A guest post by Richard Chapman, partner at private equity firm ECI Partners
Technology has enabled many businesses to transform their services and grow even through challenging conditions. Across multiple sectors, we have seen an explosion of digital providers offering solutions that can streamline, automate and deliver iterative improvements to ways of working.
The legal sector, however, has historically has been slow to adopt technology. This is despite being a people-intensive industry that’s ripe for disruption through tech.
While there is clear appetite, for example through some of the largest players in the sector acquiring tech providers or launching their own tech services, the industry as a whole is not as automated or as efficient as it would like.
Failure to adopt makes businesses vulnerable to new disruptors and companies risk falling behind the competition.
The scale of the opportunity is significant. Firms ranging from start-ups to more established mid-market businesses are shifting their services to support law firms and in-house legal teams. There has also been a significant funding behind initiatives, especially from venture capital firms.
Potential for growth in legal tech
Due to high demand, more and more providers are entering the legal tech space. They usually are selling into law firms, corporates or consumers, and often a combination of all three.
But when it comes to who will win in the legal tech space, what are some of the key considerations as to what will drive success?
Market demand: Is there a market demand for the product the business offers? For example, large law firms understand the importance and opportunity of tech, with many investing in their own legal tech seed funding schemes. If selling into corporates that may not be volume users of legal services, it might find it harder to see the ROI (return on investment).
Valuable tech: The more value-add the tech can bring, the higher the ROI for clients. If a problem is complex, the more time you will likely save customers if you can solve for it through tech.
A good example of this is case predication technology, which uses predictive analytics to assess the likelihood of winning cases.
USP: How unique is the product in the market? There are thousands of legal tech businesses, and many offer similar solutions. Winners will be able to highlight the areas that make them unique and demonstrate resistance to future competitors.
For example if using artificial intelligence/machine learning, is it using publicly available or proprietary data?
Tech platform: A good-quality business needs a good tech platform. The explosion in legal tech means many of these businesses still fairly immature, so they will need to pass tests around user experience, user interface, and seamless integrations with other applications.
Opportunities for growth: There are key themes at the moment within business compliance, particularly around data protection, compliance and regulation support. Legal firms that are able to support in these areas of the market may find themselves with more opportunities for growth.
ROI: There is a significant opportunity around AI, with some firms even going so far as introducing a ChatGPT style tool to remove some inefficient tasks such as contract analysis.
Firms that can help lawyers apply the tech to their needs and implement it effectively will be able to demonstrate a proven ROI.
However, there will be ethical questions over how much outputs can be trusted. It will be those that can effectively join up tech-surfaced outputs with human input that will be able to scale.
International: Tech that can be used across and adapt to multiple geographies and different legal regimes will be more valuable and have access to a wider buyer pool.
Tech adoption: Despite a plethora of legal tech, further implementation has been slow. This is in part because the landscape is complex and adoption can be difficult. Businesses that can support on implementation will be able to drive long-term success.
The final piece of the puzzle to succeeding in this market is having a robust sales and marketing strategy. Ultimately, to remain competitive, businesses need successful customer acquisition and retention to win.
Providers should ensure that their brand differentiation is clear and easy to understand, their sales team is effective and active, and that they understand key channels to market and the lifetime value of their customer.
One of the questions firms need to consider is who the key decision-makers are. Positioning will be different if it’s a CTO wanting to improve tech integration across their business, versus a CFO looking for productivity gains, versus a general counsel looking to improve the value-add of their team.
Firms or tech providers that offer multiple solutions are likely to have an advantage, being able to cross-sell to existing customers who see them as a trusted brand.
Understanding customers’ problems and feeding that back into a product and service development lifecycle will help drive future growth potential.
But it all comes down to how well firms can demonstrate and prove ROI. Those who can articulate it and provide evidence of successful client ROI will give their sales and marketing teams the biggest resources to go to market – and ultimately, drive the most growth.