Jae Um is a strategy executive, insights analyst & business designer for fast-changing legal markets, with 10+ years of industry experience. She leverages a highly diverse skillset to generate powerful actionable insights. Jae recently joined the law firm of Baker McKenzie as Director of Pricing Strategy. She is also a contributing author to Legal Evolution, American Lawyer, and other publications covering the legal industry. Jae also founded and is the executive director of Six Parsecs. Prior to her current roles, she served in a progression of high-impact roles in client service innovation & strategic growth at Seyfarth Shaw.
Innovation and legal technology often are inextricably linked. Do you believe that they should be linked? Why or why not?
Technology is often a critical component of breakthrough innovation. That’s been the case throughout history, from the transition of agrarian to industrial economies. In 2019 we’re on the cusp of the Fourth Industrial Revolution, and the continuing digitalization of business is a macro trend that none of us in legal can ignore, because sooner or later it will change the competitive context of all commercial activity and it will also change the day-to-day context that shapes peoples’ lives and their expectations about how they want to engage with lawyers.
The reason that technology plays such a critical role in innovation is because leap-forward advances in tech create new possibilities. In turn, those new possibilities should prompt us to question long-held beliefs about the optimal way to do our work. When the right combination of domain expertise and execution resources are applied to that question, truly amazing things can happen.
So — on one hand I’d say yes, I believe linkage between legal innovation and legal technology is necessary. On the other hand, I think there are many dangers to conflating the two concepts.
First of all, nearly all stakeholders across the legal industry are in pressing need of incremental innovation that don’t always involve technology. Improved process rigor and more management discipline are two areas that have very high potential to drive better client outcomes and better service experiences. A third might be more rationalized adoption and integration of existing technology into existing service and business models. Two other levers for progress in legal innovation are more difficult because they are opaque to most stakeholders, controlled by fewer decision-makers, and have wide-reaching second- and third-order impacts: incentives and infrastructure. Lastly, some stakeholders across legal markets in both enterprise and consumer markets are feeling pain tied to public policy and regulatory protections.
Innovation of all types requires resources, often much more than people imagine. It’s not magic and it’s not free. By domain expertise, I mean people who have deep, functional knowledge about who does what and how and why things get done the way they get done today. It takes a great deal of both individual and institutional investment over time to develop that expertise. So that domain expertise tends to reside in people whose time carries high market value and therefore those people contend with opportunity cost when considering risky ventures with uncertain outcomes. By execution resources, I mean people who have varied skill sets and experience in getting things done: the work to generate necessary insights from relevant stakeholders, the work to design and build new products or services that actually perform as intended, the work to market and sell new offerings to paying customers, the work to drive adoption and uptake among users. Each of these challenges is a discipline with its own set of functional tools and techniques and the skill of the professionals tasked with these challenges makes a difference in the eventual outcome. Building those skills, like domain expertise, takes both individual and institutional investment – and time.
In other words, a lot of wins have to be strung together for a new thing to go from an idea to reality. Meaningful innovation usually requires at least a few people to take risks and for a whole lot of people to change habits of mind and behavior. Some flavors of legal innovation are more difficult and complicated than others, but most of it takes more time than we want. So it can seem much easier and faster to run out and buy technology. In every context, people still have to do hard thinking about what they’re trying to accomplish and what problem they’re trying to solve – technology can’t do that thinking for us.
What is your evaluation of the large amount of investments being made into legal technology companies?
Generally, I see it as a positive sign. The legal tech landscape in 2019 is much more varied and diverse than it was even five years ago. In 2014, David Perla (now of Burford Capital and formerly of Pangea3 fame) gave a great talk at ReinventLaw asking whether we were seeing a Cambrian Explosion among legal startups. It’s a fabulous talk and I recommend it to everyone interested in the legal innovation ecosystem.
As context, Cambrian Explosion refers to the relatively rapid appearance hundreds of millions of years ago of most major animal phyla and the major diversification of other organisms, followed by materially accelerated rate of evolution. Preceding that explosion, though, was a pre-Cambrian period in which there was a high level of complex organism development. The upshot of Perla’s talk, basically, is that in 2014 he saw the legal industry as being that pre-Cambrian period, where a much more varied and diverse population of market players in the process of developing and maturing.
Within that context, I see the uptick in investment as a key accelerant in that maturation process of new entrants into the legal ecosystem – whether it’s legal technology companies or new types of legal service provider companies, what capital investment can do is to speed the rate of R&D and go-to-market. Because of complexities inherent in legal work, it may be that pace to market will always be limited, but one thing capital does guarantee is longer runway to allow for iteration. Plus, professional financial sponsors often impose greater focus on commercial rigor and demand more business discipline from their portfolio companies.
So one downstream impact of capital investment is a more rapid pace of learning about user needs and buyer preferences. Startups have to learn and adapt quickly before they run out of money, and that level of urgency is a critical advantage they have over incumbent innovators. And most startups fail – that’s true across all verticals. A few winners will emerge from the current crop of startups, and some aspects of legal practice and legal business will move forward.
But the collective and aggregate exhaust from this activity can actually accelerate the overall pace of learning for the ecosystem. Users and buyers will ingest new ideas through contact and interaction with new products. Startup founders and employees will get smarter and more skillful in understanding user needs and buyer preferences, again through building, iterating, and contact with the market. Because this happens gradually and in pockets, that learning isn’t always visible or tangible to the casual observer, but it happens. Lastly, the uptick in capital flow into the legal market signals that professional investors see potential for reconfiguration of the market – I generally tend to agree with that assessment and so I think the next decade should be an interesting one for the legal vertical.
