TLF Brainstorm | Ep. 5 | What is your legal forecast for 2018?
What is TLF Brainstorm?
TLF Brainstorm is an opportunity for our community of legal forecasters to share their creative ideas in response to an interesting question about the role of the lawyer.
TLF Brainstorm is one part philosophical, one part creative, and most of all, it is a space to share new ideas.
Some of our responses may be genius and change the world forever, some may completely lacklustre, some may be riddled with typos (having been typed and sent through on someone’s mobile phone while on the bus). This is the beauty of TLF Brainstorm.
This episode’s question from Angus Murray:
The Court System
I believe 2018 will see an increased emphasis on the workings of our Court System – in particular the strain and overwhelming they’ve recently experienced. There will be a renewed push to incorporate and adapt innovative legal concepts and technologies into the Court system in order to not only just streamline it’s productivity but also ensure it retains its relevance in the increasingly disrupted legal landscape. Existing initiatives such as E-filing (which has been in use for over three years) and the “Technology in Civil Litigation Practice Note” which commenced in early 2017, will be joined by other similar initiatives as the Courts continue to evolve and prepare themselves to cope with the recent surge in commercial proceedings and the increasing complexity of these cases (including an increase in group proceedings).
I believe a major focus in 2018 will be the hierarchical nature of legal structures (such as law firms) including the continued discussion as to whether these hierarchies are actually an inhibitor of progress, innovation and adaptation in the legal services market. An increased emphasis on the development of effective mechanisms and strategies to encourage firm-wide (rather than top-down or vice versa) creativity, problem-solving and innovative thinking will lead to the introduction of more collaborative platforms that foster fresh and vibrant ideas.
I hope 2018 is a year in which access-to-justice becomes a major focus for the disruptors and innovators of the legal industry. In particular, I believe a growing consideration that will be turned to is the ability to retain the ‘human element’ in connecting disadvantaged individuals with the legal services they require. Rather than merely supplementing the services of a lawyer with technology (such as AI/chatbots) I believe there will be a new focus on ensuring that innovative services that improve community access-to-justice will retain an element of personal engagement and connection – and which, above all, ensures a level of human empathy.
A much bigger focus on implementation as firms figure out how to actually walk the walk and tackle the following issues:
I think this will lead to bigger emphasis and investment by firms in either in-house or external IT providers, and other consultants and professionals.
Managing client demand
Clients are becoming more sophisticated and cunning in their selection of legal service providers. As a result they are having more of a voice in how legal services are provided, for example in relation to alternative fee arrangements and access to resources such as pro forma documents.
Preparing for a redefinition of legal services
What can lawyers do to better their own services in preparation to compete with a new wave of legal service providers (not necessarily a threat in 2018 but definitely a consideration for the future) for example:
New structures of law firms
Is it the end of the traditional partnership model? What else works and how can lawyers get a better deal.
This year has marked a significant increase in the legal profession’s interest in technology and innovation. This discourse has largely been centred around artificial intelligence (“AI”), automation and document management. I expect that this discussion will continue as a centre point in the new year, however, my forecast is that the following points will become increasingly relevant.
As technology is implemented within legal practice, there will be an increase in the way(s) in which society can access justice. This may be via AI-driven legal solutions, the Court’s architecture, information availability for the public and the cost of basic legal services. Access to justice is a fundamental aspect of law and, once the “tech hype” has subsided, I hope that access to justice will theme as both a morally and commercially important aspect of technology in law.
The legal landscape is clearly shifting into the digital era and with this transition comes the need to appropriately educate and skill new generations of lawyers. I forecast that this will involve an increased focus on the broader ambit of law (i.e. areas of practice) and utilisation of a law degree outside of the traditional pathway (and aspiration) to partnership at a large law firm.
The increase of interconnectivity is arguably the greatest disruption to the traditional legal model and mindset. The ability to work from home, on the bus, in the airport, etc. is creating a situation where the necessity for a physical and central location for a law firm may become redundant.
