Innovation is a new method of doing things. In light of the COVID-19 pandemic, there is more pressure on the legal industry to adopt new methods of offering legal services to clients.
There are two approaches that law firms can implement/continue to invest in, to ensure that they are offering cost effective and high-quality legal services to clients. These are:
continuous investment in technology and;
investing in people: optimising the workforce.
Continuous investment in technology
The issue law firms continue to face is what the author Richard Susskind references, as the more for less challenge. This will in fact be highlighted especially during this economic downturn in light of the COVID-19 pandemic.
What does this mean and why is it significant?
The more for less challenge refers to the fact that clients are increasingly pressing for the reduction in the cost of legal services, yet requiring better quality, effective and more efficient work. In many cases clients expect that law firms will have anticipated their issues and so be ready with solutions, should the problems arise. This challenge can only increase during the pandemic, as clients adopt more cost-cutting strategies within their organisations.
As a result, law firms need to be more agile and willing to adopt developing technologies to assist their lawyers in increasing efficiency and accuracy. Therefore, meeting the needs of the clients effectively.
A law survey by PwC reported that only 65% of the Top 100 law firms had a clear and flexible strategy for realising the benefits of innovation. Only 55% of those firms have innovation-based objectives for leadership. It is evident that the legal industry will need to ensure that there are specified plans for innovation, as opposed to making it a buzzword, or a mere marketing tool.
To add to the challenge, non-traditional legal businesses continue to compete with traditional law firms for clients by using their economies of scale to invest in technology. For example, the big four accountancy firms – EY, KPMG, Deloitte and PwC have invested in various forms of legal technology software to increase the efficiency and quality of work. Law firms will see these competitors look to poach their clients, by offering them a whole service package when depended on to consult the clients’ business in other areas. Clients might find that it will be cheaper to rely on one organisation for all its services, including legal services. The Big Four might be able to meet this demand.
An example of a piece of technology used in law firms is Luminance. Luminance is a document analysis tool that some firms use to obtain the most relevant information in a document. In the due diligence process in an M&A deal for example, the use of Luminance could ensure that the process is completed at a faster rate, possibly shortening the overall time of the deal’s completion. A handful of elite law firms use this.
A Word of Caution
While the adoption of technology is advised, firms should bear in mind issues that may arise.
Cybercrime is increasingly on the rise, becoming one of the major threats to law firms. This is most likely due to the confidential nature of the industry. This ranges from phishing to ransomware attacks. The cybercrime threat to the legal industry was greater in 2019 than it was in 2018, with the Law Gazette reporting that the legal industry lost around £731,000 to cybercrime in the first six months of 2019. Law firms will therefore have to reassure clients and ensure lawyers are appropriately trained and that they have effective cyber security measures in place.
Additionally, it would be worth simplifying the systems as fewer and simpler systems are easier to keep secure and cost less.
Investing in People: achieving an optimal resourcing model
Another issue that the legal industry faces is achieving an optimal resourcing model.
What does this mean and why is it significant?
Achieving an optimal resourcing model means balancing available resources so that they are optimally allocated. In a law firm the lawyers are the resources, and at the moment there is still the issue of having many talented junior associates that are not engaging in high-quality work. There are often more associates than work available.
As a result, the morale and development of these associates starts to decline, which negatively impacts the overall quality of work that is being completed for the clients.
To combat this, firms will have to attract more clients, which might be difficult to do in light of the economic effects from COVID-19. UK law firms may especially find this a difficult task, due to the additional uncertainty of Brexit.
A way to do this could be investing in in-depth sector knowledge training, but in specific sectors. For example, the aviation sector.
The pandemic caused the aviation sector to experience a sharp decline, with airline passenger revenue loss estimated at 314 billion US dollars. As a result, the aviation industry will not recover quickly and is likely to adopt a more U-shaped recovery as opposed to a V shaped recovery. Industry experts will be required to aid with this recovery. Lawyers that are knowledgeable in this sector can understand the nuances and suggest commercial solutions. This will attract more clients, possibly increasing the amount of work available to talented junior associates, and so achieving an optimal resourcing model.
What to look out for
Google’s Acquisition of Fitbit Halted
Google announced in 2019 that it intended to acquire Fitbit for $2.1 billion, but it raised privacy and antitrust concerns due to the amount of health data that Google would be gaining access to. To put it in context, Fitbit has around 28 million users.
The EU antitrust regulators have paused the deal and have until the 20th of July 2020 to make a decision. If the regulators do not agree to the merger, then there will be a four month investigation to follow.