The legal industry has a storied history of resistance to technological change. Everyday business necessities such as the telephone, computer, electronic document management systems and email were all originally met with skepticism by law’s top decision makers. Their excuses against adaptation were always the same; the costs were too high, the system as it currently existed didn’t need improvement, and that new innovations could create potentially harmful security issues for their clients.
Therefore, it is no surprise that the legal industry has been more hesitant than others – such as retail, manufacturing, finance – to embrace artificial intelligence (AI) when improving business efficiencies such as e-discovery, e-billing and business modeling platforms.
But a recent significant power shift in the relationship between law firms and their clients has prompted lawyers to re-evaluate this overly cautious approach. Clients are demanding answers that the current systems in place are not capable of providing.
Reasons for Resistance to Artificial Intelligence
There are three main reasons why the legal industry has resisted the adaptation of new technologies, specifically AI: industry mindset, existing business models, and fear.
First, from my own experience at Harvard, I’ve come to realize that there has been a certain fixed mindset bestowed upon lawyers beginning in their early days of law school. A formal legal education teaches a rigid, linear and logical way of thinking, often creating an unwavering sense of conviction in one’s professional beliefs. This is supported by research by Dr. Carol Dweck of Stanford University, who believes this fixed mindset has been a major barrier blocking the legal industries’ willingness to embrace growing and evolving needs in the industry.
Second, the fact that the industry has built itself around billable hours has hurt the adoption of AI and technology. Hourly fees have been the traditional billing unit of legal services; therefore, there has been a huge built-in wall of defiance from the profession against data-driven accountability. Why would a time-based billing industry want to adopt and embrace technologies, such as AI, that yield efficiencies, when the business makes money on being inefficient? And this makes sense – because even in other service industries, such as banking and consulting, there’s value-based pricing.
Third, there is a legitimate fear in the legal community about AI replacing lawyers. Natural Language Processing (NLP) software such as ROSS Intelligence has proven to be effective at scanning legal databases and pulling documents that will be relevant to a certain matter. Additionally, companies like LawGeex have used NLP to scan contracts to determine if it is legally sound and suggest clauses that should be added or amended. These types of programs are the cause of fear: both systems could technically take over that role from humans. But, these technologies will only make a law firm more efficient, thus allowing the firm to stay competitive, win more business, and ultimately create more jobs.
Why now is the time for AI in legal
Law firms and corporate law offices are just now realizing the importance of AI’s ability to analyze big data to recognize patterns, improve business functions, and understand new pricing models. This is a direct result of a growing need born out of the evolving relationship between law firms and clients. General counsels have started to demand that law firms draw back the curtain on their opaque, traditional billable hour fee structure, demanding alternative fee arrangements instead. However, law firms lack the historical precedent to determine how much to charge and how to efficiently staff within the new world of value-based pricing. Additionally, corporate legal departments are not able to truly understand what is fair compensation for their legal matters.
What both are now starting to realize is that analyzing big data using AI is the best way to reach an agreement. A deep dive into the patterns recognized through the analysis of past billing statements and case results, using AI platforms like Bodhala, can be mined for easy-to-use, actionable insights to improve business functionality and efficiencies.
Furthermore, artificial intelligence arms law firms of all sizes with the evidence necessary to compete for available business, not only based on name recognition and reputation, but also on performance. The insights produced can determine key differentiators and selling points to guide the new business sales cycle.
Overall, artificial intelligence allows for the legal industry to adapt to an increasingly competitive marketplace. Law firms can become more efficient, stay competitive, win business, and create more jobs, while the corporate legal departments can cut their legal spend, maximize value and improve internal processes.
To read the article on Law.com, click here.