Top ten traps which cause GC’s to fail around technology, automation and change

I recently came across a brilliant guide from Plexus, a legal software and services provider based in Australia. Although most GCs will rate rate ‘investing in technology and automation’ as their top priority, many initiatives will never get past the starting line.

There are many reasons for this and everyone’s context is different. It is certainly not for lack of intent, ambition, need, or interest.

According to Plexus, the biggest challenge functional leaders have is when they are required to rapidly work and operate in a cross-functional way. These skills are a new ‘core’ capability for a legal function or executive:

If you ask a GC how they select and sign up a new law firm to spend $100,000 - the answer is often as simple as a few emails and signed engagement letter. Ask them how they will spend half that amount on technology, and they will scratch their head… even though - because of the ‘sunk cost’ nature of professional services spend’ it is far more likely that it will not generate value

Plexus.co

I have summarised the top ten traps below:

You let risk aversion get the better of you.

You approach the project like a contract negotiation.

You frame the business case around ‘what legal needs’

You get hung up in ‘integrations’

You get too many people involved.

You try to go too big too early.

You delegate responsibility to others.

You allow other functions to drive the agenda.

You fall for the ‘tomorrow fallacy’.

You work with vendors with the wrong orientation.

I highly recommend reading the full version here which contains more detail on the above traps plus extremely practical ‘do this’ and ‘do not do this’ strategies and tactics.

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The 12 Core Principles for Legal Operational Excellence

Management consultants whether McKinsey, BCG or Accenture have made an industry out of identifying best practices and applying to specific company challenges.

Although most in-house legal and compliance departments have remained immune from this for many decades, the tide has been turning for some years now with many legal departments building out higher-performing teams, operations, and services. Leveraging best practice insight – from across all sectors not just legal teams – has been a key ways to support this.

One of these tools is the ‘Core 12’ from the Corporate Legal Operations Consortium:

“While every company and team has its own unique needs, the guidance in these functional areas – known as the “Core 12” – applies to many environments and requirements towards operational excellence”.

The Core 12 can be seen below:

Essentially these are the operations, services or capabilities which define the legal function. CLOC provide more context below:

“Legal operations” (or legal ops) describes a set of business processes, activities, and the professionals who enable legal departments to serve their clients more effectively by applying business and technical practices to the delivery of legal services. Legal ops provides the strategic planning, financial management, project management, and technology expertise that enables legal professionals to focus on providing legal advice.

The Core 12 allows any legal department leader or 3rd party consultant to assess their current state of performance maturity, map it to the ideal state, and then decide and plan what are steps they wish to take to improve which makes sense for their specific context and constraints.

The last aspect is critical as the Head of Legal in a Series A-funded start-up will have completely different challenges, requirements and objectives to a Fortune 100 legal team.

When selecting one of the 12, you can deep-dive further into that area of competence. For example, with Technology, CLOC provide the following high-level (and non-exhaustive) detail to help understand what good generally looks like:

TECHNOLOGY: Innovate, automate, and solve problems with technology.

Current reality: Teams often rely on manual, time-consuming, and fragmented point solutions. They may lack an overall technology vision and are deploying costly applications that are underused and disconnected from the team’s workflow.

Desired state: Create a clear technology vision that spans all of the needs of your organization. Automate manual processes, digitize physical tasks, and improve speed and quality through the strategic deployment of technology solutions.

• Create and implement a long-term technology roadmap
• Incorporate connected tools for e-billing, matter management, contact management, IP management, e-signature, and more
• Automate repetitive or time-consuming manual processes
• Determine where to build and where to buy
• Evaluate new vendors, suppliers, and solutions
• Assess emerging technology capabilities and incorporate into your long-term strategic planning
• Structure an effective partnership with your corporate IT team

Although the CLOC 12 isn’t of itself a useable tool as far as detailed diagnostic, business analysis or benchmarking is concerned, it does provide a helpful introduction for legal leaders looking to learn more about what good looks like in terms of legal operations and capabilities.

CLOC have a download guide with more information on the Core 12 which you can access here

Gartner’s Top 5 Legal Technology Trends Changing In-House Legal Departments

This week I came across an article from Gartner (Feb 21) covering future trends within in-house legal departments. I think the list still holds true, although it will be interesting to check when the 2022 version comes out soon.

