Law firms have been modernizing and innovating their systems, services, and technology for centuries to remain relevant and profitable. However, it was only after the 2008 financial crisis that law firms began to institutionalize the concept of innovation. Faced with budget pressures and a desire to use technology to do more with less, many firms created multi-disciplinary teams of lawyers, strategists, data scientists, and operational analysts to drive innovation.
Over the past four years, the boom in artificial intelligence has reinvigorated the legaltech market, automating legal tasks such as legal research and comparing lengthy contracts. AI has become the main focus for innovation departments in legal practice. Law firm innovation teams have a widening remit, including working out how to use AI to help firms work more efficiently, build legal software tools for clients, and provide new services.
Defining Innovation
Michelle Mahoney, chief innovation officer at Mallesons, defines innovation as “change that has a positive impact… It’s not change for change’s sake.” Dan Wright, chief innovation officer at Osborne Clarke, views legaltech innovation as being all about serving clients’ needs. They aim to better serve clients’ needs and ensure that the enduring human value that clients want is given as much prominence as possible and enabled by technology rather than replaced by it.
Osborne Clarke builds AI tools for its clients and lawyers, including one developed by a team in Cologne, Germany, to help clients comply with regulations. The objective is to help clients by enabling technology to do the heavy lifting and searching, and then lawyers can apply their knowledge of a client’s circumstances, risk appetite, and so on.
DIY vs Buy
Baker McKenzie and Hogan Lovells Cadwalader also make their own AI tools, as well as using third-party legal AI software from suppliers including Relativity, LexisNexis, Microsoft, and Thomson Reuters. Hogan Lovells Cadwalader has a tech unit called Eltemate, which makes proprietary technology for its lawyers and clients. The firm-wide digitalization program is organized along three concepts: explore, deliver, and innovate.
Ben Allgrove, chief innovation officer at Baker McKenzie, describes the firm’s innovation programme as an “umbrella” for various initiatives and activities. The AI element of the innovation programme includes technical skills, strategy, the firm’s “AI stack” − its software, hardware and other technological infrastructure − and “tooling up” its lawyers. The firm has developed its own legal AI tools, including one to help clients respond faster to cyber security attacks.
Measuring Success
Measuring the financial value of legal AI is proving difficult, according to legal innovation specialists. “As a general-purpose technology, generative AI cuts horizontally through the entire business,” said Allgrove. “It changes the way you know everything from how our most senior partner works through to how our most junior secretary in the business works.” One of the more straightforward measures for the value of legal AI is how much time it saves lawyers.
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Laura Pilkington, innovation lead at Walker Morris, says the firm looks at the time saved on particular tasks and translates that into what it would be for an hourly rate. The firm also takes into account what that means as a direct cost for an employee and then factors in the tech cost to get an overall view of its return on investment.
Lawyers need plenty of regular training on AI if innovation programs are to succeed. Mallesons has a three-level AI training system − from relatively basic to advanced − for its lawyers. Level one is ensuring lawyers have a baseline understanding of the technology. Level two is improving prompting skills and getting the technology to work better for its lawyers. And then level three is more advanced training as lawyers get more competent at using the technology.
The Future of Innovation
The future of legal innovation is hard to predict, even in 12 months from now, let alone over the next five or 10 years, due to how rapidly AI is advancing. Mahoney of Mallesons said: “I think we’re very close to moving away from asking the AI a question to [AI answering] a series of very complicated requests, orchestrating and planning… a series of activities that happen in parallel.”
As law firms dedicate more time and money to legaltech and innovation, the structure and the type of people law firms hire – inside and outside innovation teams – will likely change and widen. “[AI is] creating new pathways and opportunities for both lawyers and technical practitioners in the legal space,” said Jeremiah Weasenforth, director of AI innovation at Orrick. “We’re hiring legal engineers. We’re hiring data technologists. We’re hiring people that really you would have historically only seen hired in the software space. That’s happening all around the law firm world and the legal technology space.”
In the middle of this transformation, law firms are beginning to realize that their innovation efforts will require a different set of skills and expertise. They will need to balance the benefits of AI with the need for human judgment and expertise. A balance between technology and human expertise will be essential in determining the success of legal innovation in the years to come.
Jeremiah Weasenforth, director of AI innovation at Orrick, is using AI at scale for basic tasks such as summarising and automating documents, all the way to using sophisticated agentic AI technology to transform legal workflows.