Just before a Global pandemic disrupted the entire market for professional services, Wolters Kluwer finalised their annual Future Ready Lawyer report about the ongoing transformation of the legal sector. According to the report, the trends outlaid in this report will only be amplified by the COVID-19 crisis since it will cause a financial pressure on businesses that will demand increased productivity, higher value and return of investment. As they note in the Introduction: “Those demands, which gained momentum following the global financial crisis of 2008, now need to be met with greater urgency ... The ability to use technology to optimise performance will be more important than ever.”
The report is a follow up on last years Future Ready Lawyer report, which found that technology leaders among law firms realised greater profitability. The survey thus showed that 68% of the technology-leading law firms increased their profitability between 2017 and 2018, while only 52% of the transitioning firms did. The report also showed that only 34 % of the surveyed participants believed that their organisation is prepared to keep pace with the changes in the legal market. That was mainly due to a lack of knowledge and understanding of skills, the participants thought.
This year is different. The report seems to indicate that awareness is not the biggest problem. In fact, there seems to be a significant gap between awareness and readiness to address the issues, implement changes and make new habits. Of the 700 participating lawyers in law firms and legal departments from across the U.S. and nine European countries (the United Kingdom, Germany, The Netherlands, Italy, France, Spain, Poland, Belgium and Hungary), 76% of the respondents deemed the increasing importance of legal technology as the top trend. Simultaneously, only 28 % of the legal professionals indicated that their firm was prepared. This year, the main biggest barrier for implementation was the difficulty of change management and leadership resistance to change.
Last year, the importance of legal technology was only ranked fourth. That might indicate the beginning of technological enlightenment in the legal sector, a beginning momentum that is also reflected in the boom of investment in legal technology. However, this alarming gap between awareness and readiness to change also shows that the legal sector is subject to what the German philosopher Peter Sloterdijk calls enlightened false consciousness. In this book, The Critique of Cynical Reason, he explains it as a sensibility that we are well-off and miserable at the same time. We are no longer ignorant about the problems and injustices in the world, but we act as if we were. We know that climate change is real, but we continue to act like it is not. And the legal sector is well aware that the technological transformation will disrupt the industry but goes on with business, as usual, anyway.
Maybe the reason is that they do not feel pressured yet?
Another important gap is between law firms and their clients. When evaluating law firms, legal departments rate as the top-three criteria: 1. Efficiency and the ability to use technology to improve productivity. 2. The ability to specialise, and 3. The ability to understand client needs. Meanwhile, law firms believe that legal departments rate Price as the top-most important criteria.
82 % of legal departments think legal tech is important, while only 73 % of law firms believe that their clients’ legal departments think it is important.
On the positive side for law firms, only 3 % of the clients are downright dissatisfied with their firms, while 26 are very satisfied, and 71 % are somewhat neutral. On the more negative side, it seems that this cannot go on for long.
82 % of the legal departments say that it is important the law firms can leverage tech, and within the next three years, they will demand that lawyers describe which tech they use to increase their productivity. Only 41 % do it today. To put it in other words, clients will drive tech-adoption and innovation in the legal industry and force lawyers to deliver faster and thereby to a lower price. But are not really doing it yet.
To sum up, these findings make it clear that the use and implementation of legal technologies are critical to meet client expectations in the future. Since the crisis of 2008, legal departments have been forced to cut costs and improve their efficiency, which has pushed them to adopt more digital solutions. In the coming years, we can expect legal departments to be a driving force behind the same change in the law firms. However, the reason why these changes have not occurred yet, is that the clients are not demanding it. They actually seem quite content at the moment.
Most law firms predict that they will increase their spending on legal technologies. In fact, 83% of law firms expect more significant use of technology to improve productivity.
What is ironic is that there seems to be no reason for law firms to wait until their clients demand the change. In line with last years’ conclusions, the new Wolters Kluwer survey also finds that law firms that do use technology effectively are rewarded.
As the report state: “Key factors where Technology Leaders outperformed others include, among firms, that 62% of Technology Leaders report their profitability increased over the prior year, compared to 39% of Transitioning firms and just 17% of Trailing firms.”
It shows that even though there is still little outside pressure to innovate, it might nevertheless be beneficial to get started. Awareness is not the issue; rather, the problem seems to be organisational - based on lack of strategy, fear of change and leadership resistance.