There is widespread consensus among CEO’s that business changes underway before Covid-19 have accelerated dramatically. For example, online delivery’s volume increased by the same amount in eight weeks as it had during the previous decade. Telemedicine experienced a ten-fold growth in subscribers in just 15 days. MicrosoftMSFT CEO Satya Nadella crystallized the nexus between Covid-19 and digital transformation during a recent quarterly earnings call: “We’ve seen two years’ worth of digital transformation in two months.”
Digital transformation has been a C-Suite priority for some time. The warp-speed of change unleashed by the pandemic has established digital adoption and maturation as fault lines across industries and businesses. Covid-19 is widening pre-pandemic divides between digitally advanced industries and less advanced ones. A McKinsey study found that mature sectors like semiconductors and software are far outperforming lower-maturity ones like utilities and energy. The study also found a similar pattern among businesses across the surveyed industries; digitally mature companies far outperform less mature peers.
A Deloitte study determined that higher-maturity companies are approximately three times more likely than digital laggards to report annual net revenue growth and net profit margins significantly above their industry average. The study found this pattern cuts across industries and companies.
What Is Digital Maturity?
The short answer is that it starts with customers— how business can reimagine, then provide them expanded access, choice, delivery speed, value, and satisfaction. This yields brand loyalty and elevates net promoter scores, key business metrics that drive profitability. Digitally mature organizations reverse engineer these outcomes and engage in a holistic, integrated, enterprise-wide, collaborative commitment to achieve them.
The digital journey—and it is a journey—involves deploying more efficient technological tools; agile, fluid, multidisciplinary, up-skilled, empowered and engaged workforces; data; and smarter workflows that streamline delivery and enhance customer outcomes and experience. Digitally mature companies build a culture of constant improvement from which no business unit or individual is exempt. Digital transformation is a team sport, and there are no time-outs.
Deloitte followed up-its initial digital impact study by examining why digital maturity is associated with better financial performance. It identified several key transformational elements that it calls “digital pivots.” They include: data mastery, intelligent workflows, efficiency, product/service quality, customer satisfaction, up-skilling workforces, and a focus on growth and innovation. Mature companies invest in each of these areas. Data and workflows yielded the highest individual economic rewards among the pivot categories, and companies that pursued all pivots achieved significantly higher performance than those that pursued a less comprehensive approach.
Digital transformation requires an all-in, ongoing commitment to improvement. This is required to keep pace with the accelerating speed and complexity of business; technological advancements; new risks, skills, tools, and strategic partners required to remain competitive; prospective disruptors; geo-political changes; regulatory complexity; workforce investment; and a host of other factors affecting business.
These macro trends—especially the acceleration of digital transformation and its profound impact on performance— are a useful starting point for gauging Covid-19’s impact on the legal industry. They are a reminder why business requires much more than legal risk analysis to make informed decisions and why the legal function must be reimagined to meet the changing needs of its customers.
Law’s internal focus has long been its change barometer. This myopic perspective no longer yields an accurate forecast for law’s future. Buyers now control the legal buy-sell dynamic— not lawyers. Legal expertise is no longer the sole element of legal delivery—law’s internal balance of power is shifting from legal expertise to business of law capability that includes tech, process, and access to capital. The legal industry’s lawyer-centric, artisanal profile is morphing into a multidisciplinary, digital one that is more closely aligned with business. Covid-19 is accelerating that process even if many in the legal industry don’t yet see or acknowledge it.
Differentiated legal expertise remains highly valued, but what passes for it is far more rarified than it was even a decade ago. As practice—and the need for such differentiated legal expertise—shrinks, the business of law—everything that intersects with delivering legal services except practice—is expanding rapidly. Legal delivery—and lawyers’ role in it—is changing rapidly. This is perhaps the greatest of all legal industry change drivers, one that Covid-19 is accelerating and that digital transformation will recast.
To the legal industry: if your customer base is responding to the imperative of rapid, holistic digital transformation, is it not reasonably foreseeable that they will demand that you do, too? Legal providers—whether in-house or sourced, law firm or some other type of legal provider, employee or fluid resource, in-person or remote, and certified lawyer or other legal professional and/or paraprofessional will be affected.
To legal consumers: Why not demand more from the legal function? Certainly, your legal team is working hard, but is it working efficiently, cost-effectively, collaboratively and effectively to proactively defend the business and collaborate with it to drive enterprise value ? Legal must be a part of enterprise digital transformation, not a bystander.
This Is Just The Beginning Of Law’s Transformation
There is a growing body of evidence that the discrete, incremental changes in the legal industry forged principally in the aftermath of the global financial crisis are accelerating and coalescing into a more full-blown transformation. It’s still early days, but law’s legacy barriers—entrenched models, self-regulation, and culture— will no longer protect it from broader, more powerful pan-industry change. As Chris Fowler, GC of BT Technology puts it, “Covid is the end of legal industry incrementalism.”
Distance learning, remote workforces, and online courts are just the beginning of a transformed legal function and the new models that will drive education/training, delivery, and dispute resolution. The pandemic has illuminated the opportunity for law to do better. That means, on the macro level, improving access to and delivery of, and satisfaction with legal services, education/training, dispute resolution, a much-needed cultural reboot, and common sense re-regulation designed with the customer—not lawyer—in mind.
