The Second-Order Impact of AI on Legal Operations

Speaker A: The more you create these roadblocks that don't make sense for business, the more people will navigate around them, because what they're sure of is they'll lose their job if they don't make their numbers.

Speaker B: Welcome to Modern Business Operations, where we talk with leaders about how OPS is adapting to our modern world.

Speaker C: Hello, everyone. Welcome to another episode of Modern M Business Operations. My name is Sagi. I'm the CEO and founder of Tonkin. And today I have the pleasure of hosting Gabriel. Hey, Gabriel. Thank you for joining me.

Speaker A: Thank you, Sagi. Uh, it's a pleasure to join you and talk about my experiences with legal and legal transformation.

Speaker C: Well, there's a lot of things I want to go into, uh, so I'm excited for this conversation. But maybe as a starting point, Gabriel, uh, is the executive vice president of contracts, compliance and Commercial services at Integrion. And your executive and United Lex, uh, Corporation and hp. And so there's a lot of, uh, there's a lot of great career behind you and in front of you, but maybe give me and the audience a little bit of context of, of your career, what you're responsible for today and kind of what got you here. And, uh, so we can, uh, start from there.

Speaker A: Absolutely. Okay. In terms of, uh, a legal career, I've kind of done almost the entire arc. I started in Big Law, I did a couple of stints overseas, my Madrid, Tokyo, um, which I think were very formative for me in terms of just cultural immersion and different ways of doing things. But when I left Big Law, I always loved business, so I wanted to go in house. And I started working at Hewlett Packard back when it was a smaller company. I started probably in one of the smallest regions of Hewlett Packard, the non subsidiary countries of Latin America, basically the Caribbean and Central America, and then moved my way up the company from there, you know, you know, increasingly more senior roles. And toward the end, my last role was svp, where I was responsible for both the printing and the PC divisions from a legal perspective. But I also ran legal strategy and operations. That'll form the gist of some of the things we'll talk about today. When I left in house, I had moved back to Miami. And I've always been fascinating of trying to transform legal services delivery.

Speaker C: Right.

Speaker A: Legal is one of the last functions that in some ways still operates in kind of an antiquated model. And I've always thought that the time would come that it will be transformed. Now. I've been battling that fight for a long time now. But I actually think that we're on the cusp of a true transformational change.

Speaker C: So that's a great place to start. So let's start there. So I agree with you and I think most, uh, people in the audience that either work at legal departments or with legal departments can resonate with that. Why now? Or what do you think is the difference in the timing?

Speaker A: So I think there's a number of drivers, but we, you know, almost any conversation has to start with Gen AI, right? Why? Because the, it's a technology that the speed of usage, the speed of which it's been developing. I've been fascinated to when we started using it, to where it is now, how rapid that development has been. And it's a technology that lends itself to language and documents, which a lot of legal output is language and documents, right? More and more people are using it. There's an entire generation entering the workforce that'll be Genai native, right? That's how they'll want to work. So I think in many respects a fuse has been lit in terms of how legal services is going to be transformed. And it's really going to be the speed of it. I just tend to believe it'll be faster than other, say, it transformations just because of the speed of, you know, initial usage of people, the speed of which it's developing, right. So, you know, working at Hewlett Packard, one of the advantage for me was I've seen transformation a chunk of my career in the Valley. The Valley is all about disruption and who can you disrupt the incumbent, right? The difference is those disruptions take a while, right? Just like, for example, the cloud, the economics of the cloud made too much sense that you knew that it was going to eventually win out. But for a while it was, oh my God, who would trust their data out in the cloud? And everything had to be on prem and all that. But you knew over time that it would just get there, right? Because the value proposition was too great. And the other thing, uh, that you learn about disruption is incumbents are usually not the disruptors, right? Think about it. I supported the printing division and when we were going through digitization, right? It was all like, oh my God, this is going to be the greatest thing for printing. So many people are putting more things out in the, out in the cloud and people are going to be able to print so much more. And you're realizing like, well, but people are using their phones or people are using their computers, people aren't really printing anymore. And these are brilliant people, right? These were not dumb people. Right. But you can convince yourself as an incumbent why disruption is not going to topple your business model. Right. And, and I think that's entirely what's going to happen here is I think the disruption is going to need to come more from in house leadership and from disruptors such as us in the alternative legal services space. We have no, we have really no option but to be a disruptor, right? We're not, I'm not protecting a AH $2 billion revenue stream, right. And I can't afford to be late to the party. I'm not big enough to catch up if I missed, if I missed the industry transition. And so we've leaned heavily into it. We very much believe in it and we're starting to see enough uptake by people. Right? You talk to almost anybody in in house legal department is people are at least starting to use Genai. It is no longer about what is this, what are the risks, what are the people are starting to use it, right? Are they using it yet at scale? Have they achieved massive transformation? No, not yet. It's still early but they're starting to use it and they're finding, and they're starting to find use cases and I think that'll just accelerate more and more as time goes by.

