On Thursday, 8th of September 2016, Europe made a significant step towards joining the growing legal tech community.
Namely, on this very evening, the European Legal Tech Association (the ELTA) was formally announced to the public, at its first meetup in Berlin.
ELTA aspires to become THE platform for the legaltech community, including startups, law firms, in-house legal departments, and entrepreneurs.
Essentially, everyone aiming to drive the change in the legal scene, is welcome to join and contribute to the joint cause.
ELTA aims to facilitate the much-needed discussion on the future of the business of law, and you are invited to have your say in that future.
LegalTrek’s team was present at the launch, and we are happy to give you a taste of the inaugural event.
ELTA – European Legal Tech Association
The first ELTA meetup, titled “The First Wave of Legaltech” took place at Spielfeld Digital Hub.
The entrepreneurial vibe and excitement were in the air, while people were waiting for the presenters to start.
The event started with a few words about ELTA ‘s founders, mission statement, and near-term plans.
Founders of European Legaltech Association (ELTA)
Our hosts proclaimed that ELTA ‘s mission is to promote the knowledge and applications of technology and software-based solutions in the legal industry (the legaltech).
Additionally, ELTA will promote its members, be it interested companies, law firms, startups and other similar initiatives initiatives.
Without further ado, the host announced the first speaker for the evening, who was warmly greeted by the enthusiastic audience:
Full house at ELTA #1 Meetup in Berlin
Stereotypes, frustration, and the opportunity for Biglaw
Hariolf Wenzler is newly appointed Chief Strategy Officer at Baker & McKenzie (Germany and Austria).
Before this position, Hariolf was the CEO of Bucerius Law School. And now, he is one of the Board members of ELTA.
Hariolf announced a few follow-up ELTA meetups, before proceeding with his presentation.
His presentation, naturally enough, was about legaltech, and the challenges AND opportunities for BigLaw. In his view, Biglaw is not doomed, as many are quick to proclaim.
At first, he challenged the common perception of change in the legal industry. Hariolf feels there are two main questions:
What is the change about?; and
Is the change happening, and to what extent?
Misconceptions and frustrations about the change in legal
“There are several frustrations that I want to talk about tonight!” Hariolf proclaimed, and then switched his slide to the image of Richard Susskind.
As he explained, Hariolf once attended Richard’s presentation in London, on the topic of deconstructing and unbundling legal work.
Hariolf‘s next frustration is about the ‘drill-and-hole’ metaphor.
As he pointed out, the metaphor has been used far too many times. He agrees, though, that the metaphor is pretty valid. However, Hariolf feels that we must move beyond a simple metaphor and go towards a more actionable plan.
The next Hariolf frustration was the Kodak story, a standard trope of the legal futurists for far too long. “I have been hearing this story for over 10 years now, and I really want to hear something new already.”
Hariolf added more examples:
The Innovator’s Dilemma – a great book, written over 20 years ago;
The End of Lawyers – a book by Richard Susskind published in 2004.
And, in his final example of the evening, Hariolf mentioned the blog post from 2013, boldly titled “The last days of Biglaw”. Not years, Hariolf emphasised, but DAYS.
So where do these frustrations come from? And, more importantly, what are they all about?
Hariolf next raised a couple of stereotypes that he would like to see demystified. There is the stereotype of Biglaw and change; and there is the stereotype of startups and change.
Hariolf challenged them both. He is keen to challenge everyone who spreads unwarranted fear about changes in the legal sector. He began with the following image from 1900:
As Hariolf explained, this image was about how some people imagined the year 2000. If you take a close look, you will see that the picture has some predictions right, but some are completely wrong.
Yes, there was a huge change in the past century, but it was not entirely as imagined. The truth, as usual, was somewhere in the middle.
Hariolf made the analogy with Biglaw and chang. Yes, there is (and will be) change, but it will not be exactly what any of us imagine. So, it is important to keep our minds open to all new procedures, including Biglaw.
Change is obviously coming. As Hariolf said, legaltech seems to be the flavour of the month. Venture capital is attracted to the industry.
However, even now, if we total all the investment in legaltech, it is still considerably smaller than what happens in other industries.
For example, Foodora got more in capital investment in 2015 than the whole legaltech sector. However, this does not mean it will stay like that for long.
So, the change is coming.
