The Problems Of Today
The market for legal services is changing rapidly. The economic upheaval of the last several years has confronted law firms with challenges they have not faced before. Increasingly, business clients resist traditional hourly billing in favor of fixed fees, capped fees, or other alternative fee arrangements. The client pressure to cut costs is challenging law firm economic models, naturally leading to speculation about what the problems of today portend for the lawyers of tomorrow.
One issue that has been central in the debate about the future of law firms is the role of technology in transforming legal practice. The push away from hourly rates and toward flat fees intensifies the efficiency imperative because technology is the primary untapped route to cutting costs. Those who write and consult on law firm economics are locked in a debate over whether the current challenges foreshadow irreversible and permanent change or are more of a cyclical downturn before a return to business as usual.
The lawyers of tomorrow
In reality, however, the economic crisis that began in 2008 did not create but only intensified the debate over whether drastic change is on the horizon for law firms. Richard Susskind, one of the most prominent international figures in the role of technology in legal practice, has written a series of books over the last couple of decades predicting and advocating radical changes in the way legal services are delivered. A flavor of the arguments is suggested by the titles of his books such as, The End of Lawyers, Transforming the Law, and The Future of Law.
In his latest book, Tomorrow’s Lawyers: An Introduction to Your Future, Susskind takes his message directly to lawyers—specifically “young lawyers.” In this book, Susskind expresses frustration at the slowness of law firms to adopt new technologies. He argues that firms are in the grip of “irrational rejectionism” (p. 12), primarily because of “senior lawyers” who resist change. He portrays law firms as being “in denial” about the changes that are underway (p. 79), in part because the “elders” are “cautious, protective, conservative, if not reactionary” (p. 165).
Why has legal technology failed?
There is much about Susskind’s vision for the future of law practice that is right. The legal market has tremendous inefficiencies, many of which could be improved by technology. And much of that technology is not merely theoretical; it is available today. Thus, it seems likely that eventually technology is to play a central, even a transformative role in the changes in legal practice, so why not start the transformation today?
Where Susskind goes wrong is in diagnosing the reasons for slow adoption of new technologies. The blame for slow adoption of legal technologies does not primarily belong to the lawyers, but to the technologies themselves. The reason that law firms do not chart a course today to a radically different future involving advanced technology is not rooted in conspiracies’ reactionary opposition to new technology. The answer is economics.
The reason is that transitioning to new technologies involves considerable “switching costs” as economists call them. To the extent that new technologies must be compatible with existing technology and investments, costs are incurred. In law firms these costs are particularly high because those existing technology and investments are not machines that would be replaced anyway, but human capital and know-how that are very expensive to create and last many decades. As a result technology that works together with the existing assets in human capital will tend to have lower switching costs, but technologies require considerable investments in learning new practice methodologies and replace existing human capital will tend to have high switching costs. The problem is that many of the technology tools that are offered to law firms tend to have exactly this problem—and therefore have high switching costs. They require extensive modification of existing practice and are fundamentally incompatible with existing ways of working. The reason is that these tools are often designed by non-lawyers, too far afield of how lawyers actually work to be useful without entirely retraining an expert workforce—a cost prohibitive proposition for a law firm in a competitive environment.
The gap between promise and practice
The clearest example of the gap between promise and practice in legal technology is in a product called “document assembly.” The premise underlying document assembly is that complex contracts could be created efficiently by checking boxes on a computer screen, rather than drafting from a precedent (the way most transactional lawyers draft today). The concept of document assembly is irresistibly appealing to the legal futurist, and indeed is the very first “disruptive legal technology” that Susskind mentions that will “transform the entire legal landscape” (pp. 40-41).
The reality, however, is that document assembly has been around for decades, but has enjoyed only limited success in small pockets of highly routinized document creation. Why? Anyone who has attempted to draft a real document from a systematized model (or tried to create such a model) knows how costly it can be to create a document assembly system and how woefully inadequate they are in responding to non-standard situations. The switching cost is simply too high because an enormous front-end investment is required to create a system and retrain lawyers, largely because the system tries to override the lawyer’s expertise with routinization rather than leveraging that expertise.
The elements of a successful legal technology
Does this mean that the legal industry is inherently resistant to disruptive technologies that will dramatically increase efficiency? Not at all. But it does mean that the path to a more efficient process for legal practice is through technologies that build on the lawyer’s expertise and practice, not those that attempt to supplant it. I argue that successful technology must have two characteristics.
