The first of this two-part article explores why legal transformation remains a mirage, notwithstanding rapid global and business change. This segment examines the converging forces that will make legal transformation a near-term reality.
Jake Campbell, a character in Hemingway’s The Sun Also Rises, explained how he went bankrupt: “Two ways. Gradually and then suddenly.” The humor of his observation masks its profound insight-and cautionary tale- about life, change, and human adaptation. Change is often gradual, providing early detectors time to adapt and, for some, to capture opportunity. Most individuals and groups, however, are captives of stasis, denial, and/or procrastination. They believe change is illusory- until it affects them. Their reckoning is often sudden and harsh.
Is the gradual pace of legal change prelude to its sudden transformation? The answer is provided not from within the legal industry but from business. Here are some key business initiatives that will dramatically accelerate legal transformation.
Change, Interconnectivity, And Business Integration
In an age of constant, interconnected, and accelerating change, business complexity, and rapid decision-making, business must develop holistic, malleable strategies. That requires securely connecting its workforce technology, information, processes and services internally, across its supply chain, and with its strategic partners. Business is challenged to “connect the dots” and to operate as an integrated network, not a series of siloed departments.
The legal function must be a part of that process, often referred to as business integration. It is a 360-degree customer-focused, agile enterprise strategy that optimizes enterprise value capture through integration. It achieves this by melding data and information that informs real-time, predictive decision-making; an operating model that connects human resources and processes; products and services; technology stacks; talent management; and unified metrics to gauge and elevate internal performance and customer outcomes/experience.
Business integration enables holistic strategic planning, decision-making, operations, and real-time course correction. It is not another Panglossian academic concept distant from the marketplace; it has been successfully applied by leading enterprises. McKinsey studied the impact of integrated business planning (IBP) among over 170 leading companies around the world. Its findings reveal companies that create an integration strategy across the enterprise far outperform peers that do not.
Accenture examined the keys to successful business integration in the insurance industry. It found that in addition to doing away with legacy siloes (departments, data, hierarchical structure, etc.), successful integration depends upon several key connection points. The list includes: customers; an operating model linking people and processes; data and information; and products and services.
These same pivotal elements of integration apply to the legal function. The legal team must be integrated intramurally and across its supply chain. As well, it must be integrated across the enterprise. These are requisites for business to realize legal’s full potential to drive business value. Business will ensure that happens, because it recognizes the significant role a reimagined legal function plays in the wider business transformation journey.
Business Is Driving Legal Transformation and Integration
This column has long maintained that legal transformation is a business story. Business is recasting the legal function to better support digital/AI-era enterprises and their customers. In-house legal teams have been in the vanguard of a gradual but accelerating integration with business. It has resembled a skunk works project- with limited budget, little fanfare, and blue sky thinking- business has challenged in-house legal leadership to operate far beyond its siloed, legacy boundaries. This has resulted in an expansion of legal team portfolios, enterprise footprint, and increased reliance on data and technology to operate more proactively, predictively, and at the speed of business. This has been achieved even with year-over-year legal cost takeout quotas.
The results of in-house transformation have thus far been unevenly distributed and challenging to quantify. There is, however, an uptick of in-house alignment with other business units and enterprise strategic objectives. In-house teams are increasingly leveraging their critical thinking, complex problem solving, analytical skills, and data-backed recommendations across the enterprise. They must also acquire a digital core, the enterprise lingua franca in the digital/AI-era.
What about the legal supply chain? Until the expanding divide separating in-house teams and their outsourced providers is bridged, legal’s enterprise and end-user value will continue to be diluted. Business will not allow that to happen; too much enterprise value is riding on an integrated legal function.
Supply Chain Management, New Providers, And A Paradigm Shift
Supply chain management is playing an increasing important role in the business transformation journey. The supply chain long operated in a linear fashion—a series of steps to make and move goods/services to the end-user. In the era of intelligent supply chains, they are moving towards operating as an integrated network. This is a component of the broader business integration strategy.
Supply chain management is undergoing a rapid transformation, and, somewhat ironically, legal is playing a key role. A recent Thomson Reuters study examined the relationship between GC’s and the supply chain management team. It found early-stage collaboration has multiple enterprise benefits. The list includes: enhancing risk management by anticipating legal issues and providing proactive advice, fostering a culture of compliance by embracing technology, and developing a crisis management plan.
GC’s and their teams will be expected to apply these principles to their own supply chains. That is what will enable the legal function to realize its full potential to create enterprise and customer value. Not only does an integrated legal supply chain produce faster, more efficient output, but it is also, per Accenture, “a main driver of business growth.”
