AI and Organizational Change

In this episode of the Reminger Report Podcast on Emerging Technologies, we sit down with Ken Gavranovic, a seasoned expert in business transformations and technology integrations. Ken shares his extensive experience with strategic acquisitions, IPOs, and leadership development, offering valuable insights into how AI is set to revolutionize industries—particularly the legal field.

Transcript

REMINGER REPORT PODCAST ON EMERGING TECHNOLOGIES

Part I

ZBP      Zachary B. Pyers, Esq.

KG       Ken Gavranovic

 | ZBP | Welcome to the latest edition of the Reminger Report Podcast on Emerging Technologies. Today I am really thankful to have one of our guests on this show, Ken Gavranovic, and I will tell you, when I was preparing for this show, I started reading through his bio and his background, and I, it’s so impressive that I would not be able to tell you all of the details here, but I will hit a couple of highlights just so you understand where Ken comes from and what I will say, and, and I don’t mean to paraphrase an entire career, but Ken has extensive experience working with companies that are either being taken over or be, or are acquiring other companies and essentially helping them to accelerate their growth through the use of technologies and, and a lot of, and a lot of other, you know, techniques. So he’s worked with IPOs and grown businesses, achieving from the ground up to $500 million in annual revenue. He’s led transforming other businesses with year-to-year growth of over, revenue growth of over 40%. He’s done post-merger integration. He’s worked in private equity and venture capitals, and he’s seen a number of strategic acquisitions that he’s overseen at various entities and of course he’s got a great background in leadership development and a focus on technology which is why we’re super excited to have Ken here today talking about some of the, the technologies that we’re going to see kind of springboarding and kind of seeing growth in the legal field. So Ken, I’m happy if there’s other stuff you want to add, but we’re super excited to have you on today.
| KG | Zach, thank you so much for having me on and, you know, I think, when I think about my career, I’ve, whether it be luck, skill, timing, universe, I don’t know what it is, but I’ve been able to see a lot of big pivots and transformations where people might say, that’s not gonna happen. I’d be like, oh that’s gonna be, be huge. And you think about early in my career when I was in my 20s, you know, people thought the internet was not gonna be a thing and I was super convinced, built a really big business on that. You know, later, if you think about companies, when they were thinking about the cloud and what that’s gonna do to go fast, I was able to be involved in some huge transformations at very large companies and so I understand, you know, how hard it is for entrenched players to change. And right now, I’m, I’m really excited to talk to you about AI because I think AI is gonna be more transformative to every single part of the way we live and in particular for certain industries, if they don’t get ahead of it, it’s gonna be like if you didn’t ever, if you never got a website except much, much worse. The impact to you is gonna be huge and so I’m, really love to think it’s be great to kind of focus in on, on law firms and AI and how that’s, I, how I think that’s gonna happen and, and maybe what law firms can do to kind of get ahead of this change, the tsunami that I think’s coming their way.
| ZBP | Yeah, so I, I mean, by all, you know, intents, we love to talk about organizational change. We love to talk about technology. One of the things I will tell you, you know, that we haven’t spent a lot of time on this in this podcast over its run talking about is the organizational change itself. We love to talk about how the technology impacts the organizations, impacts the change, but really then I think there’s a lot to unpack, you know, just about organizations themselves changing, which is something, you know, frankly, I don’t know that we’ve had kind of an expert so to speak in the industry on, and so I think it, it will be really interesting to hear kind of your perspectives if we talk about, you know, how AI is currently driving changes and the practical applications and, and frankly some of the, you know, the short and longer term predictions. I think it’ll also be good to hear kind of the concept of the transformational change and, and how you kind of transform an organization.
| KG | Great. So why don’t we focus on that first. What we’ll do, you raised some examples.
| ZBP | Yeah.
| KG | Because a lot of times when there’s change, it’s easier for people to grasp, oh, it’s a technology change, and even though I’m a technologist, I always tell people technology’s the easiest part. It’s the people and process, that’s the hard part of change, right? Because all of us, like we get, you know, we don’t like our cheese to be moved, we like steady, we don’t like change and have you ever, have you ever heard of a thing called the Kubler Curve?
| ZBP | I feel like I’ve heard the name, but I don’t know that I could tell you what it is.
