Change necessitates thinking about using information in new ways.
This article aligns with the focus of the July/August issue of Strategies magazine: technology.
We’re living in a data-rich world, working in an industry that’s changing rapidly. Since the 2008 recession, even the definition of client value has changed. Client value used to mean “deliver quality matters,” but now it means “deliver quality matters at the expected price.” The impact of this increased cost-consciousness is hugely consequential.
Clients are choosing their representation differently. And law firms, like other organizations, need to more effectively leverage their data to maintain a competitive advantage.
This means using experience data differently.
The traditional approach to working with experience data results in poor data being stored in time and billing systems and the business development (BD) team leveraging spreadsheets for pitches. Change requires not only new technology, but also a new way of thinking about using information. The same data that marketing uses to maintain and capture business can be leveraged by the organization at large to work more efficiently and create stronger client relationships.
A House of Data (Driven Decisions) Cannot Fall
Netflix, of the famous $1 million data analytics prize, is frequently acknowledged as a pioneer of clever data use. You could think of that jackpot prize as the flag they planted signaling their intent to be a data-first company. But it’s the $100 million, data-informed bet they made producing two seasons of “House of Cards,” a 2013 political thriller starring Kevin Spacey, that truly established their empire.
In those pre-scandal days, they weren’t just collecting single streams of information. Before greenlighting their first original episode, they learned:
- Users who started a David Fincher movie watched to the end
- The British series “House of Cards” had strong user reviews
- Users who watched “House of Cards” were also more likely to watch movies directed by David Fincher or starring Kevin Spacey
A siloed department could have made safe, data-aware choices based on these insights: Buy the rights to more David Fincher and Kevin Spacey movies and direct current users who liked one movie to watch another. But Netflix used their data to make a new kind of business decision, and the impact was a subscriber base growth of at least 3 million. Now, the company spends $100 million on original content. And Netflix is a verb.
Like Netflix, the legal industry is due for a creative re-think of how we use our own experience data. It can have an empire-building impact when used holistically. Here are four impacts that experience data can have in legal:
1. Upgrade the Pitch Process
All firms have profile information on lawyers and client matters that business development units incorporate into their proposals. Firm X says “Hire us because we facilitated a successful merger between national natural gas company Y and wastewater treatment plan Z.” But in an organization that properly tracks and tags their metadata, the proposal also includes:
- “Hire us because we represent 37 percent of all national energy companies in the United States that are collectively worth $74 billion in revenue.”
- “Hire us because the team we’re offering you has facilitated negotiations in 27 similar matters.”
- “Hire us because we’ve negotiated with the other firm 40 times and with this partner 17 times, so we know what they value.”
- “Hire us because our experts have saved our clients from running afoul of government regulations that could have cost in excess of $300 million.”
This gives a story that’s more telling than one case study. This firm has deep expertise, far beyond the successful conclusion of a single matter helmed by a single, talented partner. With properly tagged and tracked metadata, marketing personnel can click this pitch into existence, even at a multinational firm where they may have no prior knowledge of any of the relevant details
2. Scope and Price Effectively
In the example above, Firm X has managed 27 similar matters, so this data should help them properly price their new pitch. But firms struggle to report on the arrangements made with their clients; the details get stuck in biller’s notes (fixed fees, bottom-of-the-bill discounts and outside counsel guidelines). A system should capture those notes into actionable data fields, allowing firms to understand the impact of their previous choices. Which matters were actually profitable? Which had unexpected write-downs? A competitive firm should be able to leverage their past matters to understand what was planned and unplanned, what work a client valued, and what work they didn’t. That historical information can be leveraged for pricing new matters.
Understanding investment in opportunities and then comparing it to the resulting revenue is critical in making effective business decisions. This means good data practices are critical; they’re necessary to track how business development activities convert into new clients.
Learning to scope and create profit-driven matter budgets is a new skill that’s difficult for many lawyers. Most partners price matters on gut instinct and years of experience. But in today’s environment of price-conscious clients, we need to understand that the gut can lie. Data speaks the truth.
3. Data That Drives Delivery
The rich historical experience data that wins a pitch is the same data the delivery team can use to form the best strategy to succeed. Tracking institutional knowledge enables better:
- Understanding of the opponent — It doesn’t matter if an individual lawyer has faced the opposing counsel before when a firm has a system to leverage collective knowledge. This lawyer should be able to review their opposition’s previous strategies, the clauses they value and even the feeling of their argument.
- Access to experts — Too often, a lawyer who needs to find a particular expert will conduct their research via email. If 70 people open and read a firm-wide email when they bill at $500 an hour, that’s a hidden waste of resources. This lawyer should be able to enter a search term and find whom they need categorized by their experience in similar cases, their success rate and their effect on the matter. The firm should also track the same information about their opponent’s expert network.
- Knowledge of the judge — When is a judge likely to demand a settlement?
- Leveraging of previous negotiation strategies — Knowing when a matter is likely to settle provides a cascade of valuable information that can aid in predicting price for a more reliable promise of client satisfaction.
4. Data That Drives Firm-Wide Strategy
This data, taken holistically, can impact a firm beyond the matter level. The firm-wide story becomes newly visible. Firm leadership will see:
- New opportunities — Is the group doing high-tech regulatory work increasing their productivity? Does it make sense to increase their headcount? What about investing to attend more events?
- Where to divest — Are there legacy areas, like family law, that are trailing down? Does it make sense to spend less and refocus those resources?
The legal industry is in the early stages of the data revolution, so firm leaders and lawyers have the opportunity to do some creative thinking. The entire organization needs to be able to see the value of making data-first decisions. Making the adjustment may involve investing in new technology, role modeling from leadership and incentivizing data-driven success.
It’s like with Netflix. Invest in the cultural groundwork, the legal equivalent of the “million-dollar analytics” prize to build the “House of Cards.”
Keith Lipman is the CEO and co-founder of Prosperoware and a recognized thought leader who is regularly asked to speak about law firm operations and the transformation of the legal services industry. Most recently, Keith was recognized as an ILTA Vendor Thought Leader of the Year finalist. He is one of the instigators behind SALI (Standards Advancement for the Legal Industry), and is credited with creating the concept of Matter Centric Collaboration.