Part V: Examining LegalTech Adoption

First, thank you to those who contributed to this series and apologies that I could not include all the quotes. In this series’ final installment, we will revisit change, diversity, and inclusion as well as alternative fee arrangements. The latter was not part of my original theories below. I do now believe that clients, whether that is in-house counsel, consumers, or small to medium business owners, will drive the necessary acceleration of legal technology adoption.

As a reminder, here are the theories about the legal industry that I presented in my first installment:

  1. Legal tech companies will do better if the founders are former or current attorneys, because that creates a built-in incubator for the product.
  2. In-house or general counsels are important customers as they will drive change with the larger law firms faster than the legal tech companies.
  3. Legal tech companies have more challenges with medium and large firms because of their more cumbersome decision-making processes.
  4. It may be easier to dislodge another competitive legal tech solution than create a brand new solution that has no competitors and, therefore, no early adopters.
  5. Too many solutions or legal tech products (not necessarily companies) can create inefficiencies—unless there is seamless integration.
  6. Everyone resists change; attorneys are no different.

When I was in high school decades ago, we took typing classes. Back then, teachers rapped knuckles if they caught you looking at your keys. I arrogantly announced that I was not going to be a typist—someone’s assistant or secretary! Lawyers look at technology the same way I looked at typing—not worth my time. (Joke’s on me; I spend all day typing now.) It costs six times as much to secure a new client as it does to retain a current one. Lawyers need to remember that when it comes to adopting technology, especially when it benefits their clients!

In presenting the above theories to those in the legal business, Jim Hazard, founder of commonaccord, told me, “My sense is the biggest obstacle is the impression that tech is complex, for specialists, nearly irrational.”

Matt Kaufman, a former practicing attorney, built attorney services with RocketLawyer before joining JustAnswer. He gave me his take on change being influenced by regulatory issues:

“It’s not necessarily the technology that lawyers have trouble with adopting; it’s how and when they’re permitted to deliver their services. So, for us, we see a major barrier being regulatory ambiguity. We run a service that helps connect families with professionals for fast answers to not-so-common problems. Many of the regulations in place governing the industries we support do a wonderful job protecting consumers. However, in the legal field, there’s so much variety and ambiguity in the regulations from state to state on what lawyers and private companies are allowed to do that many professionals and companies opt to remove themselves from engaging with people who need their help rather than run the risk of violating a regulation that isn’t quite clear. This keeps costs high and access limited. As technology develops that can help provide more affordable and accessible support for families, we should see regulations get clarified and evolved so they don’t do more harm than good.”

This statement goes hand-in-hand with the unauthorized practice of law (UPL) discussion that appeared here last summer. Using UPL as an excuse to resist technology and alternative fees will not satisfy clients. Consumer-facing legal plans and solutions are not disappearing anytime soon; in fact, it’s a growing market segment.

Savvy lawyers are recognizing that their clients are not all willing to pay based on hourly rates. The billable hour does not have to die first to spur the use of technology, but it may help force the issue. I have spoken with several small boutique firms that are working together to deliver package pricing and menus of services to clients.  Many of these firms include part-time attorneys.  The model of employing lawyers with only a few available hours due to child or elder care responsibilities is filling a niche for both the attorney and client.

Richard Granat, founder of Direct Law, explains the need for fixed fees as opposed to billing based on hours. “Lawyers have a really difficult time shifting from one business model to another and modifying the way they traditionally relate to clients on a face-to-face basis to an online transaction.”

When I first started Traklight, we used the ASU clinic to assess the market demand for our automated questionnaire. The research included talking to attorneys. We learned quickly that lawyers thought our software would replace them. Our goal was to educate clients on their legal needs and create demand for legal services, but most attorneys didn’t see it that way.

Two Phoenix-based family law attorneys shared their thoughts on the demise of the billable hour and the use of technology as a competitive advantage:

“I recognize that the traditional legal model is broken in that profits are declining, attorneys are generally dissatisfied, and clients hate the billable hour model. Most firms struggle with collection problems and spend many hours working for things they never get paid to do. Changing the law firm model and the adoption of technology go hand-in-hand. When you abandon the billable hour, there is now an incentive to become efficient!” said Billie Tarascio of Modern Law.

“The decision I made to incorporate technology into my practice was driven by the need to operate more efficiently than my competition, [so I could]  accomplish more in the same amount of time than my competitors, which provides me with a significant competitive advantage,” said Chris Hildebrand.

Chris and Billie both bring up an interesting point: the firm is a business, and there is a need for measurement of key performance indicators when moving to a flat rate billing model. This is a subject for a separate series coming this spring.

Law firms should support innovation and allow for pilots or betas, but the companies must be paid.  Free pilots were part of my original theories, but the idea that giving away technology free to firms does not work. Unfortunately, it is not seen as education but rather that your solution has no value. Unlike other technology verticals, simply having many users without payment does not satisfy the legal market.

My final conclusion is that overcoming change is possible, but the best way to achieve a shorter sales cycle is to have a test bed for products in law firms and large company legal departments. However, legal tech entrepreneurs take note: Make sure that your products solve a problem. Lawyers, talk to your clients and even look outside legal tech for solutions. Collaborate to improve the client experience.

As always, please reach out to me on social media @maryjuetten.

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