New Zealand legal services and lawyers — what might happen?

by Simon Tupman

LawTalk, the journal of the New Zealand Law Society, asked five innovative New Zealanders working in the legal services industry – including our own Simon Tupman – about the changes needed today and what they think could happen over the next few years.

First published in LawTalk, the journal of the New Zealand Law Society, 29 March 2018.

Predicting or speculating on future developments is fraught with danger. So many things can intervene. It can also be unfair to ask someone to look forward, with a myriad of possible influencers always ready to take things in new and unexpected directions. At the same time, marshalling current themes and practices and tracking their possible growth and adoption can be a very helpful way of benchmarking the current state of an enterprise or the wider industry in which it sits.

Michael Smyth (michael@approachablelawyer.com) is a sole practitioner and director of Approachable Lawyer Ltd.

Claudia King (claudia@autom.io) is CEO and founder of Automio, which aims to enable the automation of legal tasks through the use and development of technology.

Simon Tupman (simontupman@gmail.com) is a consultant to law firms on leadership, culture and change. He is the organiser of the annual Future Firm Forum which had its 10th anniversary in Queenstown in 2017 and which brings together law firm leaders and staff with international speakers to look at the latest developments affecting the legal services industry.

Andrew King (andrew.king@e-discovery.co.nz) founded E-Discovery Consulting in 2011 with the aim of using technology to simplify the discovery process.

Gene Turner (gene.turner@lawhawk.nz) is Managing Director of LawHawk, an online document generation service for lawyers and procurement specialists.

What are the biggest changes you think New Zealand legal services providers need to make to remain viable?

Michael Smyth: Technology is an accelerator of change. It enables businesses to deliver solutions and outcomes quicker and more efficiently than ever before. If your clients are embracing technology (which most are) then you need to embrace it too. If you don’t, then your clients will go elsewhere.

Efficiency means delivering good advice quicker and at a fraction of the cost. Put simply, if you deliver legal services the way you always have, then you are behind the curve. Law firms need to ask how they can use technology to reduce their overheads and pass those savings on to their clients. For example, we don’t yet know the capabilities of artificial intelligence. Can it do the job of a paralegal or junior lawyer? Will certain types of law become commoditised? Can you automate a conveyancing transaction to limit (or eliminate) the amount of time a lawyer needs to spend on the transaction?

Think also about how your clients want to receive their legal advice. Some clients are sophisticated enough that they don’t need you to draft an entire document for them but would rather collaborate with you in the drafting process to reduce the cost. It’s not that they want to pay less necessarily, but they want to see value in your output and don’t measure value by how long you have spent doing something but by the value to their business.

Think also of your lawyers. They don’t want to be chained to a desk in the city and will demand more flexibility in how they work. Whatever their gender they will want to be paid the same based on the quality of the work they produce and not how many hours they spend in the office filling out timesheets.

So as technology uptake continues, innovative pricing solutions and remuneration structures need to be developed to ensure value is still being delivered and law firms remain viable.

Claudia King: The biggest change New Zealand legal services providers need to make is to improve leadership and decision-making processes. The traditional partnership model means many law firms are not run like proper businesses, and are not led by people with an inspiring vision for the future that is communicated to everyone in the firm. Decisions by firms are slow and often based on emotion and fear, rather than well-researched and thought-out business strategies. Partners and practice managers often don’t understand what new technologies do and how these technologies support their firm’s strategic plan (if they even have a strategic plan), and they are holding firms back.

To remain viable firms need to create leadership teams with the right people who can inspire and facilitate innovation, and create agile decision-making processes so they can make better decisions faster. The current leadership teams at many firms will not be the leadership teams firms need to go forward, so some difficult decisions will need to be made by firms.

Another big change firms need to make is to drastically improve the client experience. Many firms operate the way they always have, without understanding what it is their clients really want from their lawyers. There is also a large and growing number of people who refuse to use lawyers because they consider lawyers out of touch with their needs as clients. Jump in any Facebook group for Kiwi businesses and you’ll see the non-lawyer members helping each other with legal problems based on what they find in Google and their own experiences.

To remain viable firms need to spend time really understanding what their clients want. Once firms understand this they can set strategies to better serve their clients and working out what technology they need to improve the client experience is a key factor. This avoids the scattergun approach that most New Zealand law firms are taking when choosing their technology.

