Another presentation at a KM peer group saw real-life examples of project management in action at large law firms. Under the rules of this meeting, firm identities are not publicly acknowledged. As with the previous notes, these are my near-live notes of the presentation.
The two firms discussed are at different phases of development and adoption of project management. It was interesting to hear real-life examples of the processes and changes necessary in a more PM-oriented law firm.
One firm saw greater client interest in knowing costs in advance of project commencement. They felt that greater certainty and predictability of legal cost would be a market differentiator for them. Clients are also seeking more nonstandard fees. They want to move away from the "cost-plus" model. Capturing historical information about staffing and pricing can be used to provide good estimates for fixed fee or other types of AFAs.
They drew on an IT staff member with significant project management skills. The KM professional worked with this person to try to identify what additions lawyers might be able to handle in terms of additional structure to their work.
They first developed a training program and some proprietary software. A small pilot led to robust feedback about what was and wasn't useful in different ways in different practice areas. Many of the partners who participated became champions of LPM going forward. The pilot has also led to some real stories about improving efficiency that help with training.
They didn't have a KM lawyer on the initial working group. In the second phase they have more KM lawyers, who have made a significant contribution in the areas of information collection and linking existing firm resources into the templates. They have also helped with naming conventions and the technical aspects of information gathering that typical lawyers are not so aware of. The KM lawyer can be a bridge or "de-mystifier" to LPM processes. KM lawyers have also helped managed the breakdown of work.
Legal PM can borrow techniques that have been very successful in other industries for decades. Putting a structure in place for planning, and increasing accountability for keeping to the plan has led to higher standards for matter organization. The communication points are crucial and are reflected in the name of their program. They believe that will greatly reduce their firm's writedowns (writeoffs).
LPM can greatly increase profitability in a few different ways. If the right people are doing the work, you will have the best leverage model for that work.
AFAs can be intimidating for law firms. A historical database of matter information can let you see how you staffed it and priced it, and what you learned from previous matters.
A second law firm is involved in the ACC "Value Challenge." They created a project management office outside of IT. They all got certified in PMI and put formal processes in place. They hired a few PMs from outside. The firm has identified PM skills as a core competency. KM professionals are supporting the PM team but aren't driving the effort.
Their goals were to institutionalize the process of having "value conversations" with clients and to work collaboratively to acheive that goal.
They are doing both process improvement and LPM. They take out ineffeciencies and take out what the client doesn't want. They've reduced the cost of legal services. They have a structure of DMAIC (Define, Measure, Analyze, Improve, Control), or "improve & control." For instance, they examined the matter intake process and found a five-day delay that could be eliminated by combining some forms and rearranging the conflict check process.
They have done process maps for 70 different types of legal work. It's like static. If you know what's going to happen it will happen faster. The maps identify proper resources and task codes. The PM team sits down in "Kaizen Sessions" with a whole team and identifies what happens when (initially using sticky notes). Task codes are a very important piece to let them track how we are providing legal services.
KM "artifacts" are connected with particular steps. What do need at each step? A checklist? Template? Form? Get "brain dumps" for checklists. People from the team can see what they need for what step. Process maps are on their intranet. They are treated as "road maps." There is a time estimate in each step. They also have staffing suggestions (staffing is still under development). They have tools that identify where people are on the map.
They have a monitoring tool they developed in-house. They have created task codes for different areas of law and require all attorneys to use them. Time and expense against the budget is shown on their tool. Attorneys have to assess and add to the tool the actual "percent complete" at the specific phase level.
At the end of an engagement, this firm uses a scorecard and lets clients rate the firm on understanding objectives of the matter, legal expertise, efficiency, responsiveness, budgeting skills, and results, and asks "would you hire us again."
This firm has a "fixed fee" offering for single plaintiff (employment?) litigation. They have reduced the average cost of such matters almost by half by managing such matters more efficiently.
The PM team now consults with in-house counsel on effective process improvement.
They did not require the whole firm to adopt this approach. Attorneys are impressed with the mapping sessions. Clients like knowing that the firm is doing effective project management.
Firm culture has changed. It is a big change. People are understanding that they will have to change with the market.
Outside of formal PM processes, some people might be able to develop a time frame, staffing, and budgeting for a particular deal. But if it is not documented, these plans are not transferable, and can't be as easily reused. If the 189 steps of a deal can be documented it would make it easier to do the high-value work. If the tasking and scope is not confirmed with client, then changes to the scope (as with the discovery of another 400 boxes of due diligence documents) aren't so easily discussed with the client.
Showing posts with label alternative billing. Show all posts
Showing posts with label alternative billing. Show all posts
Friday, October 15, 2010
Legal Project Management
Susan Raridon Lambreth of Hildebrandt Baker Robbins presented on legal project management (LPM) at a meeting of KM peers this morning. She is an effective (albeit extremely quick-talking) speaker, and seems to have found an effective approach to communicating LPM themes and approaches to lawyers.
