In this week's Law Firm Disrupted, we go north of the border to hear what a leader of a legal tech incubator thinks about the future of law.

I'm Roy Strom, the author of this weekly briefing on the changing legal market, and I can be reached at [email protected].

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Graduation day can be a total bore. I don't remember much about mine. The ceremony was long.

Anyway, there is a new type of graduation day that might be a bit more exciting: Legal tech startups are beginning to graduate from legal tech incubators! Yes, if you are looking for signs that innovation in the law is happening, that sentence is some sort of affirmative indication.

More specifically, the Canadian-based automated contract review company Diligen Inc. recently graduated from LIZ—The Legal Innovation Zone—Canada's first incubator dedicated to legal startups. Congratulations to Diligen, one of the first startups to take up residence at the LIZ all the way back in May 2015.

I've written about Diligen before, and I don't have much to say about Diligen's LIZ experience other than pointing out two things that happened during it: They won an award from software giant SAP for “most transformative solution” and they met Canadian Prime Minister Justin Trudeau. Seems worth it.

More interesting is the vantage point of Diligen's “instructor,” Chris Bentley, who founded the LIZ and has spent the past three years watching entrepreneurs attack the way legal work is handled. Bentley is a former Canadian politician who spent four years as an attorney general and then worked on a new type of lawyer license out of Ryerson University in Toronto.

The LIZ's origin story is worth knowing, at the very least as a sort of “don't-be-afraid-to-break-things” tale for innovators. It's also worth hearing in Bentley's own words.

“They stuck me in an office that used to be occupied by Google in the heart of the Ryerson Business Incubator. … I came out of the office one day while I'm working on this licensing program, and I asked, 'How many of your 80 companies are doing something in law?' They said none. I phoned up the president [of Ryerson University] and said, 'You need a legal innovation zone.' He said, 'What's that?' I mumbled something. And he just said, 'Go ahead.' I said, 'Fantastic!' What is a Legal Innovation Zone? I don't know. So we set up the first tech incubator dedicated to legal in Canada and we haven't found one that predated it.”

Turns out, a Legal Innovation Zone is a place that offers space and lots of lectures from people in the legal industry to would-be disruptors. The place has hosted plenty of well-known legal innovation speakers: Mark Cohen, Jordan Furlong, Richard Susskind and ALM alum Monica Bay.

The incubator has spawned companies that as of an annual report last year had generated more than $2.3 million in revenue and created about 140 jobs. So it's not necessarily setting the world on fire. But it's been more than enough to provide Bentley with a unique view of the changing legal market. Bentley said he's increasingly reluctant to think that large law firms or “corporate entities” will be the ones who create meaningful innovation within the legal market.

“When we have gone around to large law firms—and we've done so for years—it's been very challenging getting real attention,” Bentley said. “Everybody talks about innovation, but not as many people love change. And it's really tough to get large law firms to open up and think about doing things differently. Of course, many of them are making lots of money doing things the old way, so why would you change?”

He thinks companies and young entrepreneurs like Diligen CEO Konrad Pola and COO Laura van Wyngaarden will find ways to chip away at traditional legal work.

“Increasingly, I suspect the change will be driven by those who are not the largest [firms], but by those who are maybe a bit hungrier, and by those who are thinking completely outside the box and will gobble up a share of the market,” Bentley said. “I suspect that's where we find the next great change. History tells us that industries don't usually innovate substantially from within. They don't, usually. And it will be fascinating to see.”

Roy's Reading Corner

On Twitter: An innovative story from my editor-in-chief at The American Lawyer, Gina Passarella, presents a Twitter debate among legal tech types on whether Big Law elders are resistant to innovation or whether younger partners are stifling things. It is worth reading to see various arguments.

I tend to think that, while age may not necessarily be determinative of how you view innovation, it certainly impacts your stance. I also side with Kira Systems CEO Noah Waisberg, who says some newer Big Law partners want to live in the same environment their elders worked in. A lot of people long for the good old days.

On ILTACON: Zach Warren, the editor-in-chief of LegalTech News, has a report from ILTACON detailing four stories of change inside law firms. The stories come from Freshfields Bruckhaus Deringer; Littler Mendelson; Orrick, Herrington & Sutcliffe; and Troutman Sanders. It's worth a read if you're looking for ways to kickstart change inside your firm.

On Multidisciplinary Practices: This week, I wrote a story about the Manatt Health practice, which pairs 70 consultants with 90 lawyers. The thinking behind the practice is that hospitals, in a period of profound change reacting to the Patient Protection and Affordable Care Act, need a lot of business strategy advice in addition to strictly legal counsel. The practice brings in $110 million annually, and that is generated roughly evenly by the consultants and lawyers. It's also an interesting story of a legal practice that is, like its health care provider clients, moving to a value-based billing model from a fee-for-services model.

“I always joke that I relate it to what's happening with doctors and value-based billing: If you pay doctors fee-for-services, doctors cut. If you pay lawyers hourly, lawyers bill,” said William Bernstein, chair of Manatt Health.

That's it for this week! Thanks again for reading, and please feel free to reach out to me at [email protected]. Sign up here to receive The Law Firm Disrupted as a weekly email.