Can Legal Tech Help David beat Goliath?

Small, agile and innovative. Small law firms are the best place to capitalise on new technology and take on the big boys.

Photo by Austin Distel on Unsplash
Photo by Austin Distel on Unsplash

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LONDON (Within the Law) - The law has often pitted the Goliaths against the Davids of the world. On the one hand, you have the multinational magic circle firms operating from statement offices with huge resources. Against them are smaller, but nimbler operations bringing innovative solutions to the same old problems. Increasingly technology is giving these Davids a better slingshot to wield against the Goliaths. However, much depends on how they use it. 

The dynamic between the two is complicated. Just as Goliath was prized for his strength and power, David was smaller, more agile and able to think on his feet. This, in the Bible’s version of events, was enough to win the day. 

In much the same way, people prize the biggest law firms for the immense resources they can bring to any project. They are in a position to fight the biggest fights and maintain prolonged cases. On the other hand, according to various surveys, those who use smaller law firms do so because they offer a better and more dedicated customer service and are more innovative. 

A time to innovate

In 2020, that ability to innovate has played into David’s hands. Smaller law firms were better able to make the changes required to cope with the challenges of lockdown. Switching to remote working models was easier and more cost-effective. Many have found that they can switch to permanent remote working making precious savings on office space. 

The attitude of the Goliaths has been more nuanced. While some have embraced the opportunity to have more people working from home, many have kept commitments to large statement office moves. For them, this is as much about promotion as anything else. They wear their size on their sleeves. Statement offices are as much about prestige, impressing clients and maintaining their status as it is about operations. 

Technology has stirred the pot further. The challenge of adapting working patterns is much more serious for a large firm. Smaller firms have much less to worry about. 

Working patterns became disrupted. Technology became more important. Adoption has been accelerated by necessity. Firms which had been hovering on the sidelines made the leap and many have found it has revolutionised their operations. 

This has also put smaller firms at a disadvantage. Agility and innovation are crucial in allowing faster adoption. As such, they have moved faster than some of their larger counterparts. Smaller firms also have fewer regulatory hurdles, such as restrictions on non-lawyer ownership. They can also be more flexible in how they charge. 

The hourly rate model, used by most law firms, has often been thought of as inefficient, something which is threatened by a digital world in which efficiency is everything. Smaller firms are more likely to offer alternative fee arrangements such as flat fees. They can do this by using technology to make streamline operations and reduce the cost of delivering such services. 

Competing at scale 

Cloud-based operations also help smaller law firms boost operational capacity, while still minimising the associated costs. The cloud enables firms to leverage large computing power without the need for costly infrastructure on site. As such, firms are scaling back equipment on their premises and adopting more flexible and efficient ‘pay as you earn’ payment solutions online. 

Technology is also helping them improve the customer experience for their end clients. Tools such as Lexis Analysis, for example, offer easy access to huge amounts of content. Combined with increasingly sophisticated e-discovery tools, they are driving down the cost and improving the quality of research. Small firms are also able to pass these savings on to their customers.

A busy market is also fuelling competition with legal tech companies often willing to reduce their prices in order to compete for business. Smaller law firms can, in turn, pass those savings on to their customers. 

Big, cumbersome and slow 

Large law firms, on the other hand, find the new digital age challenging. Larger and more complicated operations make it more difficult to adopt the latest technologies. Many of these law firms have been operating for centuries, and some of their processes have been in place for almost as long. Legacy technology is a major impediment to change. Overhauling such a system represents a considerable cost and an operational risk. 

Digital innovation may be effective, but it is also fraught with danger. Approximately 70% of digital transformation projects fail to deliver any kind of value to the company. Indeed, when things go wrong, they can create a host of challenges and additional costs. 

Failure often comes from a lack of understanding about the product or an inability to integrate new technology effectively into operations. Multiple departments will not always be able to play well together. Both of these are problematic for large companies with many different departments operating in many different ways. 

At the same time, technology does not necessarily open up the opportunities for larger firms that it does for small. Although many large firms have adopted flexible working patterns, this won’t necessarily enable them to cut down on office space in the same way as their smaller counterparts. 

Technology, then, is transforming the legal sector. It is allowing firms to offer more flexible services and find new ways to deliver value for clients. For smaller firms, the ability to improve productivity and performance while saving money will be crucial to their ability to grow in the post-pandemic world. 

(Written by Tom Cropper, edited by Klaudia Fior)

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