Tag Archives: innovation

The Two Faces of Legal Innovation

When legal innovation is mentioned, we typically think of legal technology and process automation, etc. Most articles on the Internet focus on how the practice of law can be further automated, which then leads to increased productivity and profitability. As such they focus on legal technology and on the legal market. Some articles take a wider view and talk about innovation in law enforcement and in the judiciary. There too, however, the emphasis is on technology, automation and productivity.

But legal innovation is more than that. In an interesting synchronicity, two authors, Carolyn Elefant and Bill Henderson, each published an article on the two types – or faces – of legal innovation, within days of one another. The examples mentioned above all fall in the category of what Elefant calls ‘Innovation of Form’, and what Henderson refers to as ‘Service Delivery Innovation’. There is a different, and equally important, type of legal innovation, which the authors call ‘Innovation of Substance’ and ‘Substantive Law Innovation’ respectively. This type of legal innovation focuses on finding new legal solutions.

Elefant uses the example of Henry Ford to explain the difference. On the one hand, he invented the Model T. On the other hand, he came up with the design for the assembly line. The invention of the Model T is an innovation of substance. The design of the assembly line is an innovation of form. The emphasis in Legal Innovation tends to be on the innovation of form, which probably explains why lawyers often struggle with legal innovation. As Elefant puts it, “‘I went to law school to build a more efficient client intake process….’ said no lawyer ever.” Lawyers are more interested in innovation in substance.

So, how do we define these two types of innovation? Henderson gives the following definitions:

  • Substantive Law Innovation (which he calls Type 0 Innovation) deals with adapting law to fit changing social, political, economic and technological conditions.
  • Service Delivery Innovation (which he calls Type 1 innovation) deals with improving the quality, cost and delivery of existing legal solutions.

Everybody is familiar with Service Delivery (Type 1) Innovation. As Henderson points out, the vast majority of Legal Evolution content is focused on service delivery improvements (data, process, technology, etc.) that aim to increase legal productivity. Let us have a closer look at its counterpart, Substantive Law (Type 0) Innovation.

Society is changing fast, and the law needs to adapt to be able to handle these new conditions. The rise of Artificial Intelligence and the emergence of different new technologies are clear examples that demand an innovation in substantive law. Think, e.g., of cyberbullying, or of Robot Law. Henderson gives the example of synthetic biology, which impacts intellectual property, regulatory law, consumer safety. There are many more such areas: Carolyn Elefant wrote a book on 41 Practice Areas that didn’t exist 15 years ago. (You can find the table of contents here: myshingle.com/wp-content/uploads/2018/08/TOC-from-41PracticeAreas.pdf). She compiled the list to prove the point that new practice niches are growing at an accelerating rate.

In such periods of disruption, “we also need lawyers who can take on the hard work of substantive innovation — devising the kinds of new case theories and arguments and perspectives — that will allow technology to progress while preserving our democracy and our freedom.” (Elefant).

Henderson explains that Substantive Law Innovation “happens organically when a lawyer has the opportunity to immerse herself in the business and legal complexities of a new or changing industry. Although it often produces the same economic benefits as a major R&D initiative, lawyers and law firms seldom frame it that way.  (…) Virtually any lawyer has the intellectual tools to do it.  It requires zero additional training. Yet it’s undertheorized almost to the point of being invisible to practicing lawyers.”

In his article, Henderson refers to a presentation by Patrick McKenna that connected the lifecycle of law firms to the different types of innovation. McKenna explained that successful new law firms typically find the source of their growth in type 0 innovation, i.e. in finding new legal solutions in niche markets. As the law firm matures it starts paying more attention to type 1 innovation. It is however important to continue focusing on type 0 innovation: if the firm doesn’t, it loses its edge because the market it was active in becomes saturated. Henderson gives the examples of securities or debt collection as market segments that are saturated.

Henderson concludes that it is obvious that Type 0 and Type 1 innovation are both distinct and interdependent, and that the legal profession’s tool box needs to include both types of innovation. He advises lawyers and legal professionals to specialize in one or the other, while retaining the ability to effectively collaborative across the two types.

Henderson: “Neither Type 0 nor Type 1 innovation are easy or costless.  Both require continuous learning and an investment of time and resources without a guaranteed financial return.  Yet both add immense value to clients and form the basis for challenging and rewarding careers.  Thus, for both lawyers and legal professionals, the future is bright.”

 

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Law Firms and Innovation

Making headlines some days ago, was a story of how the UK government is spending 1 billion GBP to modernise its court system. The aim of this innovation project is to cut annual spending by £250m and staff by 40%, while at the same time improving access to Justice, as well as the speed and quality of service delivery (e.g. by the use of online forms for petitions).

