CodeX FutureLaw Conference 2015: Stanford Law School Karl Chapman, Chief Executive, Riverview Law, 5 May 2015
Being an intruder
In the last few years I’ve led a business in the legal market for the first time; Riverview Law was launched on 20 February 2012. Unsurprisingly perhaps, I’ve often felt like an outsider, an intruder. The language, the behaviours, the myths. The aura surrounding the rule of law, law firms and lawyers. Those real and imaginary barriers carefully constructed over generations. At first I rationalised my feelings as those of the newcomer; with all the advantages and disadvantages that this brings. All I had to do, I thought, was to listen and learn. I’d soon work out what was happening. After all, I’d had similar feelings when we entered the recruitment market in 1989 and the HR Advisory Outsourcing market in 2000. As with law, these were markets in which we had no previous experience before we set up our businesses. We just saw big markets, at change points, with unsatisfied customer demand and a fragmented and undercapitalised supply chain. We saw opportunity that we could hopefully realise by keeping things simple, and by focusing on delivering a great service to customers at a fair price. We were prepared to take calculated risks and back our judgments with capital, energy and experimentation. But this time it is different. Fundamentally so. My time at the excellent CodeX 2015 crystallised why.
As I relax on a flight back to London, with Pink Floyd’s wonderful ‘Wish you were here’ album stimulating my thoughts, I realise that CodeX has given me some language, much of it pinched from the excellent speakers and delegates (thank you!), to articulate what my colleagues and I have felt for a couple of years. Thoughts that have consciously and unconsciously driven us and Riverview Law forward. Thoughts and themes that now draw together well. The opening address at CodeX was delivered by Professor Oliver Goodenough. His subject was “The State of the Art of Legal Technology Circa 2015.” He gave an overview of legal technology, focusing on the various systemic changes confronting the law and legal practice. However, it was how he described the different technological approaches that the various stakeholders in the legal system have been adopting to respond to these changes that made things click. To make his point he kept it simple, using the now clichéd, but as he rightly said still useful terms of 1.0, 2.0 and 3.0. His summary was (and apologies to Oliver if I’ve misquoted him):
- In Law 1.0 technology empowers the current human players within the current system;
- In Law 2.0 technology becomes disruptive because it replaces an increasing number of the human players, but again within the current system and operating model; but
- In Law 3.0 we see a radical re-design and, to a greater or lesser extent, the replacement of the current system with a new system driven by the power of computational technology and new entrants.
The real storm is yet to arrive
Of course, this transition can be applied to any number of other markets; the impact of on-line shopping on retailing, automation in car manufacturing, Uber and airbnb. But there are some catches here for legal, and not just the obvious ones that most incumbents are largely stuck in 1.0, and that many new entrants (particularly the technology companies) are looking to substitute them and deliver Law 3.0 rather than help incumbents become Law 2.0. Many (particularly lawyers) would argue that the legal market is facing something like a perfect storm in the UK following the Legal Services Act 2007, the economic melt-down in 2008, the increasing shift in buying power to the customer and increased competition. But I have always thought that this is a narrow and flawed analysis. Firstly, it confuses regulatory and economic events as the key drivers. In practice the really big themes are that customers have, finally, had enough, and technology is changing the rules of engagement. Put simply, consumers and businesses have paid too much for legal services and there is a crisis in access to justice. Secondly, and most critically, it identifies the wrong date. It wasn’t 2007/2008 that triggered the perfect storm. The seeds for the coming big storm, because today is just a minor shower compared with what happens next, were planted in 1989 when Tim Berners-Lee created the first web browser. The big problem for the legal industry is that it is now having to fight on two fronts, not that many players recognise this. Yes, it is experiencing its own vertical market re-structuring which is driving Law 1.0 to Law 2.0. (about time); and a lot of the legal sector here and in the US is not well positioned to manage this single challenge given the partnership model, weak balance sheets and the culture of law firms. However, and some might say unluckily, at the same time the legal market has to contend with a technology revolution that is profound and which will impact all sectors of the economy. A revolution that has been over 25 years in the making and which saw Time Berners-Lee invent the internet in 1989, the first commercial web browser in 1993 (Mosaic), the dotcom boom and bust between 1995 and 2000, the creation of Google in 2008 … A revolution that spans big data, through the cloud to artificial intelligence. To keep things simple, and focusing on its consequences, its output, I’ll describe this revolution as ‘the rise of the knowledge worker’ (see below). Because it is ill prepared, this cocktail of a vertical market change-point with a technology revolution represents a unique challenge for legal incumbents. Even though many incumbents will suffer in all sectors of the economy, other sectors have had a head start when compared with legal. Over the last decade players in other sectors have come to understand real competition and have had to innovate and become agile to succeed. They have invested heavily in technology and automation, whereas legal has not. Most legal technology investment has either been on billing systems, so that six minute units can be recorded accurately, or on IT such as legal practice management systems that attempt to make the existing 1.0 model more efficient.