What is Legal Project Management
LPM is a "disciplined approach to the management of legal matters." We have to acknowledge that lawyers have been successful in managing legal projects before the formal application of LPM. In training LPM don't suggest that they have been doing everything wrong. Emphasize that LPM will enhance communications with clients and managing client expectations.
Process Improvement and LPM
Process improvement might be better tackled before LPM improvements. Many law firms have gotten on the LPM bandwagon, perhaps because it is less threatening. You can "back into" process improvement after doing some LPM. Process improvement may lead to greater efficiencies faster.
Drivers
One of the trends driving LPM is client demands for "better, faster, and cheaper." Clients saw more serious economic effects of the recession than the legal industry as a whole did (referred to increased profits at AMLaw 100 firms). Clients expect costs to be lower every year. Clients are looking more for alternative fee arrangements (AFAs).
The profit equation is also changing. Billable hour productivity had been going down. Billing rates were driving increased profitability. This is now flat or down in many firms. Law firms have to get more profits by changing the way that they work. There is also more competition for legal work in terms of outsourcing and aggressive pricing (large firms competing with and sometimes beating medium-sized firms on price).
The procurement offices are also getting more involved in legal work sourcing. Procurement officers may be in a position to put more pressure on outside firms.
Increased client power is driving faster segmentation and devaluing. Work even within a high-priority matter might get broken out or segmented, so that "trusted advisor" work would be compensated or sourced differently than the due diligence or filings work. The more strategic, high-value work is not getting bigger and may be shrinking. Operational or routine work might be expanding. Lower-tier work can be more highly leveraged. Some litigation practices can be very profitable, with the right work / staffing structure.
She considers project management to be not a business-world "fad" (like TQM?), but a natural evolution of application of certain tools and disciplines, already in place at the practice or department level, to the matter level. Eventually it may be internalized and not broken out as a different aspect of work.
Two hidden benefits of project management are a greater emphases on professional development and knowledge management. It leads to a greater emphasis on training and development for younger attorneys. Associates like being part of a formal project team because of the higher level of communication and awareness of the bigger picture. We can enhance the professional development of lawyers as part of an LPM approach.
She referred several times to the ILTA White Paper on alternative financial arrangement.
You can train LPM as "delegation and communication" skills. HBR's approach to project management breaks down a project life cycle into five phases of Initiation, Planning, Executing, Closing, and Lessons Learned. It's best to teach LPM without using PM jargon. They had left in the term "stakeholder," and despite some objections at a NY meeting in June it turned out that lawyers didn't mind that term.
She outline four approaches to early adoption of LPM.
Training and Education
Early adopters of LPM are starting with training and basic education. A 2-3 hour session is not really training, it's more education about "what" than "how to." It's more effective to get people to volunteer for LPM training. It can also be effective to build LPM skills into competency models for lawyer development.
Pilots
Other early adopters are trying LPM in pilot practices, such as with commercial litigation or other specific practice group. Groups with more client pressure (as described above) are more interested.
Technology / Software
Only a small number of firms have effective budgeting or project management software. Some have done historic data / analysis and others have done several years of tracking with ABA task codes or e-billing vendor codes. Litigators seem to be more on board with this in many firms, because they've had to do a tremendous amount of budgeting. In many cases they have not had to stick to those budgets, until the last two years. Budgets are now treated by clients as fee caps.
Staffing
Full-time project managers are in place at a few firms.
Lessons Learned
Don't make LPM seem mysterious. Attorneys may need support like staffing, software, and other "handholding" before LPM can be broadly adopted. Training associates where partners are not on board can be really challenging.
Adjusting compensation structures may be necessary to reward efficient practices. Client and matter profitability is increasingly the focus of compensation committees. Having partners more accountable for the profitability of their matters is an increasing trend. Some have started by making the information available but not tied it directly to compensation.
For some partners LPM might seem like fundamental change.
Initiating
The challenge for law firms in initiating projects is to slow down and more thoroughly explore the in-scope / out-of-scope parameters of the engagement. An engagement agreement is equivalent to a project charter, although typically in law firms they are much less detailed than a good project charter would be. Exploring detailed client expectations such as "what does success look like to you" (or the in-house counsel's boss) is really important and often neglected.
Planning
Law firms have done a better job at budgeting than at planning. Developing a schedule is often not done well. They don't or can't look back at previous matters and figure out what went well and was completely in a timely fashion and what wasn't. Communications planning needs to be set up for contacts with the client and internally with the matter team.
She showed a couple of examples of "work breakdown structures" that tie into a detailed scheduling processes (like phases and tasks of a matter).
Executing
Avoiding conversations where attorneys talk about increased work with clients is really common. There often weren't conversations about monitoring schedule and expenses.
