Baker McKenzie’s latest report, Closing the Invention Gap: Reinventing the Practice of Law at the Edge of Chaos, determines that the world is “racing towards the edge of chaos” — and that for the legal industry to survive — and thrive — it needs to better anticipate changes within its own markets as well as “wider, future geostrategic, societal, market and client needs”.

However, innovation within the legal profession has, historically, been fairly slow-moving, with the report noting that despite the rise in NewLaw firms and legal technology, “little of real substance” has happened in the space, with the innovation previously predicted not eventuating to anything of scale.

For this, the report blames “the invention gap”, an inter-systematic gap that cuts across industry sectors and spans global governance, policy, regulation, economic and corporate stewardship.  

“In the law, the gap is an industry-wide failure to envision and plan for the range of possible futures that the industry may face, resulting — inevitably — in short-term decision making, which will lead, as the room for manoeuvre shrinks, to irreversible crises and ‘too little, too late’ outcomes. Unless and until we close the invention gap in the legal industry, we will struggle to deliver true innovation,” the report stated.

This gap will not only limit the legal industry’s collective progress across the globe in terms of innovation but also exposes it to “existential risk” in the face of geostrategic security risk, climate change concerns and “inter-systemic failures rooted in over-reliance on global supply chains, fragile technology platforms and weak governance”, according to the report.

In conversation with Lawyers Weekly, Baker McKenzie’s chief innovation officer, and co-author of the paper, Ben Allgrove said that the firm conducted the report after repeatedly seeing a “gap in strategic foresight as a factor in inertia when it comes to innovation in the legal industry”.

“The focus of the report is not lawyers working in the innovation space, but rather it is a wider business strategy in the legal industry (both in-house and private practice) in the current economic and geopolitical environment,” he explained.  

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“The report postulates that we are now operating in ‘edge of chaos’ conditions. Innovation can be a response to the resulting business pressures. The key to seizing opportunities, and mitigating risks, is leaders considering all the possible outcomes, not just the predicted outcomes.”

In simple terms, the invention gap is a result of a section of the legal profession being slow to uptake innovation and technology — and Mr Allgrove said legal leaders are responsible for closing this gap.

“The invention gap we identify is the failure to imagine a different future. It leads legal innovators to focus on efficiency and productivity gains. That is super important, but it means that the evolution is incremental,” he said.

“True systemic change requires a different type of thinking from leaders in the legal industry. One that focuses on being ready for a range of possible futures. At the moment, we do not see much of that in the legal industry.”

To this end, “old law” needs to be completely challenged as it becomes less and less relevant in the current climate.

Mr Allgrove emphasised that “the established business model is — on all evidence — continuing to thrive”.

“That is why we hear such disappointment at the lack of innovation in the legal market — from all corners. The established business model will continue to be relevant so long as there is a market for it or there is a viable competitor for the space it occupies,” he said.  

“Ultimately, though, I do not think it is an either-or game. Rather, the business models of legal teams will evolve over time. The hourly rate model will continue for some time to be relevant for some kinds of work, but it will — and should — fall away for others.”

The report noted that over the next decade, both the risk and innovation landscapes would be transformed by “the edge of chaos world in which they find themselves”, resulting in endless opportunities for legal teams to help clients think long term, focus on strategic risk and create “exponential rates of systemic innovation” — opportunities which are largely being missed.

Whilst legal teams have traditionally understood risks to their businesses, the report denoted that the historically “traditional, specialist-centric approach is the core reason we do not see true disruptive innovation in the law”.

“It is an approach that simply does not work in an increasingly interdependent, complex and chaotic world. Diversity and innovation, not efficiency, is critical to system resilience, and the legal industry will not thrive in the world it faces by focusing on becoming more efficient and fine-tuning the business model that has got us to where we are today. It will simply expose itself to system failures by failing to hedge against possible future shocks,” the report stated.

And despite the legal industry needing to move faster in terms of “true disruptive innovation”, it also needs to move smarter, according to Mr Allgrove, who added that the talent pool in the profession would, additionally, continue to transform the legal landscape moving forward.

“We are a people industry. And we will remain that for the foreseeable future, even as technology plays a greater and greater role in legal services,” he said.

“The talent we need to recruit now and into the future is different from the talent that built today’s legal businesses. Their perspectives and desires, and the competition for their skills, will be as big a driver of change as the wider market forces at play.”

This sentiment is echoed in the report — which emphasised that as younger professionals enter the profession and, “driven by a very different imagined futures, precipitate fundamental shocks to the legal business”.

“When the prevailing narrative is that the legal industry is not fit for purpose, the predicted future of our talent pool can no longer be reconciled with established models and strategies upon which the industry is currently based. The talent shocks to the legal industry will emerge not when we are overwhelmed but when the commonly imagined future for our industry begins to look bleak in the eyes of the talent pool in which we all fish,” the report noted.  

“This shift in sentiment may reach a critical mass, creating exponential rates of change. This is not about having trouble finding a qualified lawyer or two to join a team. What happens if it becomes so hard to find lawyers that the business model itself starts to break?”

Furthermore, the report warned firms to embrace diversity of perspective in order to become more resilient and plan for the future — something which Mr Allgrove said Baker McKenzie has also embraced — and will continue to, moving forward.

“We’re experimenting, we’re digitising, and we’re mixing success with failure. We do not have a magic bullet or all the answers, but at least we are trying to have the right conversations internally and with our clients. One of our most exciting experiments at the moment is the continued growth of the Baker Machine Learning Practice, under the leadership of Danielle Benecke,” he added.

“[Legal innovation is] not optional. The world is changing, and the industry will change with it, one way or the other. I am an optimist, but the reality is that recessionary pressures will make it tougher for legal innovators to push forward their agendas in the short term at least.”