Law firms have always had to modernise and innovate their systems, services and technology to remain relevant and profitable over the centuries.
Yet it was only relatively recently, in the years following the 2008 financial crisis, that law firms have attempted to institutionalise the concept of innovation.
Faced with budget pressures, a desire to use technology to do more with less and keep clients happy, many firms have created multi-disciplinary teams of lawyers, strategists, data scientists and operational analysts to help drive innovation.
Over the past four years, the boom in artificial intelligence has reinvigorated the legaltech market − automating legal tasks, such as legal research and comparing lengthy contracts. AI has become the main focus for innovation departments in legal practice.
Law firm innovation teams have a widening remit, including working out how to use AI to help firms work more efficiently, build legal software tools for clients and provide new services. Some are developing their own legal AI tools or experimenting with AI ‘agents’ – an advanced type of AI that can make decisions and complete complex tasks on its own – in the hope that doing so will give them an edge over rivals.
Global Legal Post interviewed six heads of innovation at large law firms about the current state of legal AI innovation and its future.
Defining innovation
What is legal AI and legaltech innovation?
Michelle Mahoney, chief innovation officer at Mallesons, an Australian law firm which has won an industry award for the most innovative law firm in Asia-Pacific, put it simply: “It’s change that has a positive impact… It’s not change for change’s sake. We don’t include the word technology in that because often change is process, people and technology. It’s largely a combination of things.”
For Dan Wright, partner and chief innovation officer at Osborne Clarke, legaltech innovation is all about its clients.
“Can we better serve clients’ needs?” he said. “Can we ensure that the enduring human value that clients want… is given as much prominence as possible and enabled by technology rather than this headlong rush to replace it through technology.”
That approach is “just common sense”, he added.
The London-headquartered firm, which was founded in 1748, builds AI tools for its clients and lawyers, including one developed by a team in Cologne, Germany, to help clients comply with regulations.
The objective, Wright says, is to help clients by enabling technology to do the heavy lifting and searching, and then lawyers can apply their knowledge of a client’s circumstances, risk appetite and so on.
DIY vs Buy
Baker McKenzie and Hogan Lovells Cadwalader also make their own AI tools, as well as using third-party legal AI software from suppliers including Relativity, LexisNexis, Microsoft and Thomson Reuters.
Hogan Lovells Cadwalader, formed in July through the $3.9bn merger between Hogan Lovells and Cadwalader Wickersham & Taft, has a tech unit called Eltemate. It makes proprietary technology for its lawyers and clients.
The firm-wide digitalisation programme is organised along three concepts: explore, deliver and innovate.
“Rather than treating AI as a separate technology initiative, we’ve embedded it across three pillars,” said Mark Brennan, global managing partner for digitalisation at Hogan Lovells Cadwalader. “Explore is about ensuring that our people develop the mindset to lead in this area [on AI].
“Deliver is about making sure our people have the best tools to provide even higher quality service to our clients… That’s the piece where the rubber hits the road for service delivery.
“Innovate is sharing what works and… making sure that our people are collaborating across practices and regions.”
Ben Allgrove is a technology lawyer and chief innovation officer at Baker McKenzie. He describes the firm’s innovation programme as an “umbrella” for various initiatives and activities.
The AI element of the innovation programme includes technical skills, strategy, the firm’s “AI stack” − its software, hardware and other technological infrastructure − and “tooling up” its lawyers.
The firm, which is headquartered in Chicago and operates in more than 40 countries, has developed its own legal AI tools, including one to help clients respond faster to cyber security attacks.
The innovation department includes a ‘practice innovation council’ that acts as a bridge between the firm’s legal practices, such as M&A and disputes, and the technologists.
“They’re part of our innovation team, but they’re very much aligned with the core business,” said Allgrove. “We wanted our lawyers to increasingly recognise that this change is not about some app being created by somebody else and then just being given to you.”
Tech labs and lawyers
Orrick, an international law firm headquartered in San Francisco, specialises in a handful of industries, including technology.
It has a tech lab – Orrick Labs – established in 2017 to build legaltech for clients. It also has Orrick Analytics − a team of lawyers, statisticians and other professionals, tasked with using data and legaltech to help clients achieve their business goals.
Jeremiah Weasenforth, Orrick’s director of AI innovation, says the firm is using AI at scale for basic tasks such as summarising and automating documents, all the way to using sophisticated agentic AI technology to transform legal workflows.
The firm uses third-party software for relatively straightforward tasks and also builds its own technology.
Legal AI is becoming easier to user and more versatile, meaning that it is no longer the preserve of the IT department. Yet measuring its financial value is proving difficult, legal innovation specialists say.
“As a general-purpose technology, generative AI cuts horizontally through the entire business,” said Allgrove. “It changes the way you know everything from how our most senior partner works through to how our most junior secretary in the business works.”
He added: “Drawing a direct line between a particular investment in AI, a particular programme from our innovation team, and a specific financial outcome, is really, really hard.”
One of the more straightforward measures for the value of legal AI is how much time it saves lawyers.
“We take our AI tools [and] our other legaltech tools, and we look at the time saved on particular tasks, and we translate that into what would that be for an hourly rate,” said Laura Pilkington, innovation lead at Walker Morris, a UK law firm.
The firm also takes into account what that means as a direct cost for an employee and then it factors in the tech cost to get an overall view of its return on investment.
Some savings – in time and money – can be from more efficient working due to AI. For example, on fixed-cost projects, the firm will want to minimise the amount of additional hours they work on a client project because the work took longer than expected.
As they grapple with payback metrics, legal innovation teams agree on one thing, however − lawyers need plenty of regular training on AI if innovation programmes are to succeed.
For example, Mallesons has a three-level AI training system − from relatively basic to advanced − for its lawyers. Level one is ensuring lawyers have a baseline understanding of the technology, says Mahoney. Level two is improving prompting skills and getting the technology to work better for its lawyers. And then level three is more advanced training as lawyers get more competent at using the technology.
The future of innovation
The future of legal innovation is hard to predict even in 12 months from now, let alone over the next five or 10 years, due to how rapidly AI is advancing.
Still, legal innovation professionals predict that AI agents are likely to become more important.
Mahoney of Mallesons said: “I think we’re very close to moving away from asking the AI a question to [AI answering] a series of very complicated requests, orchestrating and planning… a series of activities that happen in parallel.”
And as law firms dedicate more time and money to legaltech and innovation, the structure and the type of people law firms hire – inside and outside innovation teams – will likely change and widen.
“[AI is] creating new pathways and opportunities for both lawyers and technical practitioners in the legal space,” said Weasenforth. “We’re hiring legal engineers. We’re hiring data technologists. We’re hiring people that really you would have historically only seen hired in the software space. That’s happening all around the law firm world and the legal technology space.”
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