From VUCA to CHAOTIC: The six trends that will drive Legal Function agendas in 2024

02 February 2024

Andrew Mellett

Andrew Mellett

Founder & Executive Director

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Each year many of our clients ask me what predictions we have on what will shape General Counsel agendas in the year ahead. And each year the task seems to get harder.

Although with age you are supposed to get the triumvirate of experience, wisdom, and grey hair – I seem to be mainly getting the latter. We live in a world with cyborg robots, advanced AI, and private space travel. So part of the challenge is it’s tough to predict the future. When we are already in it.

However, the bigger problem is that we have moved on from our pre-Covid VUCA world to a world that is:

  • Complex

  • Hyperconnected

  • Accelerated

  • Opaque

  • Turbulent

  • Inconsistent

  • Capricious.

We have transitioned from VUCA to CHAOTIC.

Making predictions in a CHAOTIC world is like playing darts on a Pogo Stick while taking LSD.

However, people seem to like these things. And no one is more surprised than me by the prescience of my predictions in past years.

So with the preface that ‘past results aren’t a predictor of future returns’, here goes:

1. A.I. is going to Eat the World…and Legal is on the entree menu

Luddites have long claimed that technology would ruin the world. From automated knitting mills to fire there have always been those who prophesised technology leading to the end. And the truth is, they have always been a small bit right. But mostly wrong.

Technology is destructive and dangerous. It destroys the old jobs and industries and can cause great harm if not regulated. However, without it, we are just slow, weak, naked animals being chased around the savannah by the true apex predators.

But this time might be different.

Firstly consider the speed of change. In previous waves of technology ‘disruption’, people often had a generation to retool themselves, and the future roles required more adjacent skills.

When Henry Ford made blacksmiths largely obsolete, it didn’t take long to retrain them to work making cars in a factory. The pace of change just wasn’t that fast, and the competency gap wasn’t that big (indeed you needed less skill in the factory).

It’s much harder to teach a truck driver how to be a Computer Scientist working on Autonomous Driving AI. Indeed, if you could reskill him, it’s likely the AI framework he learned will be obsolete by the time he graduates.

Secondly, all prior technology ‘platform shifts’ from The Iron Age, The Industrial Age, to The Digital Age were fundamentally hardware-based. Innovation cycles take a long time when you have to move atoms around the place. They are far faster when, in the case of AI, you only need to worry about Bits. The Industrial Era took a couple of hundred years before the Digital Era took over - which lasted about 30 years.

Finally, this is the first time where the machine can work on the machine. AI can help you write AI, and AI is inherently ‘self-learning’ which makes the innovation curve of AI all the steeper.

Where will this end? I don’t know for certain. All I know are two things: Firstly, as with all great technologies there will be great benefits. Secondly, most techno-optimists (including myself) are scared that humanity will not be able to adjust to the change.

Do this:

Recognise that this change is both positive and inevitable. AI is (like Cloud & Mobile) just a new computing platform that has the potential to more than 2x your team's output. Quite simply, this is your best-ever opportunity to ‘do more-with-less’.

Don’t do that:

Try to race the technology train instead of riding the technology train. It won’t end well if you do.

2. We will see the end of Lawyers…as we know them

Imagine how intimidated you would be if there was a kid at law school who had a photographic memory of all statutes and all case law globally. They could draft, summarise, compare, and analyse any document in an instant and never miss ‘the smoking gun’. Think Mike Ross from Suits. Not only that, this freak will work for close to nothing, 24 hours a day, and never take a day off. His only limitation is he will never get to date Megan Markle.

If such a person existed it would be time to drop out and take up woodworking.

This mutant lawyer is now here. Indeed, he/she/it is already embedded into the Plexus platform already doing all of the things listed above. Giving our clients an unprecedented boost in productivity.

 

You can argue it’s unfair, you can hope it’s not true, but that is as futile as arguing the sun shouldn’t come up tomorrow. It’s here to stay.

But there is good news. There is a little secret that few people know.

The elasticity of demand for lawyers in the enterprise is almost infinite. The role of an in-house lawyer isn’t going anywhere.

Indeed, research by Gartner shows that today, 85% of legal risks go unsupported in the Enterprise.

So don’t think of yourself as a Legal function, think of yourself as a business where demand outstrips supply by 10x… AI may be able to help you fulfill that demand.

A lot of the hype surrounding AI has led to a belief that AI will replace lawyers. This is the classic Lump of Labour Fallacy. The belief is that one day, because of technology, we will run out of work for people to do.

The reality is that business is about building relationships, making decisions, and navigating complexity. Legal instruments and contracts are merely the legal codification of those relationships. These legal tasks (and the IP they manage) make up 80% of the Fortune 500's value.

This provides an unparalleled time for lawyers to excel in the more human (and engaging) skills such as communication, negotiation, navigating complexity, and getting deals done. While leveraging AI to do the heavy lifting of finding and processing information.

The smartest Legal leaders see technology as a tool in their arsenal, not their replacement. They recognise that 27% of a lawyer's time is spent just finding information, and another 24% is spent on things that don’t require a lawyer. AI will change that.

Do this

Change how you think about what a lawyer does. Is it reading? Is it writing? Is it finding information? AI can do those tasks better, faster, and cheaper. The lawyer of the future is what we call ‘a pathfinder’ who navigates complexity to generate competitive advantage for their business.