Speaker C: I think there's two really intriguing points that I think worth even continue double click on because the example with the uh, printers people printing things and how it's related to the cloud and the mobile is fascinating to me. So many people are talking about the first order of implications when they think about gen AI and LLMs and so on of like how do you would do, you know, you were doing things that way and now with this, you know, new technology you will do it another way but the real transformations happen or the real disruption to use your point happens on the second order of, second order effect of some of those things. And you know you described kind of like how hard is, you know I think it's called like the innovator dilemma, right? Of like you're in that, you're in that place. The dilemma is that you by the by definition you're trying to, you're, you can't say your child was ugly, right? You're like no, like what we're doing has value, sure. Change is going to come, we going to adapt and here's the scenario where it's valuable and it's positive and it blocking you from zooming out and say actually maybe everything's going to change. Like what is the second Order. And the reason I like this and kind of to segue into your point about the legal, the in house lawyers and just law in general. I think everyone, or not everyone, but a lot of the conversation is, is still stuck on the first order of uh, impact. And now, you know, let's unpack that for a second. Like how would you think through that?

Speaker A: So let's make sure that we understand by, by first order. What, what do you want to unpack? The, the fact that you have Geni, you have the large language models, you have, you know, you, you have the use cases that people are building on top of, of these models. And so the foundations are starting to exist to transform. Right. But the real transformation will come when you take those foundations and you actually do work in a different way and do it in a way that completely transforms how that work has been delivered. Right. So I think initially a lot of attention to your point was also just put into, it's a little bit like the cloud and the fear of the cloud. It's like, oh my God, you know, is my data going to be compromised? What do we do about privacy and confidentiality and everything else? And the reality is most credible players think about that, right? It just is the same way that cloud companies thought about that because they knew nobody's more invested in their business model than they are. They know that if there's, there was massive breaches of data for people putting things in the cloud that their models would be destroyed. So nobody thinks more about security and how to provide comfort to people than people that are building those foundations and those environments. And, and I think we're starting to get to the place that people have started to make the transition where a year ago everybody was kicking the tires and we're forming AI committees and we're trying to understand what's an appropriate use or not a use and who had control over the decision to people are now starting to use. Uh, I'll give you another learning. I don't know if it's the right thing, but I'll give it to you anyway. Right. I think as companies have started to understand that they have to use AI responsibly, they also have to be careful not to be so conservative that people are going to use it anyway. I used to say this about procurement at HP and hopefully not too many people from HP are listening today, but it's been a while since I worked there. No, but it used to take us six months to onboard a client. I mean, uh, a new vendor, right. And you say, listen People operate in the real world, they get judged on a quarterly basis. There may be vendors that you need to onboard to change your quarter. You may need a new marketing campaign, you may need something. The more you create these roadblocks that don't make sense for business, the more people will navigate around them. Right. Because, because what they're sure of is they'll lose their job if they don't make their numbers. Right. They may be more willing to ask for forgiveness later on maybe when they didn't quite follow this, the procurement policy. And I think the same thing is happening now. Right. Because even when you do read a lot of the surveys, a lot of people are experimenting with gen outside of their, their corporate environments. And I think companies need to understand that they need to create quickly kind of a safe place where people can actually use and test the AI. And I think that's starting to happen now more and more. Right. And I'm going to unpack things in a little, a little different way. The way I kind of think about AI a little bit and the use cases is I think there is clearly. Let's start with in house legal departments. Clearly in house legal teams will want to figure out what are the right platforms and uses that augment the in house lawyers to do more and to do more effectively to create capacity for themselves to be able to do the more complex work. But I also think like in many instances of legal tech that they have to be careful not to rush to license something that they don't yet quite understand what the use case is, how they're actually going to deploy it, if they have the skill sets to deploy it, if they can get a bunch of people to do this at scale. Right. Because it's you know, you know, in house, you know, you know, if you ever rolled out a CLM M, you know, getting 50 lawyers to use it is a challenge. And so I do think that as in house teams consume this, I tend to recommend a lot, you know, use third parties, do pilots, do um, proof of concepts, figure out ways, maybe buy a tech enabled service. Because you can always insource right. You know, and that way you don't guess wrong.

