Interview with Markus Hartung, Bucerius Law School

 

Do lawyers need to be innovative? 

 

Interview with Markus Hartung, Bucerius Law School

Markus Hartung, Director of the Bucerius Center on the Legal Profession at Bucerius Law School in Hamburg, talks about innovation, alternative service providers, and what this may imply for traditional law firms. Markus Hartung was interviewed by Bruno Mascello.

 

You are planning a conference in November with a focus on the role of machines in the legal market. What has led you to think this topic may attract lawyers?

Since we organised our first Autumn Conference, the "Herbsttagung" in 2010, we have each year dealt with the changing relationship between lawyers and their clients, and accordingly with the changing evaluation and appreciation of legal work. In doing so we have aimed not just to repeat what had been said but to demonstrate where the market is going. This went down very well. Having said that and bearing in mind the rise of alternative service providers and so called "Legal Tech Startups", it is only a logical step to talk about "Man vs. Machine" and the future of legal work: We strongly believe that the role of technology and artificial intelligence (assuming something like AI does exist) has been underestimated so far.

 

When I talk to lawyers they appreciate emails and Word (not Excel or Power Point), however, they constantly repeat that lawyers' work is peoples' business and IT may never be able to replace creative knowledge workers' work. Do you share this view or are such statements rather a sign of a hidden fear?

Well - I would agree that the attitude of lawyers is not always consistent. Many lawyers have read Susskind and think they had understood the concept of commoditisation, and then they cannot imagine that "a machine" could ever do what lawyers do... but we should not criticize lawyers too much. Let's rather start to ask the right questions, which are: What is the core value of legal services? What is the essence of what lawyers are doing? What is it that lawyers and only lawyers can and should do? And: What is the role of communication and empathy in this process, in other words the "people's element" in what lawyers provide? Hence, only if we unpack all this there will be a chance to understand where technology has a future, and where not.

 

Let me ask differently - How much creativity is really required in a legal job and how much may rather be standardized and considered even commodity work?

This very much depends on the matter at hand. Still, in many cases excellent real time diagnosis of the issues is required, and quite an amount of creativity and imagination to find the "right way" out of the mess. Many lawyers "have seen it before", i.e. have experience with similar or even identical issues but the good lawyers are able to align their advice to the facts of the matter, not vice versa. This process has nothing to do with any sort of commodity. - But, on the other hand: Many financial transactions are rather standardized, many mid cap M&A transactions are run by paralegals and/or project lawyers - in these cases, cost efficiency is king. The art is to differentiate the one from the other. It would be quite stupid to say that "everything" will turn into a commodity (and note: Susskind doesn't say this!), and it is really stupid to say that everything which smells like legal services should be done by lawyers.

 

Lawyers want to be seen as creative and innovative. However, innovation goes a bit further than being creative for a customer and a specific mandate only. It may for example address also the operation model of a law firm. Where can you spot some innovative developments in the legal market which go beyond finding a creative solution for a specific problem of a client?

Firstly, one should indeed point out that innovation must not be confused with invention or creativity, and secondly, there are at least three different types of innovation, e.g. product innovation, service innovation and business model innovation. In order to set up innovative processes in any given firm one has to be clear what you are talking about because you are doomed to get it wrong as long as you just cry out "let's be innovative!".

Having said that: Lawyers have to learn that clients often don't appreciate the intellectual value of a certain creative solution - lawyers may pride themselves for their really thrilling ideas, but clients just want to achieve their goals and get a solution to their issues. So, focusing only on the production side of the provision of legal services does not help in the long term. But clients have a fine sense for strengths and weaknesses of the delivery of legal services, and, like it or not, clients know exactly whether legal fees are appropriate or not. Hence, many smart firms start to analyse and improve their delivery processes, to focus on the output and to make sure that irrespective from the production element of providing legal services the client gets exactly what he wants, on time and on budget. Clients do not only appreciate this, they just love it.

 

Besides the traditional law firms, do you see other service providers in the legal market who are actually even using innovation or technology as a differentiation element and producing additional values to the customer?

That's an interesting point: In many jurisdictions alternative (by means of non lawyer) service provider are banned from delivering legal services as this is reserved for lawyers. This bar monopoly is not helpful for innovative ideas, as in every monopoly. But having said that, there are quite a number of start-up firms (or grown up start-up firms) who have developed technology which greatly assists lawyers in providing legal services. Examples are automated document assembly systems, E-discovery firms that not only process tremendous amounts of data with the use of keywords but with complex and "learning" algorithms instead, or firms who provide solutions in the area of intelligent knowledge management.

Besides all that, companies like LegalZoom or Rocket Lawyer provide services in certain segments of the market, mostly B2C, and they are doing it successfully. Regarding B2B, a company like Axiom springs to mind (although Axiom says that they are not a law firm), and finally Riverview Law which is the first law firm offering fixed fees to their commercial clients. Others follow suit - the other day a German spin off has announced to work on a fixed fee basis only.

 

Let's try looking into the crystal ball. What big innovation may be in place 2020 which could revolutionize the legal market? And are there any developments which may hit the big international business law firms more than the small boutique firms?

Regarding the first part of the question: We don't anticipate the big innovative bang in the legal market, no IBM/Watson to replace lawyers. This may be different in 2025. But we have always said: What can be done through software will be done through software - even if the result is slightly worse. Hence, in five years technology will have taken over standardized legal work, standardized documentation, due diligence, process analysis, process management etc. Lawyers will more and more think about their role within the legal function for clients.

Regarding the second part of the question: Big international business law firms have two core issues: Cost of infrastructure and manageability. Bearing in mind that technology enables smaller and nimble firms to compete with far bigger firms, those big global firms have to tell a credible story to their clients as to why one should instruct them. Of course there is room and a market for global law firms, but for how many? I would rather bet on the networks of smaller firms (and on the elite firms, but they play in their own world).

 

Any recommendations or suggestions for traditional law firms how they can win the battle of innovation?

Well, that's simple: Get started. And don't settle. The issue is not the absence of innovative ideas - the world is full of great ideas. The issue is the large number of traditional law firms who just pretend to change but in reality don't even come close to it. Let's be open about this: Times may have hardened for law firms, but lawyers are still complaining on a pretty high comfort level.

 

Markus Hartung is the director of the Bucerius Center on the Legal Profession (CLP) at Bucerius Law School, Hamburg. He was German Managing Partner of Linklaters LLP and their German predecessor firm, from 1999 until 2008. At the CLP, he focuses on legal market research. His special expertise lies in market development and trends, management and strategic leadership as well as corporate governance of law firms, combined with the regulatory requirements of various legal markets. Since 2007 he is member of the Committee on Professional Regulation of the German Bar Association, chairing this committee since January 2011. He is co-editor and author of "Wegerich/Hartung: Der Rechtsmarkt in Deutschland" ("The Legal Market in Germany") which came to the market in early 2014 and has developed into a standard reference for the German legal market.

 

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