What are the strengths and opportunities for Biglaw?
Biglaw has lots to offer to the legal industry, according to Hariolf. Yes, it has its challenges. However, every challenge is an opportunity to become better.
So, what are the opportunities?
Just consider:
Biglaw attracts big brains and top talent. Young professionals find it very appealing to work on multi-disciplinary and cross-border matters, transactions, and legal projects.
There is a certain prestige in working for a Biglaw firm, and this is true today, just as it was decades ago.
Next, Biglaw is really good at adapting and introducing processes.
Yes, this may sound surprising to you. To some, it’s even counter-intuitive.
However, think of Kanban. Kanban is the favorite choice of all agile teams. And it was not invented for legal service professionals.
Originally, the Kanban method was developed for manufacturing.
However, due to its simplicity and ease of use, it can be applied to law firms perfectly. And this is what some Biglaw firms already do.
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In addition to Kanban, Biglaw introduced other practices that make this behemoth more agile than before.
For example, Baker McKenzie has its very own Legal Process Outsourcing site in Belfast, Northern Ireland. Likewise, they have their production centre for creative resources in Manilla, Philippines.
Then there is the question of attitude.
The popular opinion is that Biglaw simply does not care about change at all.
Many believe Biglaw firms feel too important to fail, so they will not go out of their way to change anything in their organisation.
However, this opinion is wrong.
Law firm workplace design is just one small example of how Biglaw cares about change, said Hariolf. This may not be well known, but, Biglaw is actually reinventing offices, and moving towards a more open and collaboration-driven culture.
This means open spaces, coworking and startup-like design.
And this should be a no-brainer, and should not surprise anybody. We already mentioned Biglaw attracts lots of the top talent. And they need to keep it that way.
Alternative Fee Arrangements have been a big topic, for the past decade, in the legal industry. And they are likely to remain so in coming years.
Many believe Biglaw to be deaf to clients’ demands to drop the billable hour. However, Biglaw is listening and adapting.
An Alternative Fee Arrangements sheet is now a part of any pitch deck, when Biglaw meets clients and prospects. Biglaw is really ready to negotiate anything, to the benefit of their clients.
Another thing that nobody should really be underestimating, is Biglaw‘s proximity to their clients. Biglaw deals with their clients every day, and they, arguably, know what their clients need.
“There is still life in the old dog. Biglaw is neither dead, nor dying. Our time is not over, our days, months, or years, are not numbered…” – Hariolf Wenzler
But Biglaw needs to be open to change. It needs to be open to new ideas.
This is also why ELTA is so significant, among its other benefits. It will provide a platform that all stakeholders need, in order to evolve in these times of change.
Five lessons learned in consumer-facing legatech
The next speaker at this first ELTA meetup was Daniel Biene, the founder and CEO of LegalBase Digital. He shared his experiences, for all those considering starting a consumer-orientated legal service.
But before that:-
Daniel reiterated what Hariolf had said – this whole craze about legaltech does feel new somehow. It feels like, all of a sudden the media, investors, the general public, and almost everyone, is interested.
However, legaltech is far from being one niche, and one simple category.
Rather, it is a common denominator for almost anything that has even a remote connection with “law” and “technology”.
So, it’s a pretty wide category, and one that is not too precise.
Hence, as Daniel said, there really is not one single legaltech, as such – rather, there are many different threads of legaltech.
This all is a signal of a growing market, one that is yet to be segmented.
Consumer-facing legaltech could be one such sub-category. These are companies that provide legal services to individuals, or business users.
(I should probably note here that this is something that many other commentators refer to as Newlaw – the alternate legal service providers. However, Daniel was referring to it as legaltech, for the purpose of his presentation).
Without further ado, here are Daniel‘s five lessons learned from LegalBase, placed in his order of importance:
Lesson #5: Do not listen to lawyers
If you want to start your own online business, one that will render (or facilitate) legal services, you will need to follow the rules of an online-based business.
The internet is a very fast-paced environment. Decisions are made in split seconds. It is arguable if anyone is ever reading anything much on it. All of this is important for you, if you would like to sell online.
Lawyers, by contrast, dwell on complexity and non-transparency. Arguably, the legal profession often creates even more complications that you, again, need to have lawyers to resolve! This is not how an online business can work.