Closing
They have separated out closing from lessons learned because they deserve extra emphasis in law firms due to their culture.
Lessons Learned
An after-action meeting could be 10 minutes or an hour. Talk about what went well, what they could have done differently. It's hard because lawyers don't like critical feedback. Lawyers are afraid of what might be discoverable in a malpractice claim. Get them to look at how it helps their team or other teams in the future.
Challenges
Who will pay for time spent on LPM tasks? Will clients pay for it? (There is an ABA code, some clients are willing to pay if it LPM is actually being done). There is a sense that LPM will make the work more "cookie-cutter." The greatest motivator for lawyers is their relationships with clients and their sense of accomplishment and professionalism (though they are also driven by relative compensation).
Making "best practices" and sample forms available without much effort can free up lawyers to do more interesting and significant strategic thinking about their matters.
Getting lawyers to work teams can be hard because of typical lawyer personalities and law school training. They teach "anti-teaming" in law school. Lawyers are contrasted with "non-lawyers. She was asked "do you mean that I'll have some project management geek telling me what to do?"
The biggest change will be moving to profitability analysis for compensation, as old metrics of production and revenue will not be as effective.
Keys to Success
Train volunteers. Get firm management buy-in. Give tools and templates matched to their needs (basic versus sophisticated / challenging).
What is Legal Project Management
LPM is a "disciplined approach to the management of legal matters." We have to acknowledge that lawyers have been successful in managing legal projects before the formal application of LPM. In training LPM don't suggest that they have been doing everything wrong. Emphasize that LPM will enhance communications with clients and managing client expectations.
Process Improvement and LPM
Process improvement might be better tackled before LPM improvements. Many law firms have gotten on the LPM bandwagon, perhaps because it is less threatening. You can "back into" process improvement after doing some LPM. Process improvement may lead to greater efficiencies faster.
Drivers
One of the trends driving LPM is client demands for "better, faster, and cheaper." Clients saw more serious economic effects of the recession than the legal industry as a whole did (referred to increased profits at AMLaw 100 firms). Clients expect costs to be lower every year. Clients are looking more for alternative fee arrangements (AFAs).
The profit equation is also changing. Billable hour productivity had been going down. Billing rates were driving increased profitability. This is now flat or down in many firms. Law firms have to get more profits by changing the way that they work. There is also more competition for legal work in terms of outsourcing and aggressive pricing (large firms competing with and sometimes beating medium-sized firms on price).
The procurement offices are also getting more involved in legal work sourcing. Procurement officers may be in a position to put more pressure on outside firms.
Increased client power is driving faster segmentation and devaluing. Work even within a high-priority matter might get broken out or segmented, so that "trusted advisor" work would be compensated or sourced differently than the due diligence or filings work. The more strategic, high-value work is not getting bigger and may be shrinking. Operational or routine work might be expanding. Lower-tier work can be more highly leveraged. Some litigation practices can be very profitable, with the right work / staffing structure.
She considers project management to be not a business-world "fad" (like TQM?), but a natural evolution of application of certain tools and disciplines, already in place at the practice or department level, to the matter level. Eventually it may be internalized and not broken out as a different aspect of work.
Two hidden benefits of project management are a greater emphases on professional development and knowledge management. It leads to a greater emphasis on training and development for younger attorneys. Associates like being part of a formal project team because of the higher level of communication and awareness of the bigger picture. We can enhance the professional development of lawyers as part of an LPM approach.
She referred several times to the ILTA White Paper on alternative financial arrangement.
You can train LPM as "delegation and communication" skills. HBR's approach to project management breaks down a project life cycle into five phases of Initiation, Planning, Executing, Closing, and Lessons Learned. It's best to teach LPM without using PM jargon. They had left in the term "stakeholder," and despite some objections at a NY meeting in June it turned out that lawyers didn't mind that term.
She outline four approaches to early adoption of LPM.
Training and Education
Early adopters of LPM are starting with training and basic education. A 2-3 hour session is not really training, it's more education about "what" than "how to." It's more effective to get people to volunteer for LPM training. It can also be effective to build LPM skills into competency models for lawyer development.
Pilots
Other early adopters are trying LPM in pilot practices, such as with commercial litigation or other specific practice group. Groups with more client pressure (as described above) are more interested.
Technology / Software
Only a small number of firms have effective budgeting or project management software. Some have done historic data / analysis and others have done several years of tracking with ABA task codes or e-billing vendor codes. Litigators seem to be more on board with this in many firms, because they've had to do a tremendous amount of budgeting. In many cases they have not had to stick to those budgets, until the last two years. Budgets are now treated by clients as fee caps.
Staffing
Full-time project managers are in place at a few firms.
Lessons Learned
Don't make LPM seem mysterious. Attorneys may need support like staffing, software, and other "handholding" before LPM can be broadly adopted. Training associates where partners are not on board can be really challenging.
