PwC Legal Switzerland - SAV/FSA · 2019. 6. 7. · “Angry Birds” can reach that milestone in a...
Transcript of PwC Legal Switzerland - SAV/FSA · 2019. 6. 7. · “Angry Birds” can reach that milestone in a...
Dr. Guenther Dobrauz-Saldapenna, MBA
PwC Legal SwitzerlandWe are building the law firm of the future. Every day.
www.pwclegal.ch
New Suits: Was kommt auf den Anwalt zu? Anwaltschaft im Spannungsfeld zwischen LegalTech und
Kulturwandel. Eine Bestandsaufnahme.
PwC
1. Innovation, Disruption & Dominant Designs 04
2. Horizons of technology disruption 09
3. LegalTech – key drivers & barriers 13
4. Options for law firms to remain profitable 20
5. New Suits & Contacts 30
Agenda
2019SAV Anwaltskongress
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- Burning Man
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The appropriate response to new technology is not to angrily retreat into the corner hissing and gnashing your teeth.
It’s to ask: “Okay, how should we use this?”
1. Innovation, Disruption & Dominant Designs
PwC
The dynamics of innovation
5
Key Success/Performance Parameter
2019SAV Anwaltskongress
Innovators EarlyAdopters
EarlyMajority
LateMajority
Laggards
Time
Inn
ov
ati
on
Pr
od
uc
tio
n/
Eff
icie
nc
y
PwC
The dynamics of innovation
6
Key Success/Performance Parameter
2019SAV Anwaltskongress
Innovators EarlyAdopters
EarlyMajority
LateMajority
Laggards
Time
Inn
ov
ati
on
Pr
od
uc
tio
n/
Eff
icie
nc
y
Dominant Design
PwC
The dynamics of innovation
7
Key Success/Performance Parameter
2019SAV Anwaltskongress
Innovators EarlyAdopters
EarlyMajority
LateMajority
Laggards
Time
Inn
ov
ati
on
Pr
od
uc
tio
n/
Eff
icie
nc
y
Dominant Design
Dominant Design
PwC
The dynamics of innovation
8
Key Success/Performance Parameter
2019SAV Anwaltskongress
Innovators EarlyAdopters
EarlyMajority
LateMajority
Laggards
Time
Inn
ov
ati
on
Pr
od
uc
tio
n/
Eff
icie
nc
y
Enforced Standard
Enforced Standard
2. Horizons of technology disruption
PwC
Horizons of technology disruption
10
2019SAV Anwaltskongress
1995 now 2025
WWW
Mobility
SocialVisualisation
Networking
CloudBig data
Data analytics
Early machine learning
IoT
Hybrid cloud Containers
Cybersecurity
Natural language processing Large scale machine learning
Deep learning Reinforcement learning
AV/VR Biometric identity
3D/4D printing
Blockchain
Autonomous systems –cars and drones
Nano-tech
Advanced robotics – cyborgs, swambots
Super computer –quantum, neuromorphic
Autonomous super systems
0
3
5
15
Tim
e i
n y
ea
rs
to
pe
ak
of
ad
op
tio
n
Time to exponential technology breakthrough pointSource: dimensions data via @mikequindazzi
Robotics
Past (Internet)
Different(Cloud)
Beyond(Smart ecosystems)
Other(Super society)
PwC
The acceleration of technological progress and uptake
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75 years
38 years
13 years
4 years
3.5 years
3 years
2.5 years
50 days
35 days
Reaching 50 Million
Users
It took about 75 years for the telephone to connect
50 million people. Today a simple iPhone app like
“Angry Birds” can reach that milestone in a matter
of days. In the past 10 years the rate of adoption
of new technologies has accelerated at a dizzying
speed.
The fundamental basis to this popular internet meme is in fact wrong or at least severely flawed, but the general message is true (Dobrauz-
Saldapenna & Derungs in: New Suits. Appetite for Disruption in the Legal World).