Do you see any imbalances in the legal tech market in terms of the customers wanting these tools and the companies developing these tools?
This is a really great question that bears close and sustained examination, on both sides of the market. I wouldn’t call it an imbalance exactly – there is a ton of friction and a ton of inefficiency in the matching process.
There are a lot of causes, but I think we underestimate the layers of complexity that underlie the word “customer.” Just as the legal market itself isn’t a monolith, the concept of the “customer” is an abstraction that is fluid, varied and situational. Abstractions are difficult for people to conceptualize, so we have a tendency to either (a) focus on one customer at a time or (b) make vast generalizations about a nameless, faceless entity. In the first instance, we get high resolution and high fidelity, but no scale. In the second, we lose both resolution and fidelity, and therefore very little utility.
In B2B contexts, we are often talking about organizations made up of diverse subsets of users and buyers, who function within the constraints imposed by their work context (the total sum of policies, processes, hierarchies and structures that make up their environment). That work context can vary from organization to organization, just as need for and readiness to use legal technology varies from user to user within and across organizations. In the consumer legal market, the “customer” base comprises multitudes of individuals with varied skills to cope with the complexities inherent in their legal needs and their buying options to fill those needs.
So that puts a different spin on your question. We often talk about the voice of the customer and how it is missing in the legal vertical. In discussions about legal innovation, we tend to put a premium on conversations that include the customer. I think this focus on customer dialogue is well-intentioned but often misguided. We actually might fare better by thinking more broadly about customer success, and how both legal tech companies or legal service providers might deliver customer success more consistently.
Conversations in and of themselves are not enough – not by a long shot. Whether we are talking about new product development, the sales cycle, or service delivery, there is a time and place to talk to the customer. But then you have to go and do something with what you learn – otherwise, you’re just wasting everybody’s time. I tend to think that it’s in this phase that things fall apart, and at least one of the reasons is the complexity inherent in a diverse and varied customer base.
Legal tech companies, especially new ones, need to be very focused in identifying a target market of customers that share sufficient commonality in their needs and readiness to adopt new technology. On the customer side, I would probably reframe your question again – I’m not sure customers actually want specific tools. Customers are likely better served by focusing on articulating their needs and pain points before they go shopping for technology, so they start with a more holistic view that includes not just a tech buy but the attendant costs associated with adoption.
What do you envision being the next step in the evolution of the legal tech market? When will we get there?
I think one sign of maturity in legal tech is growing recognition of systemic barriers and the need for collective responses to those barriers. I see this in the growing number of partnerships across segments and in a couple of interesting ecosystem developments. In terms of how the legal tech market evolves, I think legal tech companies will become more sophisticated about delivery and distribution channels.
Overall, I see more dialogue about interoperability, standards, and infrastructure as means to accelerate the pace and improve the effectiveness of technology adoption. SALI Alliance and Reynen Court are two relevant examples, though they are different types of entities. SALI is a membership organization focused on developing industry-wide standards for legal matter taxonomy and Reynen Court is a platform startup funded by Latham and Clifford Chance that is focused on private cloud security for more efficient legal tech buy and deployment. I find them to be interesting indicators of where the legal tech market is going because (a) they are both largely initiated and driven by incumbent legal service providers and (b) they are going at some very big problems that are fundamental, structural barriers that impede innovation. Taxonomy is a huge pain point and the eventual move to the cloud is inevitable with very wide-reaching implications.
Law firms are also investing in a variety of ways in startup outreach. Whether they are incubating or investing in or buying new legal tech, they are functioning as distribution channels for new tech. Some of this I see as a serious response by law firms to threats posted by new entrants and new-breed service providers like ALSPs and Big 4. There are clear signals of serious intent by incumbent players to adapt to changing competitive environments by investing in the modernization of legal service delivery. Don’t count them out.
Ultimately, the client will be the beneficiary. The simple truth is that most corporate legal departments aren’t equipped or resourced to evaluate and buy legal technology. As David Cambria likes to joke about legal operations, it’s a non-core function of a non-core function. In the enterprise market, the end-user isn’t looking to buy legal tech – they want better legal and business outcomes, and what they are likely going to end up buying is a new type of legal solution or legal service that is enabled by better tech. The law firms able to mobilize and modernize quickly will be better equipped to defend against the threat of new entrants. All of this represents opportunity for legal tech companies that can think more critically about who their products target and how to best reach them.
The consumer market deals with different barriers for legal tech – chief among them regulatory protections for the bar, particularly in the US. I tend to think as the demographics change and larger portions of the population expect digital evolution of most services in life, consumer demand and expectations will push consumer legal tech forward, but this will likely be a slow burn.
As for when we will get “there,” is there really a there? Life and tech keep moving. We’ll keep moving forward, slowly at times and more quickly at others.
How would you advise those general counsel or law firm partners who know about legal technology, but don’t want to spend money investing in it or can’t get buy in from others about using it?
This seems like a trick question. =)
First of all, I question whether most general counsel or law firm partners should really “know about legal technology.” Context matters here – certainly, I would hope that the top decision-makers would be favorably disposed to the upside potential of legal tech, but I’m not sure they are the best parties to devote the time required to work through the specifics.
Secondly, if they don’t want to spend money investing in it, I’d ask whether they have a clear sense of the ROI potential against the total cost of consumption, including change management costs to drive adoption. If the ROI isn’t there, it isn’t there.
Going back to my earlier point about customer success — technology is useless unless it gets used. We need broader recognition of the total cost of customer success and the varied jobs required to cross that finish line.