Simon Tupman: There are effectively two groups in New Zealand who provide legal services: law firms and in-house counsel. The latter group is gaining ground and learning fast about how best to add commercial value to their clients and how to operate most effectively and efficiently. For this group, I think the challenge will continue to be how best to resource their departments, and how best to exert influence on their CEOs and boards so that they are perceived to be much more than lawyers managing reputational and legal risk. The growth of in-house counsel augurs well for their future.

Law firms on the other hand face much bigger challenges which will require them to completely re-think how they operate if they are to remain viable. The fundamental difference today compared with 10 years ago is that legal services has become a buyer’s market. Clients call the shots not the lawyers. Law firms have to understand and be prepared to meet new criteria for purchasing legal services such as pricing, convenience, and overall commercial value. Time, and billing by the hour, has already become irrelevant. Increasingly, by their numbers and assisted by social media, the new generation of employees are calling the shots when it comes to the conditions of their employment. Employers need to shape new vibrant workplace cultures that break away from the traditional structures and offer a whole new way of flexible working, autonomy, high-trust and motivation. Numerous studies and ‘best employer’ benchmarks show that those organisations who invest in their people are more productive and profitable.

There will be some casualties as the progressives take on the conservatives, but it is both inevitable and imperative if firms want to stay ‘ahead of the curve’. This will require visionary leadership, something that has been as scarce as hen’s teeth in the 30 years I have been involved in the profession.

Andrew King: The profession is facing considerable change with growing pressures forcing law firms to operate more efficiently and effectively in how they deliver their legal services.

Most law firms are facing greater pressures from their clients to reduce costs, whilst delivering a faster and more accurate legal service. They also face greater competition from other firms that are already leveraging technology to provide a more cost-effective offering to their clients. There are now new sources of competition, where professional services firms, technology companies and alternative legal providers are moving into the legal market.

Innovation through leveraging technology is becoming a game changer for providing legal services. It is the opportunity to do things better, better than what we do at present and for less money. The profession is only starting to take advantage of the opportunities that technology brings – opportunities that many other industries have embraced for many years.

Many legal services can now be commoditised, whilst others will look at new business models, pricing structures together with leveraging technology to help their firms practise law more efficiently.

Being tech savvy is becoming an essential skill for practitioners and will become more so as technology evolves further. It is not necessary to understand how it works, but more if it can help add value to what you do. Technology will never do everything, critical skills like analysis, judgement and problem solving are just as important as they have ever been; it is just that technology can be used to assist in this.

The law firms of tomorrow will be the ones that innovate through leveraging technology, to deliver more efficient legal services. Those that are open to innovation and embracing technology will be the ones that lead the way. The ones that choose not to, could be left behind by an increasingly competitive market.

Gene Turner: Change the business model, from selling time to selling solutions: Many law firms’ problems come from a business model based on selling time, which rewards inefficiency and discourages innovation. Moving to fixed fees, retainers and subscriptions for agreed deliverables will be game-changing.

Look externally, and to the future: Most law firms are still inwardly focused, with emphasis on maintaining and defending outdated practices that have worked in the past, rather than what will work best in the future.

Firms need to look outwards, towards the wider economy and best practices for the future. Looking at the most innovative legal services providers and other professional services firms in New Zealand and overseas, it’s easy to see plenty of opportunities and room for long term first mover advantage.

Find their clients’ real problems: I talk to organisations every day who have problems that lawyers could help with but currently aren’t involved with, or even aware of. There is a huge amount of work that is now being done without a lawyer anywhere in sight, because even though it has important legal aspects:

Develop new solutions for them: Lawyers either don’t understand their clients’ real problems, or aren’t interested in addressing them because:

Lawyers should come up with new solutions for these problems before someone else does. What’s really crazy is that most lawyers will only become interested when they can see their competitors already doing this work, and it’s too late!

What do you see as the major developments which will happen in the delivery of legal services in New Zealand over the next five years?

Michael Smyth: Artificial intelligence is already here, but how it can be used to best serve the client is still really to be discovered. But I don’t believe AI will replace lawyers completely anytime soon. Nevertheless, there are plenty of other ways in which law firms can deliver a more streamlined service to their clients without using artificial intelligence. I believe the quality of online solutions for legal problems will improve, thereby making it easier for clients to access legal services without being saddled with the lawyer’s hourly rate.

