Blog Post

Will Legal Predictive Analytics Transform the Industry?

October 9, 2020

Even if the legal industry hasn’t always embraced change with open arms, new technologies have nevertheless made their mark. The internet, the cloud, eDiscovery systems – now, predictive analytics solutions represent the latest technology with the potential to transform how the legal industry operates. Watching this transformation unfold and responding accordingly will be key to coming out ahead in the future legal industry.

Legal predictive analytics at work

Perhaps one of the most impactful use cases of legal predictive analytics is the prediction of litigation outcomes. There’s a wealth of data out there on cases, rulings, litigation costs, timelines and more that can be assimilated and used to assess whether a given case is likely to end in a favorable outcome. By comparing the features of their case to this historical data, legal professionals can make quantifiable predictions on how lengthy the litigation might be, whether it’ll settle or go to court and whether the costs of carrying out the litigation would outweigh the potential rewards.

Additionally, legal departments can use predictive analytics for budgeting, scheduling and capacity planning. With access to an individual counsel’s data like hourly rates, past performance and areas of expertise, legal professionals can select the optimal team member based on a task’s complexity and domain. Such an analysis could take into account seasonal shifts in demand, product launch days and other key metrics to inform schedules and capacity.

In-house counsels can take a similar approach when evaluating vendors and outside counsel. Working with data like net promoter scores, past performance on different matter types, quoted prices vs. actual prices, performance against industry benchmarks, case notes and more, legal departments can select third parties that are best suited for the matter at hand.

Valuation and pricing could also become simplified through legal predictive analytics. By ingesting contract values, risks and historical price data, legal professionals will be able to more accurately and quickly arrive at settlement amounts and asset valuations.

The beauty of this analytical technique, however, is that it’s completely flexible. So long as the data exists and is structured correctly, predictive analytics could be deployed for any number of tasks in the legal industry. The tasks described above merely represent some of the most valuable use cases.

How this could change the legal industry

People still take precedence

First, it should be noted that human talent and expertise will still be just as relevant, even with predictive analytics solutions providing strategic recommendations for a given matter. Rather than spend time assessing relatively straightforward matters, legal counsel can instead turn their attention to the unique matters whose outcomes can’t be accurately predicted through historical data.

It will be equally important to remain vigilant about potential bias in a predictive analytics solution as well — these tools are only as accurate as the data they ingest, so legal counsels will need to compare recommendations with their own best judgement.

Greater diversity

This isn’t to say that the human element of the legal industry won’t change, however. At law firms, we can expect to see a greater diversity of skill sets and roles, even in leadership positions. In legal departments, there will likely be greater collaboration with the IT department, or embedded IT teams.

Data scientists and AI experts will be responsible for training individual AI models for a given legal matter, a task that requires both technical and legal expertise. Since these models will be fundamental towards informing a counsel’s approach to their matter, it’s likely that individuals with a more technical skill set will take a larger role.

Tailored and fast-changing teams

At the same time, legal teams will become more fluid and agile. As legal predictive analytics can help firms and departments make data-based decisions about the performance and suitability of outside counsel, we’ll likely see a greater reliance on gig lawyers, less reluctance to work with a third party and less time and effort needed to assess legal spend.

Fees based on value, not time

This change in team composition will also be informed by another significant change — the implementation of novel fee structures. With legal predictive analytics, the tedious work that used to generate a lot of billable hours will be completed far faster. Senior lawyers may not need to spend time on these efforts beyond making a simple review of the results. Rather than being compensated based on man hours, legal professionals will likely be compensated based on the actual value they bring to their clients.

A more competitive space

Finally, as legal predictive analytics gains greater penetration in the industry and becomes more sophisticated, we will likely see an increase in competition between law firms.

For one, using predictive analytics will enable legal departments to select outside counsel more precisely, narrowing the field of potential firms who could win their business. At the same time, individual firms using predictive analytics will be able to execute common tasks far more quickly, and thereby increase the maximum caseload they can handle.

Unless demand for legal services rises, there may be fewer clients to go around. As a result, firms will be forced to adopt sophisticated technologies like predictive analytics solutions in order to stay competitive in costs and outcomes.

Barriers to change

Of course, this transition to the use of legal predictive analytics won’t happen overnight. On the road to transformation, we can expect to encounter two major challenges.

1. Current fee structures act as a disincentive

The billable hour doesn’t lend itself toward innovation. First, increased outsourcing and greater efficiency reduce the total number of billable hours for a given matter. Second — and more significantly — there isn’t a direct link between billable hours and actual client value. While firms will always want to succeed and deliver great outcomes to attract clients, their incentive to innovate and adopt impactful technologies won’t be as strong if their compensation isn’t directly based on the quality of their work.

In the long run, however, this isn’t likely to be an on-going challenge. Faced with competition from more innovative law firms and increasing pressure from their clients, firms will ultimately have to adapt.

2. Access to good data will determine success

The problem with any data-based approach is that it’s based on data. If the data is no good, the outcomes won’t be either.

In the legal industry, this is a serious challenge. So much of the relevant data falls under attorney-client privilege or isn’t publicly available. Unsurprisingly, most litigants don’t want others to know that they are in litigation — with nearly all litigations settling outside of court, gaining access to accurate, representative data is a real problem. In fact, predictive analytics based on bad data may very well be worse than simple human judgement.

Legal teams that spend time on the quality of their datasets will, in the long run, outperform those who take what they can get. That’s why it will be crucial to have a strategy in place to inform where you gather data from and what happens to that data once you have it.

As the industry grows more competitive and technologically advanced, a good data strategy may very well become the defining factor in success. We discuss the components of a good data strategy in our whitepaper, “6 Ways to Change Your Mindset for a Successful Data Strategy.” With access to the right data, you’ll dramatically raise your odds of being among the organizations that benefit from the impact of predictive analytics on the legal industry.