Ukrainian Law Blog: A Root Cause of the Innovation Problem

on April 28th, 2016

According to AngelList, there are over 1,000 startups focusing on legal industry solutions. But, as Keith Lee points out in a nice post here (and you should read the comments) that number is inflated. After pulling out the long-departed, large firm “startups,” and other misfits, the total number of legal industry startups drops.

And, of course, startups do not have to register on AngelList so there are many out there not included, which would increase the list. Still, if you are a traditional lawyer, pause to let the AngelList number sink in.
Even adjusting it, there are at least several hundred entrepreneurs gunning for ways to switch legal work from your clients to their businesses. Yeah, most of them will not succeed. But when it comes to your clients, it may only take one success.

I often write that large law firms are not the place to look for real innovation, spelled with a capital “I.” This isn’t some failing of large law firms. They were not built to be Innovation engines and until very recently, no one expected them to Innovate. In fact today, most clients still do not look to them for Innovation.

Could they change? Maybe. But about 80% of culture change efforts fail, a number that has held for decades. Even if a large firm did want to change, the odds are against it and even if it did succeed, the amount of change needed to go from today’s model to one that would succeed with Innovation is huge. And then there are the clients.

I have read many stories featuring an apologia for clients. The authors all give reasons why clients do not push for change. In some cases, they argue that clients should not have to push for change. I have found, through teaching at a law college, that Latin has worked its way out of law so I’ll put this in English: poppycock!

For twenty years I was a client—if you want change you will get it and especially today. First, much of the change can be had with a simple phone call. The many existing alternatives to law firms are ready to show up in response to a simple call. Drop a note to your law firm that you will be meeting with firm X and you will see how fast your old firm becomes interested in making changes. So let’s be serious. Law departments’ interest in change is not much more than law firms’ interest in change. I have yet to see a law department re-invent itself using Innovation. Incrementalism abounds!

I may be pilloried now for my heresy, but I believe I am on pretty firm ground here. Some departments use more technology than others, some have tried more alternative service providers than others, and many profess to be more forward-thinking than their peers. But none, as far as I am aware, have re-invented how they deliver legal services. We talk about disruption, but when the best we can muster is about $8 billion out of $275 billion of services shifting from firms to lower cost labor, disruption is at an early and unsophisticated stage.

Why?

When I was in Japan being re-trained into a lean thinker, I was taught to incessantly ask one question: Why? Ask the question, don’t accept the answer, ask it again, and so on. By following this approach, I and my colleagues would eventually get to the root cause of a problem, attack it, and see improvement.

I have asked many times why we are not seeing Innovation in law, and see instead innovation or no change at all. In lean thinking we talk about using the “5 whys” but here I think I have well-exceeded the target of five. I have found a lot of explanations, some excuses, and many theories. I am sure somewhere in there lies “The Truth,” but so far it has not been apparent. That probably means that there are many reasons and the mix of reasons varies by law firm and even lawyer.

Can we at least say things are starting to change? There are signs that among those startups, we have some innovators and possible some Innovators so Innovation may come to the legal industry. In the meantime, those startups are giving us clues to what may be a root cause worth revisiting—the lack of data that could be used to drive Innovation.

You may have heard about the data challenge, so my root cause announcement won’t come as a surprise to you. The legal industry in the United States, and more so in many other countries, still locks up most of its data and provides no access, limited access, or expensive access. In a world where access to data is starting to define those who will have the most power, the lack of data access should be troubling. Data does not stop anyone from Innovating, but data sure makes it a lot easier to do a lot of Innovation.

There are, of course, many who have tried to attack the legal industry’s lack of access to data problem. I will not try to list them all, because I will miss many of the key players. Perhaps the best known is the Legal Information Institute at Cornell. There are many others. The most recent entry is the joint Harvard/Ravel Law effort. They are scanning United States case law and will make it available over time to everyone.