| KG | Well and, and I’ll go the short, but there’s a, a graph that basically shows, like, whenever you introduce change to humans, just, it’s the way we’re wired, it’s kind of like we go through disbelief, we’re not really sure, active, almost active resistance. Productivity goes down, acceptance, and then goes back up. And so, like when I’ve done transformation at companies, one of the things I try to do actively is minimize that dip that you have. And you know, you know, and I think that’s where, where you get into, like, how do you actually drive change and, you know, maybe before I jump into it, I’ll give you some examples. I was at a company, it was a tech company called New Relic and fast growing, you know, like zero to $300 million. I came in around the $300 million. During the time I was there, I think we went from 1,000 to 2,000 employees, but that company was, had the kind of classic problem when I, when I joined, is they had this product but in, they started to be disconnected so, like, the, the sales team was doing this thing, the product, the team was doing this thing. The customers had different demands. Everybody wasn’t connected, and so like, this was the problem of change in, in this particular company, and so when I got in there, you know, one of the first things you do is kind of get people aligned. Like, where are we going? What’s the challenge that we’re having? In this case, it was there’s competitive threats and if we don’t change, if we don’t get a lot more efficient faster, we’re gonna, we, we’re already getting our, our, we’re already having a competitive about, we’re starting to lose business, starting to be known as not as competitive. We have to get everybody aligned. So when I think about change, the first thing is identify what is this problem  or what is this thing coming, and what is the future state that we want to get to, why do we want to get to that future state, and then have conviction around that. That makes a little bit of sense, and so once you do that, because a lot of times people just start doing change and people don’t understand why and they don’t understand the risk if they don’t change.
| ZBP | I don’t mean to, it kind of sounds like to me, to, about getting people buy in, is that
| KG | Yep.
| ZBP | A fair term?
| KG | Well, you could say a buy in, but I would say people can disagree because sometimes people actually don’t buy in but they can’t resist.
| ZBP | Okay.
| KG | If you’re trying to make change, if that makes sense.
| ZBP | Yeah, it does. How do you, how do you go about, you know, in, with people in those kind of positions who find themselves where they just can’t help but resist. How do you help to get them over that hurdle?
| KG | Well, I think it, it depends. Going back to a very specific example. So there was a Fortune 50 healthcare company that we probably have all had at one point that I was involved with, and they were making a migration to the cloud, and when I got involved, they had already tried to move to the cloud and spent $50, $70 million and failed two times and the third time. And so when I got involved, I looked at, you know, I kind of said, okay, well why are you going to the cloud, and they said well, because we’re gonna build software faster and things are gonna. Great, so in your transformation, was that part of your success criteria or was it that you ha, you moved to the cloud? And they go, what do you mean. I go, let’s go look at your success criteria, and sure enough, the success criteria had nothing about moving faster or building software faster. It was all about this we move to the cloud. I said great. So that’s a problem. The first thing is you didn’t have a, you, you weren’t clear on what you’re actually trying to accomplish, the outcome. You were on a tactic, tactic - we’re gonna move to the cloud. No, outcome - we want to be more agile, we want to, you know, be able to go faster. And then I said, alright, and so in this transformation to the cloud, what does that mean. Well, that means that our operations teams, you know, are gonna be less involved because it’s gonna be a lot more automated and all that stuff, and I said great, so it’s gonna impact your operations teams. Well, well, yeah, I guess you’re right. It’s gonna impact our operations. I said, who is in charge of the project. Well, our operations teams. I said okay, so let’s just think about what you’re done and you’re wondering why have you failed and why have you lost $120 million. Because you weren’t clear on the actual outcome. You, you, you focused on a tactic - we’re gonna go to cloud. Outcome - we have to build software faster, the, computes available faster, developers, it’s all automated. Secondly is the, the team that business-wise is gonna be most impacted, you put in charge of the project. So what is humans gonna do if the thing that they’re changing is gonna impact them? They’re gonna slow roll it, right? They’re gonna protect it. So you had a design issue going back to people process, and so when we change that and we got clear on outcomes, I always, I have this thing I call outcomes over activity because a lot of times, you know, you, you’re in a meeting and someone’s like, alright, KPI, KPI, KPI, KPI, and I’m like, well, how do we know those are good, right? What’s the outcome we’re trying to drive, you know? You know, do, and, and again, you would think this is, it sounds very common sense, but I’ve been in, you know, Fortune 500 boardrooms and this exact same thing happens many times. It’s tactic, tactic, tactic, checkmark, checkmark, checkmark. So anyways, the, the point being is you have to get really aligned of what it is and it has to be that compelling reason to do it, and, and then we could tie it, but if you want me to start tying it into AI.
