All across the legal industry digital transformation has been a notable talking point for what feels like an eternity. I’ve written extensively (here, here, and here) on the subject before. The ‘why’ of incorporating technology for corporate counsel is clear. The ‘what’ depends on each department’s specific needs. Perhaps the most important question of all is ‘how’.
As Timely notes in a recent blog article: “Digital transformation has never taken off in the legal world in the same way as it has in other sectors.” The reluctance of legal professionals is hardly surprising: after all, the legal space is one where there is very little room for error. Transformation is inherently disruptive, and disruption easily leads to disarray. In this article, I’ll focus on answering the ‘how’ of digital transformation. I'll do this by providing a framework through which corporate legal departments can innovate without upsetting the delicate balance of their work.
For law firms, the pressure to change is often largely external. Sometimes, digitized clients requiring their counsel to meet new standards. Others, rival firms use their technology adoption for a competitive advantage. For corporate counsel, the push comes from inside. The business’ increasingly data-driven mindset requires the legal department to quantify their work. That quantification must happen in such a way that KPIs can be measured and ROI determined. The ever-present desire for efficiency drives CLOs to seek a new ally in technology.
What is digital transformation?
What drives digital transformation?
- Customer experience
- Legal department performance
- Data analytics
- Compliance and risk management
Steps on how to build a digital transformation strategy roadmap
4. Create a delivery plan
5. Predict budget & resource requirements
Conclusion: the digital evolution
Let's dive in!
In 2020, Forbes described the process of digital transformation as a construction project. According to them, the legal technology of today is the building block for the legal department of the future. “Such digital tools,” they write, "need to be combined with proven expertise.”
Digital transformation is the adopting of digital technology into all areas of a business, to create new — or modify existing — business processes, fundamentally changing how you operate and deliver value to customers and meet market requirements. Your digital transformation roadmap is your tactical plan for coordinating and driving change throughout the organization.
For corporate counsel, the digital transformation will not be sudden. Technological revolutions are for other departments, like Marketing or Sales. Legal doesn’t turn on a dime and certainly doesn’t change overnight. Instead, pieces need to be put in place carefully.
For Legal, digital transformation means more than adopting a couple of new tools. It also means a culture change and adopting a new way of approaching cases. Putting in place a roadmap to achieve this complicated transition is key. After all, we aren’t building a structure from scratch here: we’re modernizing a cathedral of knowledge and experience.
There are four main drivers to digital transformation in the legal industry in general. I won’t focus too much on the budgetary considerations. These are present and very real, but not the main concern in the minds of corporate counsel.
Corporate counsel, and by extension corporate legal departments, are in effect lawyers who work for a single client. This insulates them from many of the external pressures of their law firm brethren, but not all. Customer retention isn’t a concern, of course. At the same time, the business is still a client which, like any client, needs to be kept happy.
For the business, the digital transformation of the legal department means it will begin generating data. This data can then be reported. Crucial, it can be reported on in a way that makes sense to the business. For the legal department, this means each step along the digital transformation roadmap helps argue for the next.
I’ve pointed it out a number of times before, but the human limit in terms of efficiency was reached a long time ago. When it comes to document review, people cannot go any faster than they are already going. In 2018, contract review solution LawGeex drove that point home. By pitting 20 top corporate lawyers against their contract review AI in a race. The results were clear: AI significantly outperformed its human opponents both in terms of speed and accuracy.
The fact that computers are better at repetitive tasks than people are is hardly a surprise. At the same time, making use of (AI-powered) tools does not mean counsel becomes obsolete. It merely allows for a legal department that is able to focus on the things that matter and avoids sinking time into repetitive tasks. In the right hands, these solutions become the tools of a more efficient, faster-working legal department.
The data points provided by the digital transformation aren’t only good for customer experience. Sure, you can measure KPIs and ROI, which are great to show the business the value of the legal department. For the department itself, the quantification of performance allows for a clearer process of improvement. By using the data generated to seek out improvements in existing processes, Legal operations can be optimized.
Data can also be used to inform the next step of the digital transformation as a whole. It may provide insight into the next efficiency bottleneck, or shed light on a previously undiscovered inefficiency. By embracing data to improve performance, the digital transformation pays for itself. This makes justifying future budget requirements a lot easier, too.
For corporate counsel, the chief objective is to manage risk and compliance. The Lawgeex experiment I mentioned earlier illustrates how AI may help. Compliance checks are highly standardized affairs. That makes them an excellent starting point for digital transformation. At the same time, limiting risk by standardizing contracts of all kinds can be achieved through a number of solutions. Moving to automated or AI-powered tools to deal with legal hold or privacy laws can save corporate counsel time, money, and stress.
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Your roadmap begins with establishing your baseline: what’s in place, what are the current blockers, what are the short-term and long-term goals of the department? Once all this is clear, the department should have a solid base to work from.
There’s a saying my Dutch colleagues use about ideas. It translates roughly to ‘better well borrowed than poorly conceived’. By looking at peers in the industry and the types of digital innovations they run with, you should be able to gather some idea of where your own digital transformation journey may start.
Once you’ve finished assessing and researching your plan, it’s time to set priorities. Since digital transformation isn’t free or easy, it makes sense to start with the low-hanging fruit: easy-to-implement steps that offer marked improvement. Swinging for the fences might be tempting, but hardly necessary. If the assessment is accurate and the research sound, identifying easy wins should not be too hard.
The delivery plan is where the rubber meets the road. Once the first steps are made clear during prioritization, create a plan to implement and measure the effect of each digital initiative. This helps to create a sense of stability both inside the Legal department as well as for the business as a whole.
The final stage is to assess costs. One key thing is to avoid blue-sky thinking: delays are common in digital initiatives. The responsibilities of corporate counsel don’t wait for you to complete your transformation, either. Beyond time and money, a budget should also include an assessment of other resources you may need. This may include training, time to meet and align with other departments and outside vendors, etc.
One of the most common terms used in articles about digital transformation is ‘disruptive’. For most corporate departments, that might be a great term to describe a new solution or innovation, but not for Legal. In their article titled Why 2021 is a decisive year for legal digital transformation, Timely writes: “Until very recently, legal teams were too focused on the risk of digital change rather than the rewards (...) when many legal professionals have worked for years to get where they are today, such rapid change within their professions understandably may not seem attractive.”
It isn’t only a sense of self-preservation that makes legal professionals risk-averse though. Risk avoidance is baked into the very core of the corporate counsel’s responsibilities. The fact that a digital revolution that terms itself ‘disruptive’ hasn’t left Legal chomping at the bit for change is hardly surprising.
Yet, throwing on the blinders and avoiding innovation altogether is equally ill-advised. By adopting a sound adoption strategy, the digital revolution can be made into an evolution instead. One that keeps Legal in firm control of the risks and allows them to benefit from the efficiency and speed the digital transformation offers.