Artificial Intelligence: Knowing When It's Right for Your Firm

AI in the Law Firm

Two main areas where law firms can see exponential gains from AI are client development and revenue generation. The ability to automate processes that previously involved tedious amounts of manual labor opens the doors to never-before-seen efficiencies.

Rather than thinking about amorphous terms like AI and machine learning, start thinking in terms of legal decision-aiding tools and legal process automation. Is there a way to more quickly complete the required work and make internal processes more efficient? Is it worthwhile to take on certain projects given the likely outcome? What can be offered to clients that will differentiate the firm from the competition?

The answers to these questions lie with AI.

Revenue Generation

It's indisputable that computers can analyze significantly more data in exponentially less time than humans can. Existing data can be harnessed to increase the firm's profitability by determining: 1) which work should be taken on; and 2) which lawyers are best suited to do that work.

Start by evaluating specific practice areas. For example, firms with a strong litigation practice can use AI to analyze data and determine likely case outcomes, which, in turn, will help firms decide whether it's worthwhile to take on a specific case. The more a firm can focus on cases that are likely to be successful, the more profitable it will be.

For transactional practice areas such as M&A, firms are increasing their efficiency by using AI for tasks that could only be done manually in the past, like reading documents, extracting important information, and presenting summaries, thereby allowing lawyers to focus on more high-end work. Projects that may have previously required five paralegals can now be accomplished with two or three. Streamlining processes frees up the firm's workforce to handle more matters, in turn bringing in more revenue. The same general rule can be applied to any practice area.

AI can also help to capitalize on each firm's biggest asset — its lawyers. Hiring the right attorneys is a key way to boost firm profitability. This raises the questions, however, of how to know that you're hiring the best people, and what makes a potential lateral hire likely to succeed at your firm. The answers, again, are in the data.

Over the years, firms inevitably compile a fair amount of administrative data on their workforce. Analyzing it can uncover patterns as to what makes individuals successful at a given firm. By identifying commonalities among the individuals who have succeeded in being promoted to equity partner, a firm can seek out similar qualities in potential lateral hires. Every firm has its own unique culture. Knowing who fits with yours is invaluable. AI's ability to handle large volumes of data in a fraction of the time it would take humans to review it manually puts that knowledge at your fingertips in ways that were not previously possible.

Client Development

While employing top talent is an obvious goal for every firm, it's not the only thing that will ensure client retention. The days when being a superstar lawyer were enough to bring in business are a thing of the past. Today's clients are demanding more, most notably in the form of innovation.

Clients want to see cutting-edge technologies and applications that provide them with real-time information. They want interactive dashboards where they can find answers without having to schedule appointments with their attorneys.

The goal is to present the client with a superior experience and ways of connecting with counsel that exceed what has traditionally existed. In the case of a patent client, for example, constant direct attorney-client interaction isn't necessary to keep the client updated on the status of every patent that's filed. Instead, create a real-time dashboard that relays information to each client whenever they want it.

The same concepts apply to any type of client whose work involves regular filings and submissions, be it regulatory, IP, or other areas. Innovations like searchable Web interfaces and real-time dashboards that are powered by data are going to keep clients satisfied, and in turn boost both client revenue and client retention rates.

Another new avenue for generating revenue is leveraging data to sell knowledge. Take, for instance, a firm that excels in a particular geographic market, such as Asia. Clients looking to enter the Asian markets can turn to the firm to gain deeper insights and weigh their options. Charging a fee for knowledge culled from years of firm data is only possible with lightning-fast AI analysis. When considering the amount of data your firm already has in its possession, the potential for revenue generation quickly adds up.

External data can be equally as useful. Intelligence on client dealings outside of the specific matters you're handling for them can identify new areas where the firm can offer its services and increase revenues.

Ultimately, the question has become how to differentiate one law firm from another. Knowing what makes clients hire one M&A powerhouse over another firm whose M&A skills are just as strong is valuable intelligence. The answer no longer lies in pure legal skill or even personal connections, as it often did in the past. Today, clients are demanding technological innovation, and these demands will only increase as younger, technologically savvy generations move into leadership roles.

Creating Business Cases: When Is AI Right for You?

Accepting the necessity to incorporate AI into your practice is only the first step. Implementation needs to be strategic to ensure the technologies being put in place are cost-effective. Technology isn't useful if the cost of running it exceeds the additional revenue generated.

Innovative technologies don't come to life overnight. Significant amounts of work go into coding the data and documents that are ultimately reviewed by AI. To get to the point where a firm can start to effectively utilize AI, its staff first needs to train the machines, perform quality assurance, and check that everything is running properly. Only then can it begin to analyze all the data and reap the gains of AI. Given the cost and effort that it takes to do this, it's important to first look at the economics of whether a technology is worth implementing.

Start by identifying your firm's strongest practice areas. These areas are where it will likely see the most benefit from predictive outcomes. Evaluating core strengths is the best way to determine where and when AI can help a practice most. Often, it's a very niche practice area within a larger corporate or litigation department where the most benefits are recognized first. AI is not a one-size-fits-all solution. Strategic assessment aimed at increasing revenue and efficiency without exorbitant cost is the key.

Implications for the Future

AI is the future for law firms, whether firms want it or not. Given client demand, it's crucial for firms to educate themselves on how technology can transform their practices and how it can be implemented in cost-effective ways. Firms need to begin the task of reallocating resources to best allow their staff to focus on innovation. Training personnel to perform high-end work now will help the firm to embrace technology moving forward, and will help to reduce the number of people whose roles become irrelevant when the technological advancements arrive.

Technology is no longer a luxury, it's a necessity. Client demands for innovation are increasing by the day, and in five years, clients will expect to see AI fully integrated into every law firm. The legal market is a competitive one, and AI is the key to succeeding in it. It's time to figure out how to make technology work for your firm, so that you can continue to be a serious contender.

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Arup Das is CEO of Alphaserve Technologies. He is an expert in institutional level technology governance and operational risk management standards that are prevalent in hedge funds, private equity funds, venture capital funds and global law firms.