The law will be required to change to accommodate new methods of practicing and communicating legal services. The abovementioned points will require legislative change and it is, in my hopeful view, likely that the new year will see Parliament considering the best way(s) to regulate and quality control the evolving nature of legal practice.
This is probably the biggest (and boldest) forecast for the future of law. I have repeatedly stated that, arbitrarily, law is 80% science and 20% art. The science aspect of law is the process driven elements of law and are thus capable of automation (eg. the preparation of a standard license agreement). The art of law is more finesse and is the deeper human element of law. The importance of the “art of law” will become clearer as technology struggles to properly identify and act upon complex variables such as sensing untold needs, credibility, ancillary issues and advocacy. I forecast that the art of law will become increasingly important in legal education and professional development.
In sum, we live in interesting times and I forecast that the new year will continue to deliver challenging and exciting issues.
My thoughts are as follows (apologies that I have not had time to polish up as much as I’d like): My legal forecast is somewhat conservative in that I think we will see a continuation and acceleration of current trends (as outlined below), with large significant changes still to follow.
I see a continued (and accelerated) commercialisation of the legal profession. Truly ‘commercial’ firms are those that are client-centric which differs significantly from the historic role of law as a profession (in which lawyers could say, do and charge as they pleased!) and I think 2018 will see an acceleration in this shift from the latter to the former. This will raise additional tensions with the regulation of legal practice (the current model poorly applies to legal technology and to firms wishing to offer a truly commercial service) and hopefully we will start to see some of the industry’s regulations updated and adapted (however not without tensions along the way!).
I expect even more service providers to begin to offer legal services in addition to their other services, challenging the current top-tiers. I also expect a big shift towards making legal services more approachable and accessible for clients; e.g. online billing and client access to matter information (such as online portals); many clients are asking for these and it is strange that the legal industry has been so slow to adopt, however presumably they will have to be adopted in 2018. I expect that the largest corporations and the banks will really begin to implement reg tech (following in Europe’s footsteps) to cope with the increasing regulatory burdens and higher risk of enforcement action from regulators, and firms and start-ups are likely to be competing heavily in this space.
As for access to justice, I anticipate that additional online resources will pop up providing people with information on the law and further breaking down barriers (and ‘undermining’ law as a profession).
I also think the legal industry will begin to draw from other professions and disciplines in order to provide a more holistic view of legal issues. For example, perhaps we might see an increasing collaboration/merging between those involved in dispute resolution and those that understand human psychology, in order to develop and structure ‘smarter’ dispute resolution interactions between people that help reach speedy resolution (particularly in the context of family law).
I expect that the judicial system and the education system will continue to lag behind the commercial realm in terms of change (given the lack of commercial incentives driving change and the generation of those running the courts and the universities) and that it is unlikely to see any significant changes occur in these areas in 2018, however the conversation on what needs to change in these spaces will continue.
Lastly, on lawyer wellbeing, lawyers will continue to demand healthier and more sustainable work environments, as knowledge on what makes for a healthy and happy life becomes more adopted by the mainstream. I think there will be a decrease in those willing to sacrifice their health (and life) for the sake of a ‘successful’ legal career.
Save for a perhaps inevitable (but erroneous) conflation of innovation with technology and mounting evidence of a legal innovation echo-chamber, 2017 has not been without progress. The legal landscape in 2017 has been punctuated by the mass realisation that there is opportunity in legal innovation. We can also now safely say there is a burgeoning micro economy with legal innovation as its centre point.
Notwithstanding the above, 2017 has not escaped the growing pains of innovation.
This year has continued the trend of a stunning lack of understanding from industry players who continue to believe that innovation is opposed to their bottom line. To anyone familiar with the literature, the notion that innovation is inherently good is derivative. Enduring sentiment to the contrary is the intellectual equivalent of a 7-foot NBA player air-balling a free throw – disappointing, but altogether not that uncommon.
