Looking upwards: how to implement AI in your firm

Tech-savvy lawyers are critical to law firms' survival - yet persuading lawyers to adopt new technologies seems to be the biggest challenge, according to a poll carried out by Managing Partner earlier this year.1

Billions of dollars are being invested in AI across the globe. These investments demand returns and will be instrumental in driving change. Some AI is being directed to solve utopian challenges - curing cancer, for example; others are here, ready and able to be used today, to immediately impact businesses, including legal services. The legal profession has long considered itself immune to technological change, however, AI is challenging that misconception at a pace most lawyers cannot even imagine, let alone take advantage of. That begs the question, is what you do on a daily basis really immune to the force of change? Or will you take the opportunity to be part of the inevitable new normal?

Application of AI in the practice of law today

Often now referred to as cognitive computing, AI takes many forms, but most can be conveniently grouped into three broad areas: robotics, machine learning, and smart apps, previously referred to as expert systems.

AI in the form of machine learning is already being applied in legal areas such as e-discovery in assisting to identify those documents relevant to a particular case, often from a corpus of millions of electronic documents. This predictive coding technology significantly speeds up the process while reducing human labour cost. Machine learning has enormous potential to solve text heavy challenges including legal research and is the focus of much current media attention. Most AI technologies in this area are 'probabilistic' and so lend themselves to solving such challenges as determining the possible outcome of a case based on previous case history and specific judgments in a jurisdiction.

Smart apps are best described as technologies that connect complex content and expert analysis of that content to provide precise, immediate answers. These systems, rather than being probabilistic in outcome, are determinative, in that they provide a specific answer to a question. For example, 'Can I, or can't I, make this payment under the Foreign Corrupt Practices Act (FCPA)?' or 'Is the risk high, medium or low in accepting this trade?' These are often the day-to-day questions, challenges that lawyers are asked to solve.

Some law firms have embraced AI based smart apps to better serve their customers. Foley & Lardner provides an on-line and mobile app that specifically answers customers' queries regarding payments under the FCPA. Littler Mendelson has created an on-line business, ComplianceHR, which answers client human resources questions including employment status in 51 jurisdictions. Bot & Co provides online answers to client queries regarding compensation claims as they relate to late flights.

New examples pop up every day. Why? Smart apps are a way of leveraging the expertise of a firm at internet scale. The firm can address the legal needs of clients and prospects in a way never before possible. Smart apps create a new way of connecting with clients, enabling users to self-serve, solving the profession's current human choke point of one expert providing advice to only one client at any one time.

What types of activities are likely to be automated?

Due to the inherent conservative nature of the legal profession, change is likely to come as evolution rather than revolution. It is most likely that AI will be used to solve legal problems in areas currently 'under-lawyered'. Many legal questions, especially in compliance, go unanswered today because there is no means by which to connect the expertise of the lawyer to the person requiring the advice in a cost effective manner. This is the problem that AI can solve today.

Even if it were technically possible, AI won't replace all legal work. In their book, The Future of the Professions, Richard and Daniel Susskind state that 'Machines will increasingly take over - except where experts do tasks that cannot or should not be replaced by computers'. There is much legal advice for which human lawyers will always be needed, however there are also many legal tasks and answers which smart apps can perform today.

Less complex, more repetitive advice will likely be the early area replaced by smart apps. From a business perspective, this has traditionally been a lucrative area for lawyers, but these are most likely to commoditise, for example practice areas such as HR and real estate law. The broader legal profession continues to give up this battle, leaving it to specialists that are able to service these areas efficiently and still make money at lower margin.

The key with AI technology is that it allows us to look upwards into more complex legal areas. In a perfect world, expert systems are used to solve highly complex yet highly repetitive problems. The increasing regulatory environment is a good example. Understanding all the highly complex and fast changing regulations forced on businesses is difficult. Smart apps allow law firms to provide their expertise as subject matter experts to the end user client who is faced with the actual challenge: 'Can I or can't I?' Even further, it has the potential to connect that expertise directly into their clients' procedural systems such that any wrongdoing is preemptively resolved rather than having to be dealt with reactively. This creates tremendous value-add to corporate general counsel in any regulated industry.