PwC
Big-bang disruption
12
Catching the wave
2019SAV Anwaltskongress
Innovators EarlyAdopters
EarlyMajority
LateMajority
Laggards
Time
Trial user Vast majority
Source: Harvard Business Review
3. LegalTech – key drivers & barriers
PwC
Systems to help with office
management
• E.g. e-billing systems, billing systems, controlling
systems, process/workflow systems, collaboration
tools and e-mail systems, etc.
• These systems support the legal sector in
performing its work, but the technology used could
also be operated in other sectors.
• Further improvement in the future with a broader
penetration and a higher degree of
standardization is expected.
• The same applies for the collaboration between
law firms and their clients. In the future, they
will be able to work together (collaborate) using
the same IT system and therefore replacing
traditional E-mail and word text exchange.
Automation of work
• Word processing plus expert systems creates
contract documents assembly systems.
• Contracts can now be programmed in a more
systematic way by clicking through an expert tool
and providing a draft solution very close to the
final product.
• This will save time and improve quality.
• These systems are not (yet) ready to manage
high variety and also require substantial time to
design the logic and program it.
• Their first market is the B-to-C market and they
are already replacing traditional paper sample
contracts.
• These programs will substitute areas which
historically have not been covered by lawyers.
“Real” LegalTech
a) LegalTech products
• Solutions like Raven and Kira support lawyers
in DD work or compile facts relating to legal
situations.
• They substitute paralegal work and improve
efficiency by automating repetitive work.
b) Artificial intelligence, machine learning,
online dispute resolution
• LegalTech coming closest to “real” legal work.
• Only very initial developments yet.
• Development requires an enormous
investment of time, knowledge and money.
• Progress will only be measured by years.
A categorization of LegalTech solutions...
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The impact of technology on law is moving straight forward and is transforming the traditional ways of how
“legal services” are delivered. Undergoing the effects of technological innovation serves as a guide for systemic
change that is just around the corner.
Source: Prof. Oliver R. Goodenough [Professor of Law and
Director of the Center for Legal Innovation, Vermont Law School
PwC
Shifts in demand and supply as a key driver for LegalTech
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The current legal services landscape is evolving with changing customer needs and a shift in demand and
supply dynamics.
Regulators andEnforcers
• Regulators• Courts, judges and notaries
Investors
• Private Equity• Venture Capital
Customers
Corporate Legal Departments
(Large, Medium, Small)
Other – Government, Notaries,
etc.
Individuals
Providers Law Firms
(Large,
Medium,
Small)
Big Four
(PWC, E&Y,
KPMG,
Deloitte)
Other:
Information
Services,
Publishers,
etc.
Legal
Service
Providers
Legal
Techs/
Tech
Vendors
Alternative Legal Service ProvidersWith the increased use of technology in daily operations and legal delivery, several new non-
traditional service providers have entered the ecosystem
Demand and Supply of Legal ServicesIs gradually moving from a seller’s market (law firms) to acustomer-centric
buyer’s market (Corporates) with multiple sellers (ALSP, Big Four, LegalTechs)
Source:(1) “More Evidence Rolls In: Law Firms Boosted Revenues, Profits in 2018”, American Lawyer, Feb 1, 2019(2) “Alternative Legal Service Providers 2019”, Thomson Reuters. Jan 28, 2019
Alternate Legal Suppliers
Customers Providers
Corporate Legal Departments
Individuals
Other – Government, Notaries,
etc.
Law Firms
Legal Service Providers
Big Four
LegalTechs
Growing at
25%+(2)
Growing at 3%
(top 150 firms
growing at
7.6%(1))
PwC
The role of LegalTech within the new market
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The legal services market of the Future will likely look very different in the next 3 to 5 years
Expert Solutions
Information&Intelligence
Legal ServicesEcosystem with solution suites
The “Legal Services Market of the Future”Will evolve from being point solution-driven to a Legal Services ecosystem, aligned to
the customer journey for the business and practice of law
Legal ServicesMarketMarketis
here
The Services provided in the “Legal Services Market of the Future” Will be driven by size, with large firms working more directly with their lawyers, leveraging
technology for efficiencies, while smaller players will use tech platforms& ecosystems
Corporate Legal Departments
Customers Providers
Big Law Firms
Legal Service Providers / Big Four
Business of Law – primarily driven by CLDs
• Size of ALSP market $10.7 billion(1). Is expected to
grow to $55 billion(2) by 2025
• Provide managed services for repetitive
and manual tasks
Ecosystem players (TBD)
Practice of Law – Primarily driven by law firms
• Fragmented market
• Solution suites aligned with customerjourney
for specific tasks i.e. M&A, IP, etc.