1. Regulatory development
2017 has seen substantial movement in the regulation of innovative practices. Particularly interesting in 2018 will be the interplay of alternative capital raising efforts with ASIC’s crystallised positions on crowd sourced funding (RG 261) and Initial Coin Offerings (Info Sheet 225). Undoubtedly, 2018 will offer a mix of financial products that utilise alternative funding as a compliment to a sound underlying business model and those that attempt to rely on alternative funding to make an otherwise untenable project tenable.
2. Legal integration
2018 will likely see progress toward ‘legal integration’, being the merging of legal practice with business practice, as the demand for legal services ebb and flow with macro-economic trends. For those resistant to the legal integration trend, a key question is how to create utility out of the inevitable downtrends in demand for services (i.e. how can law firms create business for themselves rather than piggybacking on the business of others).
A key example of innovation in practice comes from recent ASX listed entity Go2 People Limited (ASX: GO2), which took to market the idea of combining FIFO worker recruitment with internally-driven prefab home constructions during low-demand periods. 2018 may very well be the year that law firms discover their version of the ‘prefab homes’ model.
3. The client/risk portfolio
As the goodwill of premium law firm brands retains status as the most valued currency in legal services, downward pressure on pricing will continue to influence the way law firms share project risk allocations and receive remuneration for their services. Particularly in the micro-cap space, law firms have demonstrated a willingness to accept alternative fee arrangements, whether by way of deferred payments, scrip arrangements, or a derivative thereof.
2018 may see law firms begin to view their clients as investment ‘portfolios’ that balance high risk/high return projects with more reliable traditional arrangements. Law firms willing (and financially able) to de-emphasise short term profits and carry greater risk will position themselves ideally in the long term to compete with firms above their market position.
4. Innovation in practice
For those who caught the ‘innovation discussion bug’ in 2017, 2018 should be focussed on turning those words into practical action. Core to this process will be taking the time to quantify processes (including mental processes) for the purposes of leveraging technology to replace the repeatable aspects of practice. The small minority of unquantifiable aspects of the profession that remain (being the inherently human aspects), will be a potent mix that Angus Murray so rightfully calls the ‘art of law’.
Assisting this process, and/or capitalising upon it, should be the focus in 2018.
Everyone keeps looking at the bigger firms for defining the status of legal innovation and technology. I think that is going to change in 2018. People are going to stop relying on the bigger firms as the benchmark for what is progress in the industry. 2017 saw some of the most innovative firms created or highlighted in the industry for their adaptability and commitment to making access to justice a reality. That is who will continue to shine bright in 2018.
The traditional partnership model will likely not change in 2018 but I think you are going to see more attention brought to the inherent flaws in the system given today’s world market. Millenials are continually entering and rising up in the legal industry and the traditional partnership model often does not sit well with our values. Clients want a full-service package and it is about damn time law firms realised they need to operate as a collective business rather than 50 individual businesses headed by individual partners who get angry if their client likes another lawyer at their firm more.
Importantly, universities have been quite responsive to change in the industry and I believe 2018 will see more law/technology offerings whether that be dual degrees or more courses. This is significant because the next generation of lawyers need to be prepared for the disruptions that are to come. It will also comfort students to know the big firms are not the only highly coveted positions as innovative law firms continue to offer flexibility and unique opportunities along with businesses who traditionally would not have taken law graduates.
To begin my Legal Forecast for 2018 I believe it is critically important to form a distinction between incremental innovation and disruptive innovation. Incremental innovation is the incremental improvement of a service or product. Examples of incremental improvements using technology are report aggregation from previously decentralized data sources, workflow automation in which time-consuming, repetitive tasks are automated, or integrated communicative tools. In contrast, disruptive innovation is by its nature paradigm shifting and transforms the way in which entire systems perform. Examples of disruptive innovation are Google’s search technology, Amazon’s cloud services, Netflix’s initially DVD-by-mail model, followed by its streaming service, or Uber’s transportation service. Of the two established firms tend to focus on the former. Why? In my experience, because incremental innovations are often apparent after performing standard analysis processes, it is less risk intensive, and it is far easier to identify a clear ROI for projects. Furthermore, established firms are averse to a mass transformation of the landscape they already dominate in, where disruptive innovation threatens to destabilize a tried and true business model.