Can corporate legal teams effect the integration of their existing supply chains? Few GC’s have tackled this challenge beyond cost-containment initiatives and shifting work among existing sources. Both are palliatives but not cures to the challenge of creating a unified legal function capable of serving the needs of digital/AI-era business.
The challenges GC’s would encounter integrating their current supply chain sources overlap with opportunities qualified new market entrants offer GC’s to solve them.
Big Law’s business structure, economic model, metrics, margins, and mindsets pose formidable challenges to their in-house integration. The effort would divert in-house teams from their core functions at a time when their role is expanding in scope, complexity, and significance. Most in-house leadership lacks the time or expertise to manage this process at scale. Business does not have time to wait.
A patchwork quilt of single-point ALSP and/or “legal tech” providers, likewise, are not a viable path to integrating law’s supply chain. They lack the funding, scale, breadth and depth of expertise, and digital core to provide in-house teams a quick path to integration.
Expanding the size and percentage of in-house legal spend is also not a long-term solution. The process would divert leadership from an expanding list of existing and new focus areas. The effort to address the challenge internally and organically would be protracted, resource-depleting, and beyond the ken of most legal leadership.
Gen AI, Agentic AI, and emerging technologies will change the nature of work, the workforce, workflow, talent, organizational structure, economic model, and the buyer-seller relationship. It will accelerate the next wave of business transformation that will subsume the legal function. This will, in turn, incentivize new supply sources to enter a fragmented legal market in search of consolidation by partners that see legal as “the missing link” of enterprise integration and value capture.
Who are these new market entrants? Rather than engage in name game speculation, here is a representative list of their distinguishing capabilities.
.creative, visionary leadership for whom challenge represents opportunity and customer-centricity is seminal.
- a business culture that embraces change and strives for constant improvement
- financial strength and scale
- significant, long-term commitment to tech and resource investment as well as strategic business partners operating as a network to address client needs
- Enterprise transformation expertise, experience, and track record (including internal) that can be leveraged to enhance client success
- Global footprint
- a broad, deep, agile, multidisciplinary workforce with a digital core, led by trusted advisor legal leadership with keen understanding of the legal industry from the client and provider perspectives.
- Operates at the speed of business
- Functions as a network, internally as well as with its clients
- World-class technological depth and expertise
- strong partnerships with one or more tech Goliaths
- A deep understanding of legal delivery and the business opportunity of its successful re-imagination
- Applying the foregoing to its own in-house team, and leveraging that experience for the benefit of clients
AI: The Next Wave Of Business Transformation
The paradoxical duality of challenge and opportunity has been magnified by the massive investment, global interest, astonishing advances, and rapid adoption of AI. An encapsulation of recent changes was provided in the first segment of this article. Barely a week after its publication, DeepSeek, a Chinese AI upstart, made global headlines with its mercurial rise to the top of the app download charts. DeepSeek’s sudden emergence and formidable capabilities rattled Silicon Valley tech Goliaths, roiled Wall Street markets, and was described by President Trump as a “wake-up call” for US companies. It was the AI equivalent of the 1957 Soviet launch of Sputnik.
No one is quite sure where AI will land. There is, however, near unanimity among business leaders that gen/agentic AI will profoundly change the commercial landscape. A recent Accenture Report found that:
- 97% of business executives believe AI will fundamentally transform their companies and industries;
- 100% anticipate changes to their workforce
- 93% responded their gen AI investments are outperforming investments in other strategic areas; but
- 65% say they themselves lack the tech expertise to lead gen/agentic AI transformation.
Ever-accelerating advances in gen and agentic AI (and quantum computing) are merging future with present. Humans have created machines that are already matching and often exceeding their own cognitive capabilities. What will the human role be in a world where AI can conduct conversations, proactively undertake projects, and deliver insights and strategic recommendations at a speed and level that surpasses their “human partners?”
A recent Fast Company article addresses that question thoughtfully. While the analysis focuses on the management consultant industry, it is applicable across the knowledge-based workforce. For lawyers and other legal providers, what makes them valuable to clients and what specifically they do to deliver value? In the AI-era, how and when does the legal (or other expert) partner with machines to better serve clients and what additional skills are required for the human expert to do so?
The emerging human/machine partnership illuminates what each brings to the table. A representative list of current uniquely human skills includes: empathy, emotional intelligence, passion, and trust. Andrew J. Scott, an economics professor, thoughtfully observed: “As machines get better at being machines, humans have to get better at being more human.” That helps explain why emotional intelligence (EQ) is a key talent criterion in the digital/AI-era.
Conclusion
What has long been the mirage of legal transformation is about to become the reality. Most in the legal establishment prefer the mirage of change to the specter of reality. It is no longer in their hands; for business, legal change incrementalism it is not an option. That is the clearest sign legal transformation is imminent.