Speaker C: Right.

Speaker A: Things are moving fairly quickly. There are ways that you start testing and figuring out what is the right, you know, what is the right use case for your company, what, what really makes a difference. And, and I'd like to get out of the paradigm where everybody just automatically licenses because I uh, what I don't want to happen with AI is what happened particularly in early days of clm, how many people have implemented CLM and you talk to them and it's a front end workflow and, and it's a repository and that's it. And only so many people use it and you run the same risk with the Gen application. Have you identified the right use cases? Have you really understood the technology? Have you tried the technology? Is it going to work? Can you do the change management? Can you scale it? All the things that you have to think about with any legal tech. And so I believe that partnering may be a good initial way for people to start embracing Gen and figuring out what are the right use cases for them and what are the things that are really going to be most impactful for their in house legal teams.

Speaker C: I agree. I think it's an interesting way to go about it. I also think it's an interesting comparison. So if we zoom out half a step and you think about that transformation, you kind of compare it to the cloud or even to the unquote digital transformation. Right. I do think there's an interesting, my opinion, I'm wondering how you feel about that. There is a distinct difference between the digital transformation to what might be the sort of like AI transformation. A lot of it, because we don't know what it's going to end up like. But the digital transformation was as it's called, taking whatever we did before and put it in a digital form. A lot of the reason why Ward and Excel and PowerPoint have maintained their superiority even on top of systems like a CLM that was trying to help with kind of modernizing the process is because there wasn't enough of an improvement. It wasn't like ah, an order of magnitude better. The order of magnitude was that it's no longer handwritten, it's now in a digital form. Anything on top of it was useful, was valuable. But unless you have an acute pain in a certain area that is unique to you, just adding a CLM on top of the files was not that useful for many because the work was done in the Word document anyway. And you know, and that was just adding something that is not, you know, it's not painful enough or it's not useful enough to kind of like justify the, like you said, the adoption of it. What's interesting to me, and I kind um, of want to move it to you, AI does have a, uh, more like closer to like the Internet and the mobile, you know, sort of like transformation potential where they might change behavior as a whole. Right. I really think your point about the printing is super Interesting is that if you focus on the printing industry of what cloud and Internet would open or close in the world of printing, but not considering the second wave effect of the mobile and the on the go and the screens, then you sort of like optimizing for just like the one step ahead and not two steps ahead. Do you think like it's really interesting what is the org chart for a legal department going to look like when this is fully absorbed? Like when everyone are using gen internally, not only the lawyers, what is the expectations going to be like from the counterparties from outside counsel, like from cost structures. There's so much like second secondary effects that can happen, you know, uh, and that's where the big question mark is.

Speaker A: It is, it's an excellent point. You bring me to, you know, like one of the biggest things I learned about transformation, right? And that is you have the most flexibility, the most creativity in transformation when you're early to it before somebody asks you to transform. Because you would be amazed that if you think about it in a very forward looking way you can often even self fund transformation, right? By hiring in the right places, by looking. For example, take even like basic uses of Gen, like oh, I can do diligence better or something like that, a repapering exercise better, something like that. And say the more work I can take away from outside counsel, right? That is a huge cost savings. Now I don't immediately, if I'm doing transformation before I'm asked to, I don't immediately need to give the money back, I can repurpose the money to say boy, if I had a few more lawyers who could do a bit more different things, I, I could even take more work from outside counsel and do it myself, right? All of those, like when we did this at HP, right, we were 1200 people. It was a really big transformation. But essentially we self funded all of it. And that self funding included a clm, a matter management system, all the tools that you needed to run and actually understand what 1200 people were doing. That was initially our big problem is we had no IDEA really what 1200 people we're doing it, we need it. We needed the data that tell us what that is. But we insourced so much of that legal work because we started to realize like oh, if we actually stopped giving stuff away to outside counsel and hire the people who could do the work internally themselves and here's the reality of that, and could do it better because they understand the company, they understand the risk profile, they understand that, you know, all of that is and the context. Context, right. It's germane to the in house team and I think even when we don't know yet everything that's going to happen with Genai. That's why to me it's like launch in terms of your thinking about it, how is this going to change? What are the steps you should be taking now? How do you self fund some of this journey? Even like the way you describe, like what does the organization look like? Is it all lawyers and paralegals and contracts people? No, probably not, right? It's going to have a mix because data is going to play a huge role and how you take advantage of Gen and so the more forward thinking you are about that, the more freedom you have to design things and the way you think things are going, the more resistant or the more you wait for the change to happen to you. We understand large companies, right. They're going to have a big Gen initiative and somebody's going to come down and say boy, from what I'm reading about Gen AI, you should reduce the legal spend by 25% and you'll be given a timeline and normally a headcount associated with that around how many people need to go. And if you haven't really transformed what happens? The remaining people just get stuck with even more work than than they had on their plate. So. So it is when you think about where we're going and how you have to think about it. My biggest recommendation to people is be forward thinking about how this is going. This change is going to be happening and the more forward thinking you are, the more control you're actually going to have about the moves you need to make.

