sustainability
Article
Legal Technologies in Action: The Future of the Legal
Market in Light of Disruptive Innovations
Qian Hongdao 1, Sughra Bibi 1, *, Asif Khan 2, 3, *, Lorenzo Ardito 4, *
and Muhammad Bilawal Khaskheli 1
1Guanghua Law School, Zhejiang University, Hangzhou 310058, Zhejiang, China;
hongdaoshuyuan@126.com (Q.H.); bilawal_kamber@yahoo.com (M.B.K.)
2Department of Tourism and Hotel Management, School of Management, Zhejiang University,
Hangzhou 310058, Zhejiang, China
3Department of Tourism & Hospitality, Hazara University, Mansehra 21120, KP, Pakistan
4Department of Engineering, UniversitàCampus Bio-Medico di Roma, 00128 Rome, Italy
*Correspondence: sughra.fareed@yahoo.com (S.B.); asifkhanth@yahoo.com (A.K.);
lardito@unicampus.it (L.A.)
Received: 22 January 2019; Accepted: 11 February 2019; Published: 15 February 2019
Abstract:
Legal technologies (digital solutions to providing legal services) have turned into the
essential element of competition among legal-market stakeholders. This study highlights the
competitive superiority of legal services based on the concept of innovative disruptive technologies
in comparison to traditional firms. For this purpose, the present study identified several trends in
the evolution of the legal tech market (i.e., changing landscapes of legal business, delivery models,
legal-market segments, and disruptive technologies); moreover, qualitative content analysis has been
conducted to provide sound grounds for cost-benefit analysis. Furthermore, cost-benefit analysis
makes a comparison of the monetary, social and psychological costs, benefits of legal technologies
and traditional firms from clients’ and lawyers’ viewpoints. This has been, in fact, neglected by extant
research. Based on these analyses, a new model for legal business has developed to highlight how
potential advancements can take place in legal practices. Our findings reveal that legal technologies
make legal services more affordable and easily accessible, while helping lawyers to develop innovative
solutions and a relaxed working environment. In addition, this study contributes to the literature
on service innovation with a focus on how new services and business models have been developed
in the legal market as a result of digital technologies. Eventually, this study adds theoretical and
practical implications to the research discussing the advent of legal technologies.
Keywords:
legal technology; disruptive technology; online legal services; sustainable solutions; legal
market; market segmentation; traditional law firms
1. Introduction
Law, order, and justice are essential ingredients for ensuring trust in a global age [
1
]. In particular,
since legal services have become an international phenomenon, the need for services such as the
provision of legal documents, sanctioned applications, intellectual-property management, and business
structuring has significantly increased. Accordingly, total spending in the legal-service market is
expected to grow in the following years, reaching an amount of about $B 1.011 in 2021 (see Figure 1).
Sustainability 2019,11, 1015; doi:10.3390/su11041015 www.mdpi.com/journal/sustainability
Sustainability 2019,11, 1015 2 of 19
Sustainability 2018, 10, x FOR PEER REVIEW 2 of 19
Figure 1. Growth prediction of the global legal-service market (author-generated, data source: Statistia.com).
In this context, traditional law firms are facing a very large amount of pressure from clients to deliver
more at less cost and higher quality. This goes with the advent of reforms in the legal market,
especially those pushed by new technological opportunities [2]. These changes in the legal market
have opened doors to the development and adoption of legal technologies that allow legal-service
providers to enhance productivity, offer innovative digital products (e.g., cybercrime consultation,
contract management, due diligence), improve legal-service delivery and quality while keeping costs
at a low level. Specifically, scholars have defined legal technology as the application of technology
and software to help law firms [3–5] with practice management, billing, big data, e-discoveries,
predictive analytics, knowledge management and document storage [6,7]. In addition, legal
technology helps the clients by providing access to online software that reduces time, money and
several other costs [8,9]. Overall, this has resulted in change with respect to conventional business
models and allowed meeting the demand of low- and middle-income clients through the
commodification of relatively conventional legal services [10]. For instance, Wise Legal Services,
Rocket Lawyer, Legal Zoom, and Legal Shield have adopted alternative business models based on
legal technologies to provide individuals and small- and medium-sized businesses with online legal
services including incorporation, estate plans, legal health diagnostics, legal-document automation,
practice management, document storage, billing, accounting, and electronic discovery [9].
The legal industry is experiencing a shift in delivery and business models, in turn leading to a
disruptive change of the “conventional” legal market. In fact, initially, technology-based legal
services served the low ends of the market since they were unable to afford sophisticated legal
offerings [11]. These services were novel, cheaper, simpler, easily accessible, and more convenient to
use for relatively simple legal actions [12], albeit with avenues for improvement when more complex
services were requested. Therefore, legal technologies were not welcomed by well-established firms
because of less attractive profit margins and rigid mental models [13]. Yet, as time has passed, some
(disruptive) innovators (e.g., Avvo, Axiom, Great Way Great Win, LegalZoom, and Rocket Lawyer,)
improved the quality of their offerings and started to satisfy the large population of customers and
their needs and displace prevailing firms [14]. At the same time, the leadership strategy of traditional
law firms (e.g., Bingham McCutcheon, Heenan Blaikie, Dewey and LeBoeuf) failed due to a lack of
focus on clients’ demands, refusal to learn, lack of experimentation and of the adaptation of legal
technologies (as it usually happens in disruptive revolutions) [15–17].
However, despite the increasing relevance of legal technologies in providing new services, “[t]he
clients were [still] unhappy, and the lawyers weren’t happy; it just felt like there must be a better
way” to adopt legal technologies [18]. This implies that the future of and path toward the adoption
of legal technologies still need to be clearly unveiled and designed [19,20]. Accordingly, both
academics and practitioners have tried to better understand how legal firms should deploy legal
technologies to revisit their business models and satisfy customers’ and lawyers’ needs. For instance,
the studies by Barton [21], Brivot [20], and Skjolacik et al. [22], as well as the IBA research unit report
2016 [23], the ABA report 2016 [6], and Harvard Law school annual report 2015–2016 [24] provided
Figure 1.
Growth prediction of the global legal-service market (author-generated, data source:
Statistia.com).
In this context, traditional law firms are facing a very large amount of pressure from clients to
deliver more at less cost and higher quality. This goes with the advent of reforms in the legal market,
especially those pushed by new technological opportunities [
2
]. These changes in the legal market
have opened doors to the development and adoption of legal technologies that allow legal-service
providers to enhance productivity, offer innovative digital products (e.g., cybercrime consultation,
contract management, due diligence), improve legal-service delivery and quality while keeping costs
at a low level. Specifically, scholars have defined legal technology as the application of technology and
software to help law firms [
3
–
5
] with practice management, billing, big data, e-discoveries, predictive
analytics, knowledge management and document storage [
6
,
7
]. In addition, legal technology helps the
clients by providing access to online software that reduces time, money and several other costs [
8
,
9
].
Overall, this has resulted in change with respect to conventional business models and allowed meeting
the demand of low- and middle-income clients through the commodification of relatively conventional
legal services [
10
]. For instance, Wise Legal Services, Rocket Lawyer, Legal Zoom, and Legal Shield
have adopted alternative business models based on legal technologies to provide individuals and
small- and medium-sized businesses with online legal services including incorporation, estate plans,
legal health diagnostics, legal-document automation, practice management, document storage, billing,
accounting, and electronic discovery [9].
The legal industry is experiencing a shift in delivery and business models, in turn leading to a
disruptive change of the “conventional” legal market. In fact, initially, technology-based legal services
served the low ends of the market since they were unable to afford sophisticated legal offerings [
11
].
These services were novel, cheaper, simpler, easily accessible, and more convenient to use for relatively
simple legal actions [
12
], albeit with avenues for improvement when more complex services were
requested. Therefore, legal technologies were not welcomed by well-established firms because of less
attractive profit margins and rigid mental models [
13
]. Yet, as time has passed, some (disruptive)
innovators (e.g., Avvo, Axiom, Great Way Great Win, LegalZoom, and Rocket Lawyer,) improved
the quality of their offerings and started to satisfy the large population of customers and their needs
and displace prevailing firms [
14
]. At the same time, the leadership strategy of traditional law firms
(e.g., Bingham McCutcheon, Heenan Blaikie, Dewey and LeBoeuf) failed due to a lack of focus on
clients’ demands, refusal to learn, lack of experimentation and of the adaptation of legal technologies
(as it usually happens in disruptive revolutions) [15–17].
