Analytics in Law Practice: What’s Here, What’s Next

The legal industry has invested less, relative to other industries, in technology for day-to-day work. A variety of factors traditionally have contributed to a law firm’s hesitancy to adopt technology: security concerns, cost, fear that technology could reduce firm profits (in an industry that traditionally bills by the hour), belief that a lawyer’s work is always bespoke, and the need to build technical literacy within workforces. As a result, the role that data analytics technologies (big data, machine learning, artificial intelligence, automation, etc.) can play in many legal functions is yet to be fully explored.

The pandemic forced legal organizations to get past some of these fears and, out of necessity, adopt tools for remote collaboration and practice management. Not surprisingly, legal technology had a record year of investments in 2021, totaling an estimated $9.1 billion through funding or mergers and acquisitions. With the influx of money into the industry, legal technology capabilities are advancing dramatically, and their potential value to the legal industry grows ever greater. Accelerated adoption of legal technology in law firms continues as clients demand both excellent results and efficiency from their outside counsel. (In fact, the demand for efficiency at a low cost spurred, in large part, the growth of alternative legal service providers.)

Legal technology is key to allocating a firm’s resources more wisely, yielding better outcomes and lower costs for clients. If even one organization manages to leverage technology to that end, the pressure on others to stay competitive is on. Entrepreneurs and legal organizations alike have taken notice, and the opening for advanced technology in law is being targeted by small companies introducing cutting-edge capabilities.

But is the adoption of the latest technology the right choice for every organization, and, if so, how does an organization choose between the spate of new options entering the field? Fortunately, because the legal industry is one of the last to grapple with technology adoption, we can look at how other industries have dealt with the introduction of new technologies to illustrate patterns and help the legal industry navigate its own period of innovation.

In 1995, Gartner, a leading market research firm, introduced the “Hype Cycle” to represent the maturity and adoption of emerging technologies. The Hype Cycle has five phases: (1) Innovation Trigger, (2) Peak of Inflated Expectations, (3) Trough of Disillusionment, (4) Slope of Enlightenment, and (5) Plateau of Productivity. The first phase represents the introduction of new technology that generates significant publicity, though commercial viability is still unproven. In the second phase, in reaction to publicity, firms willing to innovate adopt the new technology—with some stories of great success but many more of failure. In the third phase, when results do not meet expectations, both technology providers and adopters alike shake out of the new field, and only some early adopters remain to continue investing. The fourth phase is where expectations become more realistic, technology improves in response to failures, and the potential benefits of the technology to firms is more clearly understood. In this phase, adoption of the technology restarts with only conservative organizations staying on the sidelines. The final phase is widespread adoption of the new technology, as well as broad understanding of how to differentiate between providers and incorporate the new technology into businesses for maximized benefit.

The maturity of legal technology varies by its functionality. For example, the value proposition of technology-assisted review in e-discovery is well established and mature in comparison to newer technology such as advanced contract analytics. Gartner’s own 2021 analysis of the legal tech field in relation to its Hype Cycle confirms much of our intuition: certain tools have become commonplace in law firms and are reaching their Plateau of Productivity. However, most legal technologies have yet to come down from elevated expectations—including those with potentially the largest impact. Stories of big successes (or failures) in the real world are sure to increase over the coming years as progressive organizations look to adopt technology to keep themselves on the cutting edge.

So, how do we handle the inevitable journey through the Trough of Disillusionment and keep making progress? The key is asking the right questions to ensure utility and streamline validation. As technology grows in complexity, its explainability often suffers. The potential reward becomes greater, but the risk of adoption grows in kind. For example, leveraging predictive analytics for case outcomes can have a huge impact on a firm’s bottom line by indicating which clients and matters the firm should accept, but the criteria determining the algorithm’s prediction are somewhat of a black box. Asking questions prior to adopting a technology, and having the measurements and mechanisms for validation in place, can help minimize associated risks:

• What problem does the technology solve (not only in terms of determining whether a technology works but also in terms of whether a technology works for a particular organization)?
• What is the investment, beyond investing in the technology itself, that an organization will have to make to leverage that technology?
• What are the tangible benefits that the organization hopes to achieve?
• Is the organization willing to dedicate the resources to both implement and maintain that technology successfully?

The legal technology field is likely to continue growing and shifting due to the large potential for revenue. Technologies will mature, new companies will enter the field, and law firms will have to be selective. Being able to discern between reality and hype and adopting the technology responsibly will allow innovators to push forward. The reward for doing so is significant—organizations that adopt technology early in a way that suits the business will differentiate themselves from competitors and stand to reap huge benefits. In turn, legal tech start-ups that understand how to generate real value will generate massive revenues. At this point, the limits of legal technology are limited only by our imagination.