Speaker C: This episode is brought to you by Tonkin. Tonkin is the operating system for business operations, providing businesses with the building blocks to orchestrate any process with no code or change management required. Contact us@tonkin.com to learn how you can build complex processes fast. And if you tie it back to the innovator dilemma, I think the most important piece there is that in many times that incumbent on sort of like that current state has the false belief that they will be able to avert the change that is coming and therefore it's better to kind of optimize for what it is versus what might be. And I think if I take it to your point is like the transformation can happen to you or you can drive it and you know, and if you get ahead of it then you might as well. You definitely has a good chance to come on top but the very least you're going to be able to handle it on your terms.

Speaker A: That's right. Right. That's exactly right. And it'll reflect what you really think is the right thing to do for your legal function. It's a fascinating time to be in house remembering from my days in house it's sort of like look, the legal services delivery model is going to be reordered. It's still early days lands where we don't all really know yet but it's going to be reordered and you're in the quarter. That can use a football analogy. You're almost like the quarterback. You can be the quarterback around how this future game is going to be played but it's the point you just made but you can't let it happen to you. You have to be the one that's actually calling the game. Right?

Speaker C: Yeah exactly. You have a game plan. Doesn't mean, doesn't mean they're going to work as a quarterback you need to adjust and redo the agile.

Speaker A: Right. Just. That's exactly right.

Speaker C: So maybe kind of as a final point on this what is your prediction time wise you know there's a lot of noise this is happening tomorrow, this is far away this obviously everyone are uh in the understanding that like everything you said, you know people are using ChatGPT in their personal life their expectations are different, new generations comes in but where do you like there's listeners to this hearing all of this saying oh that's a great advice. What is the urgency here in your opinion?

Speaker A: I think take advantage of the use cases that are available today that can make a difference. Like I would focus on routine workloads. You know we've been trying to kill the NDA off for what 20 years, 25 years. Right. And I still can't tell you how many clients I get hey we need help with NDAs and it's just there's things like that routine documents that AI can be really good at automating the review the negotiation start to help desks think about like the old static frequently asked questions that people would create they'd put on an Internet site somewhere people would forget about it, they'd become dated or whatever. It's like yeah you know have have your business clients queries query the policy get their own answers again those are things, those are easy knowledge basis to build. They're available now automate workflows maybe there's basic agents that you can use to make things move better. All those things are possibility uh today I would start with all of that Today, because they're available today. Now. I think the pace of innovation is also going to happen a little bit different depending on, on practice group. Right. You know, we do a variety of service lines and you see differences depending on what the practice group is like. Right, like litigation. Right, litigation. The challenge with litigation is that it's an adversarial procedure and it involves a judge. So you do need to, you know, have a few parties agree on changing the game before, before you can jump into like, oh look, discovery is all going away, it'll all be done automatic, you know, it'll all be automated or whatever. So that may take a little while longer. Right. But again, but there are use cases today, legal research that's going to continue to accelerate and be done in a very, in a very different way. So to me it's like there's a part of legal work that's ready now, it doesn't change at all. But there's a part of legal work that's ready now that we should embrace and start to change. And it'll get you ready and it'll help you build the skills that you need as you move up the complexity stack on, on what the art of the possible is. But till it fully changes, you know, three years is my prediction. Five may be the more accurate landing spot, but I think between three and the fifth of it'll be very different than the way you perform legal services today.

Speaker C: Yeah, that checks. I think that the cycle with new folks coming in, getting out of their junior positions into more kind of like prominent positions, that will make a big impact too.

Speaker A: No, I, I agree. And if you don't mind, I want to make a one real quick point about junior positions because I know that there's a lot of people that are fearful that the junior lawyer job will go away, that uh, Genai will replace it. I think people, if they go too far in thinking that way or making a mistake. Right. If I was running a law firm or I was running an in house legal department, I would want to be hiring people that are really familiar with the technology, they really have embraced the technology, they know how to use the technology and have it be incumbent on me to teach them the context, how to review a contract, what's important, all those things. But you can't cut yourself off from the people who are going to be the most ready and willing to use the technology.

