Remember back, if you can, to when Google was just a name, not a verb; when Amazon only sold books and Facebook was only a social network. For all of these technology companies, it’s the ubiquitous nature of their presence which now drives their vast market share. That market share enables them to access and then often dominate new markets or create markets that did not exist before. However, they weren’t always so powerful and big. They started small but they were different. Money alone was not the key driver behind their initial success. They started with an idea and a desire to change the world we live in. They
did not think like traditional companies. Their technology has changed the way we behave and the way we think and how we spend our money. Their business models have changed the way other companies operate and created opportunities for new companies to emerge. Quite literally, the rest of the business world has had to adapt to survive this new way of doing things.
Legal operations – stuck in analogue?
One of the biggest and most exciting developments in the legal industry in recent years has been the advance of operational thinking and the technology to support it. But currently, most business models for this are stuck in analogue mode. We have lots of new and exciting toys or solutions to play with but they are being offered for sale in the way the industry has always operated: they have a great tech product or solution solving a great need, they need a customer with that same need and a ready budget for at least a few years. Ideally, that customer should also have the potential to continue to buy ongoing services, support and consulting at great margins.
Contrast this with Google or Facebook. They have great products solving real needs but that product has always been accessible to all, irrespective of budget or future buying power.
They have created new markets and arguably created new consumer needs (who would have thought in the 1980s or 1990s that we needed an online search engine to help us in our lives?), As a result, they have created two of the biggest and most profitable companies in the world with billions of customers.- The king is dead, long live the king. The addressable market is much admittedly much smaller but we should aim for a passion to innovate in our space that is just as big.
Google is 21 years old this year, it became the number 1 search engine in the world in 5 years and made a profit within 3 years. How long do we want to wait as an industry for legal tech and the new solutions to be that big, that profitable and that ubiquitous? How long does the current crop of ambitious legal tech players and new law providers want to wait to be the legal equivalent of Amazon? Most legal departments are still seen as a service area in the business, are less tech-savvy and do not operate with the scale and potential big budget of large scale corporate legal departments. At the current rate of legal tech adoption, will the world really look much different for the majority of corporate legal teams in 5 or even 10 years’ time? They still won’t be top of the corporate priority list and they will still struggle with finding the required budget.
The funding problem
If, as promised, operational focus and adoption of solutions such as legal tech are going to make everything much more efficient and cost-effective in the long run, why can’t the majority of companies find means to invest in it now? Generally, it’s a question of risk tomorrow versus money today. The uncertainty of a proposition based on future or current “risk” balanced against the commercial demands of business here and now, is what makes this a lower priority area for investment for most businesses. However, good corporate governance increasingly looks for businesses to demonstrate that they have appropriate controls and mitigations in place to manage their risks and to demonstrate, for key risks, improvements made during the year and plans to be implemented going forward. Once those controls are in place, it is increasingly difficult to remove them without replacing them with something else. Controls do not need to be technology enabled but there are increasing opportunities in this area for tech-providers. They and their related costs become sticky and that creates an opportunity for those tech-providers who are willing to find a method of funding the upfront costs in order to grow their pool of customers. It’s this reverse of normal business logic (buy now, don’t pay later) which has contributed to the dominance of Google, Facebook, Twitter, Amazon et al. They were free first and monetised later. Even the Amazon model was designed to encourage mass adoption by undercutting competitors. The company has built on this advantage by introducing Amazon Premium to prioritize the use of their site, create additional customer benefits that can be monetized and create a platform which can mimic the key advantages of leading alternative vendors In the world of legal and compliance technology there are fantastic opportunities to be had with a much bigger pool of value to go after (think ALL legal departments in all Fortune 500 of FTSE 350 companies as just the start of that opportunity) but take up is often too slow due to the inadequacy and inflexibility of the funding model. This is not just about innovative pricing but innovative funding. If it were just pricing, we would just be advocating more use of freemium or perhaps per-use models. That is definitely part of the answer but imagine a world where there was no pricing model but rather legal tech was funded through other revenue streams.
It is not all doom and gloom. The legal tech market has increased its capacity exponentially over recent years, There’s lots of activity – new providers, new tech, new tech hubs. There’s also the rise of legal operations and associations such as CLOC and ACC, which focus more now on promoting operations and the use of legal tech. New legal resourcing models are arising, for which think Halebury, Big 4, Elevate etc. This has led to a lot of conversation about the impact on the traditional profession.
The authors believe that now is the time for a new conversation about funding which will, in turn, allow access to a much wider pool of value and for much faster adoption of legal tech. They believe that for a true revolution to take place in legal tech and operations, and the profession as a whole, there needs to be a true revolution to the current analogue funding model. There is a role in this for traditional legal services providers, new law providers, legal tech companies, risk professionals and innovators from outside this space. Can they find a way to fund mass adoption of legal tech, and still keep tech and legal companies incentivized to keep and perhaps exceed the recent pace of innovation? The traditional growth model is to fund innovation through early adopters paying premium prices, learning from those initial sales and then finding efficiencies of scale and process. , Over time this allows the traditional pricing model to attract a wider and wider customer base as the early adopters demand lower prices or more for less. We believe there is a need for funding strategies that will enable mass adoption sooner rather than later. We don’t need tore-invent the wheel for this – perhaps we can learn from Google, Amazon and Facebook?
A starter for 10?
It is possible that there innovative companies out there who are already experimenting with one or two of their bigger clients. However, a few ideas to start the debate:
Can our insurers or insurance brokers build in risk mitigation solutions into their general offerings to all? For example, premium incentives available for clients that operate insurer-provided enterprise risk management or contract management solutions?
With the same business logic as free employment law helplines to clients, can our law firms provide genuinely free operationally ready tech solutions to a wider body of clients / potential clients and pay for this through the wider opportunities that arise from being seen as an existing part of client operations? This is more than a teaser but a genuine attempt to be an integrated part of a client’s business and be there when it matters.
Can we copy Facebook and adopt an ad-based funding model?
Would someone be willing to fund a solution paid for by client access meetings with top executives? Think – your legal team can have free access to my legal technology if we can have free access to your top executives to sell the benefit of a bigger suite of solutions?
Can more tech providers concentrate on providing freemium models with standard functionality available to all and focus on higher margin add ons for bigger teams or companies?
There are specific risks areas on every board’s table: think GPDR, crisis management and anti-trust. Boards will pay for appropriate controls and mitigation in theseareas.
Would they be more inclined to choose one provider over another if their platform already included basic additional freemium-style functionality for other legal risk areas?
Could the promotion of open-source programmes like DocAssemble in the legal space prove the way to go?
There are, of course, other practical challenges with new tech adoption within corporates. However, imagine just a world where every corporate listed on a world exchange and every major private equity owned company had its own contract management system, its own e- discovery suite, its own crisis management platform, its own legal “front door”, and its own e- billing management system. Whether or not those are appropriate solutions for all companies is, of course, debate-able. However, most companies and most legal departments do not get off first-base to even consider these solutions for want of initial funding.
The intellectual capital and creative capital of the legal and risk profession is huge. We would like to extend this challenge and a call to action to the legal, risk, compliance and IT professions – how can we creatively fund legal tech now for faster mass adoption and greater change? Let’s get there tomorrow, not in 15 years time.