Don’t do this

Think of your function as an ‘internal Law Firm’ that does work cheaper. Cheap is not a sustainable advantage in an AI-first world.

3. Fixed fees will become the norm…yet clients won’t see the benefit of it

You can increasingly expect the same Law Firm Partner who argued black and blue that they couldn’t possibly do work on a Fixed Fee basis to come to you with a proposal for a Fixed Fee in the years ahead.

Why?

You show me an incentive and I will show you a behaviour.

In the future, through technology, they will be able to do the same piece of work in 20% of the time it used to take them. But Law Firms are like kids with new Christmas toys – not good at sharing.

Unlike most other businesses, Law Firms see innovation as a means to increase margins not to increase customer satisfaction.

Do this

Research from the General Counsel Roundtable shows that the two biggest drivers of increased Law Firm pricing are the size of clients' spend and the length of the relationship. In other words, the more loyal you are to your Law Firm the more they will charge. Strange. It should work the other way. Keep them honest by regularly tendering your workout, and maintain a ‘credible threat’ to ensure you don’t get taken advantage of.

Don’t do this

Give all your legal work to your old firm ‘because you trust them’....and like the tickets to the Tennis.

4. The proliferation of Legal Technology

Gartner research suggests the Legal Technology market will grow at a compound annual growth rate of 60% per annum for the next three years.

This is largely driven by Legal Functions playing ‘catch-up’ on their functional peers, who, on average have more than 10x the software applications in their functions:

Ultimately the Legal Technology landscape is going to look similar to the Martech landscape serving CMOs, it’s estimated the Martech market is worth $509b.

Do this

Recognising assessing, procuring, deploying, adopting, and managing technology needs to be a core competency of Legal Functions - not something to delegate to the intern.

Don’t do this

Try to rely on other functions (IT/Procurement etc) for support - they will inevitably push their own agendas.

5. GCs will expand their skill set - to help defuse the DEI hand grenade

In an effort to correct ‘diversity imbalances’ many organisations have adopted specific recruitment and promotion policies that positively discriminate based on sex, race, and other attributes.

While the intent of these policies is no doubt virtuous – to improve opportunities for underrepresented groups – they also breach the Human Rights Act which precludes discrimination based on sex, race, age, disability, etc.

To date, courts have largely turned a blind eye to discrimination when linked to affirmative action.

However, the work of 2023 Nobel Prize Winner for Economics Claudia Goldin calls into question many of the assumptions these programs were built on, and Students for Fair Admissions v. Harvard in the U.S. Supreme Court has created a precedent effectively outlawing many such affirmative action policies.

This issue is as explosive as the Dynamite Alfred Nobel made his fortune from. Navigating it will be very challenging for businesses in 2024, as this emotive issue transcends: ‘the law’, social justice, identity politics, employee engagement, and business ethics.

Many leadership teams may find themselves caught between ‘the rock’ of ESG-based social reform agendas, and the ‘Hard Place’ of ‘The Law’ while sitting on the TNT of Social Media.

Understanding the best ways to achieve the outcomes of DEI while complying with the law will be a new challenge for business leaders. General Counsel will be drawn in to help navigate divergent, yet highly emotive positions from powerful stakeholder groups.

Do this

Ensure your leadership team is aligned on your business's position on these issues. Make it clear that respecting the law and desiring a diverse and inclusive culture doesn’t need to be mutually exclusive objectives.

Don’t do this

Be caught on the back foot. Work with HR, Comms, and external advisors to create a response plan to employee or social media backlash on this issue.

6. Data isn’t the new oil. It’s the new asbestos.

Ten years ago consultants, wishing to sell investors in the Next Big Thing, sold the idea that ‘Data is the new oil’... and you can drill for it right beneath your feet… if you have a budget for a large consulting project and a heap of unnecessary software.

However, it turns out data just gushes from everywhere causing oil slicks legal functions need to clear up. You don’t know where it is, who controls it, and where it might end up.

Worse, the regulations for protecting individuals' data are created locally, yet with global reach. Causing a web of regulatory overlap.

Data isn’t the new oil. It’s the new asbestos.

Instead of creating untold value, data now creates untold liabilities: Data leaks, hacks, regulatory investigations, and privacy are the new Mesothelioma of the corporate world.

Do this

Recognise that ‘data’ is now one of your organisation's biggest risks, and create a cross-functional task force to manage it.

Don’t do that

Hope that IT has it covered.

To wrap

Chaos theory tells us that the flap of a butterfly's wing can cause a tornado. In the CHAOTIC world we live in, some of these butterflies, like Legal Technology, Generative AI will enrich in-house lawyers' lives. Others, like data, will be more like moths eating away at corporate profitability if not managed well.

The only antidote to this CHAOTIC operating environment is the new operating model we call the Agile Legal Function. Those who move fast to exploit these opportunities will ‘ride the train’ to greater prosperity. Those who don’t will be walking down a dark train tunnel for a long time before they see the light.

The world's top GCs work with Plexus

As the global economy moves faster and becomes increasingly volatile, organisations must radically evolve their operating models to more dynamically identify and respond to opportunities and threats. Plexus helps leading GCs shift their organisational design, evolve their talent competencies and digitise their functions to deliver faster, most cost-effective and more agile legal support.

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