Why the legal sector and its clients are in dire need for digitalization and innovation
We all remember the horrors that followed the financial crisis of 2008. Suddenly, we were at the brink of a collapse of the entire financial system. Within weeks, the banking industry lost the trust of the general public and the former, so highly sought-after banking career was rated down to the least sought-after profession by numerous employment studies.
However, there was a bright side to this: As a consequence to this chaos, the general public, as well as politicians and regulators, became extremely wary of the financial system. The financial industry and its profession were put under close watch, and a general consensus formed around the idea that reformation and disruption were required to avoid this crisis from happening again.
Since the financial crisis, global investment in innovation within the financial sector – also called fintech – has tripled and is forecasted to reach up to $8 billion this year. With the rise of prominent examples like Stripe, robo advisor and the cryptocurrency, all based on technologies that operate largely outside the established financial system, it appears that the near collapse of this system has accelerated the development of these alternative solutions. This leads us to look at another sector - the legal advice industry, which is often compared to the financial industry - and ask why it has not been able to attract similar technology advancement over the past decade.
Apart from a few promising examples, such as Avvo and LegalZoom, the legal sector is lagging behind massively in terms of digitalization and innovation. With its interconnections to the public sector and the legislator, the legal industry is generally slower to adopt to change. An additional obstacle is the traditionalism of the sector with prominent figures holding influential positions that they hang on to, opposing any change that could put their positions at risk. These figures in many instances feel threatened by the change legaltech might bring and stand against it firmly.
This inability of the legal sector to embrace innovation is putting it in serious risk – Professor Susskind has already foreseen “The End of Lawyers” in his 2008 book and re-emphasized in his 2013 book “Tomorrow's Lawyers: An Introduction to Your Future” that this “end” can only be avoided by innovating the technology and business models that run the engine of the legal sector.
With competition in the legal sector increasing heavily, from both within and externally, and clients no longer willing to pay any price, lawyers are forced to act. According to recent studies, already today 40% of lawyers are unemployed or underutilized, and this trend will continue unless lawyers embrace the change. Lawyers have started to appreciate the need for innovation, and regulators are supporting this change, with multiple legislations in the western hemisphere having enforced acts that encourage digitalization, innovation and outside competition in the legal sector.
So now is the opportune moment for legal innovation. The potential to disrupt this $800 billion industry is huge, and the legal sector, as well its clients, are in dire need for solutions to their challenges.
Read on to our next post to learn what top 3 innovations will make the legal industry prosper again.