However, despite the increasing relevance of legal technologies in providing new services, “[t]he
clients were [still] unhappy, and the lawyers weren’t happy; it just felt like there must be a better
way” to adopt legal technologies [
18
]. This implies that the future of and path toward the adoption of
legal technologies still need to be clearly unveiled and designed [
19
,
20
]. Accordingly, both academics
and practitioners have tried to better understand how legal firms should deploy legal technologies to
Sustainability 2019,11, 1015 3 of 19
revisit their business models and satisfy customers’ and lawyers’ needs. For instance, the studies by
Barton [
21
], Brivot [
20
], and Skjolacik et al. [
22
], as well as the IBA research unit report 2016 [
23
], the ABA
report 2016 [
6
], and Harvard Law school annual report 2015–2016 [
24
] provided good insights about
the emergence of legal technologies, related business models, market segments, particularly discussing
the impact of digitalization on legal industry, the role of billable hours, digitalization on productivity,
promotional campaigns, how the role of legal technologies changed from a source of differentiation to
enabling and supporting business. Still, these studies have neglected some relevant aspects; that is, these
studies have neither specifically accounted for the social-, psychological-, monetary-, and time-cost
aspects for (legal) consumers when adopting technology-based legal services, nor pointed out the costs
and benefits for lawyers, thus highlighting relevant gaps in the extant literature because these aspects
reflect the willingness of customers’ lawyers to work under an alternative business model. Therefore,
this study aims to overcome these gaps by properly considering the efficiency and effectiveness of
legal services based on disruptive technologies that provide potential sustainable gain to the clients
and lawyers, over the traditional services. In turn, the study seeks to understand the variance between
traditional and legal tech firms, with specific comparisons between more traditional, novel business
and delivery models. In sum, this study addresses the question of how legal technologies enable the
development of new business, and delivery models, and whether they provide enough incentives to
clients and knowledge to lawyers, for the adoption of alternative legal services.
To do so, content analysis was adopted to identify new trends in the legal market and develop
a cost-benefit analysis that allows us to come up with a novel sustainable business model for legal
firms. Our model includes five main pillars (services, resources, financing, investment, and pricing)
that provide grounds for achieving the goal of cost efficiency and the fast delivery of legal services.
For the development of the paper, the following steps have been conducted to eventually propose
a novel and fresh business model on the basis of adopting legal technologies by investigating their
disruptive nature. Firstly, Section 2discusses the main theoretical underpinnings of the study, followed
by an analysis of the avenues opened by legal technologies in the legal market. Secondly, Section 3
discusses the study design and methods. Afterward, legal-market segmentation from traditional to
new legal services models is presented to better dig into its peculiarities in Sections 4and 5. Finally,
in Section 6, by relying on the prior steps, qualitative cost-benefit analysis is presented and a novel
business model is proposed. Section 7summarizes the paper, concluding the discussion, and presents
theoretical and practical implications.
2. Theoretical Background
The term “disruptive innovation” was first coined by Christensen [
25
] as a process by which
a product or service primarily takes root at the bottom of a market and then relentlessly moves up,
ultimately displacing established competitors [
26
]. Recalling this concept, Raymond et al. (2014) were
of the opinion that the legal profession is in the midst of immense disruption that will change the
practice and delivery of law [
27
]. Similarly, according to Susskind [
28
], the legal profession and industry
are experiencing substantial disruption [28] and the current trend will result “[in] the emergence of a
legal industry that will be completely strange to the current formation”, hence modifying the future of
lawyers and the legal market [29].
Broadly speaking, disruption provides a solid ground for digital transformation and is becoming
a prime objective for industries across the world [
30
], since it leads to the implementation of
novel business and delivery models by allowing various forms of co-operation between companies,
employees, and customers [
31
,
32
]. In this vein, relevant studies (e.g., Nambisan [
33
], Barret et al. [
34
],
and Nylen et al. [
35
]) have reported the importance of digital technologies, especially in the context
of service innovations or for the servitization of manufacturing firms, leading to the restructuring
of business and delivery models. This is particularly evident when considering e-procurement and
e-government, which are representative examples of how disruption has significant effects on the
delivery of new services by public administration [
36
]. Thus legal firms, as service-oriented companies,
Sustainability 2019,11, 1015 4 of 19
are also expected to benefit from digital technologies through the introduction of disruptive innovative
legal services (e.g., online courts, documentation, consultation, legal intelligence), which provide;
a. A rich user experience that can be measured on its usability, aesthetics, and engagement.
b.
Enhanced value propositions by delivering the promised services in a speedy and
innovative manner, which can be assessed on the dynamics of customers’ segmentation and
service bundling.
c.
The path for continuous improvement and cost efficiency, e.g., the invention of legal robots is a
continuation of legal drafting and contract management.
These characteristics make the legal industry a suitable candidate for developing
disruptive-service innovations [35], in line with Christensen’s definition [24,35,36].
2.1. Legal Market and Avenues Opened by Legal Technologies
People desire quick and valuable legal services that are characterized, for instance, by the ease of
access, cost efficiency and affordability. Susskind [
28
] suggests that legal-services providers are still in
the process of transforming legal work through disruption. So far, three main drivers for change have
been identified by most of the scholars and legal institutions [6,23,29]:
•the ‘more-for-less’ challenge,
•liberalization, and
•technology.
2.1.1. Drive One: More-for-Less Challenge
Scholars suggest that the 2008 recession gave birth to changes in the legal industry [
37
,
38
],
whereby the success of law firms lay in charging less by offering alternative fee arrangements, i.e.,
efficiency and collaborative strategies [
29
]. These are reflected in the recent transition from bespoke
to commodification [
39
]. The disruption process from bespoke to commodification and fee-structure
models in the legal-service market is presented in Figure 2[29].
Sustainability 2018, 10, x FOR PEER REVIEW 4 of 19
a. A rich user experience that can be measured on its usability, aesthetics, and engagement.
b. Enhanced value propositions by delivering the promised services in a speedy and innovative
manner, which can be assessed on the dynamics of customers’ segmentation and service
bundling.
c. The path for continuous improvement and cost efficiency, e.g., the invention of legal robots is a
continuation of legal drafting and contract management.
These characteristics make the legal industry a suitable candidate for developing disruptive-service
innovations [35], in line with Christensen’s definition [24,35,36].
2.1. Legal Market and Avenues Opened by Legal Technologies
People desire quick and valuable legal services that are characterized, for instance, by the ease
of access, cost efficiency and affordability. Susskind [28] suggests that legal-services providers are
still in the process of transforming legal work through disruption. So far, three main drivers for
change have been identified by most of the scholars and legal institutions [6,23,29]:
• the ‘more-for-less’ challenge,
• liberalization, and
• technology.
2.1.1. Drive One: More-for-Less Challenge
Scholars suggest that the 2008 recession gave birth to changes in the legal industry [37,38],
whereby the success of law firms lay in charging less by offering alternative fee arrangements, i.e.,
efficiency and collaborative strategies [29]. These are reflected in the recent transition from bespoke
to commodification [39]. The disruption process from bespoke to commodification and fee-structure
models in the legal-service market is presented in Figure 2 [29].
Figure 2. Richard Susskind (2008) evolutionary path.
The legal service moves from bespoke to standardization [29], and with the advent of
technology, further changes took place in legal services in form of systemization [40]. For instance,
recent trends reveal that routine legal work, such as employment contracts, was once filled by
human-resource departments; nowadays, it is done online and directly with the client organization,
Figure 2. Richard Susskind (2008) evolutionary path.
Sustainability 2019,11, 1015 5 of 19
The legal service moves from bespoke to standardization [
29
], and with the advent of technology,
further changes took place in legal services in form of systemization [
40
]. For instance, recent trends
reveal that routine legal work, such as employment contracts, was once filled by human-resource
departments; nowadays, it is done online and directly with the client organization, and this
externalization (packaging) of legal services is deemed to become a more sustainable approach [
29
].
Online technologies have thus allowed lawyers to virtually prepackage and offer their experiences to
clients in a more efficient and effective manner [
28
]. The entire process, from bespoke to packaging, is
termed as the commoditization of legal services [
29
]. Commoditization is the process through which
providers charge for access to their online services and offer dramatically lower costs to clients [
29
,
37
].
The core drivers for change in legal services are three-dimensional; clients are unable to afford legal
services due to the traditional hourly-billing model [
37
,
41
]. Corporations, small- and medium-sized
businesses, and individual consumers started to demand fast legal services for a low cost [
29
,
42
], that
is, ‘the more-for-less’ movement. Transparency functioned as a catalyst to bring change into legal
work [43].
2.1.2. Drive Two: Liberalization
The second drive for change in the legal arena is liberalization. Scholars contend that lawyers
are authorized to provide legal services, but did not offer appropriate alternatives to the client, and
this led to huge criticism for the unjustifiable monopoly and restrictive practices [
29
]. This fueled
many campaigns in countries like the United Kingdom and Australia for ‘relaxation of the law and
regulations that govern who can offer legal services and what types of businesses’. For example,
in England, the Legal Services Act 2007 permits the setting up of new types of legal businesses.
This became the birthing ground for alternative business structures (ABSs); now, non-lawyers and
paralegals can own or run legal businesses [
29
]. Legal-service regulations in England, Scotland, and
Ireland are the best examples of liberalized legal services [
44
]. Indeed, liberalization opens venues for
legal partnership and the adoption of legal technologies, as revealed by the delivery of novel services
such as e-disclosures, virtual courts, and online dispute resolution.
