Radical change is coming to the industry.
Those who embrace it will thrive. But it requires a more trusting – and less competitive – customer-centric, collaborative mindset.
Janet Taylor-Hall, CEO at Cognia
This article covers
The evolution of the legal industry and the challenges it faces today
Why General Counsels are struggling to drive change despite recognising the need
A vision for a collaborative, innovative, and agile legal ecosystem
The evolution of the legal industry and the challenges it faces today
In 2019, Artificial Lawyer quoted me sharing my view that “the legal sector is no longer just about lawyers and law firms but rather a complex ecosystem of providers, expertise, and tools. Our clients need help understanding their options and designing, implementing, and operating new models that enable them to access, manage, and leverage the legal workforce of the future.” The last five years have proved this comment prescient, but have models changed quickly enough? The legal industry stands at a crossroads, having evolved from a local to a global powerhouse and enjoyed many years of strong growth in financial performance for many law firms. However, the world today demands greater transparency, collaboration, innovation, and agility from the legal industry.
As Cognia engages with our clients, we hear a consistent message: despite this remarkable growth, the ecosystem comprising law firms, in-house legal teams, and alternative legal service providers (ALSPs) still faces significant challenges. The industry’s fragmentation and lack of cohesion are increasingly at odds with the needs of enterprise-wide thinking. Consider the current state of affairs. Law firms continue to rely heavily on billable hour models, a practice that, while profitable, has the tendency to drive misaligned incentives. The war for talent has seen escalating salary costs and much of the financial growth in recent years has been driven by increased rates – at a time when clients are constantly seeking to drive efficiency and productivity with operating margins under intense pressure. In-house legal teams, tasked with bridging legal intricacies and business realities, often navigate complex terrain – balancing the need to deliver more with limited resources while striving to demonstrate their strategic value to C-suites focused on measurable outcomes.
The legal sector is no longer just about lawyers and law firms but rather a complex ecosystem of providers, expertise, and tools.
A current challenge – understanding the pain points
This dysfunctional dance has real consequences. Our recent survey of General Counsels (GCs) revealed that 80% rate the complexity of the global regulatory landscape as their most significant external pressure. Yet, when these same GCs turn to their external counsel for guidance, they often receive advice divorced from business context – a failing that 60% of GCs highlighted as a significant pain point in their relationships with law firms.
The root of this disconnect lies in misaligned incentives and outdated mindsets that persist despite the industry’s growth. Still basking in the glow of a historically lucrative business model, law firm’s leaders are challenged by there being no compelling reason to change. “If it ain’t broke, don’t fix it,” the adage goes. Put another way, leaders find it challenging to drive change in what is perceived as a working model by many partners. The partnership models do not lend themselves to significant investment in innovation and technology needed to drive transformations.
The system is ripe for radical reengineering – certainly we hear the appetite – indeed hunger – for change from clients. But in-house teams, stretched thin by expanding responsibilities, need more resources and support to help them think and drive transformation. We empathise deeply with the challenges faced by GCs. They are at the frontline, managing an ever-expanding role beyond traditional legal and regulatory risk management to a pivotal role enabling business success in an increasingly complex global environment. Their pressures are immense, from navigating intricate and rapidly evolving geopolitical and regulatory landscapes to being guardians of the organisation’s culture and values. They face a constant wave of organisational change and transformation, in many cases driven by Gen AI and other technological advancements and as leaders are seeking to ensure that their own teams are embracing these opportunities.
It’s crucial to understand why, despite these challenges, we’re seeing less dramatic calls for change from GCs. The reality is that they’re often caught in a perfect storm of accelerating demands, evolving roles, and limited capacity. Many don’t have the capacity to drive systemic change while managing the day-to-day internal and external demands of their role.
Understanding the GC paradox
Enter technology, the great disruptor and enabler. Artificial Intelligence, particularly generative AI, looms large on the legal horizon. Its potential to automate routine tasks, enhance data driven decision-making, and democratise legal knowledge is immense.
Yet, our research shows a curious disconnect: while AI dominates conversations, it ranks lowest among GCs’ investment priorities. This paradox speaks to a broader issue: the legal industry’s struggle to integrate technology into its workflows and business models meaningfully. Other than a few notable expectations, leaders often think about tech as “legal tech” instead of as part of the enterprise architecture of their businesses. When considering the role of in-house legal teams, we should think of them not as a separate entity but as an integral part of the business ecosystem.