• LegalTech’s, tech vendors and other
information and service providers will need to
form strategic alliances. Hub and spoke model
Larg
eFi
rms
Mid
/Sm
all
Firm
s
Individuals
Other – Government, Notaries, etc.
Medium- to Small-Law Firms
• Niche firms will survive and thrive
• Some of the smaller law firms will
go out of business or merge
• Others will likely move to a tech
platform to provideservices
Tech Platforms/ Ecosystems
Source:(1) “Alternative Legal Service Providers 2019”, Thomson Reuters. Jan 28, 2019(2) “The Big Four Are Coming For You,” Global Legal Chronicle, Oct 11, 2018
Oth
er
Corporate Legal Departments
PwC
Openness to new formats of legal service as opportunity driver
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Changing client demands and perception of legal services providers due to generational shift combined with the
rise of emerging technologies provides for new opportunities. 47%
Agree that virtual lawyers are a
good idea
Prefer to never meet
their lawyer in person
Agree AI and chatbots are
useful in getting legal help
23%
20%
16%
32%
31%
24%
41%
36%
Had a legal issue in the past 2 years General population Prefer not to hire lawyers
• Most important for delivering excellent client service is
knowing what clients are looking for.
• E.g., millennials are known as the digital generation,
since they are deemed to prefer doing everything online.
• People that are more familiar with modern practices
and newer technologies show more openness to
working with virtual lawyers, working with lawyers
remotely, and using LegalTech tools (such as artificial
intelligence and chatbots) to handle their legal issues.
• People who prefer not to hire lawyers are even more
open to these alternative formats, suggesting that
there are those who may be looking for a different
type of legal experience entirely.
Source: Clio Legal Trends Report 2018
PwC
Summary of key drivers for LegalTech adoption
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Source: The Law Society, Lawtech Adoption Research, February 2019
Client pressure
Hype & publicity
Increasing volume of work
Changing
demographics of the
workforce
Agility Acceptance of Cloud Lack of lawyers
Legacy systems Regulatory drivers
Competitive pressure
Incre
asin
g im
po
rtan
ce o
f d
rivers
PwC
Summary of key barriers for LegalTech adoption
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2019SAV Anwaltskongress
Higher margins
Longer sales cycle Regulatory lagSecurity concerns
Billable hour model
Legacy systems Technical barriers Process barriers
Partnership model Market confusion
Lack of customer /
client centricityCost center mentality
Source: The Law Society, Lawtech Adoption Research, February 2019
4. Options for law firms to remain profitable
PwC
Demand for legal services is flat…
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The PMI is a composite index score, representing the change in drivers of law firm profitability, including rates, demand,
productivity and expenses. A score exceeding 65 generally indicates a healthy operating environment.
Within the last 5 years, the score remained stable between 47 – 57.
The average billable hours worked by all lawyers across the market declined from 134 billable hours per month in 2007
to 122 through the late part of 2016.
Source: Thomson Reuters
PwC
…and collected rates are going down!
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Since 2007, collection realization as measured against standard rates, has declined 11% for Am Law 100 firms, 7.6%
for Am Law Second 100 firms, and 7.3% for midsize firms.
During 2016, the average realization rate for all firms has been consistently below 83%, the lowest level ever recorded.
Collected rates are
those rates reflected by
actual payments
received by a firm from
its clients.
Standard rates are a
firm’s published rates,
without taking into
account any discounts
or adjustments.