Lawyers will likely become more mobile and the desire for big city offices with all their overheads and associated traffic problems will diminish. Clients will be much more comfortable to reach out to their lawyers remotely to avoid unnecessary visits to the city office and get answers quicker.

The commoditisation of basic legal services will push lawyers to either become more specialised or get involved in more complex legal problems which require a greater emphasis on lateral thinking rather than an encyclopaedic knowledge of the law. The top lawyers will be those who have a greater command of the soft skills, such as the ability to collaborate effectively with others, read a room, empathise with a client, negotiate a good price, deliver a persuasive argument, manage complex projects, or simplify complex issues in a way that anyone can understand. Lawyers who prefer to sit in the back office and do research are probably a dying breed.

Claudia King: One of the major developments I see is new business models (ie, the way law firms make money) becoming more common as law firms find ways to better serve their clients and themselves. Instead of billing a fee for a specific service, firms will start using subscription models to create recurring revenue for access to a range of legal services and resources, as well as selling legal products like contracts, legal documents, legal courses and legal guides. Legal products can be sold over and over again online without much extra effort.

It’s encouraging to see some lawyers already questioning whether there is a better way they can use their skills and expertise to serve their clients and earn revenue, rather than exchanging time for money by providing services. More law firms will do this, and firms will start looking at the hidden gold in their firms – the huge amount of intellectual property their firms own (every law firm has shitloads of IP) – and will look at how they can make these valuable assets generate revenue for them. The internet provides a huge amount of opportunity to generate new revenue streams and this extends to lawyers as long as they are entrepreneurial. This means we’ll see lawyers gaining skills outside of the law, like leadership, strategic planning, coding, sales, financial, and digital marketing skills.

To execute these new business models firms will need well thought-out business strategies and ‘buy in’ to this new direction from everyone in the firm. Technology is a crucial factor in both setting and executing these strategies, as the only way to deliver these new business models is to use amazing tech. So strong, inspiring leadership will be key to rolling this out.

Andrew King: How legal services are delivered has changed and will continue to do so.

The fundamental practice of law will remain the same, however those who see the opportunities in exploring new ways to innovate and drive efficiency and adapting to change will lead the way. They will be able to –

  1. Make their firm more efficient and ultimately profitable; and
  2. Deliver a better and more valuable service to clients.

To address these growing challenges many legal professionals are recognising they need to look to technology. The greater access to technology and innovative processes should help level the playing field, enabling smaller firms to compete with larger ones. For lawyers embracing technology and new business skills it will open new opportunities, which will make them more valuable.

Routine and repetitive administrative tasks are being automated, freeing up lawyers to spend more time working with their clients to create better outcomes. Tasks like accessing case law, research, manage documents, dictate, bill and communicate will change further. Many of these tasks are now being performed quicker, cheaper and more accurately through the assistance of technology.

There will be more opportunities to practise law outside of the traditional law firm model. You will not necessarily need state of the art offices in Shortland Street. It is becoming easier to have support services through embracing accessible technology and on demand services, all with considerably less overheads.

Even if the legal profession is not currently embracing some of the technologies available, it is important to keep abreast of what opportunities that technology may bring. Being a LawFest member and attending LawFest 2019 provides the opportunity to learn more about how the profession can deliver legal services both today and into the future.

Simon Tupman: I think legal services will become much more accessible and affordable with solutions available for straightforward work at the push of a button on an iPhone. Buyer sophistication will force legal service providers to meet the market by embracing technology and redesigning their business models. In the process we will see new structures, new automated processes, and new styles of law firm emerge to take advantage of a latent market for legal services.

In-house counsel will continue to grow in numbers and influence, offering better career options than private practice.