The rise of the knowledge worker
The technological revolution we’re living through will affect all of us and impact all sectors of the economy and society. Its language includes many current buzz words; big data, the internet of things, expert systems, deep automation, artificial intelligence, blockchains, computational law, the cloud. However, and cutting through the terminology to focus on its practical consequences, one of the key themes in this period will be the rise of the knowledge worker. This is a trend that is as irresistible and as profound as the move from mainframes to PCs, and the impact of mobile and the internet on the way we live and work. The race is on to provide knowledge workers with the tools and virtual assistants that enable them to do a lot of the work today that historically has been done by ‘professionals’, whether they are IT developers, lawyers, HR advisers … etc. We are witnessing the flattening of organisations and the empowering of knowledge workers. We will also see tools put in the hands of customers (whether individuals or businesses) that traditionally were used by professional intermediaries whether in medical, financial, legal or other areas. For example, in the very near future knowledge workers, in any function, who are the subject matter experts and who are closest to the customer and/or business need, will be able to undertake activities that previously required IT departments, change control, IT developers and software houses. Changes that took significant time and cost to deliver; we all have war stories about the difficulty and frustrations of trying to change enterprise wide platforms for even the simplest purposes! Using a legal example as a proxy, imagine that a knowledge worker in a legal team, whose only IT expertise is their ability to use Microsoft Office, can quickly build, maintain and evolve an end-to-end customer, local or complex global workflow and process including: (a) Instruction management (what legal support, if any, does the individual / business unit actually need?); through (b) Triage (if legal support is required who should it be undertaken by, internally or externally, given the requirement and its risk, time, cost profile?); to (c) Case management and document creation (how can the matter be managed consistently, using the right documents and with the appropriate data captured consistently, whoever is doing the work?); and (d) Reporting and Analytics (how is real time activity published so resource can be managed, and how are trends and data mining undertaken to pre-empt future risk, reduce cost, evolve the operating model?). This redefines the traditional IT and business operating model. It changes the way legal and other functions operate. This model is available today. We already operate this way in Riverview Law by deploying easy to use expert systems, automation, Artificial Intelligence and analytics. Internally we call this the ‘configuration not coding’ revolution; using knowledge workers with easy to use configuration tools to manage day-to-day requirements rather than IT developers with programming skills. Yes, we still need IT programmers. Yes, we still need lawyers and other professionals. But their focus changes. IT programmers help build the tools and platforms that unleash knowledge workers and the business. Lawyers start to play the real added value parts in the legal process. This approach also helps us and our customers address the absolutely critical need for accurate data. In the ‘big (medium or small) data’ debate, if data (content) is king, the ability to properly understand and apply it (context) is the kingdom. Of course, the keys to the kingdom include capturing the data accurately, consistently, and easily in real-time. Which neatly brings us all the way back to workflows and processes which need to be automated and amended easily, quickly and cost-effectively, by knowledge workers, so that they reflect business needs.
This all partly explains the challenges we sometimes experience at Riverview Law as we engage with the legal industry. With notable exceptions, in particular our conversations with in-house teams and a few legal leaders who ‘get it’, it has felt as if two conversations have been occurring in parallel. On one side are the current legal players (Law 1.0) with their pre-occupation with PEP, lateral hires, international expansion, mergers and, particularly in the US, maintaining the regulatory status quo. Their focus is on using IT to improve their current operating and business model. Their pre-occupation is with Law 1.0 and a desire, on the part of many, to delay Law 2.0. On the other side are the new entrants, including technology companies and businesses like Riverview Law (and some in-house teams), who have brought disciplines, business models and technology from other sectors. These players are focused not just on creating a profitable Law 2.0 platform but also on using this platform to transition quickly to Law 3.0. They, we, use the language of the customer, the culture of one team, and the application of existing and emerging technologies including automation, analytics and computational argumentation to drive quality and improve efficiency. It is no surprise that it is law firms buying law firms (a Law 1.0 Law 2.0 strategy). Why would new entrants or technology companies encumber themselves with legacy when the future requires a different model? It is also no surprise that in-house teams are adopting technology faster than most of the supply chain.
What an opportunity
Of course, for legal there is a big irony in all this. Over many decades the legal market has not been subjected to the same competitive pressures that other sectors of the economy have experienced. Whatever lawyers and law firms may think they have benefitted from protective regulations that enabled excess profits. This, inevitably, injected complacency in many of its incumbents and reduced innovation and creativity. The irony is that the very regulation that protected Law 1.0 firms has also sown the seeds for their substitution as Law 2.0 and, more critically, Law 3.0 models takeover. It would be difficult for many law firms to respond to the emerging competition in the legal vertical anyway, but when this is combined with technology upheaval all bets are off. But this does not mean that there aren’t great opportunities, because there are. It also doesn’t mean that some Law 1.0 players won’t successfully transition to Law 2.0 and Law 3.0, because some will. The legal market is a global market and, as with all markets, there is no silver bullet and there is no one-size-fits-all model that will succeed. Moreover, in England and Wales we have been dealt a good hand by our legislators and regulators. If we can combine the best of our regulatory model with the best of existing and emerging technologies, particularly those coming out of the US, then we are in a good position to dominate the global legal market in the first half of this century. By focusing on Law 3.0 and working with Silicon Valley we can become the new legal giants. What a great time to be a technology-led legal services business. Thank you CodeX, I will be back.