Source: Thomson Reuters
PwC
Leverage is decreasing
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Over the past decade, within the ranks of non-equity partner lawyers, the number of associates with three or more years
of experience has decreased slightly, the number of non-equity partners has risen, the number of first- and second-year
associates has dropped significantly.
This means that the cost of leverage has gone up substantially, with the ranks of lower compensated lawyers
declining at the same time that the number of higher compensated lawyers has increased.
Composition of Leverage by Lawyer Categories
Source: Thomson Reuters
PwC
Legal Tech is increasing price pressure
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Provider Practice areas Cost Service
123recht.net Legal Advice EUR 80/month (flat) • Unlimited access to legal documents
• Unlimited written correspondence with lawyers
PartnerVine Contract Law CHF 99 – 500 per legal
document
• Smart contracts for corporate legal services
Doctrine Legal research EUR 160/month (flat) • Unlimited access to over 7m court decisions
Arrest SOS Criminal law USD 250/year • 24/7 Emergency hotline
• Expert witness coordination
• Immediate support of lawyers
Access Family Law Divorce Law USD 300 (flat) • Divorces conducted completely online
Compensation2Go Claims management 35% service fee • Managing compensation claims in airline
business
Legal Tech companies are already offering services in almost all practice areas of law
For client, costs of legal services is reduced by more than 50% compared to traditional legal service models
PwC
The industrialization of the artisan
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Co
mp
lex
ity
Exceptional events
e.g. litigation; corporate transaction
Activities Traditional model New model
New
capabilities
+ providers
Legal
department
Law firms/
Big 4
Legal
department
Across the economy there are many efforts to convert an artisanal process into and industrial one. This trend does not leave out the legal
industry.
Strategic work
e.g. new products, new
geographies
Tactical work
e.g. corporate governance;
employment
Lower complexity work
e.g. high volume, semi-repeatable;
due-diligence
Law firms/ Big 4
PwC
The legal industry’s stages of evolution
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• People-based model: more
workload = more staff or
law firm usage
• Aging/limited technology
• Limited focus on process
and metrics
• Increased focus on
processes and technology to
drive productivity
improvement
• Work segmentation (matching
supply and demand better)
• Service level transparency &
accountability
• Initial shift to centralized/
shared services
• Embracing new Legal Delivery
models
• Transactional work removed,
automated and controlled
• Further shift to shared
services/ outsourcing
• Transparency to cost, quality
and customer satisfaction
• Internal function shifted to
business issues
• Increasing focus on proactive
business analytics
• Increasing innovation – global
expansion, mobile, social
technology
ARTISANAL(Internal Department)
INDUSTRAL(Running function as a business)
DIGITAL(Function as a strategic enabler)
2000+ 2018+ 2025+
Sta
ge o
fE
vo
luti
on
Time
Work Segmentation
+ Process + Metrics
Technology =
automation + intelligent workflow
+ digitization of contract data
PwC
From pyramids to rockets
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Today – Pyramid Structure Tomorrow – Rocket Structure & non-Lawyer
Outsourcing Projectmanager
Techmanager
Cooperations
Outsourcingpartner
Techsolutions
Partner
Senior
Junior
Paralegals Legal Tech
• Low ratio of junior lawyers per partner
• Especially entry-level jobs will vanish
Outsourcing Automation
• High ratio of junior lawyers per partner
• Junior lawyer level most impacted by outsourcing
and automationNon-lawyer
staff
Lawyers Tech positions
Source: BCG/PwC
• The traditional pyramid model applied in many law firms will vanish in future
• A “rocket-like” structure will develop over time with tech managers and legal tech companies supporting the law firm
PwC
Key action points
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1Disruptive forces are currently reshaping the legal-advice market. These forces include alternative legal service
providers and LegalTech companies
2Law firms must redesign their business model, which includes:
• Value Proposition (service offering and revenue model)
• Operating Model (cost structure and organization structure)
3Impact on individual roles
• Decline of general support staff, junior lawyers and generalists
• Increase of legal technicians and project manager
PwC
Leveraging the “ABCDEs” for legal success
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There is no single approach for a firm in the legal service industry to position itself for success in the legal
services market of the future. The approach that each firm would need to take depends on its current role in the
ecosystem, market position and its vision for where it would like to be.
