Law Firm Innovation Takes More than Talk

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By Ron Friedmann, Fireman and Company, originally published by LegalTech News.

The legal market remains abuzz with innovation talk and articles. Absent from that discussion, however, is assessing the impact of innovation. I explain here the innovation buzz and assess its current state and impact. Assessing it turns out to be hard, so I include a case study of Ogletree Deakins to illustrate one innovation approach.

Three reasons explain the innovation focus. First, clients demand value and use innovation as a proxy for it. Second, as consumers we experience innovation and disruption daily (think ride sharing) and so expect it everywhere. And third, the rise of legal AI–and AI hype–has changed expectations.

To assess innovation impact, we need to quantify it. But we lack metrics. Instead, we must rely on proxies. Angel List shows that the number of legal tech start-ups is way up. The 2017 Legal Services Innovation Index by Prof. Dan Linna, Jr., tries to measure innovation, but acknowledges it’s only a start. And finally, I track announced large law firm R&D and innovation initiatives, but I know my list is both under- and over-inclusive. These proxies show only a higher level of interest in innovation than in the past.

Without a solid innovation metric, we must rely on “anecdata” (anecdotal data). I list here steps that large law firms have taken to enhance client value, though some will argue not all are innovative:

  • Digital Legal Service: Many large law firms now offer client-facing digital services with self-service access to content, advice, or customized documents. (I maintain a list here.)
  • Pricing and Legal Project Management (LPM): Until recently, few firms had pricing or

LPM professionals. Today, over 500 attend the leading conference, P3.

  • Process Improvement: Some firms now pursue process improvement to streamline how lawyers practice. It’s not widespread, but a decade ago, few lawyers had even heard of it.
  • Incubators: Several firms have incubators to support innovation, including legal start-ups. And some have partnered with academic institutions with similar goals.
  • Staff Attorneys: Less glitzy than tech or AI—and less publicized—are the many firms that hire non-partner track lawyers who bill at lower rates than associates.
  • Artificial Intelligence: Legal AI is overhyped but significant nonetheless. One provider stated in August 2017 that it had over 200 law firm licensees.

The challenge of quantifying the amount of innovation pales in comparison to assessing its impact. Unlike most economic sectors, lawyers can neither measure quality nor output per hour.

Writing this, I struggled to come up with a way but could not.

My eureka moment was realizing that even the best innovation might have less impact than we imagine. If true, then quantification is even harder: measuring small changes is always harder than big ones.

Let’s conduct a thought experiment… a large firm that offered all services at a fixed fee would want to practice as efficiently as possible. If it deployed all available innovations, just how differently would its lawyers practice?

I suspect that only a limited portion of high-end law practice can be automated or routinized. Even before this innovation era, large firm practice regularly evolved. As know-how spread, as margins fell, and as work routinized, some practices moved from large firms to smaller or lower margin ones. Examples include immigration, trusts & estates, and smaller financing deals. The Am Law 100 stay focused largely on work that requires much thinking and creativity.

My guess is that for this work, boosting productivity more than 15 percent to 30 percent would be hard. If savings were higher, the work would likely shift to other players. Large firms would move upstream to new practice areas (e.g., blockchain or autonomous vehicles). In practices on the cutting edge of economic change, efficiency would be harder to achieve and clients would care less about cost.

Even if I’m wrong and bigger gains are possible, consider the practical constraints. The corporate law market moves slowly; clients want better value, not a revolution.

All this means we must think about innovation differently. It’s like cooking: many possible dishes, recipes, and outcomes. Recipes vary but I believe all require three key ingredients:

  1. Voice of the client.
  2. Management support.
  3. Resources to try out ideas.

To illustrate, I focus on the recipe my client Ogletree Deakins chose (discussed with permission).

Ogletree has long been innovative but its first formal step was in 2011: appointing shareholder Chuck Baldwin to the board of directors with the remit to lead innovation. Based on his recommendation, the firm hired Patrick DiDomenico in 2011 to build both knowledge management and innovation capabilities. Now chief knowledge officer (CKO), DiDomenico has a team of 30 people and a budget for new ideas and building tech-based, internal- and clientfacing services.

By 2014, the firm had built a good foundation and was ready to do more. Along the way, Ogletree regularly engaged with clients to hear their views. To formalize the voice of the client, the firm held its first Innovation Summit in 2015. I helped organize and then facilitated it. Ogletree invited 15 in-house counsel to a half-day meeting to discuss client views on, and requests for, innovation. That summit generated valuable feedback and ideas.

