Digital Transformation and the Legal Profession: How Corporate Legal Departments Should Digitally Transform to Create New Forms of Value

Abstract

Due in part to the COVID-19 pandemic, enhancements in technology, as well as shifts in the macroeconomic and socioeconomic dynamics of globalization, Digital Transformation (DT) has become an enterprise-wide imperative for most multinational companies (MNCs). As such, legal departments are being challenged to embrace enterprise DT and start their own department’s DT journeys. Despite these trends, there is little scholarship and research about how MNC legal departments attempt to meet the DT challenge: What are GCs doing to support enterprise level DT, and how are they digitally transforming their own departments? And importantly, is what they are doing effective and value-accretive? How should they approach their DT journeys?Based on interviews of 23 General Counsels and Chief Digital Officers of S&P 500 MNCs along with the authors’ professional experience, we investigate in-house legal departments’ response and approach to DT and recommend a new model approach. Standard depictions of MNC legal departments suggest that they are viewed as cost centers. And much of the literature focuses on how GCs can add value by improving efficiency and lowering cost. The literature also appears to assume law firms provide more creative, strategic, value-additive advice than in-house legal departments. Contrary to such depictions, we contend that DT can enable legal departments to add value that external providers cannot, and that goes far beyond efficiency generation, cost reduction, and increased speed-to-market. We identify a Legal DT Maturity Framework that maps corporate legal departments’ DT trajectory into three common phases. We argue that the current three-phased approach to DT that many GCs utilize generates some added value but does not enable the full potential of DT to be harnessed. Drawing upon lessons from our interviewees’ experiences and our own, we articulate a best-practices model for how legal departments should approach DT to generate new forms of value and shift from being a cost center to a revenue generator and value creator. Our model demonstrates that the GC, as internal to the MNC, has an advantage (as compared to external providers) in understanding the MNC’s strategic priorities and risk preferences and, therefore, is better at identifying the right and best opportunities to leverage and exploit to the MNC’s advantage.In addition to filling some of the gaps in the literature, this article provides a vision that has broad applicability beyond the MNC legal department context and can be used as a model for law firms and other legal services providers to harness DT in their own contexts, so as to stay at pace with—and better serve—clients with the never-ending DT challenges emerging on their horizons.