Report signals upturn in innovation in Canadian law firms

Widespread investment in LegalTech

The overall message from the report and the webinar is confirmation that there is a strong culture of innovation in the Canadian market. There is also strong evidence of an increase in the perceived value attached to using technology to advance the practice of law. The most obvious being that 85% of law firms responding to the CANLIF survey now have specific innovation functions.

It is also significant, although not surprising, that 100% of respondents confirmed investment in e-signatures. This shows digital solutions can now be adopted at pace and scale in law firms where there is significant motivation to do so (although it shouldn’t require a pandemic to move this fast!). What is even more encouraging is the high level of uptake across all categories of technology. Lawyers are now routinely using LegalTech to streamline processes, reduce routine work and speed up transactions – with the majority of firms surveyed investing in document management systems, collaboration tools, virtual data rooms, e-discovery and contract automation. Working with legal technology is clearly now business as usual for larger law firms.

The survey highlights the huge range of technology now available to law firms. But there are also gaps to fill in terms of optimising the ROI delivered by LegalTech, encouraging wider adoption by lawyers, and extending the breadth of value delivered by innovation initiatives. This relies on addressing the following four key challenges:

1) Reducing the ‘disappointment ratio’

For many of the firms surveyed, the ROI of certain legal technologies is yet to be realised. For example, more than 70% of firms have e-discovery tools but only around 40% recognised their value. This suggests firms are not experiencing the ROI they hoped for. Closing this ‘disappointment ratio’, as it was termed in the webinar, raises challenges for vendors (in terms of refining the tech provided) and law firms (in terms of selection of tools, implementation and adoption).

2) Getting lawyers behind the tech

With law firm leadership now firmly behind innovation, legal technology is no longer viewed with scepticism. According to the report, ‘people’ continue to be the biggest barrier to the adoption of innovation in law firms. To overcome this, the panel agreed technology needs to be built with technical legal understanding and implemented with more empathy for the plight of the lawyer. But delivering on this relies on finding innovation professionals (or ‘unicorns’ as they were described in the webinar) with both the bespoke technical skillsets required and robust legal experience.

3) Expanding beyond pockets of innovation

The Canadian report mirrors Clarilis’ experience in the UK: focused digital transformation is happening mainly in transactional practice areas rather than universally across firms. Corporate, Banking and Real Estate have embraced digital transformation as they seek to manage fluctuations in deal volumes. The question now arises of whether we will now see this more intensive use of technology expand across less transactional areas, such as Employment, which, according to the report, are less engaged in innovation.

4) Finding opportunities for external impact

For now, most Canadian law firms seem to be more comfortable experimenting (and making any mistakes) with technology behind closed doors. The majority of innovation initiatives focus on enhancing internal firm processes – specifically, improving efficiency and creating much needed capacity in teams. Undeniably, there is still extensive opportunity to explore this internal application of innovation, but panellists also discussed examples of and the opportunity to extend innovation initiatives to clients. An important benefit of doing this being that they feel it would enhance the profile of innovation departments within firms.

For the future, collaboration is key

The interaction between knowledge management and innovation was a theme touched on throughout the webinar discussion, with the main takeaway being this: when the two areas work together, ROI in both areas accelerates. This synergy is something we see time and again at Clarilis. As one panellist pointed out, automating documents relies on working from high quality precedents no matter how ‘smart’ the technology is. What is clear is that innovation provides a new way for knowledge management lawyers to demonstrate and increase the value they deliver for their firms.

In terms of how to structure law firms so this collaboration happens, there is still no single answer. This is also true of many other aspects of innovation. Yes, it is maturing as an area of law, but there is still an element of the unknown for law firms to navigate when it comes to applying technology to their work. And this is what makes it a challenging and exciting journey.

Download the full report here.