Adjusting compensation structures may be necessary to reward efficient practices. Client and matter profitability is increasingly the focus of compensation committees. Having partners more accountable for the profitability of their matters is an increasing trend. Some have started by making the information available but not tied it directly to compensation.
For some partners LPM might seem like fundamental change.
Initiating
The challenge for law firms in initiating projects is to slow down and more thoroughly explore the in-scope / out-of-scope parameters of the engagement. An engagement agreement is equivalent to a project charter, although typically in law firms they are much less detailed than a good project charter would be. Exploring detailed client expectations such as "what does success look like to you" (or the in-house counsel's boss) is really important and often neglected.
Planning
Law firms have done a better job at budgeting than at planning. Developing a schedule is often not done well. They don't or can't look back at previous matters and figure out what went well and was completely in a timely fashion and what wasn't. Communications planning needs to be set up for contacts with the client and internally with the matter team.
She showed a couple of examples of "work breakdown structures" that tie into a detailed scheduling processes (like phases and tasks of a matter).
Executing
Avoiding conversations where attorneys talk about increased work with clients is really common. There often weren't conversations about monitoring schedule and expenses.
Closing
They have separated out closing from lessons learned because they deserve extra emphasis in law firms due to their culture.
Lessons Learned
An after-action meeting could be 10 minutes or an hour. Talk about what went well, what they could have done differently. It's hard because lawyers don't like critical feedback. Lawyers are afraid of what might be discoverable in a malpractice claim. Get them to look at how it helps their team or other teams in the future.
Challenges
Who will pay for time spent on LPM tasks? Will clients pay for it? (There is an ABA code, some clients are willing to pay if it LPM is actually being done). There is a sense that LPM will make the work more "cookie-cutter." The greatest motivator for lawyers is their relationships with clients and their sense of accomplishment and professionalism (though they are also driven by relative compensation).
Making "best practices" and sample forms available without much effort can free up lawyers to do more interesting and significant strategic thinking about their matters.
Getting lawyers to work teams can be hard because of typical lawyer personalities and law school training. They teach "anti-teaming" in law school. Lawyers are contrasted with "non-lawyers. She was asked "do you mean that I'll have some project management geek telling me what to do?"
The biggest change will be moving to profitability analysis for compensation, as old metrics of production and revenue will not be as effective.
Keys to Success
Train volunteers. Get firm management buy-in. Give tools and templates matched to their needs (basic versus sophisticated / challenging).
Wednesday, August 25, 2010
AFAs and the New Billing Models--First Regular Session at ILTA
I attended Dan O'Day's session on alternative fee arrangements (AFAs) on Monday morning. Dan is a Thomson Reuters employee, but his session was devoid of product-pitching and served as a useful overview of AFAs, including a useful analysis of the key characteristics of all of the major varieties.
Almost half of the audience was in IT, the other half was in finance (I was in the small minority not in either camp).
Twenty Years of AFAs
Dan turned back to the DuPont Legal Model (c. 1992) for background on the development of modern AFAs. DuPont wanted to have fewer firms working for it, with closer partnerships with the fewer firms, all tracked by metrics around spend, diversity, and IT. The goal was to cut costs, increase the productivity of the outside legal work, and provide easier access (from DuPont's perspective) to legal work.
As has been noted elsewhere, different AFAs address different client concerns, and have different risks for firms in terms of cost overruns, shared outcome risk, predictability of fee amount, and so forth. Dan pointed to a 2002 presentation developed for the Legal Marketing Association (.pdf, see p. 7) and its chart ranking AFAs by frequency and noting the various key characteristics of the different types.
The rarest AFA, which I was less familiar with, is "Value-Based" or "Retrospective Based On Value" billing. In this model the firm is compensated based on the value of the services to the client. Dan's first example was a firm that raises funding in Europe based on a law firm's relationships with capital sources. A firm might negotiate that it should obtain 1% of the that funding so raised. Or, a firm might provide a 25% bonus to a litigation matter's billings if the law firm is able to prevent the firm CFO's deposition. It truly aligns the firm's needs with the client's needs, but it remains the rarest in part because they are hard to negotiate.
Moving to AFAs
Dan, a lawyer himself, noted that one challenge to moving to and budgeting for AFAs is lawyer's characteristics. A study (?) indicated that unhappy people make good lawyers, and he suggested that lawyers as a whole are more critical and negative than the population as a whole. They are paid to figure out (and try to prevent) what might go wrong in a given business situation or litigation.
Dan suggested that expanding the extent of AFAs at a firm requires a great deal of analysis and preparation.
Almost half of the audience was in IT, the other half was in finance (I was in the small minority not in either camp).