It led to two follow-ups. First, the firm made the Summit an annual event. To keep fresh ideas coming, unlike many advisory boards, this Summit invites different participants each year. And second, to prioritize internal and client ideas, the firm started a Research & Development (R&D) Council that consists of senior shareholder and staff leadership. It meets regularly to review and prioritize innovation ideas and, for initiatives selected, supports them across the firm.

To illustrate how this works, I start with some client comments at the 2017 Summit:

  • “Our compensation depends on sticking to budget.”
  • “I’d like an online Q&A session. Ideally, it would answer my questions. If it can’t, it should provide an accelerated intake. That way, after I type key information, outside counsel can review it, and she can then more quickly and efficiently provide me with a targeted answer.”
  • “Deploy AI for and automate higher volumes of lower-end work.”

Budgeting: The R&D Council had already agreed to further investment in legal project management and budgeting. Recently, Chuck Baldwin, Patrick DiDomenico, and I met for a full day to plan how to take LPM to the next level. Other responses to client requests concerning budgets are in the works.

Self-Service (Q&A): Ogletree has a well-established suite of online services, for example, O-D Comply and the Clientlink Collaboration Platform (extranet). DiDomenico and his team continue to build-out these and similar services. For example, this year, the firm released its DIY Arbitration Agreements tool, which was a product of the R&D Council.

Artificial Intelligence: The firm announced a partnership with LegalMation. It automates initial drafts of pleadings and discovery papers, and saves about 80 percent of the time required to reply to complaints in employment actions.

We may not be able to measure but we know both clients and law firms are innovating more. And we can agree that’s good. The continued roll-out of innovation initiatives, with attendant PR, suggests firms and clients see the value.

The voice of the client is key in any business. Especially here, where measurement is hard, client input on new initiatives is critical. Listening, of course, matters only if it leads to action. As the Ogletree case study shows, management and resources must support pursuing new ideas.

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A leading global retail giant achieves significant savings on legal fees on its high-volume litigation matters using LegalMation’s Complaint Analysis tool.

The Legal Operations group of a leading global retailer with significant litigation volume across the country was searching for technology tools to increase efficiency and consistency on its litigation matters, lower its legal spend, and obtain more value from outside counsel. Working with LegalMation, the retailer identified two litigation areas with large volume where the deployment of LegalMation’s Complaint Analysis tool could have a significant impact: employment and premises liability tort litigation.

The retailer conducted a pilot of LegalMation’s Complaint Analysis tool by asking select outside counsel to run complaints through the LegalMation Complaint Analysis tool and compare the outputs to those generated by the firm’s typical workflow.  LegalMation’s Complaint Analysis tool was able to generate an answer, requests for production and interrogatories that were almost identical to those generated by outside counsel and tailored to the facts and allegations of each.

Today, this global retailer has made LegalMation an integral part of its workflow and case assignment process. When a new lawsuit is served on the retailer in one of the jurisdictions where LegalMation operates, an in-house paralegal runs the complaint through LegalMation’s Complaint Analysis tool and sends the output, consisting of an answer, requests for production, interrogatories, and other jurisdiction or firm-specific output to the selected outside counsel for the matter.  Outside counsel then bills the retailer solely for the time spent reviewing and editing this initial output which generates significant savings for the global retailer.

Challenge

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Results

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  • Increased consistency and quality in work product

Large Firm Case Study

An Am Law 100 labor and employment law firm was searching for ways to become more competitive and capture more market share

Handling over 5,000 employment related litigation matters per year across the country, the Am Law 100 law firm (the “Firm”) needed a quantifiable solution to lower its servicing costs and provide more value to its national clients. The Firm engaged in extensive testing of LegalMation’s platform across multiple offices to determine its effectiveness.

Using LegalMation’s Complaint Analysis tool, the Firm was able to reduce the attorney time spent preparing answers, affirmative defenses, and initial written discovery (requests for production, interrogatories, and other jurisdiction-specific requests) from an average of 6-8 hours per matter, to less than 1 hour (including review time by an attorney). The Firm tested LegalMation’s tools across multiple types of employment cases across various jurisdictions and concluded that the resulting draft documents were not only produced incredibly fast, but were also consistent in quality.

Today, the Firm is able to offer more competitive proposals for its volume matters, which in turn allows it to obtain additional work from national clients.

