Technology

Legal Tech Moves The Bottom Line

The use of accessible and impactful technologies to achieve better outcomes and offer higher value is not only increasing, but also delivering measurable impact and profitability.

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(Image via Getty)

For the past couple of articles, we’ve discussed organizations that have pioneered new methods of driving innovation in the legal industry. Successfully pitching a business case for investment is a challenging exercise in any circumstance and, based on conversations I see and participate in daily, seems to be particularly challenging in the legal markets.

Nonetheless, we do see law firms and corporate legal departments making investments in a variety of new legal technologies — from foundational technologies such as matter management solutions, through a spectrum of enabling and even transformational technologies such as AI. In order to get a sense of where the market currently is in this adoption, Wolters Kluwer Legal & Regulatory recently conducted a global survey on the state of innovation and tech adoption in the legal industry.

More than 700 legal professionals from law firms, corporate legal departments, and business services firms around the world were asked to assess their current state, future priorities, and preparedness within three key areas: tools and technology, client needs and expectations, and organization and talent.  Based on answers relating to Tools & Technology, respondents were identified as one of:

  • Technology Leading: Organization is leveraging technology effectively today, and will continue to invest in new technologies moving ahead (over the next three years);
  • Transitioning: Organization is leveraging technology somewhat today, and plans to invest more in the future (over the next three years); and
  • Trailing: Organization is not leveraging technology today and has no plans to leverage more.

The survey found that technology is key to enabling organizations to work more quickly and efficiently — and while that finding may not come as much of a surprise, what was interesting was the extent to which technology is impacting firms’ profitability and ability to adapt to change.  A couple of key points related to profitability from the survey:

  • 68 percent of Technology Leaders reported increased profitability from 2017 to 2018, compared to just 52 percent of Transitioning firms. The level of profitability also was markedly different, with Technology Leaders more likely to report double-digit growth rates compared to those Transitioning.
  • 65 percent of Technology Leaders indicated that they would increase their technology investment over the next three years compared to 45 percent of Transitioning firms.

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These findings were striking to me — the study suggests that firms that are making effective use of technology are not only outpacing their rivals, but that they are, in essence, doubling down on the strategy of technology adoption. We’ve already seen through other studies that the law firm recovery has been uneven — while firm revenues on average increased by 5.5 percent last year, a significant minority of firms are experiencing contracting revenues — as many as 40 percent in the Am Law second 100, for instance.

The survey results imply that effective investment in legal technology is a driving factor of profitability for firms. Furthermore, given that the firms that have pursued this strategy are increasing their investing at a higher pace, one has to wonder if the gap between the “haves” and “have nots” in the market will increase over the next three years.

So, what keeps firms from making investments in technology? In the survey, lawyers identified numerous reason that technology is resisted in their organization. The responses fell into three general categories:

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To me, the most interesting takeaway from this finding is the degree to which these decisions are not financial in nature (70 percent identifying non-financial impediments). While we often get pulled into a cost discussion, the reality is that the recipe for change requires many ingredients. Successful investment may mean the acquisition of new talent — potentially from areas outside of legal.

To underscore the challenges with understanding the impact of technologies, let’s look at another survey question / result. Lawyers were asked the degree to which they believe transformational technologies will impact their organization and also how well they understand the same technologies, the results were as follows:

As one can see from the figure, there’s a significant gap in estimated impact and understanding… again raising the implication that organizations need to invest in skills / understanding as part of any technology investment plan. The study contains many, many more findings and I’d highly encourage everyone to download the study and dig in deeper.

For me the key takeaway was that, after years of debate around the transformation of the legal industry, it’s becoming clear that the use of accessible and impactful technologies to achieve better outcomes and offer higher value is not only increasing, but also delivering measurable impact and profitability for the organizations who know how to use them well.  And if profitability isn’t an incentive to build a business case for innovation — I’m not sure what is.

Next month we’ll review more of the findings and delve into the perspective of the corporate legal department — with a focus on expectations of outside counsel and leveraging technology.

May Goren Photography

Dean Sonderegger is Vice President & General Manager, Legal Markets and Innovation at Wolters Kluwer Legal & Regulatory U.S., a leading provider of information, business intelligence, regulatory and legal workflow solutions. Dean has more than two decades of experience at the cutting edge of technology across industries. He can be reached at Dean.Sonderegger@wolterskluwer.com.

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