Combining Innovation & Technology for Real Change

As director of practice services at Baker & Hostetler LLP, Katherine Lowry reports to the CIO and provides strategic leadership and governance of the firm’s information technology deliverables and services to five core practice areas. While her role oversees knowledge management, training, and integration of business applications, business process improvement solutions, and the delivery of information and research services, it also includes management of the newest legal innovation group, IncuBaker, focused on the integration of three major advancements: blockchain technology, artificial intelligence, and advanced analytics. Katherine obtained her bachelor’s degree in Political Science from Stetson University and her law degree from the University of Dayton School of Law.

The below article “Combining Innovation & Technology for Real Change” by Katherine Lowry was reposted with permission from AALL Spectrum, Volume 23, Number 3 (January/February 2019), pgs. 30-32.

Setting the Foundation 
Technology is often referred to as an innovation, but most agree that just buying technology, such as new AI-enabled software, may only serve as a Band-Aid to a problem or make matters worse. Real innovation happens when the underlying processes are examined and transformative new ways of solving a problem or creating a new service are identified. Either way, selecting technology as a solution comes later in the process.

Innovation appears to be all the rage these days, but many already believe it is an overused term. Arguably, many are getting lost in the semantics. The real question is whether the legal industry is a legacy industry so addicted to the benefits of its legacy
that it inhibits its ability to innovate and adapt. In examining the role of innovation, there is no better place to start than to reflect on the teachings of economist Joseph Schumpeter. He promoted the term “creative destruction” to describe a theory of economic innovation in which technology and innovation replace older means of production/services—one where innovation can replace or completely displace
existing companies or entire markets. Thus, either innovate on a daily basis or run the risk of becoming obsolete. In his book Capitalism, Socialism, and Democracy, Schumpeter declares:

The opening up of new markets, foreign or domestic, and the organizational development from craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation … that incessantly revolutionizes the economic
structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.

Schumpeter placed a heavy emphasis on entrepreneurs and their ability to create a new good or service, a new production technique, or open a completely new market. Entrepreneurs are a main catalyst for change that causes the most disruption by modifying our current process for delivering goods and services or by creating entirely new services. Change is constant under the creative destruction model and culture is a main component to change. Both are viewed as being critical to economic growth.

How Does an Existing Organization Avoid Becoming Obsolete?
One possibility is to make it table stakes for every organization to innovate, which might suggest that organizations incorporate R&D (Research & Development) groups to support a more routine approach to innovation or assign direct responsibility to an internal intrepreneur that is responsible for taking an idea to a finished product.

Imagine a group of intrapreneurs serving as a main catalyst for change by offering new business models that use technology and innovation to enhance existing services, or better yet, to create new offerings. An example of this notion is provided by BakerHostetler’s Legal Innovation team’s use of its Legal Nexus of Forces framework, which they created to analyze the competitive pressures to innovate that are present across the legal industry. It is an adaption of Gartner’s “Nexus of Forces,” which is used to explain the disruption that social, mobile, cloud, and information would have on industries everywhere. (Learn more at bit.ly/JF19Nexus.)

The Legal Nexus of Forces frames the issues from a law firm point of view, and it surfaces many fundamental issues being driven and changed by technology. Namely, it identifies new competitors and new strategies of existing competitors, and it provides insights on how technology modifies firms’ relationships with clients. The Legal Nexus of Forces breaks the analysis down into four categories:

  1. Client Sophistication;
  2. Change in Competition;
  3. Law Firm Innovation; and
  4. Emerging Technology.

Each category pulls together common themes and market examples. As the landscape of the legal services market changes, this framework can provide a basis for evaluating new initiatives— both internal and external.

1. Client Sophistication
Client sophistication undoubtedly drives legal technology changes. With the  advancement and consumerization of technology, law departments are able to do more with less—and that trend will continue. Reports show that law firms have been losing market share, and while corporate clients are seeing a modest increase in legal spend, the only increase in spend is occurring within the law department.

2. Change in Competition
Legal Process Outsourcing (LPO) and Alternative Service Providers (ASPs)
increasingly take market share away from law firms. With an estimated revenue of $8.4 billion, these providers are growing rapidly and represent services once provided by law firms. Two other notable shifts in the market place include PricewaterhouseCoopers
announcement of its “New Law” initiative, and DXC Technology Co. entering into a five-year contract with UnitedLex Corp. (Read more at bit.ly/JF19Report.) Both are signals
that the legal staffing market is changing, allowing companies to better scale up their legal staff or completely outsource it altogether.

3. Law Firm Innovation
Law firms continue to leverage technology and new services to differentiate themselves in the marketplace. One key observation is that some firms have created dedicated teams to focus on innovation. Governance levels of these teams range from informal to formal. Those with the most support and direction from upper management tend to make the largest advancements and have the greatest ability to meet client demands for greater efficiency, predictability, and cost effectiveness in the delivery of legal services.

The market is ripe for firms to drive innovation and transform delivery of legal services. It is a formative time for attorneys, information professionals, and technologists to explore solutions together. Innovation teams provide great settings to rethink both the business and the practice of law.

4. Emerging Technology
The emerging technology category is a direct reference to the Gartner Nexus of Forces, but streamlined to the legal industry. Today, vendors in the legal market are foundationally suited in two areas—advanced analytics (machine learning), and other forms of artificial intelligence such as natural language processing.

The legal industry faces a far greater challenge in unstructured data. Most information created by attorneys is simply unstructured, with nearly every document and email in the document management system falling into this category. Technology that creates insight from unstructured data will transform both the business and practice of law.
Motion metrics, clause analytics, and time entry/narrative analytics all have profound implications.

There is, however, a steep learning curve—but this presents a new opportunity for organizations. The machine learning model includes feedback loops and learning cycles. This creates a critical need for domain experts and teams of people who understand how to train the system. Quite honestly, this is where legal information professionals have an opportunity to create something unique, insightful, and transformative.

Now What?
Together, innovation and technology create a constant wave of creative destruction that stimulates economic growth by creating new inventions never before imagined. This action could possibly make older services, goods, and techniques obsolete. If we look at the landscape of technology start-ups in the legal industry, we will find that hundreds of companies are now on the scene and impacting how we operate our businesses. From one vantage point, it might be a technology that corporate law departments now use that was once a service that law firms provided, or, from another perspective, it might be a new role that legal information professionals play in data classification. It is clear that innovation and technology coupled together are a powerful market disrupter, and for your organization to avoid becoming obsolete, it comes down to a willingness to change, and a commitment to the investment of time and money to embrace creative disruption.

Are We a Legacy Industry That Can Transform?
Yes, I believe so. Why? Because there is an early prize for those able to successfully innovate to the point that traditional companies must succumb to the pressure of new inventions. It is market power. Innovation has the ability to change markets and break down boundaries. The economic growth of our industry depends on legal informational professionals with substantial domain expertise to help lead the charge for innovation. Be disciplined in innovation and seek new ways to create new services.

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