Twenty Years of AFAs
Dan turned back to the DuPont Legal Model (c. 1992) for background on the development of modern AFAs. DuPont wanted to have fewer firms working for it, with closer partnerships with the fewer firms, all tracked by metrics around spend, diversity, and IT. The goal was to cut costs, increase the productivity of the outside legal work, and provide easier access (from DuPont's perspective) to legal work.
As has been noted elsewhere, different AFAs address different client concerns, and have different risks for firms in terms of cost overruns, shared outcome risk, predictability of fee amount, and so forth. Dan pointed to a 2002 presentation developed for the Legal Marketing Association (.pdf, see p. 7) and its chart ranking AFAs by frequency and noting the various key characteristics of the different types.
The rarest AFA, which I was less familiar with, is "Value-Based" or "Retrospective Based On Value" billing. In this model the firm is compensated based on the value of the services to the client. Dan's first example was a firm that raises funding in Europe based on a law firm's relationships with capital sources. A firm might negotiate that it should obtain 1% of the that funding so raised. Or, a firm might provide a 25% bonus to a litigation matter's billings if the law firm is able to prevent the firm CFO's deposition. It truly aligns the firm's needs with the client's needs, but it remains the rarest in part because they are hard to negotiate.
Moving to AFAs
Dan, a lawyer himself, noted that one challenge to moving to and budgeting for AFAs is lawyer's characteristics. A study (?) indicated that unhappy people make good lawyers, and he suggested that lawyers as a whole are more critical and negative than the population as a whole. They are paid to figure out (and try to prevent) what might go wrong in a given business situation or litigation.
Dan suggested that expanding the extent of AFAs at a firm requires a great deal of analysis and preparation.
As to existing AFAs,
- How many are there?
- What percent of business do they represent?
- How profitable are they?
- Are there any patterns as to the frequency by practice area, jurisdiction, billing partner of particular types of AFAs?
Preparing to work in a manner focused on efficiency is challenging, and is a task made more challenging by lawyer's critical managing style noted earlier.
The business process structures and strategy required to handle AFAs are quite different from those needed to support only billable hour work. To use a casino analogy, what are the table limits?
- Should the firm say that no fixed fee agreements will be allowed for 7-figure of 1,000 hour potential matters?
- Should the firm exercise tight process and setup control over even the smallest matters?
- How will matters be monitored?
- How will attorneys be held responsible for cost overruns?
- When in the course of a year is the profitability of unusual AFAs assessed?
- More generally, what is the governance of AFAs? Dan recommended that the model of "permission not forgiveness" be adopted.
Marketing and AFAs
One audience member was a marketing professional who is jointly responsible with finance for addressing AFAs at her firm. She suggested that that is because in her role, she is highly aware of client requirements and needs, and because pricing can be a key part of marketing strategy.
Dan's session was at a fairly introductory level, but it was still quite useful because he was able to raise, if not answer, so many key considerations for AFA implementation.
Thursday, August 19, 2010
ILTA 2010--Upcoming Panel--KM Supporting Alternative Financial Arrangements
There is quite a bit of talk this year at ILTA about alternative financial arrangements. On Thursday August 26th at 10:30, Starvine 10, I'm presenting on how "traditional" KM supports the work on such matters (particularly that on fixed fee work) and the different risks and rewards in focused contrasted with broad-based knowledge management work.
With me on the panel are Peter Krakauer of Orrick Herrington & Sutcliffe LLP and Michael Mills of Kraft & Kennedy. Peter will be discussing how knowledge management skills and resources can be applied to the process of developing, understanding, and implementing alternative financial arrangements; Michael will be looking at some tools available in the marketplace that can assist firms with handling alternative financial arrangements. It should be an interesting session.
Formal Description:
Formal Description:
"With all the buzz about alternative fee arrangements, you may be wondering how knowledge management can support them. This session will review how KM provides critical support for firms as they design, manage and offer AFAs. In addition to more traditional methods, such as model and sample forms, matter databases, and expertise location, KM supports AFA strategies through project management, financial analysis, business intelligence, and standardized information capture."
"How KM Supports Alternative Fee Arrangements." Session Description:
Tuesday, July 6, 2010
ILTA Publication: Working Smart is Cheaper and More Profitable
Late in June the International Legal Technology Association published its annual knowledge management "white paper," Knowledge Management: Bridging People, Information, and Processes . The issue was coordinated by Wilson Sonsini's Chris Boyd.
It contains two articles directly addressing knowledge management and alternative fee arrangements. My article, also published separately here , has the subject line title. I address how knowledge management people, tools, and approaches can support legal work in a business world in which an increasing percentage of even high-end legal work is undertaken on a fixed-fee basis. Peter Krakauer's complimentary article addresses how knowledge management can support a firm's efforts in addressing and adapting to alternative fee arrangements.
The overall tone of the white paper is hopeful. Both Peter and I, and the KM survey, suggest that knowledge management, with its focus on the need to make attorneys more efficient and effective, will be more prominent and of greater strategic value in a world in which a dollar saved is a dollar earned.