2.1.3. Drive Three: Technology
The third major drive for change is technology; it has not only made legal services more
transparent, but also more accessible and cost-effective [
24
]. There are online startups that match
lawyers with prospective clients according to their needs and financial means [
45
]. Campbell
(2012) suggests that the body of general counsel has given birth to potential disruptive openings
for non-lawyers and other vendors to sell their offerings to the general counsel’s office [
14
]. Alternative
business structures are innovated by unbundling legal services through affordable prices and easy
access compared to competitors [46].
Figures 3and 4indicate huge investments in a large number of disruptive legal-tech companies
during the past few years as Susskind has mentioned that legal disruption will take place due to market
demand for cost efficiency, liberalization, and quick and easy delivery of legal services [
26
,
28
,
29
,
47
],
the results of Figures 3and 4are in-line with Susskind and other scholars. Cost efficiency in legal
services is a market force driven by client demand for ‘more for less’, and it is dominant in a law
business like any other businesses, while technology and liberalization bring a storm of reforms to
legal practices [
2
]. Scholars have, in turn, viewed disruptive technologies as key to a sustainable
economy [48].
Sustainability 2019,11, 1015 6 of 19
Sustainability 2018, 10, x FOR PEER REVIEW 6 of 19
Figure 3. Global legal-tech investments (author-generated, source: Tracxn 2018 report: legal tech
startup landscape. Note that the data for 2018 are until May).
Figure 4. Legal-tech companies funded worldwide (author-generated, source: Tracxn 2018 report:
legal-tech startup landscape. Note that data for 2018 are until May).
3. Study Design and Methods
Legal technology is in the nascent stage of development in the legal industry and very little
knowledge is available in published and structured form. Thereby, exploratory analysis is
recommended [49]. Firstly, data about legal technologies and their (potential) implementation have
initially been collected from various sources (e.g., Bloomberg Law, Capterra, Forbes, Great Way Great
Win, Law Society Gazzete, Lawfar, Lexsnap, IBA reports, ABA reports, Tracxn reports, Thomson
Reuters, Legalzoom, Minnesota State Law library, Nerdwallet, Rocket Lawyers, The Legal
Intelligencer, 1818Wise Services, news articles, and online blogs). Then, to improve the reliability and
validity of this research process [50], the present study has triangulated data for developing a more
effective method to capture and fix the main themes and trends underlying the evolution of the legal
market [46,51]. Content analysis was also conducted for systematically analyzing the data [52–54].
Scholars suggested that due to the lack of sufficient empirical evidence regarding a phenomenon, the
appropriate research strategy in such a situation is the case study and qualitative content analysis
[52,55,56]. Three different strategies have been identified by scholars for analyzing the data through
content analysis, i.e., summary, explication, and structuring [52]. In detail, the present study
particularly focuses on online legal services or tech-based legal services since they are the main
products of disruptive innovations in the legal market [57].
Figure 3.
Global legal-tech investments (author-generated, source: Tracxn 2018 report: legal tech
startup landscape. Note that the data for 2018 are until May).
Sustainability 2018, 10, x FOR PEER REVIEW 6 of 19
Figure 3. Global legal-tech investments (author-generated, source: Tracxn 2018 report: legal tech
startup landscape. Note that the data for 2018 are until May).
Figure 4. Legal-tech companies funded worldwide (author-generated, source: Tracxn 2018 report:
legal-tech startup landscape. Note that data for 2018 are until May).
3. Study Design and Methods
Legal technology is in the nascent stage of development in the legal industry and very little
knowledge is available in published and structured form. Thereby, exploratory analysis is
recommended [49]. Firstly, data about legal technologies and their (potential) implementation have
initially been collected from various sources (e.g., Bloomberg Law, Capterra, Forbes, Great Way Great
Win, Law Society Gazzete, Lawfar, Lexsnap, IBA reports, ABA reports, Tracxn reports, Thomson
Reuters, Legalzoom, Minnesota State Law library, Nerdwallet, Rocket Lawyers, The Legal
Intelligencer, 1818Wise Services, news articles, and online blogs). Then, to improve the reliability and
validity of this research process [50], the present study has triangulated data for developing a more
effective method to capture and fix the main themes and trends underlying the evolution of the legal
market [46,51]. Content analysis was also conducted for systematically analyzing the data [52–54].
Scholars suggested that due to the lack of sufficient empirical evidence regarding a phenomenon, the
appropriate research strategy in such a situation is the case study and qualitative content analysis
[52,55,56]. Three different strategies have been identified by scholars for analyzing the data through
content analysis, i.e., summary, explication, and structuring [52]. In detail, the present study
particularly focuses on online legal services or tech-based legal services since they are the main
products of disruptive innovations in the legal market [57].
Figure 4.
Legal-tech companies funded worldwide (author-generated, source: Tracxn 2018 report:
legal-tech startup landscape. Note that data for 2018 are until May).
3. Study Design and Methods
Legal technology is in the nascent stage of development in the legal industry and very
little knowledge is available in published and structured form. Thereby, exploratory analysis is
recommended [
49
]. Firstly, data about legal technologies and their (potential) implementation have
initially been collected from various sources (e.g., Bloomberg Law, Capterra, Forbes, Great Way Great
Win, Law Society Gazzete, Lawfar, Lexsnap, IBA reports, ABA reports, Tracxn reports, Thomson
Reuters, Legalzoom, Minnesota State Law library, Nerdwallet, Rocket Lawyers, The Legal Intelligencer,
1818Wise Services, news articles, and online blogs). Then, to improve the reliability and validity of this
research process [
50
], the present study has triangulated data for developing a more effective method
to capture and fix the main themes and trends underlying the evolution of the legal market [
46
,
51
].
Content analysis was also conducted for systematically analyzing the data [
52
–
54
]. Scholars suggested
that due to the lack of sufficient empirical evidence regarding a phenomenon, the appropriate research
strategy in such a situation is the case study and qualitative content analysis [
52
,
55
,
56
]. Three different
strategies have been identified by scholars for analyzing the data through content analysis, i.e.,
summary, explication, and structuring [
52
]. In detail, the present study particularly focuses on online
legal services or tech-based legal services since they are the main products of disruptive innovations in
the legal market [57].
Sustainability 2019,11, 1015 7 of 19
4. Legal-Tech Market Segmentation
Market segmentation is not a new phenomenon for industries, due to the availability of various
alternatives, specific tasks, and expertise. The legal market, client’s needs, and specific legal segments
are the cry of the modern world [
58
]. The present study views price, quality, cost, specialized tasks,
target markets, and the services model as a base for legal-tech market segmentation, and that service
model is preferred both by clients and investors that bring more economies of scale. The legal market
is similar to the other products and services, such as accountants and management consultants [
59
],
but it is broader than these examples because it has more subject areas [
60
]. Clients put pressure
on lawyers for cost efficiency, quality, and easily-accessible legal services [
61
]. The supply of legal
services consists of software engineers, clouds specialists, investors, paralegals, non-lawyers, and
entrepreneurs. Scholars suggest that supply and demand in the legal market do not match with regard
to the contents. This gap between demand and supply leads to disruptive innovation in the legal
market [
62
,
63
]. Due to change in business-model paradigms, emphasis on the legal market has shifted
from bespoke to value proposition, creating customer value and many other marketing elements [
63
].
Scholars are of the opinion that ‘Big Law’ will remain, but innovations will divide the legal market
into various segments [48,64].
From the mentioned literature and with the help of the investment portfolio in Figure 5, it is
evident that various firms offer numerous technology-catered service packages to individual lawyers,
larger corporate-law firms, and other key stakeholders in the legal market. According to the
investments in Figure 5, legal-tech market segments include a range of services, for example, Saas,
eDiscovery, legal management, review, and analytics.
Sustainability 2018, 10, x FOR PEER REVIEW 7 of 19
4. Legal-Tech Market Segmentation
Market segmentation is not a new phenomenon for industries, due to the availability of various
alternatives, specific tasks, and expertise. The legal market, client’s needs, and specific legal segments
are the cry of the modern world [58]. The present study views price, quality, cost, specialized tasks,
target markets, and the services model as a base for legal-tech market segmentation, and that service
model is preferred both by clients and investors that bring more economies of scale. The legal market
is similar to the other products and services, such as accountants and management consultants [59],
but it is broader than these examples because it has more subject areas [60]. Clients put pressure on
lawyers for cost efficiency, quality, and easily-accessible legal services [61]. The supply of legal
services consists of software engineers, clouds specialists, investors, paralegals, non-lawyers, and
entrepreneurs. Scholars suggest that supply and demand in the legal market do not match with
regard to the contents. This gap between demand and supply leads to disruptive innovation in the
legal market [62,63]. Due to change in business-model paradigms, emphasis on the legal market has
shifted from bespoke to value proposition, creating customer value and many other marketing
elements [63]. Scholars are of the opinion that ‘Big Law’ will remain, but innovations will divide the
legal market into various segments [48,64].
Figure 5. Legal-tech key market segments (author-generated, data source: Tracxn 2018 report: legal-
tech startup landscape).