So what does this mean for the legal profession in 2018? I would assert that legal profession is ripe for incremental innovation in 2018, yet not disruptive innovation. To list a few reasons why 2018 is not the year for disruptive innovation in the legal profession:
With this said incremental innovations can result in major increases in productivity, and lay the foundation for full-scale transformation. Incremental innovation often emerges from the intersection between a problem made evident through the regular performance of a business
process; and the knowledge of an available technology, software, or method. Application of this available technology, software or method to the problem generates a solution. This solution represents an incremental improvement to the process, and in-turn improves the efficiency of the system. For this Forecast, I will focus primarily on incremental innovations through intersections of problems and available technologies in the legal profession.
Open Source Technology
Open-source technology represents unparalleled opportunities for innovation. Open source projects like Red Hat Linux, TensorFlow, HyperLedger, Apache HTTP Server, MySQL to name a few offer the chance for a regular full-stack developer to leverage the knowledge of the world’s greatest software engineers through using open source technology in their projects. Open source technologies develop a symbiotic relationship with their user base, where users gain the benefit of usage, and the open source project gains active QA testers, developers to grow, and perhaps most importantly network effects through widespread user adoption.
Platforms Design/ API
Technology companies are consciously designing their applications as platforms and allowing their users to have greater control over how the application performs. API’s (Application Programming Interface) allows users to integrate services across multiple platforms, allowing functionality which previously required months or years of planning and development to be available within hours or days.
The flow-on effect from the expansion of open source technology and IT companies undertaking a platform-centric model leads to previously inconceivable interconnectivity, interoperability, and integrability for IT projects. I believe these trends will yield a stream of new SaaS (Software as a Service) applications, and accelerate the maturing processes of existing SaaS applications for the legal profession.
Does this mean law firms need to increase their internal development budget significantly? Not necessarily, many of the problems lawyers face are universal, which means it is highly likely that there are already tools and technologies available to fulfil the firm’s technological/ business process requirements. With that said, enterprises which are developing SaaS applications for the legal profession will be strategically positioning themselves to expand their service catalogue and lay the foundation for a platform technology. To gain a competitive advantage law firms may consider a similar strategic approach.
Examples of Intersections Between Technological Trends and the Legal Profession:
Chatbots (Internal and Managing Client Relations)
ChatBots are becoming more widely used and accepted across many industries. As the technology matures, firms may opt to deploy chatbots to serve as an interface with internal knowledge bases for internal stakeholders and clients alike.
The blockchain technology offers unprecedented opportunities for transparency through the creation of decentralised general ledgers for specific applications. By integrating the blockchain technology into contracts firm’s yield nearly instantaneous digital proof of a legal interaction between parties. This is only one example of countless opportunities for the blockchain to transform the way law firms manage contracts.
Softwares like Kira Systems offer new methods to aggregate large repositories of contracts and swiftly parse these contracts. Software’s like this will provide analytical features and new ways to observe trends in contracts en masse to assist lawyers in practice.
In conclusion, it is my belief that the challenge for 2018 is to actively seek opportunities to integrate already available technologies into the legal profession. Fostering a culture of innovation and dynamism in the face of technologically caused change will prepare legal professionals to take future disruption in-stride.
AI has been a big buzzword in 2017, and there has been increasing discussion about the impact it will have on law firms and the legal profession, and the pros and cons of its implementation. However, the legal profession has not yet moved beyond merely talk and speculation, and we haven’t seen much happen in terms of actual implementation or adoption of AI technologies by big law firms and the wider legal profession.