Covid-19 has exposed the fragility of traditional legal models. The labor-intensive, lawyer-centric, insular, monolithic models of legal education, delivery, and the courts quickly buckled under the weight of the pandemic. Technology and process—the business of law— prevented a collapse of legacy delivery models by being green-lighted to deploy latent technologies and processes. The genie is out of the bottle.
The pandemic has liberated the legal industry from compulsory attendance at legal sanctuaries—offices, schools, and courthouses. In a matter of weeks, the legal ecosystem became more agile, fluid, collaborative and efficient. This transition occurred with remarkable speed, pervasiveness, absence of resistance, and overall effectiveness. It illuminated the opportunity for reimagining and improving upon old ways of delivering legal services, learning, and resolving disputes.
A Proffer Of The Evidence
Here is a brief sampling of Covid-accelerated legal industry change .
Utah and Arizona Regulatory Reforms
August, 2020 will be remembered as a watershed in US legal regulatory reform. Utah’s Supreme Court unanimously approved a broad range of changes designed to combat the state’s access to justice gap, exacerbated by Covid-19. The court sanctioned a regulatory sandbox mechanism to explore the licensure and oversight of alternative business structures . It issued a statement noting its decision will enable individuals and entities to explore creative ways to safely allow lawyers and non-lawyers to practice law and to reduce constraints on how lawyers market and promote their services. The court took a pragmatic approach to existing regulation stating, “what is needed is market-based, far-reaching reform focused on opening up the legal market to new providers, business models, and service options.”
Two weeks later, the Arizona Supreme Court took Utah’s interim approach a big step further. It removed Rule 5.4’s prohibition of alternative business structures, fee sharing, non-lawyer ownership, and multi-disciplinary practice. It noted the profession’s social compact to assure that legal services are available to the public writing, “if the rules stand in the way of making those services available, the rules should change.”
The court was blunt in striking down the long-held legal monopoly. “The legal profession cannot continue to pretend that lawyers operate in a vacuum, surrounded and aided only by other lawyers or that lawyers practice law in a hierarchy in which only lawyers should be owners. Non-lawyers are instrumental in helping lawyers deliver legal services, and they bring valuable skills to the table.” The decision sanctioned licensing of non-lawyers as “legal paraprofessionals,” according them authority to provide limited legal services to the public, including representing clients in court.
The Big Four Are All-In Managed Legal Services
The Big Four has continued to been sharpen its focus and to ramp up an already formidable capability in the “business of law” sector. This has escalated during Covid. Deloitte, for example, announced in July the launch of its Legal Business Services (LBS) practice in the US. Deloitte, PwC, EY, and KPMG are each supplementing their legal talent pools by hiring well-known lawyers and business of law experts in an effort burnish their “legal” credentials. Time—and Covid—is on their side. The Big Four’s broad, deep multidisciplinary talent pool, global footprint, infrastructure, capital, and deep C-Suite ties are “safe hands” in an uncertain climate. Their change management, cross-industry business, technology, process, and data expertise are additional differentiators that are already translating to an uptick in business.
Legal Leadership—Without Lawyers
UnitedLex, Axiom, and Deloitte each made major leadership announcements during a two-week stretch in July. There was not a lawyer among the three. Capital investment in the legal industry is betting that deep business, process, technology, and digital transformation experience at scale are more important qualifications to lead a legal service provider than a law license. Business—whether that means investors or customers—wants leadership that speaks its language, understands its challenges, operates at it speed, provides multidisciplinary, data-backed solutions, and has a customer-first mindset.
The Digital Legal Exchange
The Digital Legal Exchange (DLEX) is a non-profit global forum and community of leading multinational companies committed to advancing and applying digital transformational principles to the legal function. Led by DLEX’s elite, multidisciplinary faculty of business, technology, legal, academic, and government leaders, DLEX delivers customized workshops to its members. The sessions bring DLEX faculty together with members’ senior corporate legal and business leadership to reimagine, then create “the art of the possible” for the legal function.
DXC Technology, a global leader in technology services and solutions, is a founding member of the Exchange. The company has committed significant capital, technology, data, and expertise to DLEX. Its support can be traced to the enterprise-wide benefits DXC derived from its GC Bill Deckelman’ groundbreaking managed services agreement with UnitedLex and its customer lifecycle platform (CLM). Deckelman and Dan Reed, CEO of UnitedLex (another DLEX supporter) saw an opportunity to share and expand upon their own success. They envisioned an industry-wide research center, data repository, and interactive community committed to advancing the legal function and industry into the digital age. Two years in the making, DLEX kicked-off its soft-launch at the start of the pandemic.
The Exchange has already conducted several digital workshops with leading global companies. It has also collaborated with the Singapore Academy of Law on the first of several jointly-run workshops involving leading Asia-based multinationals. DLEX expects to conduct 50 digital workshops around the globe in 2021. It is also conducting talks with several leading global universities to expand its highly successful internship program that launched this year with a cohort of students from Duke University’s law, business, and engineering schools. DLEX also participates in leading global legal, tech, and business events and conducts salon discussions, podcasts, and thought leadership events involving its faculty and senior management and members companies.
Law has much to learn from other industries. Law is not solely about lawyers anymore, and digital transformation, accelerated by Covid-19, will transform it just as it has its customers.