All of the parties who are pushing for “open access” to data in the legal industry are helping reduce the problem, and even the U.S. government is in on the action. The data.gov site is a treasure trove of information that as recently as a couple of years ago was not available.

Could Massachusetts Trial Courts Spur Innovation?

An interesting situation to watch will be the invitation of the Massachusetts Trial Courts for public to comment on the “Proposed Trial Court Rule XIV Uniform Rules On Access To Court Records.” As you might expect, access today is a bit haphazard. One group (and I am a signatory) has proposed an “API” approach. An API is an application programming interface. Simply put, it gives programmers a way to connect to a data set and extract information. A public API means anyone can connect and get the information. For example, the Securities and Exchange Commission has a public API for its EDGAR database, allowing anyone to access and download documents filed in the EDGAR system by public companies.

If Massachusetts introduced API access to its system and then other states used the same approach (or the states reconciled to a common approach), we all would have access to information already “public” but basically inaccessible. That data access would spur innovation. Researchers, law firms, entrepreneurs, and yes, even the public, could go online and access the materials that already are part of the public domain, but are sitting in closed file cabinets and boxes. (And by the way, documents filed under seal would stay under seal, so an API does not mean making public that which is private by order of the court.)

You Know You Aren’t an Innovative Industry When …

The House of Commons heard from an MP recently. It seems the House of Lords, without consulting the House of Commons, decided to stop the practice of recording laws on vellum and switch to paper. The MP was calling this to the attention of the House, because many MPs disagreed with the decision. There is much to be said for a 1,000 year-old tradition. But, pause for a moment and consider how your tech clients would think about a similar discussion in the United States.

Most of the data the legal industry could use still remains buried in files and computers, inaccessible to the world or at least inaccessible unless you are well-funded. For example, only a few states make appellate briefs available online. If you want to get materials from federal lawsuits, you must pay PACER—an irony since other government agencies are posting data on data.gov, but the judiciary is relying on a statute to charge us for access to its data. You can get some of this material from other databases (such as LexisNexis or Westlaw), but again, you must pay.

I am not ranting against capitalism. I understand that there are costs to making the data available and that agencies outside the judiciary charge for some information, such as in response to Freedom of Information requests. I also do not harbor a grudge against companies taking the data, adding extras, and charging for access to the enhanced package.

But if we (the public, scholars, researchers, etc.) do not have access to the basic data (and cost means lack of access) then we will see innovation stifled. This argument comes up frequently today, as large players in search and social media create enormous data sets. They have the data for innovating that others will not be able to replicate (or at least, not without great cost and difficulty).

The tipping point for Innovation in the legal industry may come when someone creates or gets access to the data. Many thought the major legal publishers would do this, because they already have access to great treasure troves, much like the large search and social media companies. So far, we have not seen it happen, but competition from disruptors may force that to change.

Another possible source is the large accounting firms. They have the resources to drive significant change and to acquire or build data sets, but again we have not seen much happeN. Right now, they seem to be benefitting from the same client lack of interest in re-invention that I mentioned above.

A final thought on the data issue. Many still believe that value in the legal industry comes from having the data and controlling access to it. This was the model large law firms used back when I started practicing. To get to the data, you needed to call your outside lawyer. Then, legal publishers and eventually the all-powerful internet broke through that wall. Large law firms could not control access to, for example, documents. Any lawyer could get a document to use as a template. Value came through knowledge and large law firms moved away from believing access was the choke point. This wasn’t access to data, but it was a start.

Just as moving away from a labor-centric model will be necessary for lawyers in firms and departments if they want to avoid obsolescence, moving away from hiding data will be necessary for the legal industry to spur Innovation.

Imagine what would happen if the world had access tomorrow to the data locked in all of the file cabinets in all the courthouses around the U.S. Could we radically change the litigation model to reduce the cost? To even eliminate much of the burden litigation puts on society? Access to data raises many important issues. In the legal industry, perhaps the most important one is: why aren’t we making access to data happen?

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