| ZBP | Yeah, I’d love to. So, I mean, you know, one of the topics that has been everywhere, right, no matter, no matter where you look or, you know, AI is popping up on our phones for personal use, on our, you know, our Amazon Nest home devices, our Google home devices. I mean, anything you see, AI is being integrated everywhere and, and frankly, as far as I’m, you know, aware or concerned, most industries are looking at this and saying how is our industry going to be impacted, from medicine and law to engineering to manufacturing to sales. I mean, I can’t think of a single area where AI is at least not, at least being discussed if it hasn’t already been implemented in some form or fashion. So as we talk about these, kind of these transformational changes, how do you see AI kind of rolling into some of these larger changes?
| KG | And we’re just in the earliest stages of the impact, as scary as that sounds. And again, some of it, even for myself, like, I think AI is absolutely gonna happen. You know, I wonder sometimes. There’s gonna be a lot of good. There’s gonna be bad and let’s talk about where it is right now. Right now, AI is this tremendous tool, so like, I work with a lot of private equity owned companies, and one of the things that they’re instructing their, oftentimes their security and compliance teams, and maybe they have a contract even sales, is where they would have gone to outside counsel. They’ve got like a base SaaS agreement or they’ve got some base compliance agreement. They might have gone to outside counsel to review and create the whole document. I see many, many companies that are now using AI loading in all of their previous contracts so it has all of the exceptions, and then just asking the AI to say, hey, let’s point out, we need to make this change or that change and re-draft the contract. True life story, there’s a company that I’m involved with that does, I always, I think about what I can say, in, in, in the avionics space, that literally, a small company, $40 million, literally dropped their legal bills by $400,000 by just embracing those tactics, so you think about, you know, that’s happening right now and a lot of times law firms don’t understand because they just know that the billing hours are going down, but why are the billing hours going down, and so I think you’re going to see that. I think you’re gonna, and you’re gonna see it in a lot of different ways so, you know, I can go over, if you want, you know, a couple of things that I, I think are risks if
| ZBP | Yeah
| KG | You know, the
| ZBP | Yeah, I, no I’d love to, you know.
| KG | I think one of the things is loss of competitive edge. Already there’s companies getting funded, tech startups, AI startups, legal firms that are really trying to AI-ify their business from the get-go. So that means that they’re gonna be able to be more responsive to their clients, be able to crank out contract reviews, so they can have AI, for example, so all of the pre-drafting and then just do a onceover vs. doing all the drafting. So I think companies that don’t start to think about how we’re gonna use AI in our business, you’re already gonna start to see you’re gonna lose the competitive edge, and I think that’s happening right now. I think that, you know, AI makes everything more efficient so you think about many law firms because it’s a, usually a high margin business historically. You’re seeing that, you’re gonna start to see impact on profit margins, and they’re going to have to be more efficient because that’s what the market’s going to demand because the consu, you know, the consumers of, of legal services, and I have great friends that are lawyers and my daughter’s going to school to be a lawyer, I think they need to understand that they have to be more efficient. The margins that they have traditionally had, experienced, aren’t gonna, aren’t gonna be as easy to achieve because so much of this is gonna get automated. I think, you know, with the scalability, I think the client experience, you know, going back to the company that’s really embracing AI, can be much more responsive. You’re gonna see people building training models like on all of your documents and allowing clients to access that to get the drafts because let’s face it. A lot of times you get a request for a legal document and you go, you’ve got that document and you, you go look in the file. You pull it up, you make some slight modifications, you print it out and, you know, there’s the hours billed and away you go. I think that, that whole process is gonna get very much automated. I think you can also reduce the number of errors and I think you’ll see more revenue opportunities, so those are just some of the things that I think if you, if you don’t embrace it, you’ll, you’ll start to see. And then I’ve got some thoughts, you know, I want to make sure we pace ourself on what law firms can do to actually prepare and embrace this because again you can either, like, wait until you have to change or you can kind of get out in front of it.