First, the technology must lower switching costs near zero. This is done by meeting the lawyers where they are, how they work, and taking them to where they need to go. Lawyers are not in the business of making massive gambles on one-time, front-end investments in technology. The successful technologies need to be “bridge technologies”—ones that make existing ways of practicing law more efficient in the short run, but transform practices dramatically in the long run. These are technologies that do not fall neatly into Susskind’s categories of “automating” or “innovating,” as they have elements of both. Bridge technologies automate today, but transform work habits in ways that make them truly revolutionary in the longer term.
Second, the technology also needs to be capable of client “buy in.” No matter how immediately useful the technology there are always costs in learning new systems and adapting to new, more advanced ways of working. The firm that unilaterally moves to a new technology will incur costs that other firms do not, potentially creating a short-run disadvantage. The solution is client “buy in.” The client must be persuaded that the law firm can do “more for less” as Susskind puts the imperative. Law firms that can differentiate themselves by proving the technology to prospective clients are more likely to deploy that technology effectively. This means that effective technologies cannot be ones deployed invisibly behind the scenes in the back office. Clients need to see and buy into the technology if they are to agree to pass through the costs.
The disruption irony
The primary reason that technology has not advanced more rapidly in legal work, therefore, is that technology has failed to connect to law practice. Lawyers are willing to adopt technologies that increase efficiency now, even if those technologies incrementally lead to a very different law practice model in the future. What they are not willing to do is experiment at clients’ expense with unproven futuristic ideas. This means that the truly “disruptive legal technologies” that will change the way future lawyers work, ironically, are likely to be those that preserve continuity with the way current lawyers work.
As a result, there will never be a single moment when all will transition to a new technology or face mass extinction. Instead, there will be a gradual evolution that will be guided by the bridge technologies of today. Susskind is right that purely “automating” technologies that speed up current tasks will not change the legal market much, but technologies that automate today and transform incrementally will. As a result, the route toward tomorrow’s lawyers will be charted by the technologies that create value for lawyers and their clients today, and the destination will be shaped by the bridge technologies that link the present to the future.
At Pepperdine School of Law, we are not bystanders in shaping tomorrow’s law practice. In addition to training students for law practices of the future, we are shaping what the future law practices will look like. One example is Exemplify, a legal technology venture that began as collaboration with one of my former students, Trent Wenzel (JD ’12, MBA ’12), in my office at the School of Law. We developed technology that dramatically increases the efficiency of document drafting and review in transactional legal practices. This technology is already deployed by some of the largest law firms in America, and is moving lawyers toward the practices of tomorrow by being useful today. The key to the technology’s success is that it is useful to transactional lawyers now, with no switching costs, because we designed the technology around transactional legal practice, rather than requiring that practice adapt to our technology.
The continuity with practice is not the only key to the technology’s success, however. In keeping with the second requirement of client buy-in, we are finding partners in forward-thinking law firms around the country who are using the efficiency gains of new technology to attract clients. The best example here is Baker Donelson, a firm that takes the technology pitch to prospective clients, rather than hiding technology in the back office. Baker Donelson understood earlier than other law firms that clients yearn for law firms that will show how they are more efficient, rather than simply saying it. Thus, technology that proves its usefulness for the way law is practiced today is a differentiator for the firm, producing results for Exemplify and for the law firms deploying it.
Challenge and opportunity
There is little dissent from the proposition that we should be training the lawyers of tomorrow. But the most vocal critics of the lawyers of today are often short on specifics as to how the lawyers of tomorrow will be different. The reason for this is that nobody can accurately predict what law practice or legal technology will look like in two decades. This is why it is folly for law firms to make huge gambles on futuristic technologies that will pay off years down the road, because they are likely to get the details wrong at clients’ expense. The path forward is to create productive technologies that integrate with legal work as it is practiced now. Ironically, these “bridge technologies” that emphasize continuity hold the most promise to truly transform legal practice in the future.
It is natural for legal technologists to think about “tomorrow’s lawyers,” but they will not have much impact if they do not address the needs of today’s lawyers. Today’s lawyers don’t have the luxury of thinking about tomorrow—they are just trying to get through the night. So although I agree with Susskind that disruptive technologies will transform the practice of law by the year 2020, those technologies will be built by people who understand law practice and build on that practice. At Pepperdine, we are already shaping tomorrow’s lawyers by understanding the needs of today’s lawyers.