James Goodnow of Fennemore Craig. February 8, 2016. Photo by Travis Neely.

It doesn't take a financial expert to see that legal technology is a hot market, with some estimates placing legal tech investment above $1.2 billion. However, there's no guarantee that those technologies will succeed—companies and law firms alike need more than just money to stand out and grow, after all. With industry shifts and M&A activity continuing at a rapid pace, staying on top of all the new legal technology products may be near impossible to master. But for many law firms out there, it's a necessary task in the face of a changing industry.

As part of the run-up to Legalweek 2020, Legaltech News is chatting with a number of speakers from this year's sessions to know. Today's Q&A is with James Goodnow, president and managing partner at Fennemore Craig. His Legaltech session "With Over $1B in VC Capital, Are We on the Verge of Another Tech Bubble?" will take place on Tuesday, February 4, at 3:30 p.m.

The questions and responses below have been edited for clarity.

Legaltech News: What do you think legal tech looks like in 10 years? What will be the biggest opportunities and challenges?

James Goodnow: Adoption of technology by large and mid-sized firms will speed up substantially, perhaps even exceeding the pace of tech adoption by the larger business world. Part of that is opportunity, and part is generational turnover. Gen X and Millennial partners are increasingly stepping into leadership roles, which means that large firms are now being shaped by tech natives. Law has traditionally lagged behind other industries in tech adoption, so I'd predict a surge over the next decade to close the gap.

Savvy leadership teams will find big opportunities to lower overhead and increase client satisfaction, but being on the bleeding edge means running the risk of false starts and bad investments. Partnerships need to understand that occasional failures are part of the process of joining the 21st century. Letting one bad experience sour a firm on aggressive tech adoption would be a huge mistake.

What is the biggest misconception you think still persists about legal technology?

That it has to be directly related to generated legal product. Useful legal technology isn't all e-discovery or contract drafting/management. Something as simple and universal as workflow management software or searchable team chat can be invaluable to the right firm. Making technological adoption and experimentation part of a firm's culture will open up tremendous opportunities for those who can pull it off.

What do you think is the biggest challenge facing legal tech market as a whole?

The time and expense of finding, experimenting with, and implementing new technologies. The will to use technology is growing amongst law firm leaders, but even well-intentioned, tech-friendly attorneys have few opportunities to train on new technologies and understand how tech can be used to transform their practices.

It's hard enough to commit resources and time to client development, which has a direct benefit to the bottom line. Committing resources and time to testing and piloting new technologies is a big ask at a lot of firms, for no guaranteed returns. Politically, if the tech doesn't pan out, it can become an expensive and embarrassing boondoggle for its champions. The incentives just aren't there at many firms to find and advocate for new tech. Tech companies that have cheap, fast, safe ways to pilot their programs are much more likely to get tested and ultimately adopted in the legal market.

Are the ongoing consolidations in the legal tech market signs that there are too many companies offering similar products and services?

Consolidation of diverse competition down to a few service providers is pretty much the natural life cycle of technology companies. Physical presence or geographical convenience matter for lawyers, which is why every town has more than its share of attorneys hanging out a shingle. Tech companies can often provide their services absolutely anywhere, meaning the market will tend to converge around one or two major players. We've seen plenty of tech sectors go through the cycle of an explosion of new service providers that whittles itself down to just a few monolithic providers.

Consolidation is a sign that the market is maturing and clients are sorting out which companies they want to survive. Consolidation in this context is often the sign of a healthy market. It gets problematic if unhealthy monopolies form, but so far I haven't seen anything that appears close to that line.

To what extent is investment and interest in legal tech solutions driven by the fact that many of these solutions, such as e-discovery, can serve a variety of non-legal demands and industries?

Any tech company seeking investment needs to have a plan to grow, and having a plan to grow a company's services beyond the legal industry is likely a prerequisite for many investors. It raises the ceiling on your potential market by orders of magnitude compared to companies with no ambition beyond selling to lawyers.

That said, the legal industry is a great crucible for a growing tech company. Law firms are demanding, complex customers who have sophisticated ethical and regulatory needs, yet the competitive scene is less crowded than in the broader business world. Taking the time to meet a legal customer's needs will be invaluable experience for a tech company with larger, non-tech goals on its mind. Take care to get our market right, and you'll probably be ready for anything.

What do you hope attendees take away from your Legalweek session?

Folding technology and data into your practice isn't just a smart business move, but it will also increasingly be a fundamental part of competitive survival. The legal market is being subjected to increasing competition from nontraditional sources, and those new players are leveraging tech as much as they can to compete against our JDs and bar cards. If we can't offer our clients the same levels of service and sophistication, we deserve to lose our market share.