It contains two articles directly addressing knowledge management and alternative fee arrangements. My article, also published separately here , has the subject line title. I address how knowledge management people, tools, and approaches can support legal work in a business world in which an increasing percentage of even high-end legal work is undertaken on a fixed-fee basis. Peter Krakauer's complimentary article addresses how knowledge management can support a firm's efforts in addressing and adapting to alternative fee arrangements.
The overall tone of the white paper is hopeful. Both Peter and I, and the KM survey, suggest that knowledge management, with its focus on the need to make attorneys more efficient and effective, will be more prominent and of greater strategic value in a world in which a dollar saved is a dollar earned.
Friday, October 23, 2009
KM and ROI
I'm at an international knowledge management peer group meeting today, under the terms of which speakers and affiliations are not identified.
My subject line acronyms, standing of course for "knowledge management" and "return on investment," all too rarely appear together either in discussions or strategy. This was in some ways an introduction to ROI at a fairly basic level, but given the relatively woeful state of business analytics at most law firms, investigating ROI may be a real opportunity for KM programs.
People want to believe there is a way to comprehend any puzzling or momentous force. Convince them you are the key to comprehending it and you will gain great status.
Having a basic grasp of finance can give you a leg up in law firms over most people at the firm except perhaps the CFO or COO.
ROI was a misunderstood term of art. KM people took it mean "show us what you are likely to do and how it will help."
We are starting to see a trend of relating KM to profitability or even revenue generation.
As firms have begun to embrace professional managers, it's become much more important for KM managers to establish ROI.
ROI, defined as earnings per dollar of investment, compares solution cost to monetary benefits. Measuring ROI varies between industries. There will always be some black magic behind it. It does not take into account work-life balance. An ROI of 25% means that investment cost plus an additional 25% of the investment is returned.
ROI is calculated first by identifying the solution benefits, less the total costs (not just cash investments), x100 expressed as a percentage.
Utilization rate is the actual hours billed divided by target. So an associate who bills 900 hours with an 1800 hour target has 50% utilization rate.
Realization is collections divided by billings. So a matter in which $200,000 was billed but $100,000 collected would have 50% realization rate.
As KM managers are integrated more and more into the business discussions we need to have a better understanding of the language of business.
Process improvement helps cost savings when a better-articulated, well-documented, more accessible, and standardized best practices reduces the time required for a person to accomplish a goal or complete an activity.
For example, ask attorneys how much time they spend sorting / dealing with email.
It is not as simple as saying that an hour saved is an hour that would have been billed. Tie rather to a firm initiative such as business development investment time. Look for firm initiatives that set goals for new business acquisition, client outreach, cross-selling, and so forth.
Sales metrics; one large legal market vendor tracks sales activity down to the level of clicks in a demonstration. This is not inappropriate but rather is the type of business process necessary to survive in a global economy.
At one firm, five of six projects needed no ROI. On the sixth, the KM manager identified hours that could be used for something else with the new project and used that to successfully sell the project. Another firm will be requiring ROI analysis but has not identified how to do that.
Few firms have assessed ROI on business development.
Value can be defined in a lot of different ways.
The discipline that the "ROI game" imposes helps us better find the business objectives, articulate the goals and objectives of KM work, and communicate better to lawyers about it.
KM taking over the risk management at one firm led to cost savings in not hiring a general counsel. If practice area is servicing more clients in the same amount of time, then you've helped the business of the firm because the firm didn't have to hire more people.
"You will spend less time searching" or "you will spend less time doing X" gives the direction and lawyers intuitively understand that working more efficiently means more time for managing the business or delegating more. Firm leaders may not have spent the time identifying how people should be spending their time.
It drives smart people crazy when business processes are handled poorly. Setting a good example of doing something better proves your value.
One way to get some return on invesment is to do a survey about people's pain points and degree of contentment.
Another way to tie to think about ROI is saving moeny for the client.
One firm has a "precedents" library with metrics about popular precedents, popular users, and unpopular precedents. The parallel "research" library doesn't have comparable metrics. The KM manager's CIO from an accounting firm is asking for an ROI, although the project is required to be in place before metrics measurement can really be done (chicken-egg).
The "wild card" KM managers can play in ROI discussions is risk.
One financial measurement is risk and cost of being sued. Making substantive legal mistakes due to poor precedent or absence of search is a risk and potential cost of having a poor research collection.
KM managers can trace ROI by looking at usage of precedents, derivative works, number of searches, etc.
We can estimate software cost by figuring implementation and consulting may take about 1/3 of the annual cost. Focus on three year period as implementation costs drop off quickly.
Doing calculations can help you identify if your assumptions are incorrect. You won't actually get an ROI of 71% from implementing metrics assessment.
