Why you should consider an AI strategy
Artificial intelligence can boost profit margins and firms that don’t keep up may lag behind, says Doug Hargrove, senior vice president, legal and professional services at Advanced
Law firms are grappling with artificial intelligence challenges and opportunities, although some are hesitant to admit AI usage, 27% of respondents in the legal sector reported using AI, as per our 2023/24 Advanced Trends Report, while 43% were researching AI tools.
We recently hosted, alongside Legal Practice Management (LPM) Magazine, a roundtable event for law firms exploring AI approaches. Some firms encouraged employees to use ChatGPT at home to become familiar with technology not yet deemed secure enough for legal practice purposes.
AI use cases in firms
AI is a broad term, and many legal practices are exploring safe applications, such as client onboarding to enhance client experiences. High street practices are noticing a demographic change, with a growing number of younger clients expecting automation and instant responses enabled through AI-driven solutions.
AI enhances HR processes. Many firms adopted automation during the pandemic, making AI a gradual step to boost back-office efficiency. However, there’s a general reticence around committing to using AI for client-facing work.
AI is becoming integral to new technologies, and those waiting will eventually adopt it. For example, Microsoft Copilot, an AI-powered productivity tool that combines the power of language models with a business’ in-house data, working across all Microsoft applications. At Advanced we already have around 700 engineers looking at adopting Copilot to speed up the delivery of features and updates.
Driving up profit margins
Automation boosts efficiency and profit margins. Implementing AI-driven automation is highly beneficial for instances where clients expect fixed fees for services such as will-writing.
Firms recognise the value in implementing new technology as an effective strategy to attract and retain talent and are waiting to see if, and when, candidates begin to specify AI as a factor. Some believe it is only a matter of time before top talent asks for and expects to use AI-driven tools to enhance their productivity. Career-driven fee earners, for example, can, and should, be thinking of ways to save time and money for higher profit margins.
Automation can handle repetitive tasks like risk assessments, standard contract writing, and conveyancing. AI is already embedded in some of these tools or will be in the next-generation tools.
Barriers to AI adoption
One major barrier to AI adoption is compliance concerns within firm policy. More cautious firms are sitting back and watching while large law firms invest and take the AI risks, before making any decisions. The General Data Regulation (GDPR) compliance is crucial where customer data will be entered into large databases for analysis and recommendation of next steps using AI.
Using AI for cost reduction can be counterproductive if clients demand price reductions. Some practices fear that AI might not only reduce task time, but also their fee. Using AI for fixed-fee work such as will writing could increase profit margins. Others take the view that implementation cost can be passed on to the client and is not something to shy away from. This could potentially lead to a routine declaration on invoices about how much human expertise versus AI technology was used when doing the work.
Professionals working in small firms may feel hamstrung by investment decisions falling to the CEO, as the outcome depends on their personal understanding of what is possible with new technology, and what they are looking for in a solution. Scepticism from senior decision-makers can hinder the adoption of AI.
In larger firms, investment decisions require approval from senior partners, as content and data access are necessary for AI implementation. Media concerns about Generative AI like ChatGPT contribute to a general scepticism around AI safety among legal professionals. Although younger clients may be open to AI, it may not suit others that are more wary about firms using this yet unregulated technology to handle their data and case.
Steps forward
To benefit from AI, develop policies, manage risks, and embrace its rise. One area that is going to undergo significant changes is job roles in a law firm. Many expect that office staff will be major casualties, as some firms already set a huge reduction of secretaries and support staff on the payroll.
AI will produce new roles and opportunities. For example, head of innovation to drive change and implementation of new technologies, alongside head of learning who will positively impact the future development of fee earners within a practice. There will also almost certainly be a requirement for greater oversight of work that has been produced using generative AI, possible creating specific AI supervisor roles.
Firms can explore what providers like Advanced offer during pre-implementation. We’re investing in research and development for tools like ‘Next Best Actions’ which uses case histories to suggest the best course of action, speeding up decisions. Other examples of firms using AI include chatbot-based quote systems. Recognising price often takes priority over loyalty, firms know that clients shop around, making it important to quote immediately.
Successful adoption of AI-powered tools enables firms to be flexible and adapt services to suit clients. In an environment where clients expect increasing numbers of options, it’s vital that a firm can offer choice. This is particularly important with the younger generation of clients growing up as ‘tech natives’ who demand more automation, with 24/7 access using chatbots and better access to information.
Setting up internal committees and tasking individuals to explore how their firms can engage with AI to deliver better experiences for professionals and clients may involve learning from larger firms. Some are already developing their own AI-powered platforms which may, in time, become available for smaller firms. As in many aspects of business, preparing for the future is crucial to maintain a competitive edge and attract quality talent and clients to drive growth. While tempting, a ‘wait and see’ approach, could see small firms being left behind as this powerful technology is on the rise.
