Legal Tech: The Legal Profession Goes Digital

Legal departments are going digital – in ways that go beyond minor improvements in daily workflows or marginal cost savings. And though the much-touted “End of Lawyers” is little more than hyperbole, there are indeed massive changes in store for the legal profession. Innovative tools have the potential – given the right approach – to disrupt the legal profession, creating new roles, new business models and new services. Only if, however, enterprises approach the digital transformation with legal tech as part of a holistic, visionary strategy. Legal departments will then have a unique opportunity to actively shape the evolution of their role from “notorious naysayers” to strategic partners within the enterprise.

A qualitative leap forward

Automation continues to blaze its trail into previously uncharted territory. No longer relegated to the factory floor, the digital revolution has now set its sights on the white-collar world. There are a number of factors driving this development, from big data to artificial intelligence and analytics. Perhaps most importantly, digital solutions have introduced new capabilities in natural language processing and exponentially increased our ability to analyze data and documents. Self-learning analytical tools, artificial intelligence and networked document management systems are breaking through at law offices and legal departments, opening new horizons for the legal profession. Innovative services are becoming a reality – with a dramatically different cost base – and those savings are already filtering through to end users.

One well-known, high-profile success story in the legal tech space is the start-up Flightright, which helps air passengers seek compensation from airlines. This successful enterprise occupies a precisely-defined niche that has standardized workflows and high data depth. By linking various data pools, such as flight data or weather measurements, the system can often process a single claim more efficiently than an entire law firm could. That makes it more attractive for plaintiffs to make a legal claim – and the supplier has essentially automated its revenue stream. The list of legal tasks that can be automated with similar precision is growing longer every day. More and more areas of the legal profession are being impacted by the digital division of labor made possible through legal tech, bringing with it immense changes for the role of legal departments in major corporations and law firms. The following list outlines the key areas where digital technology can be used in the legal profession:

Drafting legal documents

Texts are the bread and butter of professional lawyers, legal documents their flagship products. Over time, they have come up with more efficient ways to draft these documents than simply dictating them. Many of today’s lawyers are already working with tools like text templates or “speech-to-text” functionality to handle such a large volume of documents. And it gets even better: with legal tech’s new document management tools, templates can automatically input contextual data, apply certain regional variations and generate any related texts, actions or compliance-relevant queries required. An area where this is often used is the nondisclosure agreement. Companies need large volumes of these agreements, which are quite repetitive in some sections and very personalized in others, making them an ideal candidate for smart automation. The advantage: the time needed to draft an NDA goes down dramatically, as does the potential for drafting errors.

For intelligent contract lifecycle management, Deloitte offers the dTrax tool, an end-to-end solution for drafting complex contracts. dTrax completes an automated first draft and offers a workflow for further steps such as approvals. Detailed guidelines in the integrated negotiation playbook make negotiating a draft easier for dTrax users as well. With its micro-version control function, the application reduces risk and archives the entire audit trail. The contract is administered by the system even after signing, providing automatic alerts for specific milestones like the expiration date. Thanks to the embedded analytics tools, dTrax also enables parties to the contract to gain deeper insights into the “contract landscape”, e.g., by highlighting those clauses that were often amended in the past. The result: faster drafting and higher quality with reduced risk and more efficient administration throughout the duration of the contract term.

Managing legal workflows

The efficient management and administration of legally-relevant workflows in multinational corporations is a complex undertaking that is vulnerable to serious inefficiencies. With innovative applications like Deloitte’s Entity Management tool, users can streamline routine workflows while also complying with the specific requirements of different jurisdictions. This tool enables corporations with an international reach to closely monitor all national and supranational compliance rules. The publication of quarterly reports and other financial disclosures is just one example. Entity Management drafts standard documents for a variety of uses, compiling the necessary data directly from existing databases and eliminating the need for manual data transfer. Alerts and workflow visualizations make these tasks much easier and highly intuitive to use. Another attractive legal tech application is the so-called Expert System, which can provide significant support even in its simplest form. Deloitte developed an online tool for companies affected by Brexit. The Brexit Navigator (currently only available in German language) shows German companies how the UK withdrawal from the European Union will impact their operations – including personalized information that applies to each individual case. Particularly with regard to issues of cross-border significance, these systems may end up replacing the rather costly legal services of third-party providers.

Classifying and analyzing legal documents

Already the gold standard for our robot coworkers: the intelligent, efficient analysis of large volumes of legal documents. One of the fundamental responsibilities of the legal profession, in addition to drafting legal texts, is reading and analyzing them. In technical terms, however, the vast majority of the documents under analysis – whether they are contracts, ordinances or pleadings – basically amount to unstructured data. Innovative techniques such as text mining have the ability to process documents written in natural language and turn them into machine-readable texts. Algorithms based on probabilities produce a wide variety of analytical methods and applications, including predictive analytics. The ways this technology can be used are virtually endless. Data extraction, for example, is the application of choice for legal due diligence in corporate takeovers. Buyers can examine the takeover target’s existing agreements to identify problematic content, such as so-called change of control clauses. What is more, results of the due diligence review can be uploaded as structured data into the buyer’s ERP, among other systems.