Traditional law firm structures (partners, senior associates, etc) will disappear to be replaced by more agile, accommodating and innovative models. Law firm personnel may reduce with only the essential workforce retained full-time; the rest of the work will be contracted out to specialists in their respective legal or operational fields. Firms will be populated by more non-lawyers with new skills essential for service delivery. Traditional offices may be a thing of the past as progressive firms scale down, work from home or use hubs to carry out essential work. Increasing emphasis will be placed on making law businesses great places to work by adopting a ‘one team’ inclusive approach and by providing sufficient inspiration to engage the team. To facilitate all of this, I believe it would help to de-regulate the legal services industry in New Zealand so as to allow non-lawyers to be directors of law firms and to allow for alternative service providers similar to the UK and Australia. Failure to do so could prove to be a hindrance for incumbents and start-ups looking to make the most of the brave new world. It could also be the final nail in the coffin for the New Zealand legal profession.

Gene Turner: There won’t be one particular thing, it won’t all happen at once, and it won’t stop after five years. It will be a wide variety of small and continuous improvements that all build on and reinforce each other.

Everywhere I look, I see systems developing that are made up of combinations of people and technology. Increasingly, those combinations are being linked seamlessly by APIs (application programming interface). Stephen Ward, the founder of Billy Bot from the United Kingdom, recently spoke at a series of events organised by the College of Law’s Centre for Legal Innovation. “Billy” was a fantastic example of how this type of system can quickly grow from a very small base by adding more and more connections.

As more integrated end-to-end business process solutions are developed, legal services will increasingly become embedded into those broader processes and solutions. Legal compliance and delivery of many legal services will happen automatically, and mistakes through human error will be less common.

There will be a lot more collaboration than has been the case. Law firms will collaborate with each other, and with other solution providers and clients. Clients will collaborate more with each other, particularly in legal compliance.

Those lawyers that are involved in building and maintaining these systems will be very well positioned for the future. As well as the more predictable licensing revenue they should be able to earn from providing these systems, they should also be best positioned to seamlessly pick up whatever additional legal assistance is required.

Other firms could find that there is less legal work fixing mistakes or providing similar advice to multiple clients, and where legal support is required, it automatically goes somewhere else. There may be limited opportunity to crack into this new work from a weak competitive position.

Do you think the New Zealand legal profession in 2028 will be very different to the profession in 2018?

Michael Smyth: When I started my legal career in the early 90s in London I had a stash of 10p coins so I could ring the office from the High Court if something was wrong with the document I had been given to file; not many had mobile phones. A year or so in, PCs were put on lawyers’ desks (rather than being confined to secretarial staff) and they had considerably less memory that my phone does now. Email was starting to become mainstream but it was used more as an internal communication tool than anything else, although that didn’t stop my supervising partner giving me typed memoranda if he needed me to do something. Correspondence was dictated, amended (sometimes many times), sent by post, and if you received a reply in a few days that was considered quick. We had fax and telex, but that was only for urgent matters. The pace was much slower.

So if I jumped into a Tardis to go back to those days I probably wouldn’t believe how antiquated we were. Similarly, if I had a crystal ball in the 90s I would be shocked to learn how I work now – the thought of running a virtual paperless office back then was beyond comprehension.

The pace of change suggests that the scale of changes which occurred in the last 20 years will now happen in the next 10. Therefore, anyone would be naïve to think that it will be the same in 10 years as it is now. We can guess what it might be like, but I suspect we will just be guessing – unless you have a Tardis.

Claudia King: Yes I think there will be a crazy amount of change in the next 10 years, so the legal profession in 2028 will look really different. In 10 years law firms will likely have high performing workforces made up of:

Lawyers (human ones) performing higher value legal work, like advocacy and advising on more complex commercial transactions.

Legal technologists (humans) who work with the firm’s digital workforce to create lawyer bots (software that automates tasks that have traditionally been carried out by lawyers), and create and recommend other technology solutions for the firm’s human lawyers and the firm’s clients.

Lawyer bots and other technologies that support the firm’s human lawyers to carry out higher value legal work, and carry out lower value legal work for the firm’s clients. This is the firm’s digital workforce, and it will include AI and Blockchain-based smart contracts.

Each of these three workforce groups will work together to ensure an excellent client experience for the firm’s clients. Firms need to start planning for their digital workforce now.