From the mentioned literature and with the help of the investment portfolio in Figure 5, it is
evident that various firms offer numerous technology-catered service packages to individual
lawyers, larger corporate-law firms, and other key stakeholders in the legal market. According to the
investments in Figure 5, legal-tech market segments include a range of services, for example, Saas,
eDiscovery, legal management, review, and analytics.
According to Tom Wilson, “the legal-tech market covers companies (mostly startups) utilizing
technology to build products that solve problems faced both by the industry and clients of legal
services” [65]. He further added that the maturity of the legal-tech ecosystem, automation, increasing
transparency, innovation, and generation shift has given a boost to legal-tech startups [66]. According
to Zoe, legal-tech startups cater services to different geographies and jurisdictions, have diverse
practices and operating areas, and offer legal technological solutions to various end users in each
category. She proposes that the legal-tech market is based on three distinct features, namely:
• Jurisdiction boundaries and geographical operating areas.
Figure 5.
Legal-tech key market segments (author-generated, data source: Tracxn 2018 report: legal-tech
startup landscape).
According to Tom Wilson, “the legal-tech market covers companies (mostly startups) utilizing
technology to build products that solve problems faced both by the industry and clients of legal
services” [
65
]. He further added that the maturity of the legal-tech ecosystem, automation, increasing
transparency, innovation, and generation shift has given a boost to legal-tech startups [
66
]. According
to Zoe, legal-tech startups cater services to different geographies and jurisdictions, have diverse
practices and operating areas, and offer legal technological solutions to various end users in each
category. She proposes that the legal-tech market is based on three distinct features, namely:
•Jurisdiction boundaries and geographical operating areas.
Sustainability 2019,11, 1015 8 of 19
•
End users, such as lawyer to lawyer (L2L), lawyer to business (L2B), and lawyer to consumer
(L2C) [67].
•
Technical complexities and practical applicability, such as enabler technologies, support process
solutions, and substantive law solutions [68].
According to investments and the literature, a five-point segmentation of the legal-tech market
based on clients’ needs has been developed, as below.
4.1. Segment One
The first segment of legal-tech startups provides self-service through commoditized law solutions
and improved access to justice in the legal industry by satisfying clients’ cost-effectiveness needs [
69
].
In this category, most legal-tech startups target individuals, small businesses, and enterprises, for
example, for online legal-document services (i.e., firms like Great Way Great Win, Rocket Lawyer, and
Legal Zoom), smart law, and the drafting of smart contracts (firms like ShakeLaw, smartlaw.de, and
synergist.io) [70].
4.2. Segment Two
The second segment works on a manifold business model, it includes electronic legal marketplaces,
networks, and multisided platforms for L2C, L2B, and L2L services. Other legal tech activities in this
group include legal advice and content portals, online reverse-auction platforms, recruiting platforms,
legal-database insourcing platforms, and legal-process outsourcing [67].
4.3. Segment Three
The third segment of legal-tech startups works on a big business model and contains a large
variety of high-tech tools for specific legal workflows, processes, and tasks. This category includes
document review, e-discovery, intellectual-property asset management, automated document assembly,
legal-contract management, legal-research analysis, and legal-practice management. E-discovery [
71
]
companies include Kcura, Epiq, Recommind, Zapproved, and CS Disco; intellectual-property
asset-management companies include Anaqua, Lecorpio, AcclaimIP, and Trademarknow; legal-contract
management companies include lexalgo.com, knowledgetools.de, and normfall.de; legal-research
analytics firms include CaseText, Judicata, RavelLaw, and LexMachina; and legal-practice management
solutions companies include RAMICRO, AnNoText, Renostar, Lawpal, Clio and ViewABill. All of
these companies fall under this broad category of legal-tech startups [72].
4.4. Segment Four
The fourth segment of legal startups provides online dispute-resolution (ODR) platforms. In the
United States, legal-tech startup Modria provides ODR for small consumer claims [
73
] and resolves
90% of 60 million annual eBay disputes without court intervention. In 2001, the first U.S. virtual court
was developed in Michigan. Susskind predicts ODR to become the leading way to resolve online
cases [
29
]; the disruptive and socially constructive nature of ODR technology will displace traditional
litigators and judges as well [9].
4.5. Segment Five
The fifth segment of legal-tech startups’ business model [
61
] works on the most advanced
legal-tech solutions, i.e., legal artificial-intelligence systems. For instance, at Denton’s innovation
program lab NextLaw, the students of Toronto University developed ROSS, an artificially intelligent
lawyer solution based on IBM Watson’s cognitive computer technology [
74
]. In response to simple
legal questions, ROSS conducts legal research for relevant legal source materials by combining the
contents of legal documents from its database through advanced pattern-recognition software instead
of using keyword [75]-based searches like many legal-research or document-review tools do [39].
Sustainability 2019,11, 1015 9 of 19
5. From Traditional to New Legal-Service Models
The words “business” and “delivery models” were commonly used in the legal market after the
invention of the dot-com era [
39
]. Legal technologies led the debates on alternative business structures
based on cost reduction, efficiency, expertise, client care, and sustainable profits [28].
In this study, “delivery model” means the effective deployment of expertise, technology, and
processes that are used to solve a client’s problems, as well as the effective and efficient delivery of
services. Notably, academics and analysts around the globe have yet to develop business and delivery
models for legal-tech industry’s best utilization and sustainable profit generation [
37
]. The conventional
legal-service delivery model, developed by Cohen (2017), is shown in his article Differentiation in the
New Legal Marketplace and Why It Matters; traditional law firms fabricated a pyramidal service model
where partners leveraged the time and expertise of other lawyers to service clients, and maximized
Profit per Partner (PPP) [
75
]. In Figure 6, the upper part represents a traditional law-firm delivery
model based on the sole providers’ (lawyers), extensive labor force, maximization of profit based
on per hourly billing, and exclusively depends on legal expertise (law knowledge). The modern
delivery model of legal services is not just selling law knowledge, but the faster delivery of expertise
in a cost-effective and quantifiable manner, shown in the lower part of Figure 6. The legal-tech
business model is consumer-centric, transparent, affordable, predictable, and easily accessible [
57
]. A
traditional legal firm’s organizational structure is more labor-intensive, while a modern legal firm is
less laborious and more technologically intensive [
76
]. The literature reveals that clients were unable
to afford traditional law-firm services. Regardless of size, corporations, small and medium enterprises,
and individual clients demanded quicker and more cost-effective services [
77
]. This challenge was
accepted by alternative-business-model service providers [75].
Sustainability 2018, 10, x FOR PEER REVIEW 9 of 19
5. From Traditional to New Legal-Service Models
The words “business” and “delivery models” were commonly used in the legal market after the
invention of the dot-com era [39]. Legal technologies led the debates on alternative business
structures based on cost reduction, efficiency, expertise, client care, and sustainable profits [28].
In this study, “delivery model” means the effective deployment of expertise, technology, and
processes that are used to solve a client’s problems, as well as the effective and efficient delivery of
services. Notably, academics and analysts around the globe have yet to develop business and
delivery models for legal-tech industry’s best utilization and sustainable profit generation [37]. The
conventional legal-service delivery model, developed by Cohen (2017), is shown in his article
Differentiation in the New Legal Marketplace and Why It Matters; traditional law firms fabricated a
pyramidal service model where partners leveraged the time and expertise of other lawyers to service
clients, and maximized Profit per Partner (PPP) [75]. In Figure 6, the upper part represents a
traditional law-firm delivery model based on the sole providers’ (lawyers), extensive labor force,
maximization of profit based on per hourly billing, and exclusively depends on legal expertise (law
knowledge). The modern delivery model of legal services is not just selling law knowledge, but the
faster delivery of expertise in a cost-effective and quantifiable manner, shown in the lower part of
Figure 6. The legal-tech business model is consumer-centric, transparent, affordable, predictable, and
easily accessible [57]. A traditional legal firm’s organizational structure is more labor-intensive, while
a modern legal firm is less laborious and more technologically intensive [76]. The literature reveals
that clients were unable to afford traditional law-firm services. Regardless of size, corporations, small
and medium enterprises, and individual clients demanded quicker and more cost-effective services
[77]. This challenge was accepted by alternative-business-model service providers [75].
Figure 6. Adapted from Cohen (2018).
A more complex business model was presented by the Boston Consultant Group (BCG) in
partnership with the Bucerius Law School in Hamburg, Germany, on the legal profession [68], after
exploring and researching the legal-industry market. In their report, they presented various solutions
and ideas for how large and small law firms can exploit opportunities, as well as overcome the
challenges presented by legal tech as shown in Table 1[65].
Figure 6. Adapted from Cohen (2018).
A more complex business model was presented by the Boston Consultant Group (BCG) in
partnership with the Bucerius Law School in Hamburg, Germany, on the legal profession [
68
],
after exploring and researching the legal-industry market. In their report, they presented various
solutions and ideas for how large and small law firms can exploit opportunities, as well as overcome
the challenges presented by legal tech as shown in Table 1[65].
Sustainability 2019,11, 1015 10 of 19
Table 1.
