Law firms today are trying to navigate a shifting legal market by focusing on AI technology investment and deeper client understanding, as these factors are increasingly intertwined with growth and competitive advantage
Key takeaways:
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The legal market is experiencing uneven growth — While some law firms are emerging as performance leaders due to their effective use of technology and client management, others risk falling behind.
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Law firms are increasingly investing in AI technology— They’re doing this in order to stay competitive, meet client expectations, and address concerns about being left behind as clients themselves adopt advanced tools.
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Clients now expect law firms to use AI — Clients want this not just for efficiency’s sake, but so that firms better understand their clients’ businesses and provide more valuable, tailored guidance and solutions.
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WASHINGTON, DC — As the opening session of the Thomson Reuters Institute’s 24th Annual Law Firm COO & CFO Forum began, presenters painted a somewhat rosy picture for the state of the legal market. After all, legal demand is climbing as are billing rates, which is a net positive overall, explained Jen Dezso, Director of Client Relations at Thomson Reuters.
“It’s a pretty good time to be a law firm,” Dezso said. “More so than we thought it would be at the beginning of the year.”
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The 24th Annual Law Firm COO & CFO Forum Executive Summary
Despite the good times, however, there are darker clouds behind the silver linings. For example, all this growth isn’t being distributed evenly, and this bifurcation seems to be driving some firms into a group of performance leaders and others into a group of laggards. “Previously, the rising tide lifted all boats,” Dezso said. “This time, we’re not seeing that.”
Other metrics, such as realization and expenses, are moving — albeit slowly and tentatively — in the wrong direction. This hasn’t really been seen since 2008-’09, which were not great years for law firms, she noted, adding that this may add a wrinkle of worry to forecasts for the current fourth quarter and for next year.
Still, there are a lot of positives, Dezso said, especially around law firms’ opportunities for growth and the largely optimistic view of many large corporate clients. Indeed, recent research shows that about one-third of corporate clients — including 41% of those with annual revenues of $1 billion or more — plan to increase their legal spend over the next year.
As the big questions shift
The annual COO & CFO Forum attracts not only its namesake executives and corporate clients but an alphabet soup of C-Suite roles that range from Innovation and Legal Operations Officers to Chiefs of Strategy and Growth.
“It’s a pretty good time to be a law firm. More so than we thought it would be at the beginning of the year.”
Many of the legal professionals gathered for this event in the past may have been seeking answers to the age-old questions that puzzle lawyers every time they gather: What do clients want and how can I best deliver it to them? Now, however, those questions have evolved, quickly morphing during this time of AI-driven innovation. Today, the question is: How can I best use advanced technology to not only give my clients what they may not know they need, but also to demonstrate the value of what I am offering?
Not surprisingly, top of mind for many speakers and attendees were the twin and intertwined concerns of technology investment and client management. Indeed, if the legal market is going to become rocky over the next year, these questions around tech investment and implementation will become more critical than they even are now.
The AI question… and answer
During a panel on formulating business strategy during turbulent times, one panelist said that it wasn’t that long ago that some corporate clients said they didn’t want their outside law firms using AI, whether out of fears over data security or potentially damaging hallucinations. Now, however, it’s not whether an outside firm will use it, but how and to what impact on service and price. “Most clients want their outside firms to use AI because their corporate teams are already using it,” the panelist noted.
In fact, several panelists said it was this pressure — fears of being left behind by their own clients — that is pushing more law firms to expand their investment in AI-driven tools and solutions. Of course, that is only part of the battle. “AI is already here,” another panelist explained. “But the next part of this equation is how law firms are going to invest in training our lawyers to use this technology to clients’ advantage.”
How to train lawyers to leverage the most of a firm’s investment AI is a key question that hinges not only on aspects of lawyer training, hiring, and retention, but also on aspects of AI implementation and client management.
“We don’t have the advantage any more of walking the dog slowly on this,” said another law firm panelist, adding that firms need an implementation strategy to get ahead of the game in areas such as pricing, because clients are already thinking about that. “They want their law firms to use it, for example, to look at trends in business data and create specific solutions for clients while keeping their data secure.”
A little understanding… okay, a lot
In fact, that’s what ties law firms’ use of AI so closely to issues of client management: Clients, more than anything, want their outside law firms to more closely understand them, their business, their market, and their internal operations. Only in this way, clients say, can their outside lawyers offer the best service and provide the best guidance — and if AI gets them there faster, so much the better.
“We want to see that our outside counsel does not just understand where we, as a business, are now, but rather that they understand where we want to go,” said one corporate client, noting that these relationships should develop into true partnerships. “If you help us grow, we can help you grow.”
Again, many corporate clients and their outside firms now see that the pathway to becoming true partners runs directly through AI. It is this advanced technology that can best and most rapidly allow firms to deepen their understanding of clients’ businesses and needs while providing the metrics that can help firms demonstrate the value they are bringing to clients.
As these two factors — AI investment and client management — continue to swirl around together, each influencing and impacting the other, it’s the firms that can best use the implementation of AI-driven technology to understand their clients and articulate the value of the services they can offer that will end up in the performance-leader group, rather than in with the laggards.
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