AI ecosystem orchestrators will emerge, says Tellmann

A Law Society talk entitled ‘Creative Disruption in Legal Departments’ (24 March) has heard that the traditional legal mode is being upended at a rapid pace.

The relentless march of the ‘AI factory’ and the rise of autonomous ‘agentic’ AI will put an end to the linear model of the billable hour, the Blackhall Place gathering heard.

Industry thinker Bjarne Tellmann, a former general counsel at Haleon and Pearson, said that global corporate investment in AI is expected to hit $2 trillion this year alone.

Legal departments are being "sucked into the slipstream" of their parent organisations, as this enormous capital expenditure forces a rapid evolution, he said.

AI factory

Tellmann described a four-stage journey towards ‘AI factory’ status.

While many firms are still grappling with analogue data silos, about one-fifth of firms have reached a stage of ‘agentic’ automation, which performs independently of human direction.

Unlike standard generative AI, which merely suggests answers, and guesses where it doesn’t exactly know, agentic AI performs autonomously.

This includes tasks such as triaging workflows, managing governance, and monitoring regulatory shifts.

'Dragonfly' GC

The role of the general counsel is also undergoing a metamorphosis.

Tellmann described his concept of the ‘dragonfly lawyer,’ named for the insect’s 360-degree vision.

In a volatile world defined by unpredictable events, the modern GC can no longer rely solely on narrow legal precision, he said.

Instead, the GC must provide holistic business judgment as well as risk anticipation.

To meet this demand, legal departments must become what he termed ‘gaz-elephants’—combining a stable, reliable ‘elephant-like’ back-end for governance, with a nimble, ‘gazelle-like’ front-end for speed and scale.

The 'last 5%'

Tellmann estimates that up to 95% of the work traditionally performed by junior associates, such as IPO documentation and due diligence, can now be completed by AI in a fraction of the time.

AI cannot yet replicate honed human judgment, he said, although deep, vertical risk analysis may no longer be enough for a GC to provide.

"The last 5% is what really matters," Tellmann said, referring to high-level strategic judgment.

But Tellmann, referencing Harvard Business School Professor Clayton Christensen, warned that law firms face an "innovator’s dilemma" while simultaneously being asked to deliver ‘more for less’.

Dominant players often fail to adapt to new technology because it initially appears substandard, or threatens their core commercial model, he said, pointing to the sudden failure of industry leader Nokia, after the 2007 launch of the i-Phone.

Tellmann stated that the variances of risk and the speed of technology adoption will define future winners and losers.

However, he sees a move away from endless cutting of resources, to investment in deep skills.

According to Tellmann, these digital platforms allow companies to achieve ‘hockey stick’ growth through three specific effects:

• Scale: Servicing additional customers at near-zero marginal cost,
• Scope: Using modular data to move into new business sectors,
• Learning: Continuous, aggregated system improvements, exemplified by Tesla’s fleet-wide data sharing.

He noted that 20% of companies, including Walmart, have already reached this status, resulting in market valuations that dwarf traditional competitors.

Tellman said that his old law firm is now charging $3,400 an hour for legal advice, but that there is widespread client regret about supplier value noted in surveys.

Poor morale

This is allied with poor morale and high rates of alcoholism and depression in the legal industry, he said.

However, Tellmann said that it was hard for profitable firms, which are so good at what they do, to divert profits towards disruptive technology.

“I think law firms will exist in the future, but I do think they will take different forms,” he said.

He compared the legal profession to that of tailoring in London in the Victorian era, and the collapse from thousands of firms to a couple of hundred currently.

“So, you can almost imagine an inverted pyramid model where you expand the number of fee earners at the top and really mint that, but then you have to find a way of streamlining everything below,” he commented.

“Like tailors, there just isn't room for everyone at the top,” he said.

“I know at least 150 firms that believe firmly that they're in the top 10,” he quipped.

The work that top-level firms are doing contains many tasks that can be commoditised, he added.

Firms may also be ‘corporatised’ with private equity investing in technology and reimagining service delivery, rewarding partners using restricted stock rather than partnership shares, he said.

Fragmented supply base 

“What all this means for the client is you're going to have a fragmented supply base, so not just one model anymore, and you're going to increasingly have to orchestrate that complex supply base,” he said.

Alternative legal service providers are also part of the disruption theory model, he said, and there are also tech providers helping legal departments source legal services.

“The most valuable leaders will not be the ones who know the most law … it's going to be the ones who can design, govern, manage and orchestrate the ecosystems of the future,” he said.