Adopted from the Boston Consultant Group (BCG) and Bucerius Law School in Hamburg
(2016).
Main
Components Traditional (Today) Legal Industry Modern (Tomorrow) Legal Industry
Value
Scheme
Client
Demand:
need for legal
advice.
Offering
(services):
Transaction or
litigation advice
Pricing
Structure:
Billing per
hour.
Client Demand:
Need for legal
case management,
project
management, cost
reduction,
efficiency.
Offering (services):
Product portfolio:
advice, project
management, case
management,
legal-tech consulting,
online dispute
resolution (ODR),
contract
management.
Price
Structure:
Fixed price
and billable
hour.
Operation
Model
Value chain:
Integrated—do
it yourself.
Cost structure:
People, low
electro-optical
system (EOS).
Organization:
Traditional
Pyramid
Value chain:
Disintegrated—
>Outsource
>Automate
Cost structure:
People and
technology High
EOS
Organization:
Rocket
This model offers a win-win opportunity to all legal-industry stockholders [
5
]. The BCG model has
two basic components, i.e., value scheme and operations model [
10
]. The value scheme of traditional
law firms is based on legal advice and billing hours, and the operations model is centered at integration,
high labor, a low electro-optical system; the organization structure is pyramidal [
78
]. The value scheme
of the modern business model in BCG is based on client demands and offers portfolio variety at fixed
and flexible prices. In addition, the operation model is disintegrated, automated, cost structure consists
of low labor, high technology, and an electro-optical system, while the organizational structure is
like a rocket [
79
]. Researchers have identified four different alternative legal business models (e.g.,
secondment firms, law and business advice companies, law-firm accordion companies, and innovative
law firms and companies) in the United States [40,76].
5.1. Secondment Firms
In legal practice, the word secondment means “a procedure in which a law firm temporarily loans
out an associate to a host organization, usually a client of the firm, to act as an inside counsel” [
80
].
The process of secondment is beneficial not only to law firms, but also to clients and attorneys [
81
].
According to William et al. (2015), secondment-firm lawyers are not guaranteed annual salaries, as they
are only paid for the work done, but lawyers are not under the pressure that law-firm lawyers are [
40
].
There are two different secondment models, one is independent-contractor secondment, and the other
is the employee-secondment model. The independent-contractor secondment model includes Avtikka,
General Counsel Limited, Innova Counsel, LLP, and Conduit Law. These firms offer flexible work
schedules and an escape from billable hours [
12
]. The employee-secondment model includes firms
like Paragon Legal and Bliss Lawyers; the motivation behind this model is to offer women a high level
of work after they become mothers or while having a career break [82].
5.2. Law and Business Advice Companies
Historically, lawyers are prohibited by law to share their fee with non-lawyers. Law and business
advice companies provide legal and business advice and insourcing services to corporate general
counsel [
83
]. Under this kind of arrangement, companies “combine legal advice with general business
advice of the type traditionally provided by management-consulting firms [
84
], and/or help clients
with investment banking as well as legal needs”. For example, Axiom Law Corporation and Exemplary
Companies Inc. work under this model [40].
5.3. Law-Firm Accordion Companies
Law-firm accordion companies [
40
] manage networks of curated lawyers, available to enable law
firms to ‘accordion up’ to meet short-term staffing needs. Such companies provide employment to
Sustainability 2019,11, 1015 11 of 19
women [
85
] who stay at home but want to polish their skills by working short part-time hours. Such
companies, as matchmakers, connect lawyers with law firms rather than directly with clients [
86
].
Companies like Counsel On Call, Montage Legal Group, Custom Counsel, and Cadence Counsel are
examples of accordion companies [87].
5.4. Innovative Law Firms and Companies
This type of organization includes “the widest variety of different business models [
88
].
An innovative law firm is based on the concept of monetization model that allows attorneys to
work in a sophisticated schedule [
89
], little or no weekend work, and three weeks’ unplugged vacation
per year” [
90
]. Innovative law firms have changed key elements of the traditional law-firm model in
various ways [
91
], e.g., better work-life balance, alternative fee arrangements, team scheduling, and
elimination of the partner distinction [18]. An example of such a firm is Smithline PC [40].
6. Findings: Cost-Benefit Analysis and Proposed Legal Business Model
6.1. Cost-benefit Analysis
A cost-benefit analysis is a systematic approach to estimate the benefits and costs of
alternatives [
92
]. According to the customer-delivered value concepts, the delivered value is the
difference between the total cost and benefits of an offering [
93
]. From the client’s perspective, when
purchasing a product or service, they take into account several types of costs, i.e., monetary, time,
energy, social, physical, and psychological cost. Similarly, clients also compare the value (is the bundle
of the benefits obtained from a product or services?) for various alternative offerings, i.e., image,
offered value, value-delivery system (consisting of choosing a value, provision of the value, and
communication of the value), personnel value, and innovation [
94
]. Clients choose that product or
service that offers the maximum benefits, incurs the least cost, and is the most important to serve their
needs the best [
95
]. The cost-benefit analysis in Table 2, based on the content analysis of the previous
literature, indicates that modern legal firms offer more benefits at less cost for satisfying the specific
needs of clients than traditional legal firms [
96
]. Likewise, from the lawyer ’s perspective, modern legal
firms are easy to form because they require minimum investment, low overhead cost, and low labor
and consumable cost [
97
]. The modern legal firm provides flexible working hours to lawyers, highly
innovative solutions, a more client-oriented approach, various partnership opportunities, a high level
of differentiation, and several selling points through an online portal and the easy delivery of legal
services [
98
]. Modern legal firms also offer higher profits to lawyers through a market-penetration
strategy that allows the provision of services to very large middle- and lower-class markets at low cost
rather than providing services at a high cost to the small elite market [97].
Table 2. Cost-benefit analysis (CBA) of legal tech.
Client Cost-benefit Analysis Lawyer Cost-benefit Analysis
Description Traditional Firm Legal Tech Firm Traditional Firm Legal Tech Firm
Cost
•High time •Low time •Hard formation •Easy formation
•High energy •Low energy •More working hours •Fewer working hours
•High monetary •Low monetary •High overhead •Low overhead
•High social •Low social •High consumable •Low consumable
•High Psychic •Low psychological •High labor •Low labor
Benefits
•Bespoke •Bespoke and innovative •Low networking
opportunities
•High networking
opportunities
•Drive to the office •Easily accessible •One practice area •Many practice areas
•Billable hour •Alternative billing •High-end market •Low-end market
•Standardized •Commoditized •Fixed hours •Flexible hours
Sustainability 2019,11, 1015 12 of 19
Table 2. Cont.
Client Cost-benefit Analysis Lawyer Cost-benefit Analysis
Description Traditional Firm Legal Tech Firm Traditional Firm Legal Tech Firm
Benefits
•Legal advice
•Legal advice/project
management, document
automation, legal research,
risk assessment, etc.
•Traditional solutions •Innovative solutions
•Low access to
information
•High availability and
access to information •Low differentiation •High differentiation
•
Takes maximum time
•Takes minimum time •High profit per
partner (PPP) •Client-centric
•Periodic updates •Regular updates •Only lawyers •
Lawyers and non-lawyers
•Technology used for
cost reduction
•Technology used for cost
reduction and quality
enhancement
•Lawyer partnership •Lawyer and non-lawyer
partnership
•Address general
needs of client
•Address specific needs of
client •Low innovation •High innovation
•Low innovation •High innovation •Sophisticated
delivery •Easy delivery
•
Image and offer value
•Image and offer value •One selling point •Many online selling
points
•
Limited collaboration
•Limitless collaboration
6.2. Proposed Legal Business Model
The legal-technology industry is in its nascent stage [
75
]. Even though scholars are trying to
present a uniform business model [
5
,
79
,
99
], there is still a difference of opinion regarding its business
models [
65
]. Each segment of the legal-tech market has a diverse business model from the other
category with some degree of variation [
61
]; this variation is required for distinguishing oneself from
the other. Based on more for less, flexibility, innovation, client demands, and a service structure, a
generic uniform business model for the legal industry has been developed on the five pillars, i.e.,
services, resources, finances, pricing, and investments (Figure 7).
Sustainability 2018, 10, x FOR PEER REVIEW 13 of 19
Figure 7. Authors’ proposed legal business model.
The proposed legal business model here is applicable to every firm in the legal industry
regardless of size and geographical location, whether they are providing a mix of traditional and tech
services, non-legal services, or only tech legal services. The service structure, irrespective of what
type or segment a firm wants to serve, should be based on value creation.
6.2.1. Service Value
“Value creation” is the process of diagnosing a client’s problem to develop a service that can
serve their needs best, and “value proposition” is the promise that a firm makes to deliver certain
service value to the client. Therefore, value proposition is based on value creation, and it tells the
client why they should do business with you rather than your competitors, making the benefits of
your services crystal-clear to the client. According to the proposed model, service-value creation is in
the middle because it is a client-centric model. Value creation and value proposition are based on the
utilization of the other four elements in the model, i.e. resources, finances, pricing, and investment.
