highlighted some interesting points. Over 56% of firms responded that the investment into the tech might not bring any business benefits. 27% thought that the tech provider’s support might be poor. And 34% thought it posed unexpected legal or regulatory risks to the business.
Although these things might not be true, if the firm decision-makers believe it to be so, they will stay on course as is, and technology will sit on the sideline.
Innovation was similar. 27% felt they didn’t need any at all at their firm, they were just fine as they are. 31% cited that it wasn’t a strategic priority, and 36% said they were uncertain it would benefit their business.
Most of these risks are subjective, and the hurdles LawTech faces is making it more demonstrable to the firms in the first place.
Most feel that The Solicitors Regulation Authority (SRA) could provide more clarity in guidance or regulation, provide help with regulatory compliance, and provide support with education/training/conferences around LawTech. The keyword here was ‘provide’.
Promoting tech and innovation will require addressing the financial constraints, staff expertise, and raising awareness about just how investing in these two conduits will benefit the firm’s business.
What are the perceived benefits to LawTech?
The biggest ways the various types of LawTech will benefit a firm according to the respondents in the study is:
- Improving service quality
- Improving workflow efficiency
- Increasing security and compliance
- Reducing the overall cost of service delivery
- Allowing staff to work flexibly
And further to those points, the main purpose of using LawTech was because of increasing demand for their services as opposed to reducing costs or increasing security even though those are benefits.
The Future of LawTech in the UK
Another article from Tech Nation reports that UK lawtech startups are growing at a rate of 101% outpacing finance, climate, and healthcare tech. And it reports that the greatest opportunity that LawTech will provide is by improving access to legal services across the board, although some sectors will benefit more than others.
“The £22bn in annual economic contribution of lawtech evidenced in this report only scratches the surface of the true impact we can have through digital transformation in law.” —Jennifer Swallow, Lawtech UK director at Tech Nation
It’s possible to see why firms who are forging ahead and adopting technology and innovation, be they large or small, BigLaw or PeopleLaw, well-established or newly formed are looking on track to be a large step ahead.
If legal services are going to become increasingly accessible and the norm includes using the tech on offer, some of the traditional firms are going to get left behind.
Certainly, there are some sectors like employment that have their own unique hurdles and are among the slowest to be taking advantage of LawTech, but that is likely more to do with the nuances of their sectors.
The explosive growth in LawTech in terms of providers and developers to suit each sectors needs merits a closer look by those firms who say they don’t need to make any changes.
The future of legal services merging successfully with technology and innovation has arrived. It will be the ones who fail to take notice that may end up on the wrong side of future revenue streams who may also alienate clients in the process.
This article and the statistics quoted were based on the Oxford University report on Technology and Innovation in Legal Services for the Solicitors Regulation Authority.
Reference: Sako, M. & Parnham, R. (2021) Technology and Innovation in Legal Services: Final Report for the Solicitors Regulation Authority. University of Oxford.