A survey by the International Bar Association and Cambridge Strategy Group in October 2019, testing perceptions on the digitalisation of legal services, revealed several findings that are surprising, even counterintuitive in some cases. The survey was sent to members of the Law Firm Management Committee and of the six Regional Fora. 685 responses were received from a total of 100 countries. Initial findings were presented at the IBA ‘Building the law firm of the future’ conference in London on 22 November, the deck for which is attached here. A more comprehensive report is currently being prepared.

Are emerging digital technologies on balance an opportunity or a threat, in terms of their likely impact in terms of their likely impact on the practice and business of law

Responses to this question were remarkably similar across the various categories of respondent. Across age cohorts, sizes of law firm, practicing lawyers versus other roles and even geographies, the average score allocated was 4/5 where ‘5’ represented significant opportunity, and ‘1’ significant threat. To be clear, responses by those aged 65 years and older were statistically similar to those aged 30 or younger. This seems to counter the sometimes-heard argument that older lawyers do not ‘get’ the implications of digitalisation of legal services to the same extent as do younger lawyers. This level of convergence was the first surprise.

Will client legal needs be radically different in 2025, compared to today?

A similar level of convergence was discovered in responses to this question, with the averages across respondent categories also clustered around 4/5 where ‘5’ represented significantly more complex and greater in scale and ‘1’ represented simpler/fewer. Again, this indicates a realisation across all ages, kinds of firm and geography that client needs are changing, and that digitalisation will likely yield new, more complex legal needs within the next five years.

Later in the survey, respondents were asked what they expected their firm/organisation’s key challenges to be in responding to emerging digital technologies, from today until 2025. By far the most frequently mentioned challenge was: “Understanding opportunities offered by new, digitally induced client legal needs.” Fewer than 20% of respondents selected “Lack of demand from clients for services using enhanced technology.”

Combining the insights above, in my opinion, uncovers one of the most seminal challenges of our time for law firms. It validates the reason why we undertook the survey in the first place. Clearly, what is sometimes referred to as the “4th Industrial Revolution” (4IR) is having a transformational impact on clients and their businesses, and hence their legal needs, in two ways. Firstly, transformation of their current needs and the way in which their external advisers meet those needs but also, secondly, entirely new needs that are emerging and that clients themselves usually do not yet understand. Clearly, both ways represent more opportunity than threat for law firms, but only if they can get to grips with these changes and are agile enough to work out what they need to do in order to continue to advise their clients well in this new, emerging digital world.

The changes required involve more than simply buying new technology, but clearly that is part of the recipe. To the question of what technologies firms are acquiring or planning to acquire, legal document automation received the most mentions (68% of respondents) followed by legal research tools (62%). Surprises here included that only 53% mentioned cybersecurity tools, 49% tools to enable remote working and 30% technologies to encourage teaming and collaboration. This was especially surprising given that when asked how a law office might be different in 2025-2030, compared to today, the second most highly rated option was “better digital collaboration tools, driven by increased remote working.” The only option that was more highly rated was, unsurprisingly: “more work will be delivered via technology.”

The survey also asked respondents their views on which kinds of emerging digital 4IR technologies would likely have the greatest impact on business and society (and hence their clients and perhaps their own firms/organisations) by 2025? (Underlining added to emphasise, in just five years time). Cybersecurity threats ranked highest, followed by ‘Big Data’ and advanced wireless technologies / 5G, machine learning / AI and the ‘Internet of Things.’ Drones, 3D printing and virtual or augmented reality were ranked comparatively low, on average, in terms of expected impact. Another interesting surprise was uncovered when cross referencing the average scores against the ‘standard deviation’ which is a measure of the degree to which the individual scores varied in order to yield that average. For instance, an average of 4.0 where all scores are tightly clustered between 3.8 and 4.2 would have a lower standard deviation, than where those scores scatter widely from 2.5 to 5.0. It is, in other words, a measure of the level of agreement across the respondents. The surprise was that the lower the standard deviation for a particular technology, the higher the impact that respondents predicted it would have. In something like the likely impact of technologies, is level of agreement perhaps a good proxy for the degree to which something is understood? If it is, then one might deduce that the better respondents understood a particular emerging digital technology, the greater the impact they expect it to have. This trend held true to a greater or lesser degree across all technologies except cybercurrencies, where the opposite trend was discovered. Another surprise, worth digging into, especially given that in this case perceptions varied between respondents from northern European countries (expecting a low impact) versus those from southern Europe, emerging markets, and Switzerland (expecting a greater impact!) Which view will be proven correct?

This would loop back to the most commonly mentioned challenge (i.e. understanding opportunities offered by new, digitally induced client legal needs) which, together with other indicators in the survey responses, suggests that law firms simply know far too little about these emerging trends, to behave more than tactically in response. Pitches from software vendors are useful but aimed at selling rather than meeting real needs. This is not enough. Understanding these issues requires that they be explored through more than only a legal lens. Legal needs exist within a complex, interconnected, dynamic network of rapidly evolving client business needs. Developing an accurate enough view to be strategically actionable requires a combination of technological, deep legal and business expertise, working together.

Respondents were also asked to rate a number of models of legal advisory business in terms of how actively they believed they would be used by clients in 2025. The lowest scoring model (but with the highest standard deviation i.e. lowest level of agreement) was legal platforms. The second lowest was another surprise, namely: “Good, progressive traditional partnership-based firms.” The most highly rated models, on average, were in-house legal departments, small specialised boutiques and the largest international law firms. The ‘Big 4’ global advisory firms (aka ‘accounting firms’) and other alternative legal service providers fell in between. Clearly, the average view across respondents, mostly themselves practicing lawyers in law firms, is that many law firms are going to have to transform their business models quite significantly over the coming three to five years in order to meet these new suites of opportunities and challenges.

How are law firms and other kinds of legal service providers addressing these issues? In order to better answer this and to provide a more useful survey report, a document outlining the initial findings is currently being circulated to a selection of managing partners across the globe, asking for their thoughts and insights. These will be incorporated into the survey results to yield not only an overview of the results, but also what law firm leaders believe that they tell us. This process will be completed in the following weeks and the report released by the IBA, probably during April 2020.

If you have any thoughts or queries about this survey, I would love to hear from you. Please contact me at robert.millard@camstrategy.com.

This article was first published in the IBA Law Firm Management Committee Fourth E-Bulletin, on 2 March 2020. It can also be found on Cambridge Strategy Group’s website here.

Postscript: This survey was conducted immediately before the COVID-19 pandemic emerged. It will be interesting to run the same survey again at the end of 2020 and see how responses differ.