New Revenue Streams: Firms must adapt to changing client mindsets

By Geoffrey D. Ivnik, Esq. | Director of U.S. Legal Markets, LexisNexis 

More than three in four (77%) of senior lawyers at Am Law 200 firms believe that generative artificial intelligence (Gen AI) technology will enable them to offer new value-added services to clients, with 54% reporting they are already exploring these potential opportunities, according to the 2024 LexisNexis Investing in Legal Innovation Survey.

One important question that firms need to contemplate is how they can best adapt to shifting client mindsets about the value of the work that outside counsel does and how they expect to be billed for that work.

Client mindsets changing about how to assess value

The adoption of Gen AI tools into law firms’ workflows will reduce the time lawyers need to spend on labor-intensive tasks and therefore accelerate changing perceptions among in-house counsel about what they are prepared to pay for legal services, according to the new report, Gen AI in Law: Unlocking New Revenues.

“Corporate counsel do expect that their firms using this technology are going to deliver business benefits back to them, so that might mean faster or more efficient production of the information,” says Jeff Pfeifer, chief product officer at LexisNexis. “Ultimately, they expect to see some financial benefit in the way their work is managed by their outside counsel.”

Indeed, the Investing in Legal Innovation Survey found that 80% of in-house teams believe that the adoption of Gen AI means their external legal bills will fall.

But veteran observers of the legal services industry point out that the value of Gen AI is found in helping law firms complete work more efficiently. That type of work has already been carved into fixed-fee arrangements that more accurately reflect the value provided, while legal work that requires human judgment is unlikely to be impacted by Gen AI with respect to billing rates.

“The legal profession is more insulated than most, because ultimately most of the legal profession’s skill is in judgment and foresight — that’s what people pay an attorney for — and that’s the hardest part to translate to a machine,” says Tod Cohen, a partner at Steptoe.

Perhaps a more likely implication is that law firms will need to adapt to shifting client expectations about the nature of the work they are billed for.

“I think as Gen AI becomes widely used we would expect to see a shift in how time is billed to us,” says Christy Jo Gedney, senior manager at Liberty Mutual Insurance. “I would expect to be billed more for detailed legal strategy, risk analysis and the refinement of legal documents, and less for the routine analysis and for the initial drafting of documents.”

Advising clients on AI

One specific illustration for how law firms can adapt is spelled out in the new report, Gen AI in Law: Unlocking New Revenues. Law firms should be moving aggressively to capitalize on the emerging need for reliable AI-related legal advice and expertise as companies seek help with navigating the fast-changing regulatory landscape — and the subsequent legal implications — for how they can utilize AI technologies.

“We’re building out an AI practice that is global because so many of our clients have users globally and this is going to be regulated worldwide,” says Cohen. “We’re working with clients to establish AI governance policies and structure them in the world in which they exist, as opposed to just a single narrow jurisdiction.”

Industry thought leaders forecast that this potential boom in AI advisory work for law firms is going to increase demand for lawyers who have technical expertise and experience on top of their legal acumen.

“There may be a bit of a war for talent around those with the technology skill sets, trained as lawyers that can provide these kinds of advisory services to their clients,” says Pfeifer.

For example, firms that have sophisticated patent practices may be well-placed to extend this into Gen AI capabilities because they will likely already have attorneys who are skilled around technology questions and issues.

REPORT: Gen AI in Law: Unlocking New Revenues

We interviewed a variety of AI leaders from the legal profession to explore how law firms and corporations that embrace Legal AI can generate new revenues through the use of this technology. In addition to the section of the report we unpacked today, which explores how Gen AI is accelerating changes to client mindsets when it comes to assessing the value of legal work, other sections of the report include:

• An introduction to your new business development tool;
• How law firms can seize new opportunities with the right skills in place;
• The transformation of unprofitable practices into thriving businesses; and
• Why law firms should start business innovation now to maximize success.

Read the full report now: Gen AI in Law: Unlocking New Revenues.