A
B
C
D
E
Assess the state of the market and business, and then determine the
“marketplace of the future”
Build a vision for the firm’s “business of the future” and develop
a plan of action
Create a culture of change
Design and create innovation
Execute on the plan
One potential
approach for
service providers
to position
themselves for
future success
could be to
leverage the
“ABCDEs for
Legal Success”
Source: “The Big Four Are Coming For You,” Global Legal Chronicle, Oct 11, 2018
5. New Suits & Contacts
PwCPwC
6 November 2018
New Suits
Appetite for Disruption in the Legal World
Pre-order here:www.staempflishop.com/newsuits
PwCPwC
6 November 2018
Why Do Lawyers Need New Suits?
Chapter Title Authors
- Prologue Peter D Lederer
1 Taking the «Alternative» out of Alternative Legal Service Providers Professor David B Wilkins and
Professor María José Esteban Ferrer
2 The Changing Role of General Counsel Professor Mari Sako
3 Innovation Professor Michele DeStefano
4 Legal Professionals of the Future Professor John Flood
5 Legal Marketplaces and Platforms Christoph Küng
6 PropTech Karl Koller
7 Gig Economy Lawyers and the Success of Contingent Workforce Models in Law Dr Marc O Morant
8 Virtual Lawyering — Lawyers In The Cloud Dr Eva Maria Baumgartner
9 The Status Quo in Legal Automation Michael Grupp and Micha Manuel Bues
10 e-Government & e-Justice: Digitizations of Registers, IDs and Justice Procedures Karl J Paadam and Priit Martinson
11 Lawyer Bots Dr Christian Öhner and Dr Silke Graf
PwCPwC
6 November 2018
What New Suits Might Lawyers Need for the Future?
Chapter Title Authors
12 Innovation, Disruption, or Evolution in the Legal World Dr Guenther Dobrauz-Saldapenna and
Corsin Derungs
13 Strategic Mapping of the Legal Value Chain Dr Matthias Trummer, Dr Ulf Klebeck and
Dr Guenther Dobrauz-Saldapenna
14 Legal Publishers in Times of Digitization of the Legal Market Simon Ahammer
15 Smart Contracts and What the Blockchain Has Got to Do With It Professor Rolf H Weber
16 The Blockchain in Action in the Legal World David Fisher and Pierson Grider
17 eDiscovery Juan Crosby, Mike Rowden, Craig Mckeown
and Sebastian Ahrens
18 RegTech David Bundi
19 SupTech Dr Marcel Lötscher
20 Legal Research in the Second Machine Age Dr Antonios Koumbarakis
21 Artificial Intelligence and Advanced Legal Systems Luis Ackermann
22 Automated Legal Documents Dr Christian Öhner and Dr Silke Graf
PwCPwC
6 November 2018
How Will Lawyers Fit into The New Suits of the Future?
Chapter Title Authors
23 Fix What Ain’t Broken (Yet) Maurus Schreyvogel
24 Law Firm Strategy for Legal Products Jordan Urstadt
25 Legal Procurement Dr Silvia Hodges Silverstein and
Dr Lena Campagna
26 Restructuring Law and Technology Tom Braegelmann
27 From Legal Process and Project Management to Managed Legal Services (MLS) Philipp Rosenauer and Steve Hafner
28 Legal Hackers Jameson Dempsey, Lauren Mack, &
Phil Weiss
29 New Jobs in an Old Profession Noah Waisberg and Will Pangborn
30 The Law Firm of the Future Salvatore Iacangelo
31 The Secret Sauce to Teaching Collaboration and Leadership to Lawyers Professor Michele DeStefano
32 The Importance of Diversity Maria Leistner
- Epilogue Jordan Furlong
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Partner & Leader PwC Legal Switzerland
Dr. iur. Guenther Dobrauz-Saldapenna, MBA
PwC
37
Thank you for your attention……and now let’s go and do amazing things!
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