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New Revenue Streams: Gen AI for business development

July 10, 2024 (4 min read)

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

The proliferation of generative artificial intelligence (Gen AI) technology trained for the legal profession is already changing the way that lawyers work by streamlining and automating time-consuming processes, such as research and drafting. For law firm leaders who are willing to jump on board the Legal AI train, it also has the potential to accelerate revenue growth.

How can a technology that reduces the amount of time it takes for lawyers to get work completed actually increase law firm billings in an industry still largely dependent on the billable hour? According to the new report Gen AI in Law: Unlocking New Revenues, the answer is coming into view more clearly for early adopters of Legal AI.

Building innovative products and services

More than half (54%) of senior lawyers at Am Law 200 firms believe Gen AI can help them expand into new business areas or take advantage of new billable opportunities, according to the LexisNexis Investing in Legal Innovation Survey.

These firms are discovering that, by freeing up lawyer capacity, they are able to offer more services to existing clients and/or more easily absorb new clients. This liberating impact of Gen AI serves as a driver for both top-line revenues and bottom-line profits per partner.

Law firms can use Gen AI tools to innovate and provide new services for clients — and even help improve margins in practice areas that have been less profitable — by unleashing the power of this remarkable new technology, according to the new report, Gen AI in Law: Unlocking New Revenues.

Disruption in the market creates fresh revenue opportunities

Gen AI technology is creating dislocation in the legal services market right now. The emergence of more trusted and reliable Legal AI tools is producing major efficiency gains, enabling savvy lawyers to focus on higher-value work. These tools are also helping law firms expand into new practice areas and identify ways to drive profitability in other practice areas.

“The business opportunities are being able to do more fixed-fee or alternative fee arrangements due to the fact that some time-sensitive work can be done more quickly,” says James Metzger, chief financial officer at Reed Smith.

Indeed, the vast majority of lawyers are optimistic about the potential impact of Gen AI on law firm profitability. As many as 77% of senior lawyers at Am Law 200 firms believe Gen AI will enable them to offer new value-added services to clients, with 54% saying they are already exploring these potential new revenue opportunities.

For example, Metzger anticipates that Gen AI will open “lower profitability segments of the market” where it may not have previously made financial sense for large firms to compete. This may also extend to boosting the profitability of certain types of legal work within an existing practice group where margins were previously not as attractive.

The LexisNexis Investing in Legal Innovation Survey found that the largest firms see the biggest opportunities, with 54% of Am Law 200 respondents saying they are exploring new lines of business made possible by the technology, compared to 38% of other firms.

In the meantime, industry experts are issuing an important warning to law firm leaders who are choosing to bide their time with the adoption of Legal AI. With some law firms already implementing Gen AI initiatives and AI innovation happening at a rapid pace, firms that move too slowly could get left behind during this period of market disruption.

Five potential Gen AI legal use cases

AI has been used in legal tech applications for many years, but the breakthrough of Gen AI has opened up a number of new possibilities for transforming how lawyers work.

Some of these applications may have a significant impact on future operational models, such as the possible reversal of the offshoring trend, where certain low-value work has been outsourced in recent years to legal ops teams in lower-cost jurisdictions.

Other applications are capable of having an immediate impact on day-to-day workflows. Here are five of the most compelling use cases right now:

  1. Legal research

Lawyers can ask Legal AI tools to quickly find and summarize the information they need, making legal research more efficient.

  1. AI assistant

Similar to Microsoft’s Copilot, a Legal AI assistant can support lawyers with multiple tasks, all personalized to that individual lawyer’s preferences.

  1. Predictive legal analytics

Legal AI tools can analyze the characteristics of a particular case and predict case outcomes by analyzing similar cases, helping inform more strategic litigation decisions.

  1. Contract drafting

Legal AI applications can generate contracts that are tailored to specific client and matter needs.

  1. IP prosecution

IP lawyers can do faster patent and trademark search and analysis by relying on Legal AI tools.

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 introduces Gen AI as a new business development tool for law firms, other sections of the report include:

  • Accelerating changes in client mindsets when assessing law firm value;
  • 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.