Obviously most lawyers have long been resistant to and risk-averse about new technologies and automation, but the effects of the pandemic forced many to shift gears in 2020 and pursue — or at least actively consider — more extensive automation of certain legal activities, especially those around major corporate transactions. According to Gartner, the challenge now is deciding which technologies to embrace to drive real business outcomes.

“The new pressures brought about by the coronavirus pandemic certainly have acted as a catalyst for this shift,” says Zack Hutto, Director, Advisory, Gartner. “Legal and compliance teams have rarely been frontrunners to modernize, digitalize and automate. The pandemic has flattened staffing budgets and increased legal workloads; technology is the most obvious solution for many legal departments.”

Here are the Top 5 trends:

Trend No. 1: By 2025, legal departments will increase their spend on legal technology threefold

Trend No. 2: By 2024, legal departments will replace 20% of generalist lawyers with non-lawyer staff

Trend No. 3: By 2024, legal departments will have automated 50% of legal work related to major corporate transactions

Trend No. 4: By 2025, corporate legal departments will capture only 30% of the potential benefit of their contract life cycle management investments

Trend No. 5: By 2025, at least 25% of spending on corporate legal applications will go to nonspecialist technology providers

You can read the full article here

Legaltech Venture Investment

This week Crunchbase produced some numbers covering Legal tech investments in 2021.

Legal tech companies have already seen more than $1 billion in venture capital investments so far this calendar year, according to Crunchbase data. That number smashes the $510 million invested last year and the all-time high of $989 million in 2019.

While dollars are higher, deal flow is a little behind previous years, with 85 funding rounds being announced so far in 2021, well behind the pace of 129 deals last year and 147 in 2019.

Some of the largest rounds in the sector this year include:

• San Francisco-based Checkr, a platform that helps employers screen job seekers through initiating background checks, raised a $250 million Series E at a $4.6 billion valuation earlier this month;
• San Francisco-based legal services provider Rocket Lawyer closed a $223 million venture round in April; and
• Boston-based on-demand remote electronic notary service Notarize raised a $130 million Series D in March at a reported $760 million valuation.

According to various start-up founders:

“This mainly is a paper-based industry. However, COVID exposed inefficiencies and it forced people to look at everything you do and explore new ways.”- Patrick Kinsel, founder and CEO at Notarize

“There’s no doubt COVID provided huge tailwinds for legal tech growth,” said Jack Newton, co-founder and CEO at Vancouver-based legal tools platform Clio, which raised a $110 million Series E at a $1.6 billion valuation. “It was the forcing factor for firms that had put off their transformation.”

“Since the midpoint of last year, we’ve seen an acceleration of our business,” said Vishal Sunak, co-founder and CEO at Boston-based management tool developer LinkSquares, which used that increased interest to help raise a $40 million Series B in July.

Here are a few observations on what is going on:

1. Impact of the Cloud: Just as in many industries, the cloud and other new tech had been slowly changing the legal world for more than a decade. However, after COVID caused offices to close and legal processes and documents to go virtual, adoption of those technologies skyrocketed. Investors started to eye technologies that took many firms “in-house” processes and moved them to the cloud—many involving documentations and filings as well as tools to help better communicate with clients.

2. Cloud-first generation: Many general counsels are now coming from a “cloud-first” generation and know the importance of things such as data insights that can help predict outcomes. Just as data and AI has changed marketing, sales and finance, the legal community is now catching on, and many don’t just want to be a cost centre

3. Increasing investor knowledge: The increasing market and scaling legaltech start-ups are causing VCs to take note. While many investors eyed the space in the past, more investors have knowledge about contracts and legal tech, and founders do not tend to have to explain the market

However, the market is still small albeit growing and no ‘goliaths’ exist in the space. With no large incumbents, how investors see returns remains a popular question.

This may chance if, for example, horizontal software companies like Microsoft or Salesforce could become interested in the space—as legal tech has data and analytics those types of companies find useful, Wedler said.

Some companies in the space also have found private equity a viable exit, with films like Providence Equity rolling up players such as HotDocs and Amicus Attorney several years ago.

However, perhaps more interesting to some startups is the legal tech space even saw an IPO this year, with Austin, Texas-based Disco going public on the New York Stock Exchange in July. The company’s market cap now sits at $2.8 billion.

One thing most seem certain about is that while the legal world’s tech revolution may have been brought on by a once-in-a-century event—there is no turning back.