My legal forecast for 2018 is that the legal profession will be confronted by the impact of AI in a way that they have not been before, and mere discussion of its potential influence will have to shift towards actual reaction and implementation. The responses of law firms and the wider legal profession will have an unpredictable impact on their continued operation and existence into the future. Whether law firms embrace AI technology into their operations will influence whether they will survive over the coming years. I predict that law firms will need to deeply consider AI technology, and their current use of it as a buzzword to demonstrate that they are ‘tech-savvy’ will not be enough going into the future.
More talk, less action, little change. No choice.
Big firms, who possess the capital which could be deployed to effect real, meaningful change in the legal industry, will continue to eek out growth where scarce opportunities for growth exist. Big firms will continue to assume that their own ignorance of the changes threatening their profession is shared by their clients, who will continue accept an inferior product from “trusted advisers”. They will try to fill their sales with the winds of change, however, puffing about how their “AI-enabled, machine learning, cloud-based fully integrated” solution is groundbreaking and miles ahead of the competition.
One could speculate as to whether these firms’ amazement with, what is to the tech-savvy, quite mundane outputs, stems from pure ignorance or laziness. Whether firms are genuinely unaware that the ‘innovation’ they have achieved is technologically “ho hum” or whether, rather than invest in meaningful, revolutionary change, firms would prefer to scale back investment in innovation, while continuing to herald it as the the greatest thing since the automated bread-slicer.
In fact, firms’ current attempts at innovation will sate the appetites of the entrenched management who are simply seeking to adorn their firm in the sleek gloss of the digital revolution and the growth in innovation initiatives will slow. The During-Kruger effect will take hold and firms who fail to properly address the knowledge asymmetry that exists between their management and the junior members of staff will have the dual effects of:
Firms need to critically assess who is in charge of assessing the adequacy of their innovation initiatives and ensure that an adequately critical eye is applied to the task.
More broadly law firms and lawyers will fail to confront the fundamental substance of the disruption occurring in their industry. Conversations will skirt flirtatiously about the “how” of law (i.e. the method through which legal services are delivered), rather than boldly scaling the depths of the “what” (i.e. tackling the existential question of “what does it mean to be a lawyer in 2018?”).
Lawyers and policy-makers alike need to start to articulate an answer to this question to ensure that the job of “lawyer” and the professionals in pursuit of it remain focused, and more importantly, relevant to community needs.
The biggest risk with the bleak portrait of the profession I have penned above is that readers will take my prediction as a promise. It is not. It is a view of things to come based on current trends. But current trends are just that, current, and if you don’t like them, make new ones.
I hope that in 12 months I look ridiculous for having put to paper such a pessimistic view of the legal profession. But at this stage, I’m looking far more reasonable than ridiculous.
The discussion regarding changes to legal education is just beginning. I think in 2018 there will be greater involvement and discussion with Regulatory bodies regarding skills sets required to meet the demands and changes of the evolving legal industry. The difficulty is to set a curriculum that can weather unseeable changes in the market place. However, I do think that greater cross-disciplinary collaboration between Faculties, an understanding of legal business and tech literacy will be on the rise and setting in motion shifts so that some of these can be introduced within curriculum. I hope that there will be an equal push for developing EQ-related skills. It would be great to see industry, academia, students and Regulatory bodies come together to visualise a curriculum to provide students with the skills they need for the fourth industrial revolution.
Focus on diversity of thought
Terri Mottershead at the Melbourne Centre for Legal Innovation ‘To Code or Not to Code?’ event, discussed the ‘rise of the aggregator firm’, firms constituted and managed by different skillsets in addition to legal minds. It will be interesting to see whether there is a shift to decentralised structures, maybe not in 2018 but I believe there will be a shift in the commonality of the business model in future. I think there will be an increase in firms merging with technology-based companies or investing in their own start- ups. There is a universal recognition that embracing different skillsets is necessary and the importance and rise of lateral hires, however I think there will be a shift in discussing how we go about communicating, constructing and working in teams which carry different value propositions and priorities. This is underpinned by creating cultures that value contributions across the board and the spirit of inquiry.