As Ben Eason, Managing Director – Head of Legal Change and Innovation at HSBC, aptly puts it, legal should be viewed as a wing of the hotel – the enterprise – rather than its own separate house. In this context, in-house legal teams are continually working to seamlessly integrate their business realities. expertise into the broader business structure, balancing legal intricacies with practical business realities.
With the expanding and increasingly pivotal role of the GC today, they and their teams are at the heart of many businesses – empowering and enabling every aspect of success for the organisation.
The challenge is not merely technological but cultural. As a profession, law has long relied on human judgment and expertise. The notion that a machine could replicate or enhance these capabilities represents a paradigm shift many find challenging to embrace. But this is precisely the type of thinking that must be challenged. The future of law is not human versus machine, but human enhanced by machine. This approach is valid of all other professional services – why would the law differ?
With the expanding and increasingly pivotal role of the GC today, they and their teams are at the heart of many businesses – empowering and enabling every aspect of success for the organisation.
A collaborative future – a new legal ecosystem
So, what does a flourishing legal ecosystem look like in the future? We’ve considered this puzzle at Cognia, a collaborative yet disruptive ALSP. The answer lies in co-creation. The rigid silos between law firms, in-house teams, and ALSPs must evolve into fluid networks where expertise flows freely, unencumbered by outdated notions of competition or exclusivity.
This ecosystem is also innovative, not just in its use of technology but in its business models and approaches to problem-solving. Value-based pricing becomes the norm, aligning incentives between service providers and clients. Multidisciplinary teams, combining legal expertise with technological savvy and business acumen, tackle complex challenges holistically.
Agility is the third pillar of this future state. In a world where regulatory landscapes shift like quicksand and business models evolve at breakneck speed, the legal function must be able to pivot rapidly. Flexible structures and processes are required, as is a workforce with diverse skills and adaptable mindsets.
Crucially, this ecosystem places the end client at its heart. Every decision, innovation, and collaboration is evaluated through the lens of client value. In a world where traditional boundaries between industries are blurring, legal service providers that fail to deliver tangible value risk supplanting more agile, client-centric alternatives.
From talk to action – trust is a must
So, what does a flourishing legal ecosystem look like in the future? We’ve considered this puzzle at Cognia, a collaborative yet disruptive ALSP. The answer lies in co-creation. The rigid silos between law firms, in-house teams, and ALSPs must evolve into fluid networks where expertise flows freely, unencumbered by outdated notions of competition or exclusivity.
The path to this future is neither straight nor easy. It requires rethinking deeply entrenched systems and challenging long-held beliefs. For law firms, it means reconsidering partnership structures and balancing short-term profits with long-term sustainability. In-house teams need to shift from reactive risk management to proactive value creation. For ALSPs, it calls for a delicate balance between disruption and integration.
Perhaps most challenging, it requires rebuilding trust across the ecosystem. The current atmosphere of mistrust – between firms and clients, in-house and external counsel, law firms and ALSPs, humans and machines – is counter productive.
Rebuilding this trust starts with transparency. Law firms must be open about their processes, pricing, and technology use. In-house teams must clearly articulate their needs and the metrics they measure value. Alternative providers should be forthright about their capabilities and limitations.
The stakes in this transformation are high. Those who embrace change stand to not only survive but thrive in this new landscape. They will forge more meaningful relationships with clients. They will attract top talent drawn to innovation and purpose. They will, in short, shape the future of law.
Those who resist this evolution, clinging to outdated models and mindsets, risk obsolescence. The world will not wait for the legal industry to catch up. Businesses facing unmet needs will find alternatives – bringing more work in-house, turning to non-traditional providers, or leveraging technology to bypass traditional legal services altogether.
As we stand at this crossroads, the question is not whether change will come but who will lead it.
While disruption dominates discussions about the legal industry’s future, an often-overlooked trend is the overall expansion of the legal services market . This growth presents both challenges and opportunities, suggesting a future where traditional and innovative models may coexist and evolve in parallel.
In the next article in this series I’ll explain how we at Cognia are spearheading and co-creating this evolution with all the players in the ecosystem, our view of how the reimagined legal services are delivered and how the entire ecosystem functions.
Key takeaways
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