PwC Legal Switzerland - SAV/FSA · 2019. 6. 7. · “Angry Birds” can reach that milestone in a matter of days. In the past 10 years the rate of adoption of new technologies has

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

2

- 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


Innovators EarlyAdopters

EarlyMajority

LateMajority

Laggards

Time

Inn

ov

ati

on

Pr

od

uc

tio

n/

Eff

icie

nc

y

PwC


6




EarlyMajority

LateMajority

Laggards

Time

Inn

ov

ati

on

Pr

od

uc

tio

n/

Eff

icie

nc

y

Dominant Design

PwC


7




EarlyMajority

LateMajority

Laggards

Time

Inn

ov

ati

on

Pr

od

uc

tio

n/

Eff

icie

nc

y

Dominant Design

Dominant Design

PwC


8




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


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

11


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



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...


14

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


15

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


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


16

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


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


PwC

Openness to new formats of legal service as opportunity driver


17

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

18


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

19


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…

21


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!

22


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.


PwC

Leverage is decreasing

23


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


PwC

Legal Tech is increasing price pressure

24


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

25


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

26


• 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

27


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

28


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

29


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?


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?


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

mailto:[email protected]

PwC

37

Thank you for your attention……and now let’s go and do amazing things!

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