Rob Saccone is an entrepreneur and recognized expert in technology, business and practice optimization within the legal industry, spending the last 20 years studying and serving legal markets worldwide.  He’s built and sold tech businesses, designed and launched new products and business models for law firms and legal tech vendors, and advises participants in the legal ecosystem from startups to global firms on business and technology strategy, new product and market development and data-driven innovation.

I talked with him to get his thoughts on the legal industry, law firms, and the role of legal technology and legal innovation within the legal industry.

You wrote late last year that “Law firms have debts to pay before investing in innovation.” Could you summarize your thesis and state whether you think that law departments have similar debts to pay as well?

Software engineers use the term “technical debt” to describe the sum total of shortcut and trade-off decisions made when coding a software product. This tech debt can accumulate over time to the point where a product can no longer be maintained or enhanced, and in some cases leads to failure of a product or business.

Using technical debt as an analogy I described how incumbent law firms have also made many short-term decisions over time, from technology investments to broader structural and procedural choices around teams, incentives and operational best practices that shape a firm and its culture.

My advice to firm leaders is that this accrued “management debt” must be paid down before building additional layers of complexity vis-à-vis innovation investments or changes to their business. Understanding and addressing the technical, structural, procedural and cultural debts a firm has accrued is critical to compete and grow; and ignoring them can be catastrophic.

As I wrote in the article, firms have made a number of decisions over the years that shaped their culture, infrastructure, agility and overall model. These decisions may have seemed reasonable at the time, given then current market conditions and firm performance, etc. But now they are facing changing client demands and a much more competitive market, and must make new decisions in terms of markets, products, talent and technology. Some of these are a change in direction from previous norms, and may not be compatible with the status quo.  This is the debt that must be addressed.  If ignored, i.e. a choice is made to live with past decisions and to continue operating in exactly the same way, then they will likely struggle to compete even as they experiment with “innovation” on the fringes.  In other words, get your house in order before worrying about curb appeal or a new kitchen.

The same advice applies to any business or function, including law departments. When evaluating investment decisions, we must take a holistic look at current conditions and operating performance and consider these debts. It is too easy to get distracted by “innovation” while there are fundamental problems to solve and improvements to be made.

How do you view legal technology in terms of its opening the doors for legal innovation and/or getting in the way of legal innovation?

I believe technology helps create opportunities to change or create new value. For example, NLP and ML-based tools have been proven to significantly accelerate high-volume document review and analysis in e-discovery or due diligence.  But technology is but one driver or enabler of change.  My view on innovation is that it must start with a defined problem or opportunity, and then you consider the right combinations of technology, human resources and processes to best address the problem within the constraints and tolerances of your business.  I’ve observed too many firms start with technology and then fumble while looking for problems they might solve.

Technology can sometimes be a distraction from real problem solving more so than an impediment to innovation. An example: firm buys an “expert system” because they believe it will allow them to “make apps” or “sell content” or “appear innovative”.  But they do so without fully understanding what “apps” they are going to make, i.e. what problems they will solve and for whom.  And even when identifying a real problem, they may not have the skills or tools to evaluate whether it’s worth solving from a business or financial standpoint.  This leads to untethered or runaway projects that fail to meet expectations, real or imagined.  The platform may be a very capable technology toolset, but without the appropriate skill and commercial rigor to first identify and validate new product ideas it could support, it’s a distraction at best.  The impediment to real innovation isn’t tech, it’s lack of product management and business discipline to determine where to invest and why, tech or otherwise.

Much continues to be written about the billable hour model. Do you see this model ever changing? Do you agree/disagree with the notion that the model is an impediment to innovation and/or change?

We are already seeing this model change, albeit slowly and inconsistently.  I expect it will continue to change as new providers and solutions emerge with different packaging, pricing and value propositions. I do not believe that the billable hour itself is the issue, though clearly compensation programs that aggressively drive billable hours do not necessarily align with client needs. The real issue is the industry’s inability to cleanly define and measure outcomes and values based on these needs.  I have observed firms that create new products or services that clearly run counter to the billable hour approach, and unless pricing, compensation and other factors are aligned with these new products or services they often die on the vine.  Again, innovation shouldn’t happen in a vacuum or as an isolated “spin off” activity or team.  It must be integral to the core business and must be looked at holistically (while considering “management debts”) in order to be successful.

Tell me a little about what you do at NexLaw Partners.

We work with a range of firms and businesses in the legal industry, from startups to law companies to global firms. We primarily advise and help businesses explore and develop new products and markets, or to assess and improve existing products and services. This includes technology-enhanced or content-centric offerings as well as traditional legal or business practice areas.  We combine deep and practical business, technology and practice experience across segments, and look at innovation from an investment perspective first. As such, we’ve developed a very measured and insight-based approach to innovation and change that targets sustainable growth.

Where do you envision legal services going over the course of the next couple of years?

Nothing happens very quickly in the legal industry though the pace of change seems to have accelerated following the recession.  I have a few opinions on where things will head over the next 5-10 years, however:

a.       We’ll see consolidation in all segments of the ecosystem: firms, technology companies and especially in the “alternative” market including law companies and the Big 4.  We’re already seeing increased M&A and funding activity, and I suspect this will pick up pace and we’ll likely see some PE-backed roll-up plays.

b.       The tech market, including AI, will eventually settle down as use-cases become clearer and winners emerge. I believe that much of the underlying AI tech will become commoditized to some extent, and the winners will be those with the best content combined with the best workflows and user experience for any defined problem and solution.  Some of these winners will be acquired, few will continue to grow and expand.

c.       Ultimately, I agree with those that predict we’ll have fewer and larger firms serving the high-end of the legal market, along with some remaining specialist firm exceptions. This will happen through M&A and lateral poaching and likely with some downsizing or dissolution.  I think the same will happen in the mid-market, and the lower half of the AmLaw along with numerous regional law firms will face extraordinary pressure as strong brands and new options emerge and take market share.

What advice would you have for a young lawyer/law student seeking to best be prepared for 21st century legal practice?

There will always be a need for legal expertise, but I think we must come to terms with the fact that lawyers will not always lead the charge and the partnership model as we know it is going away. I believe lawyers will play a key role within multi-disciplinary teams, and those roles will become more specific.  For example, becoming a partner (if at all) will no longer mean you become a stakeholder, a manager, a salesperson and a legal expert all in the same body.  Instead, we’ll have clearer division of responsibilities and areas of specialization – legal sales, account management, solution architecture, technology, data analysis – in addition to depth of legal knowledge.  There will be more JD-advantaged jobs and not all will be practicing law.

So, my advice would include picking a “major” in addition to areas of law. Want to work with technology? There will likely be more companies and firms with jobs available that offer that focus.  Do you thrive on relationships?  Sales, account management or leadership roles.  Entrepreneurial spirit? Hang a shingle or join a startup while you are young.

Simply want to practice law?  I believe that thanks to shifts in the market, in business models and use of technology we will address more legal demand than today, both consumer and business. There will be a need for legal expertise even as some areas become commoditized or automated/operationalized as business instead of legal solutions.  But in any case, I think it’s imperative that law students enter the market with a good understand of what the market is, what these roles are, and which best fit their personal goals.