Lawyers, too, are being urged to be innovative. Last year, the British Law Society published a 116-page guide on innovation for law firms, called Capturing Technological Innovation in Legal Services. And there are good reasons to being innovative. It gives a competitive advantage, improves productivity, profitability, and, as mentioned above, the speed and quality of service delivery.

But what does it mean for a law firm to be innovative? The first thought that usually comes to mind, which is also reflected in the title of the Law Society document, is the use of new technologies. Lawyers have already successfully been automating many aspects of their law practice for over three decades. New advances in the fields of artificial intelligence and machine learning are heralding a new age, a second wave if you want, of office automation.

Some examples: law firms can already use virtual legal assistants to do legal research. They can even use virtual receptionists. Document assembly and document review can now be done more efficiently by AI than by their human counterparts. In fact, many specific tasks that have a sufficient degree of repetition can already be automated, as the advent of robot lawyers and legal chatbots has proven. Progress is also being made with smart contracts, where human intervention is often no longer required. AI is proving useful, too, in knowledge management and eDiscovery, as well as in predicting the possible outcome of cases.

These advancements in legal technology are resulting in a change in the professional demography of law firms. With new technology comes a demand for new skill sets, which in turn leads to new roles and positions that need to be filled in law firms. It is not uncommon, these days, to find law firms who employ specialized programmers, statisticians and data scientists, chief data officers, and project managers.

One of the more novel new occupations is that of Data Analytics Attorneys (often shortened to either data attorneys or analytics attorneys). In their article on legal innovation, Wendy Butler Curtis and Kate Orr explain that “the data analytics attorney understands the needs of the client, the function of the tools, and the value of the data. They know it is necessary to train and maintain the artificial intelligence and the richness and quality of the data to predict the accuracy and value of the AI output. Analytics attorneys are also adept at identifying tasks that can and should be automated.”

But just as innovation in law firms is not limited to the use of new technologies, so are the new roles in law firms not limited to tech related jobs. Gone are the days where lawyers were solitary consultants who would charge by the hour. Lawyers now are professionals who are running a business that delivers legal services and products. They are concerned with optimizing and automating processes and work flows, with improving service delivery, as well as customer relations and customer satisfaction. As a result, law firms started employing non-lawyers to run their company (CEO), to keep their finances in check (CFO), and to handle their accounting, marketing, and even customer relations.

As these examples show, innovation requires a different approach, which can affect each aspect of being a lawyer and running a law firm. The first part of the Law Society’s paper focuses on technological innovation in practice. It deals with working smart (which involves putting the client first, innovation hubs, Robotic Process Automation (RPA), Machine learning and Artificial Intelligence, and predictive analytics), with agile resourcing (where attention is paid to a fluid workforce), with new pricing models, as well as with innovating for Access to Justice.

 

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The Law Practice of the Future – part 2

This is the second article in a two-part series that looks at the law practice of the future. It is largely based on the Law 2023 Study (www.law2023.org), which predicted seven evolutions law firms will undergo by 2023:

  • Technologies Will Enable Lawyers to Bill for Real Value
  • Firms Will Develop Offerings That Transcend Jurisdiction
  • Demand for Responsive Institutions Will Create New Markets for Accountability
  • Firms Will Tap New Talent and Enable New Pathways to Practice
  • Information Access/Transparency Will Push Firms to Seek Hyper-Specific Markets
  • Firms Will Launch R&D Departments to Create New Offerings
  • User/Anthropological Research Will Shape Client Experience of Legal Products

The first three were discussed in the first article. In this second article, we’ll focus on evolutions four to seven. Note that the original Law 2023 Study was published two years ago, and that more recent findings have been integrated into this article.

[Part 1 of this article can be found here].

Evolution 4: Firms Will Tap New Talent and Enable New Pathways to Practice

The study found that “all kinds of companies are coming to grips with how they will acquire the skills and abilities they need in a workforce of unprecedented demographic and cultural diversity. Many organizations are also faced with the challenge of rapidly developing capacities they never needed before. Law firms will need to figure out how to hire new kinds of minds and address ongoing value concerns from clients.”

This is one of the evolutions that is already clearly visible. Traditionally, law firms consisted of lawyers, assisted by some administrative aids. Larger firms could have paralegals, accountants and an IT department. Now, it is not uncommon to also find project managers, client service managers, programmers, business analyst, industry advisors, etc. in law firms.

Another new tendency is to find lawyers who no longer are ‘just lawyers.’ On the one hand, there are e.g. scientists, engineers and mathematicians who are switching to the legal sector, and combine their fields of expertise. On the other hand, we are witnessing the emergence of what some call the “T-shaped lawyer”. Traditionally, lawyers had a deep knowledge in one discipline or ‘vertical’ market, i.e. the Law. A T-shaped employee, however, has a wide breadth of knowledge across multiple disciplines that allow them to bring new and innovative ways of thinking to their job. Some Law Schools already offer a curriculum for T-shaped lawyers.