How to Fail Fast and Pivot: Lessons from the Legal Ops Front Lines

This week I attended a virtual Summit hosted by CLOC (Corporate Legal Operations Consortium). One interesting session covered lessons learned from developing and implementing legaltech and operation changes within legal and compliance teams of large corporates and SMEs.

Panelists including range of lawyers, project managers and legalops experts from Netflix, Salesforce and GE and covered topics including:

*How to manage change and being comfortable with being uncomfortable

*Avoiding big bang deployments which are so risky now vs POC/MVP and more agile approaches to change

*Learning how to take some budget off the total and use it for experimenting and be prepared to fail.

The below is a blurb introducing the session:

“…On the path to success, failure is not only an option, it’s inevitable. Mistakes, missteps, and misunderstandings are opportunities to acquire new skills and knowledge that can contribute to your professional growth. The growing and evolving legal operations profession is filled with opportunities to evolve beyond errors. 

In this honest and impactful session, legal operations professionals will share a key moment of failure and how they learned and grew from it. After hearing from the panelists on their vulnerable moments of growth, we will spend time as a group sharing our own stories and offering our peers perspectives and possible solutions for overcoming some of their failures…”

Below I captured a few nuggets of gold from the panellists:

• Give a purpose to failure; this helps to gain buy-in from users and clarify the bigger picture
• Allow the community to own the new way to work rather than push to them
• Leadership (e.g. town hall) to set the tone
• Wider business context, and show why the change is important
• Be transparent – there will be failure. Expect it. Tolerate it!
• If leading the change, need to get to a stage of comfortable with being uncomfortable…but not too uncomfortable. Have to be mindful of current state of culture, empathise with users
• Need to balance focus on the big picture using storytelling, sales skills etc as can’t control every details of the change
• Experimental in communication, design thinking, courageous leadership, state of culture a huge consideration on how to balance approach
• Big bang projects are so risky now vs POC/MVP and more agile approaches

25 Legal Tech Stats for 2020/21

This week I came across a blog post from ImpactMyBiz which compiled a list of great statistics, use cases and market data pertaining to the current state of technology in the legal sector.

In sum, there’s a lot of good progress but the sector is still subject to a lot of hype and extremely slow adoption when compared to other sectors. This is moreso in the B2B space with B2C innovation moving at a faster rate of adoption in improvement over time.

Perhaps the continued challenges presented by COVID around the world, increasing regulatory complexity, competitive pressures from alternative legal service providers (ALSP) and new entrants, remote working, client cost pressures, access to justice, and other key drivers will continue to move the needle forward.

25 legal tech stats to shed light on where where the industry is heading for in the new decade:

1.  In 2018, legal tech investments broke the $1 billion mark. That figure was topped in 2019, with $1.23 billion in funding by the end of the third quarter alone.

2. With the help of AI, a contract can be reviewed in less than an hour, saving 20-90% of the time needed to perform this work manually without sacrificing accuracy.

3. AI legal technology offerings for businesses increased nearly two-thirds in 2020 compared to 2019.

4. JP Morgan launched their in-house program, COIN, which extracts 150 attributes from 12,000 commercial credit agreements and contracts in a few seconds. This is equivalent to 360,000 hours of legal work by lawyers and loan officers per year.

5. Cloud usage among firms is 58%, with smaller firms and solos leading the way.

6. Security measures are lacking, with no more than 35% of firms using precautionary cybersecurity measures to protect their businesses. A staggering 7% of firms have no security measures at all.

7. Despite some reservations, lawyers continue to use popular consumer cloud services like Google Apps, iCloud and Evernote at higher rates than dedicated legal cloud services. Clio and NetDocuments ranked the highest among the legal cloud services.

8. The percentage of the ABA 2019 Legal Technology Survey participants answering “Yes” to the basic question of whether they had used web-based software services or solutions grew slightly, from 55% to 58%. 31% said “No”, a small decrease. 

9. When asked what prevented their law firms from adopting the cloud, 50% cited confidentiality/security concerns, 36% cited the loss of control and 19% cited the cost of switching.

10. 26% of respondents in a 2019 survey report that their law firms have experienced some sort of security breach

11. In 2018, just 25% of law firms reported having an incident response plan. In 2019, this figure had risen to 31%, and we expect the same for 2020.

