The LegalTech Hype Cycle

The Gartner Hype Cycle is a graphical depiction of a common pattern that arises with each new technology or other innovation. It characterize the typical progression of innovation, from overenthusiasm through a period of disillusionment to an eventual understanding of the innovation’s relevance and role in a market or domain. (Blosch and Fenn, 2018) 

The LegalTech Hype Cycle follows this path very closely. LegalTech has evolved with e-discovery, legal practice management and related software being purpose built. Several of this software have been utilised by law firms and corporates to maximise cost and time efficiency. There has been significant buzz around it, especially within legal circles in the recent few years. There is a high expectation from the software in terms of bringing new efficiencies to both the business and practice of law. The note below provide more details on how to consider where a specific LegalTech product under consideration by the customer, investor or entrepreneur would fall under.

Source: Blosch and Fenn, 2018, p. 8

The Hype Cycle for Legal Technology will also similarly pass through several stages on its path to productivity, as mentioned below:

·     Innovation Trigger: The Hype Cycle starts when a breakthrough, public demonstration, product launch or other event generates press and industry interest in a technology innovation.

Several companies in e-Discovery passed through this phase a few years back, while new products being developed using Artificial Intelligence (AI), Natural Language Processing (NLP) and Machine Learning (ML) especially in Legal Analytics.

·     Peak of Inflated Expectations: A wave of “buzz” builds and the expectations for this innovation rise above the current reality of its capabilities. In some cases, an investment bubble forms, as happened with the web and social media.

With an increase in the number of companies working on LegalTech focused issues, especially around Legal Automation and Practice Management, there has been more news from LegalTech. Investors are slowly taking a few smaller bets, with one or two outsized investments.

·     Trough of Disillusionment: Inevitably, impatience for results begins to replace the original excitement about potential value. Problems with performance, slower-than-expected adoption or a failure to deliver financial returns in the time anticipated all lead to missed expectations, and disillusionment sets in.

With the increase in the buzz around AI, there is a higher expectation that LegalTech software will immediately become much smarter. There has been incredible work done in this area, but it will take a lot more effort to make the software ‘intelligent’ and the results ‘accurate’. Many firms which face this hurdle tend to blame the performance of the software, which is essentially linked to the quality of training data made available.

·     Slope of Enlightenment: Some early adopters overcome the initial hurdles, begin to experience benefits and recommit efforts to move forward. Organizations draw on the experience of the early adopters. Their understanding grows about where and how the innovation can be used to good effect and, just as importantly, where it brings little or no value.

With a surge in the number of LegalTech companies, strong case studies on how such software can be used more effectively, and the rise of industry bodies like the Corporate Legal Operations Organisation (CLOC), there is significantly more awareness around how lawyers can benefit from the use of technology within their organisations.

·     Plateau of Productivity: With the real-world benefits of the innovation demonstrated and accepted, growing numbers of organizations feel comfortable with the now greatly reduced levels of risk. A sharp rise in adoption begins (resembling a hockey stick when shown graphically), and penetration accelerates rapidly as a result of productive and useful value.

In-house teams at large corporations have begun using LegalTech software in a variety of functions within the legal department especially for contract automation (drafting, review and diligence), e-discovery, legal analytics and compliance. With successful deployment in Fortune 100 companies, the adoption by smaller companies is expected to increase.

The typical Hype Cycle shows two increases in expectations. The first rise (up to the Peak of Inflated Expectations) is due to the excitement about the new opportunities the innovation will bring, driven mostly by market hype. Excitement occurs in a rush, rises to a peak and dies down when early expectations are not met rapidly enough. High expectations and low maturity lead to the drop into the Trough of Disillusionment. The second rise of increasing expectations (up to the Slope of Enlightenment) is driven by the increase in maturity of the innovation, which leads to real value and fulfilled expectations.

The Hype Cycle ends at the start of the Plateau of Productivity, where mainstream adoption of the innovation surges. The final height of the Plateau of Productivity varies and depends whether the innovation is broadly applicable and highly visible, or benefits only a niche market.

Innovation profiles do not move at a uniform speed through the Hype Cycle. During the first part of the Hype Cycle, many uncertainties exist regarding an innovation. At this stage, its position on the curve is guided more by its hype levels and market expectation than by its maturity. At the later stages, as more information about maturity, performance and adoption becomes available, hype plays a lesser role in determining the innovation’s position on the Hype Cycle.

The constant barrage of positive and negative hype often leads organizations to behave in ways that may not represent the best use of their resources. The peaks and troughs of the Hype Cycle exert pressure on organizations to adopt risky technologies or innovations without knowing their potential value. They also mask opportunities to embrace less visible innovations that may be highly relevant. This leads to the four traps of the Hype Cycle — adopting too early, giving up too soon, adopting too late or hanging on too long.

Source: Blosch and Fenn, 2018, p. 14

 But, it is equally important to examine the opportunities that arise from the inevitability of the Hype Cycle.

Source: Blosch and Fenn, 2018, p. 15

 Organizations which try to adopt innovations early in the Hype Cycle (typically at the Peak of Inflated Expectations), are prepared to accept the risks associated with early adoption in return for the rewards. These are Type A (aggressive). Majority of organizations (Type B) try to adopt innovations in the middle of the Hype Cycle (around the Trough of Disillusionment). By doing so, they learn from the experience of Type A. Type C (conservative) organizations try to minimize risks by adopting innovations late in the Hype Cycle, once they have reached the Plateau of Productivity. However, organizations that operate exclusively within their comfort zones miss opportunities, and should be selectively opportunistic.

 There is still a wide gap between emerging technologies and their application to legal and compliance use cases. Emerging technologies are not often built into applications that advance legal and compliance objectives. They are therefore not readily usable for attorneys and legal staff whose expertise is law and compliance, not machine learning, data and analytics, or process redesign. Vendors exacerbate the confusion with exaggerated claims of value and liberal use of buzz terms. (Murphy, 2019, p. 3)

-------------------------------------------------------

If you enjoyed this article, and would like to read more, head on to 'Understanding the Basics of LegalTech' and see the entire set of articles that I have written. Please do share with friends, like and leave your comments / feedback below for me. Thank you.

#LegalTech #LegalTechnology

@LinkedInEditors