Emerging AI Strategies for Law Firms

When it comes to structural shifts, law firms tend exhibit herd-like behaviours which, rather than be a criticism, I attribute to sensibly managing regulatory risk

For AI, it strikes me that there is now a relatively consistent approach emerging across three key dimensions

In isolation each is understandable, but taken together I think firms are setting themselves up for commercial failure

1 - Buy rather than build AI products

Dom Conte called this out last week, the result being an undifferentiated tech offering as everyone is buying the same products (Harvey, Legora etc)

Any first mover/early adopter advantage is fast eroding at this point as the market at large catches up

2 - Update T&C's to push GenAI reliability issues onto the client

Todd Smithline recently highlighted both law and accounting firms attempting to shift risks around output accuracy to the end client

I'm NAL so offer no opinion on enforceability but rather on commerciality. Assuming clients accept it, they will likely want to extract a concession on price to reflect the reduced quality assurance offered

3 - Shift from hourly rates to fixed fees

Candidly, there's a lot of naivety here in saying let's 'just' shift to value-based pricing, when in practice firms are mostly taking the historic hourly rate fees and fixing at the average (or average plus x%). This is fundamentally cost-plus-margin pricing, not pricing with reference to the client's perceived value

A consistent gap here is not the maths - it's the gap with marketing, that being effective market segmentation and targeting (who do we want to serve/not serve), robust market research (what do those clients value) and branding (what does price say about our brand)

Taken together, the emerging playbook seems to be saying (1) we're using standard AI products, (2) we are reducing our assurances on the overall quality of the work product, and (3) we have no defensible price

From a client perspective, that may all be acceptable - but don't be surprised when they push prices down far beyond sharing the efficiency gains

Why would clients pay £x, when they can pay a lower £y from any number of your competitors who are offering much the same?

None of this is to say there aren't outliers - either with incumbent firms, or with new entrants - but this is a fast track to commoditisation driven by FOMO on the tech

Partners should be challenging themselves and their firms to answer - what's the long term plan here?

For example, you could drive volume to compensate for lower price. Or you could retreat into the work types that AI can't touch (yet)

Either are valid, but difficult to pull off both

Emerging AI Strategies for Law Firms