6.2.2. Resources
The legal industry has entered into a technology race; thus, to be successful in the market, its
resources should be diverse, i.e., human (partners, junior lawyers, paralegals, professionals,
technicians, innovators, and technologists) and technological. This combination reduces cost and
expedites service delivery.
6.2.3. Finances
The finance structure in the model is based on sustainable profit. “Sustainable profit” is the ratio
between the actual value and cost of the delivered services. The financial structure of this model is
assessing the fees in the market that the client wants to pay for specific services, the cost it incurs, and
the profit margin it needs to achieve to sustain its business.
Figure 7. Authors’ proposed legal business model.
Sustainability 2019,11, 1015 13 of 19
The proposed legal business model here is applicable to every firm in the legal industry regardless
of size and geographical location, whether they are providing a mix of traditional and tech services,
non-legal services, or only tech legal services. The service structure, irrespective of what type or
segment a firm wants to serve, should be based on value creation.
6.2.1. Service Value
“
Value creation” is the process of diagnosing a client’s problem to develop a service that can serve
their needs best, and “value proposition” is the promise that a firm makes to deliver certain service
value to the client. Therefore, value proposition is based on value creation, and it tells the client why
they should do business with you rather than your competitors, making the benefits of your services
crystal-clear to the client. According to the proposed model, service-value creation is in the middle
because it is a client-centric model. Value creation and value proposition are based on the utilization of
the other four elements in the model, i.e., resources, finances, pricing, and investment.
6.2.2. Resources
The legal industry has entered into a technology race; thus, to be successful in the market,
its resources should be diverse, i.e., human (partners, junior lawyers, paralegals, professionals,
technicians, innovators, and technologists) and technological. This combination reduces cost and
expedites service delivery.
6.2.3. Finances
The finance structure in the model is based on sustainable profit. “Sustainable profit” is the ratio
between the actual value and cost of the delivered services. The financial structure of this model is
assessing the fees in the market that the client wants to pay for specific services, the cost it incurs, and
the profit margin it needs to achieve to sustain its business.
6.2.4. Pricing
A firm’s pricing strategy should be based on output rather than input. One of the main reasons for
the downfall of traditional law firms was their pricing strategy, which was based on billing per hour.
6.2.5. Investments
The last element in this model is investments. A specific amount of the firm earnings must be
invested in research for developing new sustainable ideas, processes, fast and smart delivery models,
and technology creation.
The use of these four elements must be focused on how efficiently and effectively to deliver the
promised services in an improved and less costly way.
7. Discussion and Conclusions
7.1. Main Findings
This study examined how legal technologies became the main disruptor in the legal field by
offering various kinds of innovative legal solutions and, hence, the possibility to establish new
business and delivery models. However, a comprehensive analysis of previous studies [
6
,
14
,
18
,
20
,
21
,
23
] had research gaps, i.e., on the client level of value (beyond legal expertise), lawyer level of
value, and the technical differences between the business and delivery models of traditional and
tech legal firms. In client cost-benefit analysis, it is evident that technology in the legal field has
changed clients’ buying behavior as it is more cost-efficient. Traditional business models have a
strictly hierarchical structure and are inherently interested in keeping the law opaque and obfuscated
to gate-keep the monopoly. On the other hand, legal-tech business models are more flexible and
client-centric. The present study proposed a generic business model for legal firms that is more
Sustainability 2019,11, 1015 14 of 19
client-centric and advocates for investment in research and development in the legal field for more
innovative and sustainable solutions.
Based on content and cost-benefit analysis (client and lawyer value), this study highlighted that
modern legal business models are client-centric and lawyer-friendly, and more flexible in terms of
opportunities for lawyers, paralegals, non-lawyers, and entrepreneurs. It similarly provides a bundle
of rich experience and increased value for the clients.
The current study has the view that failure has long existed in the legal industry. To overcome this
gap, entrepreneurs brought a huge variety of innovations to meet the needs of the clients and lawyers.
Furthermore, cost-benefit analysis allows the complementing of previous findings by addressing a
client’s monetary-, social-, psychological-, energy-, and time-cost incentives obtained from legal-tech
firms in comparison with traditional firms. In addition, legal technologies equipped lawyers to
innovate on their offering, propose flexible prices, and have partnerships with non-lawyers, easy
delivery, sustainable profit, and flexible working hours. Furthermore, clients are more empowered to
choose between different alternatives to meet their needs. Additionally, legal technologies minimized
the communication gap and allowed online team collaboration for lawyers, e.g., investigators,
counselors, and experts, to access the information related to cases on which they are working
together. In sum, legal technologies had a positive impact on the legal industry in terms of client and
lawyer perspectives.
The present study is different from the previous literature in terms of specific analysis of business
and delivery models, providing better insight of real changes in the legal market through technologies.
In addition, the discussion on market segmentation signifies the target market for firms according to
their specialties. Furthermore, the proposed business model defines a path of success not only for the
legal-tech business, but also for traditional legal firms on how to overcome the challenges of current
market demands.
7.2. Theoretical Implications
Previous studies [
6
,
14
,
18
,
20
,
21
,
23
] have focused on the emergence of legal technologies and related
opportunities for the legal market. However, they are silent about specific implications from client
and lawyer perspectives. This study narrowed the attention on client and lawyer cost and benefits,
which are the critical driving forces in the legal market. Thus, the current study’s evaluation of legal
technologies from a market standpoint further advances the research on this subject. In addition,
this study’s findings explicitly compare the monetary, social, and psychological cost, and the benefits
of legal-tech and traditional law firms from a client and lawyer viewpoint, which has been neglected
by extant research. Furthermore, the automation in the legal industry has resulted in global market
revenue of $3.6 billion in 2010 ($1.1 billion in software and 2.5 billion in services), with growth to
$9.9 billion anticipated by 2017 [
5
] ($2.5 billion in software and $7.4 billion in services); this further
strengthens our arguments based on the cost-benefit analysis that legal tech disruptive innovation is
growing due to its accessibility, cost effectiveness, and greater benefits for clients and lawyers.
More generally we may struggle to contribute to the literature on service innovation with a
focus on how new services and business models are developed as a result of the adoption of digital
technologies. Indeed, we further confirm that digitalization is a relevant antecedent of (disruptive)
service innovations.
7.3. Practical Implications
From the literature and the findings of this study, it is evident that legal tech has empowered
clients and lawyers in the market. Furthermore, monopoly in the legal market was disrupted by legal
tech, and this has created a competitive environment that demands continuous improvement and cost
reduction of the offerings.
The proposed business model has practical implications for business strategy and policy decisions
because it provides comprehensive directions to individual lawyers, firms, managers, and policymakers
Sustainability 2019,11, 1015 15 of 19
with respect to legal-service value creation via sustainable investments in research and development
for ideas, processes, and tech generation. The proposed model guides individual lawyers and firms
through the process of choosing partners (IT engineers, paralegals, AI enterprises, investors, financers)
for the enhancement of their business offerings. The proposed model has identified the specific
dimensions essential for value creation in service sector in terms of consumer/client perception and
required for business success in the contemporary arena, which is a unique contribution in legal
studies. In other words, to face current market needs and competition, traditional firms must adopt
legal technologies and invest in their further development.
Author Contributions:
The first author (Q.H.), the second author (S.B.), and the third author (A.K.) have
contributed equally to the conception, study design, and writing of the original manuscript. The fourth author
(A.L.) has revised and edited the manuscript, the fifth author (M.B.K.) has contributed to the data collection.
Funding:
This study was supported by special project on Artificial Intelligence and Law at the Guanghua Law
School of Zhejiang University, Hangzhou, China. Grant number 18ZDFX011.
Conflicts of Interest: The authors declare no conflict of interest.
References
1.
Pandya, J. The Global Age: NGIOA@ Risk; Springer Science & Business Media: Berlin, Germany, 2012;
Volume 17.
2.
Waage, S. Disruptive Innovation is Key for a Sustainable Economy. Guardian Sustainable Business. 2013.
Available online: https://www.theguardian.com/sustainable-business/disruptive-innovation-sustainable-
economy (accessed on 8 December 2018).
3.
Susskind, R.E.; Susskind, R.E. The Future of Law: Facing the Challenges of Information Technology; Clarendon
Press Oxford: Oxford, UK, 1996.
4. Eva Hibnick, E. What Is Legal Tech? In Legal Technology; Law insider: San Francisco, CA, USA, 2014.
5.
Kerikmäe, T.; Hoffmann, T.; Chochia, A. Legal Technology for Law Firms: Determining Roadmaps for
Innovation. Croat. Int. Relat. Rev. 2018,24, 91–112. [CrossRef]
6.
Association, A.B. Report on the Future of Legal Services in the United States; Commission on the Future of Legal
Services, American Bar Association: Chicago, IL, USA, 2016.
7.
Kimbro, S.L.; Robertson, M.A. Virtual Law Practice: How to Deliver Legal Services Online; ABA, Law Practice
Management Section: Chicago, IL, USA, 2010.