| ZBP | Yeah, so I’d, I’d love to talk about, about, before we jump there, I’d love to talk about at least a couple of things that you had mentioned that kind of stuck out to me. So one of the things that I was thinking was the example you gave of, currently, of the, the avionics company, $40 million, they dropped their legal bill by $400,000. You know, and I’m doing the math in my head. I’m like, that, that’s 1% of their revenue.
| KG | You got it.
| ZBP | That, that’s a, that’s a sizeable decrease for a company of that size. So I, you know, as I think about this, right, I understand, I kind of understand at least in my head conceptually how a $40 million company could start to implement this and could say, hey, this is gonna cost us some money to build. This is gonna cost us some amount, but when you’re, when you’re saving $400,000 a year, it’s probably worthwhile because that savings is going to occur year after year. How do you see even the smaller companies, right, the, the $10 million or the $5 million companies, how do you see them utilizing it? Is it something they’re gonna have to wait for until we start to see other companies kind of start selling these products at a lower scale? I mean, how do you see that playing?
| KG | Well here’s the, here’s the scary part, is that particular company used just ChatGPT and Claude.
| ZBP | Okay.
| KG | So they invested $60 in, in AI services. Now granted, it didn’t just give them the answers so when you, when I, when you think about it, AI today is really, I call it more of a helper because AI, as it’s designed right now, is not capable of original thought. All AI is doing is a derivative of all the things, so basically these companies have scanned everything that’s publicly available on the internet, all the contracts they could possibly see and that’s, that’s where, that’s where the intelligence of, of AI is, but it can’t think of original thought. There was a study in Harvard Business Review where they put 10 executives together and had them work with AI and said, build this adjacent product. I think it was, like, Colgate, if, if I recall, and 80% of the ideas were exactly the same because it was AI, so there is downsides to AI, is it’s, it’s only, it only knows what it knows and its gonna do derivative works of that. But going back to that example of that, that person that saved $400,000, this was a legal and compliance. They already had somebody that was used to reviewing contracts so they weren’t, and what they could do then is just load all of their contracts that had previously done and then ask the AI different points like how can we make this clause be consistent with that clause but not risking this, or review this, is there any other things, and that AI did really, really well. So in some cases like, this is a true life example, there was a big compliance issue they had and they came to a law firm and asked for a price to, to do this, this particular set of documents, and the law firm had this opinion and the guy had done research on, with Claude and ChatGPT and said, well, couldn’t we take this other legal perspective, I think that would pass muster. And they were, like, oh well, no, but then they did a little research and they go, well how did you know that. Because he used it, he used, because again, it’s, it’s all of that data so, you know, going back to, I think that right now, and again, private equity companies that I own, I, I don’t own, that I work with, they’re automatic, they’re already using this like this, like Claude, ChatGPT which is very minimal expensive, if they already have standardized contracts, the modifications or, or slight changes, it’s so more cost effective whereas before they might have had every one-off SaaS agreement reviewed by external counsel, now they’re feeling a lot more comfortable to do it internally at, at minimal cost.
| ZBP | Yeah
| KG | Now, at the, at the bigger stages, you have to make the little bit bigger investment for sure.
| ZBP | Now one of the things you’ve talked about was, and the other thing you mentioned was the client experience, right, and so, I, there’s no secret that as a lawyer I’m in the service industry.
| KG | Right, absolutely.
| ZBP | Without my client, without my clients and being able to serve them, I mean I’m really no different than anybody else in the service industry whether you’re an accountant, a restaurant owner, a landscaper, we’re all selling services. And so, you know, one of the things that at least I think of is, I think of how AI is going to affect my role as that service provider. But how do you see it potentially affecting, and I’m, I’m hoping it will improve the, the client experience.
| KG | Yeah, well, I think that’s a good question is, like, what can you do with the client experience. You know, I think if you’re a, a larger firm, for example, we’re seeing some law firms go and start to, to train their own models. So let me explain what that means. Is, if you think about it, you have, you probably have, you know, a larger firm’s probably got an internal portal. The internal portal probably knows all, it probably has many of the existing legal contracts that firm has ever built. It knows the expertise of all of the various lawyers, and you know, it’s a portal that people search for and they go find this and that. That’s a fantastic opportunity to use AI to do it and this is what companies are doing with that is, you can take, we’ll call, I’ll call it a base model and if I say anything too complicated, just, you know, call me on it.
