Rob Millard looks at what the near future holds for law firm workspaces, from collaboration tools to artificial intelligence, and what these developments could mean for the business model of ‘law firm 4.0’
Along with most other traditional professional services, the legal profession will likely be radically different in 10 years – perhaps even five. Forecasting, as we all know, is a dangerous pastime, but given the need to make investment and other strategic decisions, it is simply unavoidable. How does one apply one’s mind to this without straying into conjecture and hyperbole?
A plethora of reports has emerged recently about the “future” of work, some predicting with breathtaking prescience that work from home is here to stay, technologies will continue to advance, and client demands will continue to become more complex. So much for that.
Coronavirus (COVID-19) has, it’s been said, projected us five years into the future so far as ‘digital transformation’ is concerned. We are all now adept at Zoom or Microsoft Teams and whatever collaboration apps appeal, and the world of work is a better place for that, at least. But what comes next?
1. The number of solutions will increase
According to Thomson Reuters, the number of patents for legal services technology filed globally with the World Intellectual Property Organisation jumped 34% in 2019, to a new high of 1,369. Impressive growth. This number pales, though, when compared to the roughly 181,000 applications submitted to the European Patent Office alone in 2019, with digital communications and medical and computer technologies leading the field. Given the sheer differences in scale, it seems likely that digital innovations from outside the profession will have at least as much impact on future legal services as what we call “lawtech”.
2. Collaboration tools will continue to develop
Completely unsurprisingly, recent lawtech surveys (for instance, those of the American Bar Association and International Legal Technology Association) show radically increased uptake of collaboration tools. The ILTA’s 2020 Technology Survey shows that while Zoom remains the preferred videoconferencing solution, use of Microsoft Teams quadrupled from 2019 to 2020 (from 12% to 48% of respondents). These are trends worth watching. Vendors compete aggressively to add collaboration-enhancing functionality.
Looking further ahead, and given the pace of advance of enablers such as 5G, it seems certain that collaboration tools in, say, 2022/23 will be significantly better than those of today. Microsoft’s use of mixed reality enabled by its Hololens headsets seems especially interesting, as do interactive platforms including touch-responsive screen ‘walls’ that digitally emulate the tools typically used for design thinking and similar workshops. Will the ‘user experience’ of a 2022/23 videoconference be one of avatars that actually resemble the meeting participants interacting in a virtual space resembling a meeting room at the office, or a coffee shop, or client premises, or a beach in the Bahamas?
3. AI is already reaching smaller firms
Tools based on artificial intelligence (AI), such as machine learning platforms, have also penetrated smaller firm markets more deeply in the past year. In a survey by the American Bar Association, in 2019, large law firms (>100 lawyers) comprised 26% of respondents who reported using AI-based technology. In 2020, their share of respondents contracted to 17%. In other words, smaller firms are using these tools to an increasing degree. In 2020, 6% of respondents were even sole practitioners (0% in 2019.)
Some law firms are also producing proprietary digital tools, and at least one, Travers Smith, is making their tools freely available to other law firms as an altruistic contribution to their colleagues in the profession.
Looking further ahead
Without detracting from the tragedy and inconvenience of the COVID-19 pandemic, we find ourselves today at a fascinating historical juncture. Much as law firms were propelled to entirely new levels by the ‘Second Industrial Revolution’ at the turn of the 19th to 20th centuries, so today we seem poised for a similar sea change as the ‘Fourth (digital) Industrial Revolution’ transforms first our clients’ businesses and hence their legal needs, then the services that they need to acquire from external legal advisers, then the business models of our firms.
For the same reason that today’s digitally enabled business models are more productive and efficient than older analogue models in mainstream commerce and industry, so these ‘law firm 4.0’ businesses that embrace opportunities as they emerge will likely end up being more profitable than their 20th century predecessors. Their business model will likely be very different to the ‘pyramid of lawyers’ model that has persisted for the past century, in three key ways.
First, the default workspace of law firm 4.0 will shift from the office, to an ecosystem of physical spaces (the office, client premises, a coffee shop, work-from-home – in other words, ‘work anywhere’) and the virtual spaces that knit people in the various physical spaces together. People will collaborate despite being dispersed not because they are forced to, but because that allows them to do their very best work and delivers the best performance for the firm.
Second, the technology doing the work will become responsible for steadily more of the value produced, compared to the humans operating the technology. For an example, look no further than how the architectural, engineering and other design professions advanced in recent decades as a result of computer aided design (CAD). In law firm 4.0, at some point along this continuum, assessing performance in terms of human increments of effort (measured in time) and billing by the hour will also become quaintly redundant.
Third and finally, the work done by law firm 4.0 will be exponentially more complex than that done by its predecessors. The scale and complexity of data that will need to be managed will be exponentially greater. Data will no longer be a concept sensibly associated with storage devices like hard drives. Using new tools (probably most frequently experienced as new apps), lawyers and others in law firm 4.0 will solve client business and legal challenges of a complexity that would be impossible to even conceive of today.
These are not wild speculations, but simple extrapolations of technologies already available in the market, including some in increasingly widespread use. In terms of their business models, most law firms are still configured as ‘law firm 3.0’ – that is, still structured almost exclusively around people, but enabled by early digital innovations such as the internet, office apps such as the Microsoft 365 stack, and mobile devices. Not only law firms, but professional services generally are lagging other industry sectors. We need to look outside not only the profession, but also the professional services sector in order to understand the future as it emerges. Clients are a very good place to start.
The key competency for negotiating the coming decade is not so much the technical ability to use new technologies, but the ability to keep pace with evolving client needs and the value propositions to meet those, the resources required to deliver those value propositions, and the financial models to deliver the best performance in doing so. Collectively, this amounts to the new business model. Law firms need to be paying as much attention to business model transformation, as they do to strategy. And that is a considerably more difficult topic to address properly.