8. Lowell, E. The Current State & Future Prospects for Legal Tech Adoption. SLS Blogs, 17 May 2016.
9.
Susskind, R.E. Tomorrow’s Lawyers: An Introduction to Your Future; Oxford University Press: Oxford, UK, 2013.
10. Gobble, M.M. Digitalization, Digitization, and Innovation. Res.-Technol. Manag. 2018,61, 56–59. [CrossRef]
11.
Nadimpalli, M. Current & Future Outlook of Legal Services Industry. 2017. Available
online: http://115.248.176.49:8001/xmlui/bitstream/handle/123456789/307/current-and-future-outlook-
of-legal-services-industry-2162-6359-1000430.pdf?sequence=1&isAllowed=y (accessed on 2 January 2019).
12.
Meyer, C.R.; Cohen, D.G.; Nair, S. Some have to, and some want to: Why firms adopt a post-industrial form.
J. Manag. Gov. 2017,21, 533–559. [CrossRef]
13.
Christensen, C.M.; Rosenbloom, R.S. Explaining the attacker’s advantage: Technological paradigms,
organizational dynamics, and the value network. Res. Policy 1995,24, 233–257. [CrossRef]
14.
Campbell, R.W. Rethinking regulation and innovation in the US legal services market. NYUJL Bus.
2012
,9, 1.
15.
Parnell, D.J. The Failing Law Firm: Symptoms and Remedies; Tort Trial & Insurance Practice Section, American
Bar Association: Chicago, IL, USA, 2014.
16. Heinz, J.P. When law firms fail. Suffolk UL Rev. 2009,43, 67.
17.
Sterling, J.S.; Reichman, N. So, You Want to Be a Lawyer-The Quest for Professional Status in a Changing
Legal World. Fordham Law Rev. 2009,78, 2289.
Sustainability 2019,11, 1015 16 of 19
18.
Williams, J.C.; Platt, A.; Lee, J. Disruptive innovation: New models of legal practice. Hastings LJ
2015
,67, 1.
[CrossRef]
19.
Zynga, A.; Diener, K.; Ihl, C.; Lüttgens, D.; Piller, F.; Scherb, B. Making Open Innovation Stick: A Study of
Open Innovation Implementation in 756 Global Organizations: A large study of international companies
shows that distinct routines and organizational structures differentiate organizations that succeed with open
innovation. Res.-Technol. Manag. 2018,61, 16–25.
20.
Brivot, M.; Lam, H.; Gendron, Y. Digitalization and promotion: An empirical study in a large law firm. Br. J.
Manag. 2014,25, 805–818. [CrossRef]
21.
Barton, B.H. A glass half full look at the changes in the American legal market. Int. Rev. Law Econ.
2014
,38,
29–42. [CrossRef]
22.
Skjølsvik, T.; Breunig, K.J. Virtual law firms: An exploration of the media coverage of an emerging archetype.
Int. J. Law Inf. Technol. 2017,26, 64–88. [CrossRef]
23.
Association, I.B. Times Are A-Changin’: Disruptive Innovation and the Legal Profession; IBA Legal Policy &
Research Unit: London, UK, 2016.
24.
Christensen, C.M.; Raynor, M.E.; McDonald, R. What is disruptive innovation. Harv. Bus. Rev.
2015
,93,
44–53.
25. Bower, J.L.; Christensen, C.M. Disruptive technologies: Catching the wave. Harv. Bus. Rev. 1995,73, 43–53.
26.
Christensen, C.M.; Wang, D.; Van Bever, D. Consulting on the Cusp of Disruption. Harv. Bus. Rev.
2013
,91,
106–114.
27.
Brescia, R.H.; McCarthy, W.; McDonald, A.; Potts, K.; Rivais, C. Embracing disruption: How technological
change in the delivery of legal services can improve access to justice. Albany Law Rev. 2014,78, 553.
28.
Susskind, R.E. The End of Lawyers?: Rethinking the Nature of Legal Services; Oxford University Press: Oxford,
UK, 2008.
29.
Susskind, R.E. Tomorrow’s Lawyers: An Introduction to Your Future; Oxford University Press: Oxford, UK, 2017;
(Revised Edition).
30.
von Leipzig, T.; Gamp, M.; Manz, D.; Schöttle, K.; Ohlhausen, P.; Oosthuizen, G.; Palm, D.; von Leipzig, K.
Initialising customer-orientated digital transformation in enterprises. Procedia Manuf.
2017
,8, 517–524.
[CrossRef]
31.
Rachinger, M.; Rauter, R.; Müller, C.; Vorraber, W.; Schirgi, E. Digitalization and its influence on business
model innovation. J. Manuf. Technol. Manag. 2018. [CrossRef]
32.
Delmond, M.-H.; Coelho, F.; Keravel, A.; Mahl, R. How Information Systems Enable Digital Transformation:
A Focus on Business Models and Value Co-Production. IUP J. Bus. Strategy 2017,14, 7–40. [CrossRef]
33.
Nambisan, S. Information technology and product/service innovation: A brief assessment and some
suggestions for future research. J. Assoc. Inf. Syst. 2013,14, 215. [CrossRef]
34.
Barrett, M.; Davidson, E.; Prabhu, J.; Vargo, S.L. Service innovation in the digital age: Key contributions and
future directions. MIS Q. 2015,39, 135–154. [CrossRef]
35.
Nylén, D.; Holmström, J. Digital innovation strategy: A framework for diagnosing and improving digital
product and service innovation. Bus. Horiz. 2015,58, 57–67. [CrossRef]
36.
Carlos Barahona, J.; Elizondo, A.M. Introducing a disruptive service innovation: A national dilemma in
e-procurement. Manag. Decis. 2014,52, 1782–1800. [CrossRef]
37. Killian, K.E. The Long Tail and Demand Creation in the Legal Marketplace. Hastings Bus. LJ 2015,11, 157.
38.
Dzienkowski, J.S. The Future of Big Law: Alternative Legal Service Providers to Corporate Clients. Fordham
Law Rev. 2013,82, 2995.
39.
Tyner, K. Literacy in a Digital World: Teaching and Learning in the Age of Information; Routledge:
Abingdon-on-Thames, UK, 2014.
40.
McGinnis, J.O.; Pearce, R.G. The great disruption: How machine intelligence will transform the role of
lawyers in the delivery of legal services. Fordham Law Rev. 2013,82, 3041.
41.
Hadfield, G. K. Legal barriers to innovation: The growing economic cost of professional control over
corporate legal markets. Stan. L. Rev. 2007,60, 1689.
42. Libby, E. A Qualified Yes. ABAJ 2008,94, 32.
43.
Bogers, M.; Zobel, A.K.; Afuah, A.; Almirall, E.; Brunswicker, S.; Dahlander, L.; Frederiksen, L.; Gawer, A.;
Gruber, M.; Haefliger, S.; et al. The open innovation research landscape: Established perspectives and
emerging themes across different levels of analysis. Ind. Innov. 2017,24, 8–40. [CrossRef]
Sustainability 2019,11, 1015 17 of 19
44.
Stephen, F.H.; Burns, C. Liberalization of Legal Services; Institute for Law, Economy and Global Governance,
School of Law, University of Manchester: Manchester, UK, 2007.
45.
Marlowe, J.D. Evidence for Paralegals; Wolters Kluwer Law & Business: Alphen aan den Rijn, Netherlands,
2015.
46.
Laursen, K.; Salter, A. Open for innovation: The role of openness in explaining innovation performance
among UK manufacturing firms. Strateg. Manag. J. 2006,27, 131–150. [CrossRef]
47.
NSW Law Reform Society. Flip the Future of Law and Innovation in the Profession; Law Society of New South
Wales: Sydney, Australia, 2017; p. 112.
48.
Lazzarotti, V.; Manzini, R.; Pellegrini, L. Is your open-innovation successful? The mediating role of a firm’s
organizational and social context. Int. J. Hum. Resour. Manag. 2015,26, 2453–2485. [CrossRef]
49.
Glaser, B.; Strauss, A. The Discovery of Grounded Theory: Strategies for Qualitative Research; Aldine Transaction:
New York, NY, USA, 1967.
50.
Hasan, H.; Hyland, P.; Dodds, D.; Veeraraghavan, R. Approaches to the development of multi-dimensional
databases: Lessons from four case studies. ACM SIGMIS Database DATABASE Adv. Inf. Syst.
2000
,31, 10–23.
[CrossRef]
51.
Cox, J.W.; Hassard, J. Triangulation in organizational research: A re-presentation. Organization
2005
,12,
109–133. [CrossRef]
52.
Mayring, P. Qualitative Content Analysis, 1, 2. 2000. Available online: http://www.qualitative-research.net/
index.php/fqs/article/view/1089/2385 (accessed on 14 February 2019).
53. Berger, J.G. Helmet Liner. U.S. Patent Application 29/214,514, 16 May 2006.
54.
Gaikwad, P. Including rigor and artistry in case study as a strategic qualitative methodology. Qual. Rep.
