Paul Neo for Skolkovo LegalTech. Black Edition: Innovation does not begin with technology
Legal technologies allow not only to free lawyers from routine and time-consuming tasks, but also to engage them into strategic management and business. In the run-up to the largest conference on legal innovation in Moscow Skolkovo LegalTech. Black Edition the COO at the Singapore Academy of Law and Executive Director of SAL Ventures, leading expert on LegalTech Paul Neo talks about the recent trends and challenges in the industry, his expectations from Russian legal markets and partnership opportunities for Singapore and Russia.
– Recently, you presented the “2019 State of Legal Innovation in Asia Pacific” report at Stanford Law School. There you state that innovative technologies have been rapidly spreading into LegalTech markets during last three years. What are the drivers for such growth?
– I am more familiar with the ASEAN markets, but there are some commonalities in how multinationals and law firms adopt legal technology all around the world. Recent LegalTech market growth is the result of law firms trying to increase productivity in order to be more cost-efficient as well as to expand their revenue streams. Law firms generally rely on associates, young lawyers and graduates to do the grunt work. Of course, in Singapore, where you have manpower shortages, the cost of doing this has been increasing because salaries have been going up and so on. It is getting more and more challenging to continue to rely on human labor to do research, basic background checks etc. Clients are also becoming more demanding: customers of law firms want faster results; they expect lawyers to get back to them the next day. It has become impossible to rely on humans to do this, especially with the amount of data available in the world now. To sort through all these electronic documents and evidence takes a lot of time.
“In a sense, law firms have little choice but to explore LegalTech solutions that can help them process greater volumes of data to achieve faster turnaround times and at the same time reduce their backend costs.”
– Traditionally, legal firms are slow to adopt new technology. How can they be further motivated to introduce LegalTech solutions? Should the government support this initiative?
– It is quite common that technology is seen as expensive and as something that most law firm partners feel is not their immediate problem. They might resist investing in technology to upgrade the firm’s capabilities. To tackle this issue our government has implemented funding schemes to subsidize the cost of adopting legal technology for law firms. Government support has been quite effective in getting law firms to explore and use legal technology to help with their operations.
“In the end, in Singapore, it is the combination of government putting in money to increase the affordability of LegalTech solutions as well as market demands that are driving the legal sphere to adopt technology.”
In other parts of the world, governments and authorities are not as pro-active as in Singapore. Still, law firms face similar challenges: they have to increase productivity and cost-efficiency. At the same time, they want to demonstrate to their clients that they are better than their competitors because they are innovative. By using the latest technology, they increase their attractiveness to the customers.
– What are the main challenges in the Russian LegalTech markets? Are there enough drivers to motivate legal firms to adopt technology, what should change?
– I am not an expert on the Russian LegalTech market, but from what I have observed there are no major government schemes similar to those we have in Singapore. There are some government-sponsored incentives like the Skolkovo Foundation. Its LegalTech incubator program is run by my friend Anton Pronin. I do see this sort of programs set up in Russia to help the legal industry and it is very good to know. I hope to see more of it.
– The Future Law Innovation Programme (FLIP) that you curate under SAL aims to innovate the business models in legal industry, not just introduce new tech. What should companies do if they want to introduce LegalTech solutions? How should they change their business processes?
– It is a very important issue.
“Innovation does not begin with technology. Technology is just a tool and it must be fit for purpose. The starting point for innovation is looking into your business models and processes.”
If they are not ready for technology to be layered on top of it, than you will not be able to extract maximum value from the technology that you acquire. There will be a mismatch between what the tech solution is able to accomplish versus what you are actually using in day-to-day practice. What we hope to achieve is to educate our law firms and in-house legal departments to look internally at how they can deliver legal services first. This way they can identify areas that can best benefit from technology solutions; spot more sensibly what to automate etc.
Innovation entails two aspects. The first one is increasing efficiency and productivity from current resources. The second one is to expand and develop new revenue streams by monetizing internal capabilities so that you can deliver services in new areas using channels you have never tried before. This way you can reach out to even more customers.
There are two main strategies to reorganize business practices: first, a more defensive game of cost-saving and second, growing capabilities and extension.
Another task is to look at the structure of the company. Many law firms in Singapore follow the partnership model. It can be an impediment because you have to get investments from the pockets of the partners, and not all of them are keen on spending on innovation from their retirement budgets. This business model may put law firms at a disadvantage, so they have to think which structure is best suited for them to be agile in the future economy.
– What about the way firms charge their clients? Is there any advice on how the payment structure should be reorganized?
– In Singapore, many firms still use hourly rates. It actually encourages being unproductive: the longer time you take to produce results, the more you earn. This model will be at odds with what you are trying to achieve – increasing efficiency and reducing turnaround time. Customers nowadays have much more choice; they do not have to agree to hourly billing anymore. Law firms have to think how to position themselves to be more attractive than new alternative service providers.
“This is what we mean when we talk about business model innovation. Once you have identified these issues and developed a new business model, you can think about how you can use technology. Understand your customers, understand your current capabilities, and identify the gaps that you want to close with technology – this is innovation.”
– How has new technology, such as AI, machine learning, blockchain, already changed the way legal industry works? What are the trends and main challenges?
– I would say that the latest technologies still have a limited impact on the legal industry. Though there are some AI-powered services on the market, most technological solutions utilizing blockchain, machine learning and AI are still relatively new. The problem is that in order to effectively use these tools you need to make sure that there are properly trained people for it. I do not think our legal industry has an adequate pool of human talent who know how to train algorithms properly. This is something our law firms are still learning. Concerning blockchain, it is not very widespread in Singapore. We are currently exploring the use of blockchain for notarization and land title registrations. However, it is still very limited.
– In 2019 SAL, Skolkovo and IPChain Association agreed to cooperate. What are some of the prospects of this cooperation?
– So far, IPChain Association is the only Russian company that is a member of FLIP. It is a very mobile, unique solution. In the future, we want to help Russian LegalTech companies to expand and reach ASEAN markets. I believe there are many opportunities for development. LegalTech is very new; we are all still learning what we can do. The market is rapidly growing, so there is a lot of interest and many players are coming in with cutting-edge solutions. Whoever is first will have a huge advantage. You can still establish yourself here, unlike, say, already crowded North American or European markets. This part of the world is ripe for LegalTech companies and good solutions. A lot of them are coming from the UK and USA, but only a few from Russia. We hope to see more.
We also hope that this partnership will help Singapore LegalTech companies collaborate with their Russian counterparts in order to co-develop LegalTech solutions that are relevant and applicable for both our countries.
– Skolkovo LegalTech. Black Edition conference – what are your expectations?
– It is a learning trip for me. I am very excited. I have read a lot about Russian LegalTech market, communicated with my Russian colleagues and am very glad to see that LegalTech is gaining interest here.
“I hope to introduce Russian LegalTech enterprises to the opportunities we have in Singapore, share our ecosystem and state of legal innovation, and where we see the opportunities for cooperation.”
There is a lot happening now in the industry, and I would love to see the trends on the Russian market!