Refocus on the people – access to justice
2017 was filled with discussion about AI and how this will change lawyers’ work. I feel in 2018, there will be increasing discussion regarding the way innovation can transform accessibility to legal information and justice. Technology will play an integral part but I also think there will be a re-focus on human-centric redesigning of process (e.g. communication pathways, fee structures, accessibility of lawyers and legal information).
Implementation of technology
The narrative regarding technology is likely to widen and refocus on questioning, experimenting and sharing learnings such as how do organisations effectively implement technology, how do we find the balance between the human element and technology within an organisation and how do organisations find new ways of effectively balancing risk and expenditure, technology development and the iteration processes of new products within a law firm?
I agree with Chris, I think AI, Blockchain and machine learning are in their infancy stage in terms of their implementation and it will be interesting to see their further impact on practice.
Client-firm technology collaborations will be on the rise in 2018, increasing visibility of trajectories of client matters and the role of the Legal Project Manager, Technologist, Legal Designer and Legal Engineer will be of increasing importance.
I think overall, 2018 will see an increase in the adoption of innovative ways of providing legal services across all levels of the market. As technology assisted review (TAR) and contract automation skills become necessary requirements of members of the profession, the ‘buzz’ surrounding these technologies will fade and they will simply become the norm.
Adaptation of Technology
The threat that firms may fall behind will be realised in 2018, and investments into increasing technological capacities will undoubtedly be at the forefront of many firm’s strategies leading into the new year.
I think that this will result in the solidification of the divide between firms who have the ability and willingness to implement changes in the way that legal services are provided, and those that don’t. Firms must work with their clients in trialling and testing new ways of producing deliverables or face the threat of obsolescence.
The role of smaller and mid-size firms who have neither the agility, willingness nor the capital to embrace new practices that meet the increasing demands of sophisticated clients remains to be seen. The less risk averse the firm, the more likely that firm will be able to sustain themselves.
The role of the non-lawyer will only become more and more important to legal practice as time goes on. Legal project managers, process engineers, knowledge managers, pricing experts and most importantly legal technologists have quickly become integral to the practice of law in Australia. I believe 2018 will formalise the necessity of these positions in the market, and in turn create new and alternative career pathways for law graduates.
Education & Recruitment
2018 will only see firms continue to increase the diversity of characteristics they seek when recruiting their junior lawyers. Soft skills, intricate commercial understanding, tech literacy and openness to new ways of working will become of paramount importance for tomorrow’s graduates, if they aren’t already.
As a result, the education landscapes in which the LLB and the JD are taught will continue to evolve, as it has been in recent years. Australian law schools are rapidly designing and implementing courses relating to change management and technology in order to future-proof graduates. These ‘alternative’ and sought after skills will become more prevalent in course structures over next 12 months as law schools attempt to equip their students with the necessary skills and mindsets to tackle the rapidly changing industry.
Initial Coin Offerings
We have had the first official word from ASIC regarding the new fundraising model of initial coin offerings (ICO) in September of this year. The information sheet confirms that many of the provisions of the Corporations 2001 (Cth) will apply to ICO’s dependent on which preexisting regulatory box the ICO can be put into (as a derivative, managed investment scheme, crowd-sourced funding etc). It is likely that ASIC is working on a clearer regulatory direction for ICO’s in 2018. Hopefully, it will strike a balance between the current mostly unregulated framework which allows greater access to smaller investors and the strict and expensive compliance requirements of initial public offerings.
Smaller firms packing a bigger punch
The current structure of most mid-tier and top-tier firms which often has each partner or team running an isolated business unit does not lend itself for firm-wide uptake of new technologies. I believe we will see more small law firms started by young senior lawyers from large firms who leverage technology much more effectively. These firms will continue to chip away at the client base of larger law firms by providing a quicker, cheaper and more effective service.