ROI analysis ties well into matter management and alternative fee arrangements.
A major benefit of ROI analysis is a more rigorous business approach.
One commentator said that our firms do not apply rigorous analysis to major business decisions. Most don't even do profitability analysis.
My subject line acronyms, standing of course for "knowledge management" and "return on investment," all too rarely appear together either in discussions or strategy. This was in some ways an introduction to ROI at a fairly basic level, but given the relatively woeful state of business analytics at most law firms, investigating ROI may be a real opportunity for KM programs.
People want to believe there is a way to comprehend any puzzling or momentous force. Convince them you are the key to comprehending it and you will gain great status.
Having a basic grasp of finance can give you a leg up in law firms over most people at the firm except perhaps the CFO or COO.
ROI was a misunderstood term of art. KM people took it mean "show us what you are likely to do and how it will help."
We are starting to see a trend of relating KM to profitability or even revenue generation.
As firms have begun to embrace professional managers, it's become much more important for KM managers to establish ROI.
ROI, defined as earnings per dollar of investment, compares solution cost to monetary benefits. Measuring ROI varies between industries. There will always be some black magic behind it. It does not take into account work-life balance. An ROI of 25% means that investment cost plus an additional 25% of the investment is returned.
ROI is calculated first by identifying the solution benefits, less the total costs (not just cash investments), x100 expressed as a percentage.
Utilization rate is the actual hours billed divided by target. So an associate who bills 900 hours with an 1800 hour target has 50% utilization rate.
Realization is collections divided by billings. So a matter in which $200,000 was billed but $100,000 collected would have 50% realization rate.
As KM managers are integrated more and more into the business discussions we need to have a better understanding of the language of business.
Process improvement helps cost savings when a better-articulated, well-documented, more accessible, and standardized best practices reduces the time required for a person to accomplish a goal or complete an activity.
For example, ask attorneys how much time they spend sorting / dealing with email.
It is not as simple as saying that an hour saved is an hour that would have been billed. Tie rather to a firm initiative such as business development investment time. Look for firm initiatives that set goals for new business acquisition, client outreach, cross-selling, and so forth.
Sales metrics; one large legal market vendor tracks sales activity down to the level of clicks in a demonstration. This is not inappropriate but rather is the type of business process necessary to survive in a global economy.
At one firm, five of six projects needed no ROI. On the sixth, the KM manager identified hours that could be used for something else with the new project and used that to successfully sell the project. Another firm will be requiring ROI analysis but has not identified how to do that.
Few firms have assessed ROI on business development.
Value can be defined in a lot of different ways.
The discipline that the "ROI game" imposes helps us better find the business objectives, articulate the goals and objectives of KM work, and communicate better to lawyers about it.
KM taking over the risk management at one firm led to cost savings in not hiring a general counsel. If practice area is servicing more clients in the same amount of time, then you've helped the business of the firm because the firm didn't have to hire more people.
"You will spend less time searching" or "you will spend less time doing X" gives the direction and lawyers intuitively understand that working more efficiently means more time for managing the business or delegating more. Firm leaders may not have spent the time identifying how people should be spending their time.
It drives smart people crazy when business processes are handled poorly. Setting a good example of doing something better proves your value.
One way to get some return on invesment is to do a survey about people's pain points and degree of contentment.
Another way to tie to think about ROI is saving moeny for the client.
One firm has a "precedents" library with metrics about popular precedents, popular users, and unpopular precedents. The parallel "research" library doesn't have comparable metrics. The KM manager's CIO from an accounting firm is asking for an ROI, although the project is required to be in place before metrics measurement can really be done (chicken-egg).
The "wild card" KM managers can play in ROI discussions is risk.
One financial measurement is risk and cost of being sued. Making substantive legal mistakes due to poor precedent or absence of search is a risk and potential cost of having a poor research collection.
KM managers can trace ROI by looking at usage of precedents, derivative works, number of searches, etc.
We can estimate software cost by figuring implementation and consulting may take about 1/3 of the annual cost. Focus on three year period as implementation costs drop off quickly.
Doing calculations can help you identify if your assumptions are incorrect. You won't actually get an ROI of 71% from implementing metrics assessment.
ROI analysis ties well into matter management and alternative fee arrangements.
A major benefit of ROI analysis is a more rigorous business approach.
One commentator said that our firms do not apply rigorous analysis to major business decisions. Most don't even do profitability analysis.
Wednesday, August 26, 2009
ILTA 09 Panel--Technologies That Will Disrupt Traditional Legal Practice
This was an excellent session that provided a good list with lightly described examples of disruptive technologies and three more in-depth case studies from two of the more technologically sophisticated firms.
I am putting up these notes with fairly minimal review as I am presenting on matter management in an hour.
What is disruption?