Just one example, whenever you talk with lawyers, you will get lots of legalese and overanalysis. By all means, do get legal advice when you need it, but filter it through your business acumen, before you make your decision, and certainly before taking action.
Lesson #4: Demand does not equal actual demand
One of the reasons why legaltech seems so “hot” right now, is because the market feels largely untapped. Up to 70% of the actual market is not part of the current market yet.
Let me illustrate with an example:-
People need legal services. People are willing to spend to get those legal services, but sometimes they refrain from going to a lawyer.
Why?
There can be many reasons, but sometimes they do so because they are afraid of possible costs, and the opacity of the whole process.
Similarly, many people still do not know they can obtain legal services online. Hence, they are not part of current demand for online-based legal services. This is what I meant by “demand does not equal actual demand”.
Also, you cannot really judge this demand by the number of searches for certain legal topics online. A mere search does not necessarily translate into demand. So, be careful when approaching and analysing this market.
Lesson #3: Legal is emotional
Emotion is very frequently overlooked in discussion of the legal sector.
For us, here at the meetup, who are lawyers, fee earners, or senior managers: law is a part of our daily life.
We accept it as such. We may sometimes take it for granted.
However, for the vast majority of the population and/or the business owners out there – legal topics are actually part of their inner struggles.
Legal issues that they have can cause fear, involve risk, and be make-or-break situations.
If you want to sell legal services online, you will need to take this into consideration.
Lesson #2: Awareness and perception are everything
I talked about perception, at the beginning of my presentation. The question of awareness is simple – if you are unaware of something, you are not going to be looking for it.
Therefore, if you want to build a successful and innovative business, you will need to build up a lot of awareness about the issues that you are solving. Ultimately, awareness will help the whole market grow.
This is where I see a role for the community. You may sometimes feel someone is your competitor.
However, this view is far too narrow.
In fact, all the stakeholders can help create even bigger awareness of the issues that one particular legaltech (or Newlaw) firm is solving.
Greater awareness will mean a bigger pie to split. The markets are not finite. They are growing and constantly evolving.
This is why all of us need to be a part of the community.
Lesson #1: A startup is a startup
I mentioned before why I feel the term legaltech is deceiving. One reason is that it is far too wide, and has many sub-categories within.
Another reason is that this terminology creates an illusion about what the companies and initiatives do for technology and the legal profession.
By extension, people are led to believe that they can apply the same principles that work for law firms, when building such companies.
Those people could not be more wrong.
If you want to build a business in the legaltech space, you will need to treat it as a digital startup, and observe all the best practices.
Yes, I talk here about Lean, Agile, MVP, Scrum, Kanban (to name just a few) – all those principles matter for legaltech.
Many people made so many mistakes, and their learning became a part of those principles.
Hence do not think you, and/or your business, are somehow special, and that these principles would not apply.
Incorporate them into your business. Stick with what works.
The questions
Following those two presentations, Micha-Manuel Buess, the MD of Leverton, and a Board member of ELTA, invited questions.
Some of the questions really stood out:
One of those was directed at Hariolf Wenzler. Namely, Hariolf argued that Biglaw (still) attracts and will continue to attract top talent. But is he really certain of that?
There will be challenges, Hariolf answered, but what is evident, so far, is that very good lawyers still go to Biglaw, since they get the challenges that are up to their intellectual level.
Additionally, mandates, legal projects, and, by extension, compensation, is really rewarding to those candidates.
Yes, this will change, so Biglaw needs to change. But Hariolf never advocated for Biglaw to remain in place.
Another interesting question was about the AI, and if the presenters feel it will kill legal profession.
Hariolf, as a few savvy thought leaders, agree that AI is growing stronger and stronger.
However, AI is a solution widely adopted by some of the Biglaw, and currently proves to be a great solution that supports (not disrupts) this industry.
In this e-Magazine from the Legal Business World you can find Ron Friedmann’s article on the subject.
Ron sides with Hariolf, and provides some great examples too. I have also left some comments on this topic, which you can also find in this issue.
The exciting future
We feel this is just a start of a wonderful journey and a huge step for the European legaltech community.
Startups, but also law firms, corporate legal department, and educational institutions can potentially benefit from the value this community will create.
LegalTrek team is proud to be a member of ELTA. The best is yet to come, and the future for the legaltech and the legal industry in Europe just became brighter.
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