| ZBP | I, I
| KG | It seemed like an open source model, like that, that runs say ChatGPT or Claude. There’s a lot of open source models, and then you can augment your own data, so you could literally then, for example, ingest all of your firm’s legal documents. Now, the, the open source model didn’t have all of your legal documents, so now it’s gonna be incredibly smart in what it has. It has all those legal documents, and you can put in all of the expertise of your firm whereas a lot of times right now, it’s like one, especially if you’re like a 500 person firm. It’s like, oh, who’s good at that. I’ve got this case that’s this or that, I need this expertise. Well now, you, you could have a junior attorney, you know behind the scenes, literally draft something that’s, that probably is great because it was originally created by your senior attorneys, almost instantly and if it’s, say it’s like an edge case, maybe it’s an insurance claim or something like that, you can identify your specialist who’s, who’s, you know, who’s licensed in that particular state and that expertise instantly whereas before, that might have been word of mouth. So you think about the quality of service. You could talk to your client and understand the problem and you could literally then go to your internal AI system and say, I have a client that has this issue, da da da da da, da da da da, who are our experts in our firm that should do that and what other documents do we have that are related to a similar thing like this go and then you have instant access to that. If you’ve got a junior attorney, you might say, hey there’s a thing, can you go take the things we’ve already drafted in the past and now it’s leveraging your firm’s proprietary data to actually deliver high quality services faster.
| ZBP | Yeah. I, you know, and so that’s one of the things that I think that we have seen, right, is, and I’m, I’m thinking back, is we’ve seen a lot of services over the last 15, 20 years that have occurred faster just because of everyday advancements from e, instead of, you know, sending letters, which would take, you know, 3/10 of an hour, 4/10, now we send an email which takes 1/10 of an hour.
| KG | Right
| ZBP | Or we were reviewing documents and in the old days we would have banker’s boxes of documents
| KG | Right
| ZBP | In some conference room and people looking through page by page and now we use e-discovery platforms where we review electronic versions of the document and we can click much faster than we would physically flip the
| KG | Right
| ZBP | Pages over. And so, you know, I, what I’ve seen is that there’s been a handful of, of, kind of efficiencies and what I hear you saying is that this is gonna be like a, at least in my head, right, I could find those documents. It will just take me a long time.
| KG | Right
| ZBP | And because, and I’ll use this as an example is that, you know, when I first started practicing law, we had documents stored on a server but it wasn’t all of the documents in the file. I mean, we were, still had physical paper files and it wasn’t like we were the only firm that did it. All of the firms did it that way. And then, you know, throughout my career, I’ve seen, obviously, the introduction of the cloud and now these, you know, data management services or providers where stuff’s all being stored, all of our files are stored in the cloud. And what I, what I hear you say, and, and it makes sense and it sticks out to me, is that I, I had a friend who was a data scientist years and years ago, very smart kid, Ph.D. He was working for a very large insurance company and he was talking about his job and he said we have so much data at this insurance company. He goes, they don’t even know what they’re doing with 98% of it. This was, like, 15, 20 years ago. So he was really kind of on, you know, the introductory level of kind of the data scientists because now when we think of, you know, lots of companies have them. But I can’t help but think that law firms are similar in that we have a lot of data, not just from the past 5 or 10 years, but in some of these law firms that big go back 50, you know
| KG | Yeah
| ZBP | A hundred years. A lot of data in that, and then how much are we actually utilizing that data and how are we effectively using it.
| KG | I totally agree, and if you think about it, again, just the, the way AI, the simplest way, you think about, like, our brains work, right. It’s, it’s little, you know, kind of, if bits, you know, if this, if this, if this, if this, and so much, and so that’s how we have a, you know, a, a coherent thought. Where if you think about it, if you could take all of the information that your attorneys, every, everything that’s been created, and put it in a format where it’s accessible like you could talk to a person and say, well tell me about this, tell me this, this client, who were the original founders of it, what was the last thing with the share agreement, what was. And all of that stuff is now instantly as if you were talking to a human that had, had all of that knowledge. You know, what about draft this, what, you know, what did we ever do, have we ever created a document that’s reflect, have we ever had litigation related to this. That’s now instantly available if you can digitize it, if you can put it into a proprietary format and that’s a huge competitive advantage so all of that knowledge that already is a competitive advantage today, right, because that’s why your, your clients trust you, right. You’re, you’ve been doing this a long time, you’re smart, you’ve got a track record. Well this just takes that track record and that experience and puts it on steroids.