As a result, individuals with a deeper understanding of technology and data, as well as the law, are changing the way the law is done. We can find some examples of that in the fields where AI is being integrated into the law.

Millennials are also changing the legal workplace. They grew up in an ‘always online’ paradigm, where services are available 24/7. More flexibility is required because the work can be performed at any place and at any time. So, they approach their work differently, and that affects the way law firms operate:

  • They prefer to work independently
  • The prefer assignments that can be done from home
  • They don’t care much for the traditional meaning of “work/life balance”
  • They value constructive coaching/mentorship relationships
  • Leadership and professional development opportunities are important
  • They give back

In short, in the office of the future, the employee gets more freedom, but also more responsibility. Law firms that adopt more flexible work practices and pay structures will be best prepared to compete with other industries for the capable people needed to fill these new jobs.

Evolution 5: Information Access/Transparency Will Push Firms to Seek Hyper-Specific Markets

The study found that “clients will have much more access to objective information about the effectiveness of firms and individual lawyers. Public companies in particular will face increasing pressure to rely on firms with the best track records.”

Increased competition on the legal market already pushed law firms to explore niche markets and to build greater expertise in specific fields. What we are witnessing now is that clients get access to all kinds of extra information about law firms like their success rates and effectiveness. This will force law firms to “define and dominate niche markets in which they can credibly claim to be the best. As with other industries, changes to legal markets will increasingly be driven by organizations’ collective ability to produce disruptive innovations, in addition to individual lawyers’ skills and experience.” Which leads us to the next topic.

Evolution 6: Firms Will Launch R&D Departments to Create New Offerings

The study found that “the variety of demands on law firms will lead to a new diversity in the way legal solutions are conceived, packaged, sold and applied. Some of these novel legal products will immediately find vast markets; others could take years to catch on or turn out to be false leads.”

Technology is changing the way that law is being practiced. It is to be expected that law firms will start creating their own R&D departments, either to take the lead or to keep up with the pace in a certain field. These R&D departments may focus on products, services or methodologies, which respond not only in changes in technology on the market, but also to shifts in industry needs and client preferences.

Evolution 7: User/Anthropological Research Will Shape Client Experience of Legal Products

The study found that “a deeper understanding of users’ experience is increasingly becoming the driving force behind the offerings of all kinds of companies. Companies are using data and design to predict consumers’ desires, aiming to appear in their lives before they even know what they want.”

The role of the clients’ experience when dealing with the law firm is becoming an even more important aspect of great customer services than it was before. Just like online retail shops can keep track of what you and other people buy to give you recommendations, technologies are being developed to anticipate the clients’ future needs. This may lead to greater understanding of entire industries, which in turn will allow law firms to approach their clients with new opportunities instead of simply reacting to their problems.

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AI Predicts Outcome of Human Rights Cases

It’s the stuff of science fiction: an artificial intelligence judges the merits of a court case and reaches a verdict. We are now one step closer to that being a reality. Researchers have created an artificial intelligence system that has accurately predicted the outcomes of many cases heard at the European Court of Human Rights (ECHR). Out of 584 cases, the system had a success rate of 79% where it correctly decided whether there had been a Human Rights’ violation or not.

The project was carried out by researchers at University College London and the universities of Sheffield and Pennsylvania. The method consisted of automatically analyzing case text using a machine learning algorithm. For the learning phase, equal amounts of cases with violations and without violations were used. In developing the method, the team found that judgements by the ECHR are highly correlated to non-legal facts rather than directly legal arguments, suggesting that judges of the Court are, in the jargon of legal theory, ‘realists’ rather than ‘formalists’.

The most reliable factors for predicting the court’s decision were found to be the language used, as well as the topics and ‘circumstances’ mentioned in the case text. The ‘circumstances’ section of the text includes information about the factual background to the case.

The team identified English language data sets for 584 cases related to three articles of the Convention on Human Rights:

  • Article 3: cases involving torture or degrading treatment, good for 250 cases
  • Article 6: rights to a fair trial, good for 80 cases
  • Article 8: respect for private life, good for 254 cases

By combining the information extracted from a) the abstract ‘topics’ that the cases cover and b) the ‘circumstances’ across data for all three articles, an accuracy of 79% was achieved.

The 21% of cases where the prediction was not correct involved situations where there were similar cases but with different outcomes. This could be an indication that in those cases, the finer subtleties of the law were missed by the artificial intelligence.

