Graduating The Hype Cycle In alt.legal: Three Areas Of Change In 2017
Change says easy and does hard; it visualizes in a flash but materializes at a crawl.
Does the normative “new year, new you” culture inspire irrational optimism about ways you can fundamentally change who you are? Are you finding yourself subject to these forces and resolving to learn a new language or run a marathon?
Of course it does, and of course you are. The first week of January is really like any other week, but our culture has assigned a lot of meaning to it. Health clubs, weight-loss programs, fitness apps, and stop-smoking aids revel in the ready-made market. Ultimately, everyone has some area of growth and change, and the beginning of a new year presents a (somewhat) confected opportunity to resolutely pursue those areas.
Yet, the reality is that change says easy and does hard; it visualizes in a flash but materializes at a crawl. We know that the pace of change is incremental, with only a handful of watershed moments. Drivers of change clap early adopters on their backs, encouraging them to make viable a first-generation tool/service/technology/process and promising a world of change. In the legal industry, change seems to move even more slowly.
Gartner, the technology research firm, maps “hype cycles” as a tool to track the life cycle of new technology. Here is one hype cycle map for emerging technologies:
Notice a handful of emerging technologies that have found use cases in legal: machine learning (at the peak of inflated expectations), blockchain, natural-language question answering (entering the trough of disillusionment). You’ll also notice that some technology moves more quickly than others, based on the color and shape of the data point.
This hype cycle can be applied beyond technology to innovative business process, like practice management tools or lead generation for law firm marketers. Or perhaps we could even generously place alternative fee arrangements as an “innovation” as we track adoption and evolution of the practice. Fewer corporate legal departments are using AFAs, but they are comprising a larger part of outside counsel spend, to the tune of 35% of all firm spending.
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There are three trends to watch this year that will dictate what happens to various alt.legal points on the hype cycle:
Contract lifecycle management.
Everyone wholeheartedly agrees that blockchain contracts offer a paradigm shift in magnitude sufficient to dramatically change transactional practice. Other segments of the contract lifecycle (negotiation, execution, analytics, obligations management) can also receive considerable benefit, and there’s a bevy of legal technologists chasing this down. According to the hype cycle, we’re about to enter the trough of disillusionment, but I think we have the right pieces in place to reach the “slope of enlightenment” in this space.
Technology acquisitions and consolidation in the market.
Integration, by itself, may not be a trend in the hype cycle, but in industries like mine (e-discovery), we’ve seen substantial M&A activity to the extent that the major players left standing today are dramatically different than the major players from two years ago. These combinations have been driven by the notion that e-discovery is a high-CAGR industry, as well as presumably by traditional market power and efficiency drivers (which, apparently, isn’t always a success, according to the data). As a result, we’ve seen e-discovery costs drop as these new mega-players commoditize their services and (theoretically) have less margin pressure. But some of the consolidations have been more Silicon Valley-style: acquisitions of proprietary assets. As an alumni of a former startup (Pangea3 is now Thomson Reuters Legal Managed Services) and as part of an enterprise that has done some wildly successful acquisitions (like Practical Law Company), this is an area where I’m very interested. What has Microsoft done with Equivio’s technology-assisted review? What will OpenText, mostly an information governance company, do with Recommind, mostly an analytics and e-discovery company? Will LexisNexis realize the potential of Lex Machina?
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And were their valuations at the time of purchase anywhere close to sanity?
Law firm investments into business and technology innovation.
This falls into two major areas that Joe Borstein and I have written about at length: law firm business models, and law firm tech and process capabilities.
In terms of the business model, the ABA Commission on the Future of Legal Services ended its charter with its final report in 2016. The report had a lukewarm reception from many, as some of its recommendations were non-committal (“continued exploration of alternative business structures will be useful, and where ABS is allowed, evidence and data regarding the risks and benefits associated with these entities should be developed and assessed”). But we should watch firms organized in D.C. and especially in Washington State, where non-lawyer ownership is permitted. In 2015, the Washington Supreme Court created a paraprofessional license, the Limited License Legal Technician (LLT), and the LLT is allowed to own a minority interest in a law firm. Change happens slowly, yes, but it should be interesting to see how this unfolds and whether firms reap the benefits of non-lawyer ownership.
Setting aside their operating model, law firms are also much more aggressively exploring how to take advantage of their internal data, glean information about their peers and competitors, and invest into business systems that enable more efficient practice and matter management. Process, innovation and technology investments are being made by Biglaw firms like Littler, Seyfarth Shaw, Bryan Cave and Dentons. Will future-minded law firms seeking an innovative advantage be able to deliver value to their clients?
I’m hopeful for real change, even if incremental, in these three areas and more. Happy New Year, everyone!
Ed Sohn is VP, Product Management and Partnerships, for Thomson Reuters Legal Managed Services. After more than five years as a Biglaw litigation associate, Ed spent two years in New Delhi, India, overseeing and innovating legal process outsourcing services in litigation. Ed now focuses on delivering new e-discovery solutions with technology managed services. You can contact Ed about ediscovery, legal managed services, expat living in India, theology, chess, ST:TNG, or the Chicago Bulls at edward.sohn@thomsonreuters.com or via Twitter (@edsohn80). (The views expressed in his columns are his own and do not reflect those of his employer, Thomson Reuters.)