Challenge

  • Downward price pressure in high-volume, lower-exposure matters
  • Making Alternative Fee Arrangements more competitive and yet more profitable
  • Differentiate from competitors during marketing pitches
  • Lack of work product consistency from associates/paralegals

Solution

  • Integrate LegalMation into volume litigation matters in the Firm’s busiest offices

Results

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  • Higher profit margins on volume matters, particularly those on AFAs
  • More distinctive marketing
  • Higher levels of associate satisfaction

SMALL LAW Firm Case Study

A high-caliber general litigation boutique reduced paralegal and associate time and money expended on key early litigation tasks by 75%+

A general litigation boutique with around 40 attorneys needed to cut costs in order to stay competitive in a very crowded local market and also sought to minimize reliance on support staff.

Using LegalMation’s platform, the boutique law firm was able to reduce the attorney (and paralegal) time spent preparing answers, initial discovery (requests for production and interrogatories), and discovery responses, including objections, from several hours per matter, to less than 1 hour (including review time by a supervising attorney). The boutique firm tested LegalMation’s Complaint Analysis tool and Discovery Analysis tool across multiple practice areas and concluded that the resulting draft documents were not only produced incredibly fast but also with consistency and quality similar to its own junior attorneys and paralegals. In particular, the boutique law frim, which did not have the luxury of a large support staff, found LegalMation’s Discovery Request tool particularly helpful in dealing with burdensome discovery requests served on its clients.

Today, the boutique law firm is able to offer more competitive proposals for its matters and through the efficiency gained by LegalMation’s platform compete against national law firms with more resources.

Challenge

  • Downward price pressure due to a crowded local market
  • Limited associate/paralegal resources to handle routine drafting tasks
  • Compete against national law firms with more resources
  • Differentiate from competitors during marketing pitches
  • Lack of work product consistency from associates/paralegals

Solution

  • Deploy LegalMation’s Complaint Analysis tool to generate initial draft responsive pleadings, and the Discovery Analysis tool to quickly generate shells and responsive objections throughout the life of a case

Results

  • 70-85% time savings on key litigation tasks
  • Higher profit margins on volume matters, particularly those on AFAs
  • More distinctive marketing
  • Higher levels of associate satisfaction
  • Reduced staff overtime
 

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James M. Lee is co-founder and CEO of LegalMation. He is a founding partner of LTL Attorneys LLP, a nationally recognized litigation boutique. As an experienced litigator, he has tried numerous cases in federal and state courts. He has been recognized as a top business litigator by various legal publications including the National Law Journal. James has served as lead counsel to a number of Fortune and multinational clients including Wal-Mart, Thomson Reuters, Symantec, and VIZIO. He was formerly associated with litigation powerhouse Quinn Emanuel before co-founding LTL Attorneys. He is a frequent and noted speaker and commentator in the field of AI and innovations in the field of law. He received his J.D. from Stanford Law School, and his B.S. from the University of Southern California. At LegalMation, James serves as the key driver of the Company’s vision and strategy.

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A national insurance carrier achieves significant savings on its high-volume, low exposure litigation matters through its adoption of LegalMation’s Complaint Analysis tool

A national insurance carrier with significant litigation volume across the country for its insureds, was searching for technology, tools, and processes to increase efficiency on its litigation matters to lower its litigation costs. This national insurance carrier partnered with LegalMation to identify an area of litigation where LegalMation could have a significant and immediate impact and decided to deploy LegalMation’s Complaint Analysis tool for all of its third-party motor vehicle tort litigation.

LegalMation worked closely with the national insurance carrier to customize the output from its platform to generate documents that mirrored the current output of the national insurance carrier’s attorneys and paralegals.  LegalMation was able to automate the creation of an answer, requests for production of documents, interrogatories, requests for admissions, and deposition notices, all tailored to the facts and allegations of each complaint and almost indistinguishable from those manually created by the insurance company’s attorneys and paralegals.  LegalMation was able to generate this output in 2-3 minutes—a significant time savings over the insurance company’s prior practice for generating this output.

Following a pilot program consisting of processing all of its complaints for a single jurisdiction through LegalMation, the national insurance company made LegalMation an integral part of its workflow for all jurisdictions where LegalMation currently operates. In these jurisdictions, when a new motor vehicle-related lawsuit is served on the insurance company or its insureds, the assigned counsel or paralegal runs the complaint through the LegalMation Complaint Analysis tool, downloads the initial outputs, which are then reviewed by the attorney or paralegal and finalized, all within a few minutes.

Challenge

  • Increasing budgetary pressure to lower legal spend on defense of insureds
  • Obtain more value from staff counsel
  • Reduce legal secretary/paralegal overtime

Solution

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Results

  • Up to 80% time savings on key litigation tasks
  • Reallocation of staff/captive counsel time away from process/volume work to higher value strategic tasks
  • Increased consistency and quality in work product

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