The seven most expensive words in the business of law and in the practice of law are: “We have always done it that way”.
We live in a legal bubble where, to work your way up to be the key decision maker of a firm, you have to conform to the group. This is the way business and practice has been carried out for decades. And these words echo in the hallways of not just law firms, but other professional service firms too.
I remember starting my career as an analyst and, as you do, being really enthusiastic and just wanting to contribute my ideas. I once asked a manager about why we hadn’t thought about changing our service. And the response I got was: “We have always done it that way.”
If we continue to think like this, we will be stuck in the old way of doing things and we won’t be able to unleash efficiencies into the practice of law and the business of law. Can you imagine if we didn’t have electronic calendars today?
Eric Chin (above, left; photo credit: Lawrence Loque) has consulted to the legal industry for nearly a decade, first at renowned consulting firm Beaton, and now with his new firm, Alpha Creates.
When I first started my career in the legal industry, it was still a time when the law firm career path was the go to path and a move in-house was seen as a step down or for lawyers who have not made the partnership track.
All of that has changed now. Top-tier lawyers move in-house because the challenge of running a legal business unit is completely different to practicing in a law firm. Also, in addition to that, you now have so many more pathways for lawyers, like NewLaw, LegalTech and the Big 4. The career path for lawyers has tripled.
Secondly, if I was a lawyer today, I would be excited by the explosion of LegalTech solutions in the market that will make me more efficient in how I practice and how I will ultimately run my legal business.
The legal industry has its quirks. There is the practice of law and then the business of law. Because the practice of law usually takes precedence over the business of law, the way lawyers work and win clients is different to other industries. For example, other industries aren’t bounded by geographic areas, so it is easier to scale expertise across jurisdictions. But in law, there are different legal systems and you need a local practising certificate.
There are a number of consequences of these differences. For example, lawyers can be a bit closed off to doing new things. From a tech perspective, because the total addressable market is not as big as a fintech product or solution, there are limitations on technological developments. And, even though law firms hire a lot of professional support services – COO, CTO, BD professionals – because practice takes precedence over business, they don’t have level playing fields internally.
As I originally conceived it, the NewLaw business model describes the businesses that use labour arbitrage at the centre of their business model in the delivery of legal services. Some of the examples of this of course include legal process outsourcing firms, lawyer secondment firms and fixed fees legal service firms that leverage on demand lawyers.
Since its introduction, of course, different industry analysts and experts have put forward their own definitions.
In contrast, the LegalTech business model is a business that uses technology arbitrage at the centre of the delivery of legal services.
It’s also important to understand the context in which I came up with the term NewLaw. In September 2013, I was writing a paper which made predictions about what the legal industry would look like in 2018.
Some things have come true. NewLaw is now mainstream. There isn’t anyone who hasn’t heard of alternative legal service providers or managed services. In 2013, the whole concept of alternative legal service providers was new.
A big moment was when AMP’s general counsel, Brian Salter, came to the market and said for law firms to stay on the AMP panel, they needed an arrangement with a legal process outsourcing company where the work is outsourced to the most cost-efficient provider. Now, obviously, the larger law firms have their own offshore legal service centres to do that. Some have also expanded into NewLaw services. What did surprise me was the Big 4 setting up their own NewLaw service.
By reputation, yes. Statistically though, it is still small. A study by the Association of Corporate Counsel Australia in 2017 revealed that legal departments outsource 9% of their work to NewLaw firms. But, even though it’s only 9% of the total market, it’s growing quickly. In the same study 5 years ago, it was less than 5%.
To understand the rise of the alternatives, you have to look into the history of the legal industry. Up until the 2000s, when an organisation had a legal need, it essentially had two choices: first, to turn to its in-house legal department and second, if expertise was required, to engage law firms. Law firms built a very successful business model providing expertise arbitrage to corporate legal departments.
When you think about it the law firm business model is about hiring, training and then billing based on expertise provided to the client. It is not until the turn of the millennium when the industry was engulfed by both outsourcing and technological trends that new solutions were conceived. The outsourcing trend in the 2000s gave birth to NewLaw firms and of course the technological trend in the 2010s gave birth to LegalTech firms.
After spending 9 to 10 years working in the market, I’ve seen the strategic agenda in law firms boardrooms change dramatically. Most of the projects I worked on about 10 years ago was around helping law firms with growth whether it was practice specialisation, geographic expansion or mergers and acquisitions. But then we saw the rise of the alternatives in the form NewLaw firms, the re-entry of the Big 4 and the rise of LegalTech in the last 24 months.
All of that combines to create a hyper-competitive market that puts innovation at the top of the list for law firm boardrooms. Alpha Creates is a reflection of those changes in the market. We are a group of innovation, strategy and technology consultants that have come together to help legal service providers, whether you are a law firm, NewLaw firm, LegalTech firm or a Big Four accounting firm to help work through those trends in the market, to build better legal businesses.
If you look at the Australian market, 23 of the 50 largest law firms have now established an innovation function. We can scale our offering according to the firms’ innovation and technology journey, whether they are at the start or at a more mature stage of their journey.
There has been a lot of hype around artificial intelligence in the market. The reality is that we already use artificial intelligence in our daily lives.
Unless you’re still using a Nokia 3210 or Nokia 3310, the smartphones that we carry to make phone calls, check the weather, take pictures, check our emails, calendars and text has built-in artificial intelligence whether it is imaging AI or assistant AI.
It’s really not that big of a leap other than to change habits.
When you think about it, innovation is essentially adopting new ways of getting to the same or better outcome in a more efficient way. For example, we all use washing machines (I am a big fan of Hans Rosling). Instead of wasting time and energy hand-washing our clothes, we just put it in the washing machine. That time saving translates to productivity to do other things in our daily lives, like reading, exercising, spending time with our family or even working.
My relationship with Josef has evolved from a perception that it is a chatbot that is focused on the access to justice space, to an understanding that it is an expert system that amplifies law firm productivity with automation. I put Josef ahead of washing machines for sure!