Yesterday’s
final
Legalweek
keynote
by
Heather
Nevitt,
Law.com
Editor
in
Chief,
and
Patrick
Fuller,
ALM
Chief
Legal
Industry
Strategist,
was
entitled
“State
of
the
Industry
–
The
Reckoning.”
It
was
revealing
and
scary.
Focusing
on
two
non-legal
industry
disruptors
in
the
early
2000s,
Apple
and
Netflix,
Nevitt
and
Fuller
tried
to
present
a
call
to
action
to
law
firms
to
embrace
AI
and
advance
change.
Both
Apple
and
Netflix
abandoned
very
good
business
models
because
they
saw
something
much
better
on
the
horizon.
For
Apple,
that
meant
creating
the
iPhone,
which
ultimately
made
the
iPod
obsolete.
For
Netflix,
it
meant
creating
a
streaming
service
that
made
their
video
mail
service
no
longer
popular.
Nevitt
and
Fuller
hypothesized
that
law
firm
clients
are
hungering
for
law
firms
to
similarly
use
AI
to
do
things
faster,
cheaper,
and
importantly,
better.
To
offer
predictable
pricing,
more
collaboration,
and
innovative
use
of
new
tools.
To
be
leaders
in
using
AI
to
solve
problems.
For
firms
to
be
more
transparent
and
client
aligned.
More
than
ever,
clients
are
more
interested
in
value
and
outcome
than
rates
and
time
spent.
And
those
law
firms
that
are
innovative
and
use
AI
to
be
disruptive
will
be
the
winners.
But
is
it
actually
happening?
The
Power
of
the
Billable
Hour
To
meet
these
client
goals
and
desires,
law
firms
would
need
to
make
fundamental
changes
in
their
business
model.
It
would
require
disruption
of
law
firm
culture,
goals,
and
visions.
Why?
The
billable
hour
does
not
necessarily
produce
better
—
and
certainly
not
cheaper
and
faster
—
outcomes.
But
AI
provides
the
opportunity
to
do
things
differently.
Nevitt
and
Fuller’s
thesis
was
that
engaging
AI
tools
and
different
pricing
models
can
better
achieve
what
clients
really
want.
So,
the
firms
that
make
that
pivot
will
be
the
ones
that
succeed
in
the
future.
Hard
to
quarrel
with
that.
But
I
come
back
to
the
famous
Richard
Susskind
quote
when
it
comes
to
law
firm
change:
It’s
hard
to
convince
a
room
of
millionaires
that
their
business
model
is
all
wrong.
As
one
managing
partner
told
me
one
time,
“Our
business
model
is
pretty
simple.
Bill
more
time.
Make
more
money.”
My
Experience
I
know.
In
the
late
90s,
I
undertook
a
national
engagement
under
a
flat
fee
model.
Much
of
what
Nevitt
and
Fuller
observed
proved
true,
even
back
then.
The
client
loved
it.
I
loved
it.
The
firm
budgetary
officer
should
have
loved
it.
The
revenue
to
the
firm
was
predictable
and
the
cost
to
the
client
was
set.
So,
what
went
wrong?
I
needed
to
get
work
done
at
the
lowest
cost
to
maximize
profit.
That
meant
getting
partners
and
associates
to
do
work
as
efficiently
as
possible.
As
a
result,
they
all
hated
me
because
their
hours
took
a
hit.
And
it
was
billable
hours
that
ensured
associate
advancement
and
ultimately
partner
compensation.
It
was
simple:
The
flat
fee
was
anathema
to
the
billable
hour
model.
Culture
always
eats
strategy
for
breakfast.
What
Firms
Are
Really
Doing
And
some
statistics
cited
by
Nevitt
and
Fuller
evidence
the
continued
viability
of
Susskind’s
quote
and
the
absence
of
an
Apple/Netflix-type
pivot.
When
law
firm
leaders
were
asked
how
significant
AI
will
be
to
their
business
over
the
next
five
years,
most
believed
it
would
be
very
significant.
And
most
firms
feel
pretty
comfortable
about
their
rate
of
AI
adoption.
But
when
asked
how
prepared
their
lawyers
are
to
use
AI,
that
confidence
wanes
a
bit.
So,
you
would
think
that
to
prepare
for
the
future,
firms
need
to
be
robustly
training
their
workforce.
Indeed,
75%
say
they
are
offering
AI
training.
Sounds
good
until
you
look
at
how
they
are
doing
it.
Only
66%
are
hiring
professional
specialists
to
help.
As
Fuller
put
it,
“That’s
like
giving
someone
a
map
before
building
roads.”
