Blog post written by Dinara Davlembayeva
Alex Craig is a Partner at Muckle LLP, a commercial law firm based in Newcastle Upon Tyne, working with regional, national and international clients. The company is increasingly dealing with technology challenges, in terms of contracts, disputes, acquisitions, sales and other legal aspects of the business. Alex has been at the centre of many discussions around data protection and international property ownership over the course of her career. To broaden our understanding of the key digital innovation milestones and challenges in law firms, Alex shared her experience of how digital disruption has affected the firm operations, what strategic meaning such impacts have had, and what the role of socio-technical and regulatory factors in digital disruption was.
Technological developments have significantly changed the professional services industry over the past decade. Although the accounting, legal and consulting service sectors have seen a less seismic digital disruption relative to other industries like telecommunication and media, the transformations are greater than they might seem. A longitudinal insight into the service industry at a granular level could shed light on the changes in the business structure, workforce, the competitive landscape, clients’ expectations, and overall market supply-demand dynamics.
Against this backdrop, the future of professional services is likely to be different in the coming years. Considering a significant transformation of the industry and the likely impact on the future of professions, the September Sphere Network event featured a discussion with an invited guest, Alex Craig, about the digital disruption of professions, and the law in particular.
Technological developments
Digital disruption in law firms is primarily manifested by the automation of document production, AI-supported work practices, process improvement, data analytics, agile/remote working and the shift to a digitally-enabled client interaction through video conferencing and interactive tools. Whilst 20 years ago, research in an office meant a laborious inspection of and sorting through piles of physical materials, archives and books, the digitalisation of sources has significantly eased documentation. The replacement of papers by electronic resources and faxes by digital dictation and phones are some of the most obvious changes that have happened in the way of working. The new ways of conducting meetings, exchanging, and producing information have led to changes in the work style and the use of physical space.
Initially being stipulated by the developments in technology, digital disruption is greatly facilitated by socio-economic and market factors. For example, the use of video conferencing solutions, cloud storage and e-verification/e-signature have increased exponentially following the COVID-19 outbreak. With workers being increasingly attached to their workstations, be it at home or in the office, multiple connected displays and devices have become a typical configuration of digital technologies to improve the speed, quality and efficiency of work. Rising client expectations and demands aid the wider adoption of AI-based tools to enable real-time services, such as the online debt recovery system, recently launched by Muckle. The benefits of such innovation in the house is improved efficiency, flexibility and reduction in overheads. On the flip side, though, the technology has some implications in terms of confidentiality and privacy, which require stricter compliance with data protection policies and procedures.
Disruption of the workforce
The automation of a significant amount of workflow and virtual communication help improve efficiency, reduce work timeframes and address the pressure posed by client expectations. However, the exponential growth of the utilisation of new computing technology at work can create tensions among the workforce, as the employment of technology requires new technical skills and capabilities. Such changes lead to the creation of new roles and opportunities but challenge the labour market. Considering the rising expectations of clients, redesigning the firms’ talent pools to offer better value for customers is rather a necessity than a choice. Reshaping the skill set of existing professions is imperative to cope with the dynamics in this highly competitive market.
Drivers and Obstacles of Digital Innovation
The adoption of new technologies in law firms is driven by the need to improve service quality, efficiency and flexibility. As per the Solicitors Regulation Authority Report 2021, the majority of law firms employ technology for automation and communication purposes. 87 % of companies use video conferencing tools, 66 % store data in the cloud and half of the surveyed companies use practice management or legal research software. A relatively smaller number of firms use new technology, such as AI and chatbots, for interactive purposes and customer relationship management. It is anticipated that the use of online portals, interactive websites and live chats, giving clients immediate access to services, will rise.
However, financial, human, legal and market factors hinder law firms from embracing digital innovation at its full pace. Not all firms have the financial resources to innovate. Also, the lack of expertise poses a big challenge, as lawyers need to operate new concepts and regulations in a technological sector, which is not yet certain. The ambiguity of rules and regulatory frameworks result in the equivocal interpretation of laws, which might have bigger implications for both firms and their clients. In a market which is not fully regulated the value perceptions of clients’ needs and the options to address these needs are very unclear. It is difficult to navigate through the rules when jurisdictional guidance is not available. Apart from uncertainty, stringent regulatory measures, such as data confidentiality and protection obligations, slow down the adoption of technology.
Market Structure
Due to the segmentation of the market of legal services, digital innovation is at a different pace for people-oriented services (People Law sector) dealing with individual clients and companies focusing on corporate clients (Big Law sector). There is a sharp divergence between the two market segments, with different business models and differential access to resources. The ratio of the introduction of new technologies, new services and the barriers to digital transformation is not in favour of People Law firms. However, Alternative Business Structures-introduced by the Legal Services Act 2007 to enable non-lawyers and lawyers to manage and co-own law firms are regarded as a front of innovation and forward-looking adoption of legal technology (see full report:
Conclusions:
- Technological development has hugely changed the legal profession
- Rising clients’ expectations and the COVID-19 Pandemic facilitated digital disruption in the service industry
- Service quality, efficiency and flexibility are key drivers of digital innovation in law firms
- Lack of financial capital, expertise, regulatory uncertainty, the perception around needs, the visibility of options and the lack of available solutions are the key obstacles to digital innovation in the legal sector
- There is an unequal proportion of opportunities, barriers and resources available to innovate among law firms from different market segments.