Speaker C: I could not agree more. They're bringing skills that you don't even know right now that you would need. And I think that was always the case. And I agree with you, it's very short sighted to think that whole class of people will not be necessary. History proves the exact opposite. Every time.

Speaker A: Every time. Right?

Speaker C: Every time.

Speaker A: I remember it was funny because one of the things we did at HP is we hired first year lawyers and I was at a Stanford meeting and there was uh, a general counsel that would not, that will not be named from a very prestigious company who said you're ruining their careers. If they don't start a law firm, they won't succeed. And I'm like we're 1200 people legal department. We are literally like a law firm. We're almost like a captive law firm inside a company. And the reality is you always underestimate how fast young ambitious people learn.

Speaker C: Right.

Speaker A: We always want to spoon feed them and oh boy, you have to sit in a room and look at documents, any discovery or do due diligence for a year. And no people can learn very rapidly if you give them good training then experiences to do that. And that always taught me like no young people, they're ambitious and you have good training and good experiences. They develop at a much more rapid clip than you give them credit for.

Speaker C: Yeah. And I would say, you know, the cloud was for example, was uh, a more of a corporate ah, transformation but the mobile for example was you know, consumer as well. I think AI is a consumer as well which means the expectations of everyone else like the entire society is going to go through a transformation. I don't know how big or small, I don't know but a transformation for sure. So those guys you're hiring, those you know, girls, gals and girl guys you're hiring, they're going to be in their height of their career in like 5, 10, 15 years. Like who knows like what's the expectations are going to be in 15 years outside of the department that you hire them for by the way, regardless if it's legal, finance, hr, marketing, sales, like it is all, you know, we're all part of this ecosystem and reacting to it and some stuff are always kind of like for ourselves the way we run things and then a lot of it is how this interact, you know, intersect with the rest of the organization and outside of the organization. So I think it's really double down on your point, which I agree with is completely shortsighted to think that whatever was true 20 years ago is going to be true in 20 years.

Speaker A: Absolutely. Or two.

Speaker C: Yeah. Or into perfect. Well maybe to finish on with uh, you know, kind of back. On a personal note, you Know, I think that was a great advice of kind of how think about AI. But maybe on a personal level, any advice you maybe like to ask, any advice you got early in your career that you feel like is good paying forward.

Speaker A: Yeah, I'm happy. I'm going to provide two and I'll be, yeah, I'll be brief. One is going to be very much on the Gen AI theme. Some people get scared of change. I will tell you that change is an opportunity. My career was defined at HP by willing to take risk and change. Like literally it's, you know, it's going to be silly. And I don't mean I love California. So it's not meant to be a critique on California. When HP bought Compaq, right, it was in Houston and like everybody in California was like, oh no, I'm not moving to Texas. And it was. And it was like, I'll move. It's a big promotion. And my point is, and when there's change, there's the opportunity for those who embrace change and never forget that. And so think about everything that's going on, look at how you take advantage of change. And. And then the other advice that I would recommend, anybody who works in an in house environment is it's incumbent on you to step out of just legal and learn the business. Learn the company, the competitive landscape, the risk profile, the products and services, the technology, all of it. It will make you so much better lawyer and it will allow you to have really good conversations with your business clients when you understand what they do and what their, and what their challenges are. I mean that was the other thing I recommend to anybody who goes in house is learn the business.

Speaker C: I think both of them are perfect timing too because even the second point, it's like the context is the king. When if gen AI actually happens like we think it will and LLMs and all that stuff, that what remains is the context and the nuances of the specific business culture. You know, priorities. Very, very impactful. Thank you so much Gabriel for this. This was really fun. If anyone wants to chat with you, um, or you know, nerd on those things, where can they find you on LinkedIn?

Speaker A: Gabriel Buas uh, @integron.com I actually like this stuff too. I will gladly talk to anybody about it. Honestly, I don't mind. I'm super responsive. If people want to reach out to me, if they have questions, they want to know what we're doing at uh, at Integra on what use cases we see. Although all those experiences, I'm more than happy to to talk to them.

Speaker C: Awesome. Gabriel, thank you so much. That was great. Um, thank you for joining.

Speaker A: No, thank you for the invite. Have a great day.

Speaker B: I hope you enjoyed this episode of Modern Business Operations. You can see the show notes and all of the resources mentioned on Today's episode@tonkin.com mbopod thank you for listening and be sure to subscribe for updates on future episodes. And if you're interested in staying up to date on the latest in business operations technology, head over to tonkin dot com.