A story of innovation, AI, and pricing
Innovation – Whose flying this plane?
From Mark Whitely’s opening remarks at a recent legal tech event through nearly every session that followed was an unanswered question: “Whose role is it to drive innovation in a law firm?” Is it the CIO? COO? KM Team? Tech Partner? Or, indeed, is it a new hybrid role that brings CIO and COO roles together, à la Matt Peers at Linklaters? While this issue was at the heart of many debates – what was clear was that Legal IT teams are, for the most part, focused on stability and availability, not process redesign or transformation.
We heard about some of the great work being undertaken by the likes of Mike Poulson at Ashurst Advance and Barry Rodick at Evershed Ignite – where functional units have been established to look at innovation and process redesign (either those of the firm or their clients). Dene Rowe from Keoghs shared interesting insight on the power of AI to transform high-volume processes in the firm.
Innovation ranged from the more exotic exploration of AI to support contractual review, right back to the more mundane, but arguably most cost-effective and fastest route to ROI, which could be characterized as “workflowing the s**t” out of legal processes. A reminder that there’s still plenty of scope to make legal processes more efficient with outstanding and thoughtfully executed basics. Lean six sigma anyone?
What struck me as I listened is that the reason innovation leadership isn’t clear is that the answer is “all for one and one for all”. What I mean is that every party mentioned should be innovating in their own area because it's contextual and requires deep knowledge of the process. IT should be leading innovation in IT service delivery and management. Practice groups need to lead innovation in practice service delivery. KMs lead innovations in how knowledge is organized, taught and shared in a firm. Expecting one department to lead innovation is an inevitable drive towards an unbalanced result, which could doom any projects to failure.
David Aird of DAC Beachcroft put it most succinctly when he said that too often innovation fails in legal as it leads tech first rather than problem and business case first. Understanding why you need or want to do something first will lead on to how you should do it and, inevitably, who should lead it.
AI – That train is still pulling out of the station
No discussion on innovation would be complete without covering the AI wonderland. Dene Rowe described how high volume transactional processes can benefit from AI, with great supporting insight from Milos Kresojevic on his experiences at Freshfields, and a healthy dose of skepticism on the real value being seen at the client level from Jeevan D’Silva, GC at T- Systems.
Regardless of which side of the fence you were on, there was general agreement that for an AI project to succeed it has to be incubated outside the traditional practice group. Encouraged to compete against the existing way of working, I have to echo this sentiment. In my experience, that’s how you deliver transformation. It creates less friction and disruption while forcing a clear demonstrable benefit between the old way and the new way of working. Beware though, with this model your challenges move from being technical to cultural as you create competition between the old and new guard. That’s where you call for HR innovation and support to keep your culture intact.
My main takeaway from all the sessions was that AI is still finding its feet and seems to be the bastion of Big Law – who have the volume of transactions and the budgets to invest in projects of discovery to find true value.
As an observer, I’m hoping that another 12 months of suppliers and Big Law firms working together to build more effective solutions will see a clearer picture of which use cases will truly benefit from the wonders of machine learning, which will then have a meaningful impact on the mid-market.
Pricing – Are cost-efficiency and value-add on a collision course?
There was a lively discussion on pricing chaired by Mohammed Ajaz from National Grid. Panelist from Herbert Smith Freehills, De Brauw Blackstone Westbroek, and Pinsent Mason gave fascinating insights into how matter pricing is handled in a law firm context.
Having grown up in software virtually my whole career, the same pitfalls open up in the pricing process – poor upfront instructions, coupled with little better than guestimate pricing, followed by inefficient billing are a recipe for unhappiness on all sides of the equation.
The general feeling was that this was a huge area for potential improvement, given the quality of time recording in firms and some very interesting value-based pricing models. The theory looks good, but old habits die hard. From the client side - regardless of alternative billing models offered, they don’t want to pay for inefficient processes and from the firm’s side, they aren’t prepared to take a risk with excessive caveats that render the new model meaningless.
From someone who wrestles with pricing scenarios daily, I was left with the feeling that both pricing and innovation focus on cost reduction (how to make it cheaper), rather than on what makes it better or values add. It’s a harder question, but law firms and the consumption of legal services is experiential, and experiences are not often defined by cost.
The Big 4 Are Coming…
Hearing the divergent and varying strategies of KPMG vs EY. Jeremy Barton and Matthew Kellert discussed the fact that law firms were yet to establish market dominance seen in the accounting vertical (the Big 4 take 25% of Accounting service delivery, while the top 100 law firms account for only 16% of Legal services). As a result, both firms felt there was lots of room for their entrance into the Legal services market.
Interestingly, aside from scale and position, the Big 4 seem to be able to innovate through their investment in technology and their process redesign – as its part of their DNA. While intellectually that makes sense, I looking forward to seeing tangible moves in this space. Hey, it’s great for market disruption, so let’s see how that plays out.
And so, to the Cloud
It says much about the onward march of Cloud tech that this was the footnote of the event, however, it was illuminating to hear more about Microsoft’s approach to the legal vertical and to get insight from Richard Skinner of Taylor Wessing and James Temple at Seddon on their own moves to the Cloud.
It’s clear that risk and compliance teams give wildly varying advice on what it takes for something to qualify as Cloud appropriate, and more needs to be done to work with firms and clients to address gaps or restrictions in client contracts because Cloud has modern, highly secure features, which deserves more recognition.