For the most part these are new services. The technology is not replacing traditional in-person advice by in-house counsel or law firms. The technology is providing advice in an area currently under serviced, a win-win for law firms and their clients. Without smart apps, such advice has been too expensive for general counsel to deliver at scale across a whole company for individually small (but collectively consequential) issues.

Some smart apps also serve to augment legal advice in the highly complex but more unique space. These address processes that are necessary to the overall legal service but do not require the judgment, creativity, negotiation, and other skills that only lawyers can provide. For example, in the course of a large-scale merger or acquisition, there are multi-jurisdiction regulatory questions to be answered and filings to be made, and dozens of supporting documents to be drafted and executed. These tasks are secondary to the creative legal work of defining deal structures and terms, drafting and negotiating the merger agreement, and are perfectly capable of being handled by a smart app.

Understanding the benefits

The benefit to be derived of deploying smart apps depends largely on what it is you are replacing or augmenting. In effect it is about creating 'technology enabled services'. The world has moved from the era of putting information on-line, through to putting transactions on-line, to a new paradigm of putting services on-line. AI enables that new paradigm for professional services firms.

Broadly speaking smart apps will reduce the risk of poor decision-making. They allow for consistent, accurate results, every time, any time. By overcoming the one-to-one bottleneck of having an expert advising a client, the firm can leverage its expertise at scale allowing clients to self-serve. Professional services firms can connect deeper into their clients, creating 'stickier' relationships answering questions for the end users.

In fact it is possible to connect even deeper into their clients' business by connecting their expertise directly into the clients' computer systems. This creates potentially new revenue streams, for example subscriptions for access to expertise and on-going maintenance of the logic within the system. Perhaps most importantly, smart apps have two distinct advantages: they never forget a case, and they have no bias. Imagine the possibilities as it relates to solving the growing access to justice agenda, a problem that Mitchell Kowalski, author of Avoiding Extinction: Reimagining Legal Services for the 21st Century, states is fast becoming a problem of the middle classes.2

What factors are driving legal innovation?

The challenge for most legal professionals is working out where to start. Most law firms are inherently conservative by nature. Media attention is currently focused on innovation in law firms, however much of what is considered innovative by the legal profession has been solved within other industries many years, sometimes decades ago. In a world where profit per partner remains high, there is little incentive to change. Change is occurring at the edges; wholesale change will take time.

There are certain drivers forcing some law firms to act expeditiously. Certain areas of law are experiencing significant commoditisation. HR law is a good example of this and as a direct result ComplianceHR was created by Littler Mendelson to provide on-line answers to frequent HR questions. Standing still in this climate of change is a dangerous strategy. Professional firms must understand these forces of change and act accordingly. Starting small to build internal understanding is key. The danger of not understanding is that the world will move past and once it has, there will be no catching up - just consider the examples of Kodak or BlackBerry. Professional services firms are facing similar challenges right now.

This is more than a fad. The tech era is here to stay. Law firms will need to do more than just undertake an innovation branding exercise. Many firms have allocated an 'innovation budget'. However, budget without experience and understanding to support it will be wasted. What is required is cultural change within a firm.

Law schools around the world are reacting to the change. Some have commenced educating law students in legal technology. These graduates are tech literate; they are living through the revolution of mobile, intuitive user experience, Internet of Things and now they are learning legal technology. Georgetown University offers a Technology Innovation and Law Practice course, and Melbourne University offers a Law Apps course where students undertake their end of semester smart app 'Bake Off.'3 These students are expecting to enter a practice where they can practically apply these skills. They have been trained to use technology to solve legal problems at scale. They will be looking for law firms with a culture that supports this new way of thinking. Professor Evans, Dean of Melbourne University Law School states, 'Legal expert systems are a growing part of the legal landscape, assisting Australian and international lawyers to provide fast, accurate and cost-effective answers to common legal problems'.4

Since the recent financial crisis, in-house lawyers have been under pressure to do more, with less budget, and to add value to their companies. So GCs are looking to find more value from panel firms. Corporates are under pressure from their clients to innovate and that pressure is being pushed through to their suppliers including law firms. The combination of Gartner's Nexus of Forces, 'Social, Mobile, Cloud and the Internet of Things', will drive demand for real time reporting, transparency of services, real time answers. Clients no longer accept the bottleneck of waiting on a person with the answer, because their own clients would not accept it of them.

