How digital disruption is changing the game for small law firms

From debates about whether robots will end up taking jobs, to how much tax those robots will end up paying, there’s no shortage of worries about digital disruption in every industry, from retail to accounting.

Smaller businesses are often nimble enough to pivot towards whatever new trend is in their sector, but in some industries they need to play catch up as bigger firms begin to deploy capital to face industry-wide challenges.

SME operators in the legal sector are among those grappling with the challenges posed by digital disruption. Not only is momentum gaining on the rollout of new technologies, smaller law firms have to find a way to make themselves relevant in a world whether the big players are investing large sums of money in new solutions.

Read more: Four ways to fight digital disruption when it threatens your business

In practical terms, how can lawyers, and others in the professional services space, prepare themselves for the changes coming to their industry, before they get shut out of the game? Here are three things to consider.

Clients are changing their approach to professional services

“All of our businesses is about to get punched in the face in a big way,” says technologist and co-founder of online legal services startup LawPath, Nick Abrahams

Speaking at an industry function held by legal software platform GlobalX earlier this month, Abrahams said the needs of legal clients are changing at a time when a number of new technologies are also being trialled. He believes the combination of these two trends is going to sneak up on firms of all sizes.

When it comes to clients, legal firms are facing a number of changes, said Abrahams. For one, the size of in-house legal teams mean more work is now staying within big businesses.

“In house has become massive. There are 12,000 in-house lawyers in Australia. There’s a massive change in how organisations are sourcing legal and how clients are calibrating the risk,” Abrahams explained.

Meanwhile, clients are no longer willing to paying the price they used to, particularly for business-as-usual services, said Abrahams.

In the face of these challenges, it could be tempting for firms to focus on promoting a high-end, exclusive offering — but Abrahams warns that getting in the mindset of only doing certain types of work is not the right way to go about fighting disruptors.

“If you are sitting inside an incumbent, you have to avoid the desire to just climb up the value chain, to say ‘we only want to do the good work’,” he said.

A failure to think about how your business can appeal to the widest audience and perform a broad range of services will mean you get left behind, said Abrahams.

“If you leave that work, it will be done by the disruptor,” he said.  

There’s a whole new world of legal tech — and bigger businesses are investing 

There’s now a startup developing legal technology for every element of a lawyer’s job, from e-discovery platforms, to online legal forms and tools, and all manner of artificial intelligence (AI) for driving productivity within firms.

The bigger players are already investing in startups to help them with workflow, while others are coming up with their own low-cost models to give customers easy access to basic information, said Abrahams.

With customers moving away from models based on traditional billable hours and towards lower cost solutions, Abrahams said some legal firms are developing “the Jetstar model” of general, on-demand services for simple tasks.

Meanwhile, other firms have formed partnerships with artificial intelligence companies to use their technology, like Corrs Chambers Westgarth’s recent investment in AI software provider Beagle, which provides contract analysis through data sets.

With the bigger players already in on the game, it’s important for smaller operators to think about what solutions a business actually needs.

“There will be a lot of providers and as law firms we need to able to apply whatever is best,” Abrahams said. 

There’s a cost in getting left behind

The cost of not matching technology to your business needs early on can result in bigger fallout that lost clients, with GlobalX chief executive Peter Maloney telling attendees at the event that firms also risk being cut out of work if their systems simply don’t fit with how documents are filed anymore.

As more and more systems move online or to the cloud, Maloney says those in the legal profession need to prepare their firms to be able to process documents when practices like electronic conveyancing, in which parties settle property settlements online, become standard.

“If you are not getting ready for electronic conveyancing, you are without a doubt setting yourself up for failure,” Maloney said.

Maloney said firms should plan their approach carefully and make sure technology can work across more than one task, if possible. The landscape is changing fast, and even the companies that are developing legal technologies are looking ahead, he added.

“Digital disruptors are the most vulnerable — and we certainly are,” Maloney said, highlighting that GlobalX itself has developed cloud-based offerings in anticipation of its users needing new ways to store documents.

With this in mind, partnerships with other companies that can grow as their business does, will be key for smaller operators.

“Your supplier of technology needs to be responsive to those challenges. If you don’t have a responsive technology provider, you’re less likely to adapt,” Maloney said.

Maloney said one of the top priorities for lawyers at present should be “technology that is driving efficiency”, with recent research conducted by GlobalX finding that many firms say they’d be willing to invest in technology once they’ve worked out what would give the best return on investment.

“Price is not the primary driver — value for money and quality are the number one,” he said.

Never miss a story: sign up to SmartCompany’s free daily newsletter and find our best stories on Twitter, Facebook, LinkedIn and Instagram.