12. Interest in cloud services from law firms is high, but expectations of adoption among them remain low, with just 8% of firms indicating they will replace existing legacy software with cloud tools.

13. Only one-third of lawyers (34%) believe their organizations are very prepared to keep up with technology changes in the legal market.

14. Firms described as “technology leading” fared better, with 50% prepared to meet digital technology demands in the industry.

15. 49% of law firms report that they are effectively using technology today, and 47% say they can improve technology adoption and plan to do so.

16. Over half (53%) of lawyers in the US and Europe say their organizations will increase technology investment over the next three years.

17. While over half of lawyers expect to see transformational change in their firms from technology like AI, big data and analytics, fewer than one quarter say they understand them.

18. The biggest trends cited by lawyers that are driving legal tech adoption are “Coping with increased volume and complexity of information” and “Emphasis on improved productivity and efficiency.”

19. It is estimated that 23% of work done by lawyers can be automated by existing technology.

20. 27% of the senior executives at firms believe that using digital transformation is not a choice, but a matter of survival.

21. The top challenges for corporate legal departments today include reducing and controlling outside legal costs; improving case and contract management; and automating routine tasks and leveraging technology in work processes.

22. 60% of lawyers believe their legal firm is ready to adopt new technology for routine tasks.

23. According to research conducted by Gartner, only 19% of law firms’ in-house teams are ready to move forward with enterprise-level digital strategies.

24. A recent study uncovered that 70% of consumers would rather use an automated online system or “lawbot” to handle their legal affairs instead of a human lawyer because of three important factors—cost, speed, and ease of use.

25. 70% of businesses indicated that “using tech to simplify workflow and manual processes” to cut costs was a top priority going forward.

“New Law” Opportunities for Law Firms

I recently came across a presentation I gave in April 2015 to senior partners at Eversheds LLP in London. At the time, Eversheds were proactive in starting to diversify their professional services offerings away from traditional legal and transactional work into ‘alternative’ services areas, such as business improvement consulting for in-house legal teams, and flexible resourcing solutions.

You can view the deck here: Download

At the time, it was unusual for a major corporate firm to be experimenting into different areas.

The question for the presentation was as follows:

Downward cost pressure, deregulation and new technology are transforming the legal industry, as ‘New Law’ providers compete with traditional law firms.  What are the opportunities for large law firms in this evolving marketplace? 

I focused on 2 main themes of (a) Changing the mind-set and (b) Managing innovation.

Since then, in six years a lot of innovation has been introduced into the legal sector. However, it has been a fairly low-bar for many years with the legal sector ‘glacial’ when it comes to change and technology.

Certainly the ‘legaltech’ and/or ‘lawtech’ markets have received significant injections of VC to build next generation B2C and B2B solutions. Most large firms are now experimenting with different AI and automation solutions, running incubators, offering flexible resourcing arrangements, investing in start-ups, and so on.

To better support Fortune500 General Counsels with their efficiency challenges, the Big4 are building services and capability at scale, as are legal process outsourcers and ALSP’s.

Many of these ideas were referenced in the presentation.

However, the critical question is has anything really changed in how legal services are delivered, bought and sold? How much of this is ‘innovation theatre’ and nibbling around the edges versus real change?

For example:

• Does the partner in the Freshfields office in HK work any differently then they did as a trainee 20 years ago?
• Are the skills and requirements of a newly qualified lawyer any different?
• Does the single lawyer law office in Bristol run their practice any differently?
• Does the COO of a regional law firm run the business any differently?
• Do consumers who need a family lawyer do this any differently?
• Does the barrister or judge involved in a trial do this any differently?

The short answer I think is not a great deal of change across the industry as a whole. However there has been a tonne of experimentation and innovation in some fragmented areas, especially in B2C (e.g. DoNotPay). COVID-19 has certainly accelerated this, and that can only be a good thing.

I think what we are seeing is a marathon, not a sprint. In fact, it is more like the start of a triathlon where there’s a washing-machine effect as participants fight their way forward before a steadier state emerges.

We see this with most new technologies, where things often take much longer to truly disrupt. In retail and e-Commerce, it is only recently that the Internet is causing significant challenges for traditional players, almost 20 years after the Dot.Com crash in 2001.

One thing is for sure – the next 10 to 15 years in the legal sector will be fascinating.