One of the key researchers, Dr Nikolaos Aletras, who led the study at UCL, said the following about using AI to predict cases: ‘We don’t see AI replacing judges or lawyers, but we think they’d find it useful for rapidly identifying patterns in cases that lead to certain outcomes. It could also be a valuable tool for highlighting which cases are most likely to be violations of the European Convention on Human Rights.’

Given the huge numbers of cases that the ECHR’s legal staff has to consider every year, the program could indeed prove very useful: in 2015, e.g., the court had to process 40,650 applications for a hearing, while in 2014 it processed 56,200 cases.

It is easy to see how such programs could benefit law firms as well. Having intelligent software at your office to predict the outcome of a case would offer a clear and objective view of the strengths and weaknesses of your case and argumentation. This could then help devise a different argumentation if necessary. Alternatively, it could help avoiding the costs of litigation if similar cases were not considered ‘winnable’.

Does this mean lawyers or judges should start fearing for their jobs? No, it doesn’t. The program still misses the finer subtleties of the law. As Dr Aletras pointed out, it is meant as a tool to assist, not to replace. In the long run, though, it could result in lawyers and judges dealing with more complex or specialized cases, while the processing of simpler cases gets more automated.

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The changing shape of the legal market

I always keep a close eye on how the legal market evolves. In the last ten years, we have witnessed quite a number of evolutions that have disrupted the traditional legal market. In a presentation at Lexpo 2016, held in March, Chris Bull gave an interesting overview of ten ways in which innovative business models have changed the market. (Chris Bull, An uncharted world: 10 ways in which innovative business models have changed the shape of the legal market forever, presentation at Lexpo 2016. Available on video at http://lexpo.com/videos). Here are the highlights.

  1. Investment

Ten years ago, a law firm typically consisted of partners who co-owned the firm. Now we see law firms that have external investors on board who are not lawyers. These can be insurance companies, accounting and consulting companies or plain capital investment companies.

  1. Corporation

As the correlate of the first evolution, we find more and more law firms in a more traditional commercial corporation model. Where ten years ago, law firms were partnerships, many law firms have adopted a corporate structure of a Limited company. In this corporate structure, law firms often have directors (CFOs, COOs, CIOs, etc.) who are not lawyers.

  1. Outsourcing

Law firms tend to focus more on specializing in certain fields than before. As a result, anything that is not part of their core business is subcontracted to third parties.

  1. Insourcing

Another way in which the legal market has been disrupted is by an increase in the insourcing done by the customers of the law firms. Bigger corporations tend to have bigger legal departments and do more in-house than before.

  1. Agile Firms

In the last ten years, we have also witnessed the emergence of ‘agile firms’. Four aspects set an agile firm apart. A) Role: ‘role’ has to do with who plays what part/role in the company. Apart from the partners, agile firms tend to use more paralegals, and temps, and have a larger diversity in who works full time or part time, etc. B) Place: where does the firm operate from? These days, many firms operate in a multi-site set-up. At the same time, people spend less time in the physical office and work more from home. There even are ‘shared service centres’ for lawyers. Traditionally, law firms were located in the city. Now they may just have an office there, where the main site of operation has moved to the outskirts of the city because it’s cheaper. C) Time: more and more firms are using flexible hours. Some companies have moved to a system where work hours are counted on an annual basis instead of per week or per month. D) Source: where do you find your people? Recruitment is no longer a matter of just prospecting at law schools.

  1. Start-ups

Over the last ten years, we have seen a tendency where bigger firms merge. In spite of that, the number of law firms remains more or less the same. As big firms merge, people also leave to set up their own start-ups. These start-ups typically operate differently.

  1. Legal Tech

Legal tech has dramatically changed over the last ten years. New on the scene are online offices, which can take one of two forms. On the one hand, there is the ‘Remote Office’. Here, lawyers are still involved and do the actual work. They don’t necessarily ever meet the customer in person but operate through a website front. On the other hand, there are offices that are entirely virtual: the AI office. Here no lawyer is involved. Everything is done through and by the website, using an Artificial Intelligence engine.

  1. Fixed Price

The traditional law firm worked with timesheets and billable hours. But because of market demands, more and more firms offer to work for fixed prices. That way the customer knows exactly in advance how much what will cost.

  1. Group Structure

Traditionally, law firms were single legal entities. Now we also see group structures that can be national or international. There may even be a holding company.

  1. Collaboration

Over the last years, there also has been a sharp increase in collaboration between law firms. These can take the form of collaboration networks, franchises, membership groups, purchasing groups, joint ventures, and/or firms using a common brand name.

All of the aforementioned changes have a dramatic impact on how the firm operates. But for CICERO LawPack 10, this is not a problem. It is designed to be able to handle things like multi-site set-ups, corporate accounting, etc.