With technology changing the world of business, where does the legal sector fit in? If recent developments are anything to go by, the trickle in tech innovation over recent years, led by selected law firms and multi-disciplinary practices is now turning into a flood.

Law firms are embracing AI, Big Data, cloud computing, machine learning and other tech advances to become more commercial and business-led - disrupting the traditional conduct of legal business as we know it. In doing so, they are driven by technology’s potential to help them offer an enhanced service, by providing innovative solutions that can be applied to their client’s business.

This includes changing how they work with in-house corporate and banking legal teams, who are looking for cost-effectiveness in their external legal spend, at a time when compliance is increasing and they are under pressure to demonstrate ROI. Have a tech-led approach is also important if law firms are to work with non-traditional market entrants and the new generation of tech savvy business leaders.

Tech solutions can enable the automation of routine work such as reviewing commercial contracts, as well as offer the prospect of more complex solutions, for example employing Blockchain technology for contract verification without the need for human intervention.

A key driver in this revolution has been law tech incubator schemes, either within firms or as external hubs. They have been set up by leading law firms and other professional and financial services heavyweights, to attract and support entrepreneurs to develop new tech solutions for the law. The role of the law firm is to provide a test bed to the entrepreneurs to try their ideas out, with reference to the firm’s day-to-day legal workflow and operations, and developing client demands.

The founding father of modern management, Peter F. Drucker, defined innovation as a means by which entrepreneurs may exploit change, in order to create new service and business opportunities. Those firms and organisations funding and backing legal tech developers understand this and are helping to set up effective frameworks to help the legal sector evolve.

In adopting this approach, law firms are taking their lead from the UK’s fintech sector, which has already disrupted banking and financial services, leading to a shake-up in those sectors in the way that they provide their services and interact with customers.

Law tech incubators give their backers the chance to guide entrepreneurs towards workable solutions - pushing those ideas that are likely to succeed, and pulling the plug on those that don’t reach expectations. This “fail fast” approach to tech innovation - involving extensive testing and incremental development to determine if an idea has value – has been a key feature of the fintech sector. With critics of legal incubators asking if new legal tech solutions are coming to market before their viability has been properly established – adopting such an approach may be prudent to say the least. [The Lawyer 26 April 2018]

What is not in doubt is that those commercial law firms still on the tech starting line risk being left behind without the tools to deliver the new services their clients are starting to expect. They could be danger of being disrupted themselves, through a lack of focus on the market factors that are driving change.