He’s
right:
Law
firms
all
want
to
say
they
are
embracing
AI
but
very
few
are
adequately
preparing
their
lawyers
for
effective
use.
A
use,
by
the
way,
that
without
planning
and
forethought
could
reduce
billable-hour
revenue
and,
ultimately,
profit.
Another
Hurdle
Profitability
in
the
brave
new
world
of
AI
can’t
hinge
on
time
spent
since
it
will
necessarily
be
less.
It
has
to
be
based
on
outcome
and
value.
To
maintain
profitability
where
fees
are
based
on
outcome
and
value,
you
have
to
move
to
alternative
fee
models
that
aren’t
based
on
time,
leveraging
AI
in
the
process.
But
there
is
a
second
hurdle
to
changing
law
firm
business
models.
Compensation.
Advancement.
Culture.
All
are
based
on
the
billable
hour.
So,
when
you
try
to
move
to
something
else,
you
aren’t
just
talking
about
a
minor
shift,
you
are
talking
about
changing
the
very
fabric
on
which
law
firms
are
built.
The
More
Things
Change,
the
More
They
Stay
the
Same
Here
are
some
statistics
cited
by
Nevitt
and
Fuller:
Only
19%
of
firms
have
modified
fee
arrangements
in
place
that
are
consistent
with
increased
AI
use
and
adoption.
Think
about
that.
Everyone
thinks
AI
will
disrupt
and
reduce
billable
hours,
but
less
than
20%
are
doing
anything
about
it.
But
here’s
something
worse:
72%
of
the
firms
have
no
plans
to
change
attorney
compensation
structures
to
align
with
the
increased
use
of
AI.
If
you
don’t
change
the
compensation
structure,
you
can’t
change
the
business
model
to
something
other
than
time
spent,
period.
Bottom
line:
Law
firms
aren’t
enthusiastic
and
robustly
training
their
workforce
to
deal
with
AI,
they
aren’t
changing
how
they
bill,
and
they
sure
as
heck
aren’t
changing
how
they
compensate
their
lawyers.
But
What
About
Clients?
And
here’s
a
final
nail
in
the
coffin.
Despite
my
client
embracing
my
flat
concept,
I
had
very
little
success
convincing
other
in-house
counsel
to
do
the
same.
The
typical
response
was:
“What
a
great
idea!
But
we
can’t
do
that.”
I
would
like
to
think
that’s
changed
since
my
1990s
experience.
But
the
law
firm
statistics
suggest
that
despite
all
the
talk,
in-house
demands
for
change
may
not
be
as
robust
as
some
think.
Why?
One
thing
that
drives
law
firm
change,
and
perhaps
the
only
thing,
is
client
demand.
If
clients
were
demanding
flat
fees
reflecting
the
rise
and
power
of
AI,
then
more
than
19%
of
the
law
firms
would
be
doing
it.
What
clients
may
instead
want
is
for
firms
to
use
AI
to
reduce
time
spent
and
cost
under
a
billable
hour
model
that
they
aren’t
prone
to
want
changed.
Could
There
Be
Change?
Nevitt
and
Fuller’s
point
was
that
successful
future
firms
will
do
what
Apple
and
Netflix
did
in
the
early
2000s:
Change
their
business
model,
how
they
do
things,
and
their
culture.
That
takes
foresight
and
leadership.
But
law
firms
are
primarily
driven
by
a
consensus
decision
model.
This
means
unlike
Apple
and
Netflix,
where
one
visionary
at
the
top
could
move
the
organization,
law
firm
leaders
have
to
get
the
buy
in
from
virtually
all
partners.
That’s
a
harder
sell.
And
they
have
to
do
it
in
the
face
of
revenue
continuing
to
roll
in,
a
seemingly
inexhaustible
ability
to
raise
rates,
more
work,
and
client
complacency.
So,
I
applaud
their
efforts.
I
think
they
are
right
about
a
lot
of
things.
But
moving
the
needle
won’t
be
as
easy.
And
here’s
something
else
telling.
The
keynote
about
the
state
of
the
industry,
arguably
the
most
important
part
of
the
show,
was
held
on
the
last
day.
Was
sparsely
attended.
But
previous
keynotes
by
an
ex-football
player
and
an
actor
in
the
TV
show
The
Office,
both
of
which
had
little
to
do
with
legal,
were
full.
Think
the
legal
industry
is
ready
to
change?
Think
again.
It’s
still
whistling
past
the
proverbial
graveyard.
Stephen
Embry
is
a
lawyer,
speaker,
blogger,
and
writer.
He
publishes TechLaw
Crossroads,
a
blog
devoted
to
the
examination
of
the
tension
between
technology,
the
law,
and
the
practice
of
law.