Bring in the changes

Although expert systems are capable of delivering tech based services today, other forms of AI will continue to develop and will solve other challenges. The legal sector will always require human expertise, however, many of the less complex repetitive tasks performed by lawyers today will, in the future, no longer be performed exclusively by them. This is just a stepping stone. Tasks like photocopying, creating discovery lists, basic conveyancing are all now more likely done by lower cost or outsourced. Given the change that has been achieved in the past 20 years, any future change is likely to be evolutionary, not revolutionary. The big question, is what will be the tipping point?

There will be a shift in the profession to be much more client focused - this means not waiting by the phone for a client to call about a problem and then reacting to solve it at hourly rates, but rather preemptively ensuring that the problems don't ever occur. AI enables this.

Proactive lawyers will be able to connect deeper into their clients' organisations answering repetitive, important questions for their clients' end users. AI enables this. Further thinking lawyers will be able to wrap-up their legal logic and expertise and connect it directly into their clients' IT systems to ensure compliance. AI empowers this.

Law firms that embrace this future will have a competitive advantage. The key is to understand the technology, to understand that an expert system is only as good as the expert who creates it: the best expert will create the best system. In essence this is an opportunity for law firms that brand themselves as having the best lawyers to demonstrate it. In much the same way as at the end of every semester students in various law schools around the globe meet in a legal tech competition, putting their legal apps up against other students, imagine a scenario where law firms put their respective smart apps up against other law firms' to determine which provides the best answers. AI will allow professional services firms to create smart apps that are your best lawyer, on their best day, every day.

Ignorance is not an option

Many law firms consider themselves to be doing unique, bespoke work for clients. For those that truly have a business performing only those types of tasks, they will likely be able to continue running a successful business doing what they do. For those law firms that are reliant on more routine work, or perhaps a mix of bespoke and routine work, change is inevitable. Ignore change at your peril. Most firms are finding their profit per partner (PPP) under pressure. Even for those that are maintaining PPP, most firms are already struggling to find revenue growth. That should be a concern and wake up call. Traditional law firms will find it even harder moving forward.

As competitors engage in delivering new business models, joining the queue late will inevitably mean a tougher journey. Change is being driven by forces beyond law firms' traditional competitors. Take for example the rise of 'alternative legal services providers' like Axiom and Riverview Law. Process improvement and project management are merely the beginning. Expect to see significant technology investment moving forward.

Are we really ready for AI?

So that leaves the question, how do you know if your law firm is ready for AI? In Geoffrey Moore's book, Crossing the Chasm, he identifies firms on the technology adoption curve falling into the following categories: innovators, early adopters, early majority, late majority, and finally laggards.

Clearly not all law firms are innovators as defined by Moore, but as this article has identified, there are some genuine early adopters of AI. Smart apps are fast gaining momentum. Currently, the bulk of these are US law firms, begging the question, when will UK law firms 'get on the curve'? Work out where your organisation fits on the curve and set up your strategy for adoption accordingly. That way you are much more likely to succeed.

No matter where you fall on that adoption curve, the key is to start. Set goals in line with what you know your organisation can accomplish given its culture. You don't have to look to make wholesale change; just identify an area in your organisation that would benefit from change through AI. Identify a champion to lead the change. Ask your clients how it would benefit them. Create a cross-functional ideation team to help identify an area.

The key is to make a start, set achievable goals, deliver something with tangible benefits and build on the success.

Greg Wildisen is international managing director at Neota Logic (www.neotalogic.com)

References

1. Managing Partner survey, 2015 www.managingpartner.com/node/7809

2. Avoiding Extinction: Reimagining Legal Services for the 21st Century,16 Oct 2012

3. www.youtube.com/embed/GqPHHIomBg0

4. www.australasianlawyer.com.au/news/students-compete-for-best-legal-help-website-207221.aspx