For these systems to succeed, however, the software has to undergo targeted training up front. This preparation phase relies on a human “trainer” to correct the software’s errors, from case omissions to inaccurate assessments, using a rules-based process. This is the only way to ensure the system is secure enough to apply the criteria of text analysis, while also improving and finetuning it on an ongoing basis. Deloitte has already used this system to great success in its auditing operations, using proprietary applications like Argus, for example, which enables auditors to analyze large volumes of documents, or the consulting tool D-Ice that can analyze numerous contracts simultaneously. Experts at Deloitte USA – using the Kira software solution – have already processed more than a million documents. 3,000 employees were involved in the analytical process, which naturally led to a high degree of accuracy and diversity in the available analysis categories. The software is now capable of detecting a total of 200 different types of information across all documents.

Given that there are marked differences in the profiles of the standard software systems on the market, Deloitte works with the tools of several different providers, depending on the customer’s particular needs (in addition to Kira, we use Leverton, ABBYY Flexicapture, Seal and others). In many cases, however, it is not even necessary to capture or summarize the entire content of the documents under review. The process is sometimes more analogous to finding the proverbial needle in a haystack: that one relevant document among many. Particularly in the legal department, Deloitte relies on e-discovery solutions such as Relativity, an application that can analyze thousands of terabytes of documents. Technology Assisted Review (TAR), on the other hand, is a system designed more to support human analysts by culling documents and passages that are not relevant on the basis of past revisions and actions.

Measuring legal performance

On the one hand, digital tools can sometimes make work easier for lawyers by eliminating certain “manual” steps that are especially resource-intensive. On the other hand, automation can also provide new methods of measuring performance as well. Legal tech gives legal departments the ability to calculate meaningful and realistic KPIs, which can help them better manage resources. It is vital, however, to make sure these KPIs are part of the bigger picture strategy, focused on both quantitative and qualitative factors and flexible enough to adapt to continually changing workflows.

There are a number of useful metrics available in different areas of legal work. The system can automatically calculate the percentage of time saved during contract negotiations, for instance. It can record the number of contracts that have errors or inaccuracies, as well as distinguish between structured formatting and dynamic elements (for example, automatic alerts when a contract expires). It can track the increase in productivity for each employee. Feedback on the user experience is also much easier to obtain using digital means, which can then be translated into meaningful metrics almost immediately. This is important overall, but particularly for internal reporting and executive information management. Dashboards and visualizations make it easier for users to access data and achieve efficient management reporting.

Structuring legal workflows

Let there be no doubt: legal tech stands to play a huge role in reinventing how lawyers work in corporations and law firms. The digital transformation in other fields has shown us, however, that automation can do much more than simply improve efficiency. While legal tech does indeed lighten the workload in certain areas of the legal profession, it can also free up legal resources that can then be channeled into highly complex cases. Above all, legal tech has the potential to invent entirely new careers, for people like programmers and experts working on the underlying intelligent tools. New legal-technology roles will emerge with very different professional profiles and job descriptions:

• Legal Technologists develop innovative applications and manage the testing and implementation process for new software
• Legal Analysts apply big data solutions to specific legal issues
• Legal Process Managers work to design workflows and optimize processes
• Legal Designers transform the insights gained with legal tech into compelling graphics and visualizations
• Legal Engineers are generalists that will be able to work in all areas of legal tech
• Legal Project Managers coordinate the diverse projects of the legal department

For companies and law firms to have access to a sufficient pool of specialized talent in the future and for the next generation of lawyers to have what it takes to succeed in the legal profession as it evolves, we still have a lot of work to do in education and training. Legal tech is only gradually gaining traction in universities. Some institutions in Germany are pioneers in the field, such as the private Bucerius Law School in Hamburg with its summer school course on “Legal Technology and Operations” and other comparable initiatives. Many in the field are debating whether to apply the Law School Innovation Index used in the US to European universities and law schools as well. Having individual rankings in this area would make it easier for us to assess them objectively and drive progress.  

Legal management consulting for the digital future of the legal profession

The legal profession goes digital – a contradiction in terms? Far from it. But only if we accept that the digital transformation is not a miracle cure on its own and that the ultimate goal is not to replace all lawyers with machines. The fact is that demand for legal advice is growing by the day, while regulatory requirements are becoming increasingly complex. It is virtually impossible to meet the demands of the legal profession’s future with conventional means – and legal tech is blazing the trail. Robot lawyers are, of course, the stuff of science fiction. In the real world, legal tech stands to liberate corporate lawyers from many quite cumbersome tasks and allow them to focus more on the real complexities of the legal profession. Legal technologists will work across disciplines, combining legal skills with IT expertise and adding value for their enterprises with completely novel ways of working. General counsels will aim to bring the internal structure of their departments in line with the enterprise’s overall strategy and make a measurable contribution to the bottom line.

As recent Deloitte studies attest, the time has come to take a more systematic and more structured approach to the work of legal departments. Availing of services such as Deloitte’s Legal Management Consulting gives companies access to a worldwide network of Deloitte experts, knowledge and infrastructure. With their support, companies lacking the resources and IT expertise to achieve a technological transformation on their own can face the digital future with a targeted, farsighted strategy. That is the promise of legal tech – taking the legal profession to the next level, where efficiency and innovation go hand in hand.