Are law firms doing enough to innovate and compete with the rise of the machines?

There was an important conference recently at Stanford University, a ‘National Summit on Innovation in Legal Services’. (Note to Mr Gove: instead of wasting your time trying to extricate us from the European Convention on Human Rights and casting us into the outer darkness next to Belarus, how about investing in something useful like this in the UK?)

The agenda showed a sense of reality by inviting senior representatives from IT disrupters like LegalZoom, Avvo and Modria to address the participants. I have to declare at this stage that the Gazette did not stump up the thousands necessary for me to attend, and so this account is based on a report of over 40 pages from someone who did attend, and from the presentations by some of the speakers, which are available here.

Let me start with the presentation of Professor Gillian Hadfield, professor of law and professor of economics at the University of Southern California. Her conclusion, which seems inescapable, is very bad news for the legal profession. It is based on the premise that lawyers need to innovate in order to beat competitors, particularly those built on disruptive IT solutions.

She asks first what is necessary for innovation. She answers by listing three things: ideas, risk and money. And what obstacles to these three exist in the legal profession? For ideas, the obstacle is ‘Restricted/homogeneous pool of potential innovators’ – in other words, all entrants must have law degrees. For risk-taking, the obstacle is professional regulation, which for well-known reasons of public policy tries to induce the least possible risk-taking in lawyers.

And for money, the obstacle (less relevant to English solicitors since the advent of alternative business structures) is ‘No access to diversified risk capital’ and ‘Limitations on business model and risk/incentive contracts’. You get the message. It is the actual structure of the legal profession which is the enemy of its own survival, particularly since competitors - now poised to take control of legal services - don’t suffer from the same obstacles.

The next scary news came from Marshall Van Alstyne, associate professor/dean’s research fellow, Boston University and MIT. He spoke about the power of platforms in the delivery of legal services. He showed how platform business models are changing the structure of professional services and industry.

Under the rubric of ‘No lawyer is smarter than all lawyers’, he gave examples of some existing platforms in legal services – Legal Zoom, Yahoo Answers, and Law Q&A. ‘They drive innovation via openness, modularity and enabling third parties… Work can be done inside the firm (employees), outside (counsel, crowds), or by machines (algorithms).’ It goes without saying that the size of investment in a successful platform is beyond most, maybe all, law firms on their own.

As for the kind of platform which might take over your job, the conference heard about Watson. Watson is the IBM computer which competed on a TV quiz show and beat former winners. It has now given birth to Ross, which has been developed by students at the University of Toronto (and is a computer platform): ‘Lawyers using Ross ask a legal question, and the program sifts through thousands of legal documents, statutes, and cases to provide an answer.

‘Ross’s responses include legal citations, suggest articles for further reading, and even calculate a confidence rating to help lawyers prepare for cases. Because Ross is a cognitive computing platform, it learns from past interactions, meaning that Ross’s responses will grow to be more accurate as lawyers continue to use its system.’

Colin Rule, the founder and chief operating officer of Modria, an online dispute resolution (ODR) platform, whose founders created the ODR systems at eBay and PayPal, gave the well-known example of eBay: 60m disputes per year, 50% resolved amicably, 90% resolved in software with no human intervention, almost never appealed in court. 

This is an appealing route for governments facing shrinking budgets, and a threat to those who rely on litigation.

I was going to end this piece by saying how little thinking is being conducted by the legal profession into the juggernaut roaring towards us, threatening to steamroller us, while the ownership of legal services is distributed to innovators – computer platforms, intelligent machines, ODR, whatever.

But then I read that Dentons has launched NextLaw Labs, ‘a global collaborative innovation platform’ to develop and invest in new technologies and ‘transform the practice of law around the world’. At last there is a response from the legal profession. The question is whether it is too little, too late.

Mr Gove, if you do not want to be dealing with American IT companies as the principal deliverers of legal services in this country, please take steps to sponsor a similar summit here.