This article originally appeared in Legaltech News, June 2021.
Revolution FOMO? How to Pivot to a Data-Driven Strategy, our founder, Chris Egan has identified 6 important steps he sees that entities are taking to successfully create business value from AI and data analytics investments.
The legal industry is seeing an innovation boom like never before, with software companies, alternative legal service providers (ALSPs), consulting firms, and law firms alike investing in analytics and artificial intelligence at record levels to help refine and streamline the business of law. Corporate legal departments are also increasingly using AI within their tools and processes.
Nearly every aspect of law will be impacted by innovations in data analytics and AI. These technologies are responsible for the digital transformation that is taking the legal industry by storm and causing what was once a highly traditional, analog profession to become increasingly data-driven.
Data-Driven Legal Services
Organizations are utilizing emerging technology and data science to help legal practitioners draw insights from large volumes of data and make data-driven decisions to support legal strategies. The areas of law being most actively impacted by data and analytics include e-discovery, legal research, document management, contract analytics, compliance, and data privacy.
Those who have FOMO (fear of missing out) are eying the rapid changes happening in legal tech and considering how to participate in the revolution.
The next generation of legal technology and service leaders are changing the face of legal services. Inventive organizations are taking a variety of approaches to leveraging AI, automation, and data science in new offerings, and it is clear that there are common elements among those who are successful.
1. They have a clear strategy.
To digitally transform, organizations need to have an in-depth understanding of their markets and business model. They identify the areas that present the greatest opportunity for leveraging AI and analytics to advance products or services, prioritize them, and approach analytics in a systematic manner, starting with the areas that will produce the quickest results, the greatest benefits, or both.
2. They consider the build or buy options.
For an effective digital transformation, analytics and AI solutions may be built from scratch, or obtained through purchasing, licensing or partnering. It all comes down to a question of resources, staffing, and what’s most feasible in a particular situation. Building requires in-house capabilities and expertise to create the core AI and analytics solutions needed to meet transformation goals. This might involve hiring AI experts and data scientists if the organization does not have those capabilities in-house.
Some organizations decide to take advantage of the many off-the-shelf models, algorithms, APIs, and tools that are available today. Others have opted to purchase technology companies outright to expand their offerings, such as e-discovery provider Reveal Data acquiring AI provider NexLP, legal workflow technology provider Litera purchasing cloud-based litigation platform Allegory Law, global legal company Elevate acquiring AI provider LexPredict, and Relativity recently purchasing Text IQ.
3. They find strength in strategic partnerships.
Sometimes building and buying don’t cover all the bases. Successful providers of legal analytics often fill any gaps by partnering with providers who can help solve technical problems, design new user experiences, or expand a company’s geographic footprint. Drawing on partners who bring additional expertise is a great complement for off-the-shelf products that are meeting specific needs.
Strong partnerships grow over time, bringing more knowledge and expertise in-house for future transformation initiatives. You can also lean on these partnerships to keep things moving forward until you’re able to adequately hire the staff you need to execute your strategy on your own. While it may be tempting to rely strictly on building or buying to retain control, successful leaders in legal innovation realize that partnerships are often more logical and cost-effective in the short term, if not longer. For example, law firm Hogan Lovells partnered with FTI Consulting and Cognia Law to create Hogan Lovells Engage: LIBOR, a solution designed specifically to address administrative and legal challenges related to LIBOR re-papering.
4. They work with investors to fund new initiatives.
Building success in the analytics revolution requires a significant financial investment. Fortunately, given the rapid rise of legal technology, venture capital and private equity firms are actively seeking opportunities in the space, and many bring domain expertise. Taking on an investor firm can enable companies to fund new staffing and development, or outright acquisition of technology, thereby accelerating time to market.
A great example of using capital to expand capabilities is e-discovery company Compliance, who leveraged investment from Oaktree Capital in early 2021 to transition beyond e-discovery into contract analytics. Law firms are also increasingly getting into the technology game by investing in legal tech startups and bringing them under the firm umbrella, often functioning as separate, wholly owned entities with their own unique branding. A perfect example is SixFifty, a technology subsidiary of law firm Wilson Sonsini that specializes in legal document creation. Law firm Reed Smith similarly created and then spun off tech company Gravity Stack, while legal tech company LexCheck raised $3M in funding through a seed round.
5. They are creative in finding the right talent.
Buying and partnering are often catalyzed by a lack of internal talent, so many organizations look to shore up their ranks with data scientists, solution architects, linguists, statisticians, project managers, customer success and machine learning experts. This often proves to be the most challenging piece of the puzzle, however, because there aren’t currently enough skilled professionals to meet the burgeoning demand.
In the coming years, we are likely to see new types of lawyers emerging from top law schools – lawyers who focus on technology and give equal weight to legal and data science skills. Until then, it will continue to be a struggle to fill the talent gap. Some legal technology providers focus on training current employees in new skillsets, while others look beyond traditional candidate pools to hire staff that bring technological, rather than legal, skills to the table. Another possible route is looking at flexible or contract work arrangements to fill gaps. Considering all these options offers the best odds of securing the talent and skill levels needed to bring new solutions to market.
6. They play well with others.
For decades, the legal technology ecosystem consisted of law firms, corporate legal, and the technology and service providers who served them. The revolution underway today is not only bringing analytics, AI and other new technologies to the industry, it is also feeding creative new types of businesses and service providers. Law firms are establishing innovation arms and technology subsidiaries). Alternative legal service providers (ALSPs) within and outside the law firm are an important and growing segment of the legal services community.
Historically, law firms shunned ALSPs as unworthy competitors. Now, as ALSPs have risen in prominence and proven their utility and expertise, law firms are starting to create ALSPs within their own ranks, much like they are creating internal technology companies. The moral of the story is this: the competitor you battle today may be an ideal strategic partner tomorrow.
Those who will emerge as winners in this revolution of analytics and AI in legal are focused on knowing their markets, building a strong strategy, and leveraging investor partners, talent, and partnerships to execute on the strategy.
Chris Egan is an industry veteran who started his career with a discovery services company that eventually sold to Integreon. Chris founded Celeritas Recruiting in 2011 as a boutique search firm focused on the legal and professional services community.