My vision for the future is that we will no longer have written legislation and contracts like we do today. Legislation and contracts will instead be created using AI legal bots, so instead of reading legislation and trying to apply it to a specific situation, a person who wants to understand how the law applies to them will ask an AI legal bot about their situation and then the bot applies the law to that person’s situation. This does away with the need to draft written legislation – instead the law can be written in logic flows. When a person asks an AI legal bot to apply the law to their specific situation, the AI legal bot can then, if required, go on to record the intentions of contracting parties using a variety and combination of technologies and mediums, including smart contracts, video, text, audio and illustrations.

Andrew King: Ten years is a long time, but we will continue to see even greater change in how legal services are delivered. The legal profession of 2018 is already very different to that of 2008.

There will inevitably be further automation of tasks that are time-consuming, costly and presently performed by humans. The profession will be able to focus on practising law and providing expert legal advice for their clients, instead of being restricted by time-consuming administrative tasks.

We are a long way off lawyers being replaced by robots. Problem solving, creative thinking and expert legal advice will be in higher demand. The technology should help to make lawyers’ life easier and more efficient.

There should be greater access to justice for those who may not always seek legal services due to cost. This will be provided by non-traditional sources, which will include ‘robo-advice’ and ‘chat-bots’ for straightforward legal problems.

The billable hour should become outdated as clients look for more innovative cost structures, where the goal is to improve value for clients – so firms will be expected to produce more for less, but with the technology now available this transition is manageable.

The technology available is improving all of the time. There are an increasing number of New Zealand legal tech companies, with some led by lawyers, who have identified a problem and developed a solution to address these issues.

There will be further evolution and innovation in how legal services are delivered.

In this age of disruption, you cannot stand still, as it will be important to remain curious and open to change. The profession should continue to ask themselves: “how can we do this better – to deliver legal services that are more efficient, profitable, whilst providing greater value and outcomes for their clients.”

Simon Tupman: Yes. I think the legal profession as we know it will become increasingly irrelevant and will eventually disappear to be replaced by a competitive ‘legal services industry’, one full of opportunity and one that is already taking shape thanks to some fundamental events and changes in our society. Generational change, technology and globalisation are just three of the major triggers of change that are revolutionising the world of business, not just the legal profession.

For decades, lawyers and law firms have had a monopoly on the delivery of legal services but not anymore. Buyers of legal services no longer need to consult a lawyer or a law firm to access legal services, thanks to deregulation (overseas), the emergence of law firm/lawyer substitutes (accountants, online documentation, expert applications that automate traditional tasks), and ‘NewLaw’ innovation start-ups such as Riverview Law (UK), Hive Lawyers (Australia) and Valorem (United States) who have taken real steps to meet the needs of a buyer’s market through specialisation, restructuring and automation and in the process, are redesigning the DNA of the ‘legal market’.

These trends are not temporary fads. You cannot put the genie back in the bottle. There is no going back to ‘the good old days’. Firms that ignore the trends and their ramifications do so at their own peril. Professor Stephen Mayson, former director of the UK-based Legal Services Institute, stated as far back as 2007: “The profession would be well advised to lose its current tendency to equate the legal services market with the legal profession. The market may grow and prosper; the legal profession may not.” Take note.

Gene Turner: I hope so! The way law is currently practised didn’t work well for me, and I know it doesn’t work well for a lot of lawyers.

There is good reason for hope though. Every other area of our life is changing so much, so why should law be any different?

I think it will happen more quickly and naturally than many expect, and a lot of the current barriers to adoption of new ways of working will disappear. For example, software that is currently only used to a limited extent because it is new, separate and server based, and requires training on how to use it with other systems, will become integrated into other cloud-based systems we already use so that we don’t even notice it – just like we now use Siri and Google Maps without thinking.

Clients and law firm staff will increasingly demand improvements from their law firms. At present a lot of them don’t know any better, and assume that their law firms are better than they actually are.

Law firms will increasingly want to make the changes anyway, either because they are losing work and realise they need to improve in order to remain viable, or because they can see the opportunities it creates.

I hear the talk about diversity and how law firms need to satisfy their client needs without sacrificing all the other areas of lawyers’ lives, but little seems to be changing. While the issues and solutions are complex, my view is that the technological changes that are coming will be at the core of addressing the work/life balance issues that play a part in the wider discussion. We can already see through our work with lawyers that automation is removing a lot of the hours, stress and repetitiveness from their work, and allowing them to do work that is much more enjoyable.

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