2017,22, 3431–3446.
55.
Ardito, L.; Ferraris, A.; Petruzzelli, A.M.; Bresciani, S.; Del Giudice, M. The role of universities in the
knowledge management of smart city projects. Technol. Forecast. Soc. Chang. 2018, in press. [CrossRef]
56.
Eisenhardt, K.M. Building theories from case study research. Acad. Manag. Rev.
1989
,14, 532–550. [CrossRef]
57.
Jones, J.N.; Cope, J.; Kintz, A. Peering into the Future of Innovation Management: As the world changes,
innovation professionals consider what the future holds for innovation and innovation management.
Res.-Technol. Manag. 2016,59, 49–58. [CrossRef]
58.
Chambliss, E. Two Questions for Law Schools about the Future Boundaries of the Legal Profession. J. Leg.
Prof. 2011,36, 329. [CrossRef]
59.
Webb, J.; Ching, J.; Maharg, P.; Sherr, A. Setting Standards: The Future of Legal Services Education and
Training Regulation in England and Wales. The Final Report of the Legal Education and Training Review
Independent Research Team; Legal Education and Training Review. 2013. Available online: http://www.letr.
org.uk/wp-content/uploads/LETR-Report.pdf (accessed on 14 February 2019).
60.
Ramsey, E.; McCole, P. E-business in professional SMEs: The case of New Zealand. J. Small Bus. Enterp. Dev.
2005,12, 528–544. [CrossRef]
61.
Witzeman, J.S.; Henderson, P.; Welling, A.G.; Cosner, R. The Future of R&D Leadership: Wider changes in
the culture and the market will drive changes in the practice of R&D leadership. Res.-Technol. Manag.
2018
,
61, 35–44.
62.
Cotterman, R.; Fusfeld, A.; Henderson, P.; Leder, J.; Loweth, C.; Metoyer, A. Aligning marketing and
technology to drive innovation. Res.-Technol. Manag. 2009,52, 14–20. [CrossRef]
63.
Susskind, R.E.; Susskind, D. The Future of the Professions: How Technology Will Transform the Work of Human
Experts; Oxford University Press: Cary, NC, USA, 2015.
64.
Roper, S.; Love, J.; Rieger, P.; Bourke, J. Innovation in legal services: A report for the Solicitors Regulation
Authority and the Legal Services Board. Table 2015,4, 44.
65.
Wilson, T. Legal Tech—Mapping Disruption. Medium, 2016. Available online: https://medium.com/@taw/
legal-tech-mapping-disruption-3e6685fc4a5c#.rh7rnwydr (accessed on 15 February 2018).
66.
Liyue, H. Legal Service Market in China: Implementation of China’s GATS Commitments and Foreign Legal
Services in China. Tsinghua China Law Rev. 2012,5, 29.
67.
Zoë Andreae. Legal Tech Insights: Legal Tech Startups. 2017. Available online: https://medium.com/legal-
tech/legal-tech-startups-9755b18f93ac (accessed on 14 February 2018).
Sustainability 2019,11, 1015 18 of 19
68.
Veith, C.; Bandlow, M.; Harnisch, M.; Wenzler, H.; Hartung, M.; Hartung, D. How Legal Technology
Will Change the Business of Law. 2016. Available online: http://www.bucerius-education.de/fileadmin/
content/pdf/studies_publications/Legal_Tech_Report_2016.pdf (accessed on 15 February 2018).
69.
Sako, M. Make-or-Buy Decisions in Legal Services: A Strategic Perspective. In Proceedings of the Law Firm
Evolution: Brave New World or Business as Usual, Washington, DC, USA, 21–23 March 2010.
70.
Ling, Y. Upholding free speech and privacy online: A legal-based and market-based approach for Internet
companies in China. Santa Clara Comput. High Technol. LJ 2010,27, 175.
71. Dirking, B.; Kodali, R.R. Strategies for preparing for e-discovery. Inf. Manag. 2008,42, 56.
72.
Barton, C.S. End-to-End Management of Carrier Services for Enterprises and Resellers. U.S. Patent 7,933,813,
26 April 2011.
73.
Rickman, N.; Anderson, J.M. Innovations in the Provision of Legal Services in the United States; RAND
Corporation: Santa Monica, CA, USA, 2011.
74.
Smith, R. Digital Delivery of Legal Services to People on Low Incomes; The Legal Education Foundation: Guildford,
UK, 2014.
75. Legal Delivery Is Becoming Digitized. What Does It Mean? Legal Mosaic, 25 May 2017.
76.
Mottershead, T.; Magliozzi, S. Can competencies drive change in the legal profession. Univ. St. Thomas Law J.
2013,11, 51.
77.
Slovakia, A. Blog: Sustainability Needs Will Drive Future Disruptive Innovations. 2017.
Available online: http://www.amcham.sk/publications/connection-magazine/issues/2017-05/272726_
sustainability-needs-will-drive-future-disruptive-innovations (accessed on 31 July 2018).
78.
Baker, J.J. 2018: A Legal Research Odyssey: Artificial Intelligence as Disruptor. Law Libr. J.
2018
,110, 5.
[CrossRef]
79.
Barnett, J.; Treleaven, P. Algorithmic Dispute Resolution—The Automation of Professional Dispute
Resolution Using AI and Blockchain Technologies. Comput. J. 2017,61, 399–408. [CrossRef]
80.
Feinberg, J.R. Second Look at Secondment Advantageous to All, But Not Without Risk; New York Legal Ethics
Reporter: New York, NY, USA, 2008.
81. Huston, L.; Sakkab, N. Implementing open innovation. Res.-Technol. Manag. 2007,50, 21–25. [CrossRef]
82.
Salter, A.; Criscuolo, P.; Ter Wal, A.L. Coping with open innovation: Responding to the challenges of external
engagement in R&D. Calif. Manag. Rev. 2014,56, 77–94.
83.
Granat, R.S.; Kimbros, S. The Teaching of Law Practice Management and Technology in Law Schools: A New
Paradigm. Chic.-Kent Law Rev. 2012,88, 757.
84.
Knake, R. Why Law Students Should Be Thinking About Entrepreneurship and Innovation in Legal Services.
Bloomberg Law, 30 November 2012.
85. Jessica Hall, ‘Therapist’ for Mom Lawyers Branches Out. Portland Press Herald, 11 June 2012.
86.
Berger, M.J. A Comparative Study of British Barristers and American Legal Practice and Education.
Northwest. J. Int. Law Bus. 1983,5, 540.
87.
Weinstein, J.B. Proper and Improper Interactions between Bench and Law School: Law Student Practice,
Law Student Clerkships, and Rules for Admission to the Federal Bar. John’s Law Rev. 1975,50, 441.
88. Stern, R.E.; Li, S. The outpost office: How international law firms approach the China market. Law Soc. Inq.
2016,41, 184–211. [CrossRef]
89.
Flood, J. Lawyers as sanctifiers: The role of elite law firms in international business transactions. Indiana J.
Glob. Leg. Stud. 2007,14, 35–66. [CrossRef]
90.
Liu, S. Lawyers, state officials and significant others: Symbiotic exchange in the Chinese legal services
market. China Q. 2011,206, 276–293. [CrossRef]
91.
Quack, S. Recombining national variety: Internationalisation strategies of American and European law firms.
J. Strategy Manag. 2012,5, 154–174. [CrossRef]
92.
Cutler, D.M.; Jessup, A.; Kenkel, D.; Starr, M.A. Valuing regulations affecting addictive or habitual goods.
J. Benefit-Cost Anal. 2015,6, 247–280. [CrossRef]
93.
Svensson, M.; Hultkrantz, L. A Comparison of Cost-Benefit and Cost-Effectiveness Analysis in Practice:
Divergent Policy Practices in Sweden. Nord. J. Health Econ. 2017,5, 41–53. [CrossRef]
94. Schultz, C.I. Legal offshoring: A cost-benefit analysis. J. Corp. Law 2009,35, 639.
95.
Hazard, G.C., Jr.; Pearce, R.G.; Stempel, J.W. Why Lawyers Should Be Allowed to Advertise: A Market
Analysis of Legal Services. NYUL Rev. 1983,58, 1084.
Sustainability 2019,11, 1015 19 of 19
96.
Decker, C.; Yarrow, G. Understanding the Economic Rationale for Legal Services Regulation; Regulatory Policy
Institute Report for the UK Legal Services Board; Legal Services Board: London, UK, 2010.
97. de Fontenay, E. Agency costs in law-firm selection: Are companies under-spending on counsel? Cap. Mark.
Law J. 2016,11, 486–509. [CrossRef]
98.
Prescott, J. The challenges of calculating the benefits of providing access to legal services. Fordham Urban LJ
2010,37, 303.
99.
Replogle, T.J. The Business of Law: Evolution of the Legal Services Market. Mich. Bus. Entrep. Law. Rev.
2016
,
6, 287.
©
2019 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access
article distributed under the terms and conditions of the Creative Commons Attribution
(CC BY) license (http://creativecommons.org/licenses/by/4.0/).