Susskind recommends "The Innovator's Dilemma"; Christianson. Technologies that come and challenge the way that business works. What are the implications of disruption for market leaders? Often they dismiss these technologies when they first appear. Sometimes the innovators end up challenging the market leaders. For instance, Kodak ignored digital cameras and for a while were able to argue that film was better. They lost market but now are invested in digitial photography as well.
For Whom is it Disruptive?
For innovators, disruptive technology can lead to competitive advantage. Most law firms are far more afraid of being left behind than they are of leading the pack.
It's hard to motivate lawyers. It's more persuasive to say that other firms are doing this.
He's surprised by the persistance of the billable hour. He offered to pay his 12-year old daughter by the hour for a chore and she smiled and said "Well I'll take my time then." (You really have to say this out loud with a Scottish accent to get the full effect).
About 50% of general counsel are still comfortable with it.
Ten Disruptive Technologies
The legal world does change slowly. It will take 5-10 years.
1. Automated document assembly.
A lot of work is still hand-crafted. There us a fair amount in small shops with commoditized work. Automation has changed only a few sophisticated practices (European bond market).
Making them available on-line changes the ball game. You can go from a production level of several hundred to several thousand.
The automatic assembly of documents is disruptive because it takes the lawyers out of the business of producing documents.
2. Relentless Connectivity
We'll never be less connected than we are today. 24/7 availability is scary for senior lawyers. You need to put in place systems to have someone be responsive or accessible. Email is not going anywhere. "The calls on our time electronically are increasing."
3. The Electronic Legal Marketplace
We know we can auction services on-line. Clients can more quickly find out what services are available at what price. The idea that clients can find out about the availability of resources outside those of the law firm is fundamentally disruptive. Can a corporation find out that a law firm in Ohio has a week's worth of resources to throw at a due diligence project.
4. e-Learning
The romantic vision of bespoke services draws people to the law but does not reflect the current practice of law. How should we be training them?
There are simulation and learning techniques that afford a far more realistic view of legal practice. A lawsuit simulation might include a large filing the night before a scheduled oral argument that attempts to totally change the argument (which happens in practice but not moot court).
5. Online Legal Guidance
Current websites are fairly crude but still provide some information. There's great potential to provide legal services to a much broader pool of people, cheaply.
6. Legal Open-Sourcing
This will be more directed at citizens than at corporations. If people are networked together they can offer each other much in a community spirit. We'll start to see people coming together who have similar problems.
7. Closed Legal Communities
By and large there aren't many truly new problems. Big London banks collaborated to force law firms to deliver their legal know-how in a portal. Clients are also starting to come together.
8. Workflow and Project Management
We need to systematize and organize our project better. Rigorously apply well-tested techniques to project management. It is laughable to think that a lawyer can become a project manager by at most attending a 3-day training course.
Project management in principle and practice reduces the time and cost in providing legal services.
Project management becomes more necessary with multi-sourcing. Chunking up projects is a separate type of challenging task and needs to be managed.
Global tax compliance efforts are underway at large accounting firms. It's worth hundreds of millions. Accenture won it by saying that it was a complex project that needed a strong management instead of tax expertise (that was subcontracted out).
Are law firms ready to implement and train on project management? No, not currently.
9. Embedded Legal Knowledge
Rules are embedded in systems like computer Solitaire.
Self-monitoring and self-assessing legal systems will reduce need for lawyerly attention.
10. Online Dispute Resolution
He asks, "are courts a service or a place?" Cybersettle uses "double-blind bidding system." to resolve dispute. Over 30 days you negotiate until you're within 10%. The State of New York (?) has resolved hundreds of personal injury suits through such a system. Moneyclaimonline is a UK based dispute resolution.
********************
You know there are other ways to deliver legal services. The economy has catalyzed the uptake of new ways. There are radical new ways of delivering legal services that will be enabled by technology.
*********************
John Alber of Bryan Cave then addressed an online service his firm provides in the trade/export restrictions area.
Automating Low End Legal Advice
A good opportunity has:
Legal Advice for Clients: Import/Export Tool
They set up a client-facing decision tree tool for a client who needed information about import/export restrictions. Clients like it. They obtained all of the trade business for the first client. The service was completely repriced. They use it as a training toool.
Workflow for Due Diligence
They also applied technology to wireless spectrum sales. Radio station sales are very expensive, especially the due diligence.
They developed an automated workflow that walked 50 contract lawyers through a set of review steps and captures the information at issue. It has a significant reporting feature to track work. You can use Sharepoint workflow (it is not technically complicated). They put the people in large rooms and ran the paper flow through them.
The result is that the cost per unit of due diligence roughly by 2/3 and deal turn time is measured in months not weeks. Client's deal process is changed and they can do deals they could not have before. It's a real competitive advantage.
*****************
Gerard Neiditsch of Australia addressed "Mallesons Connect."
Mallesons did not want to provide "black box" services where what is happening with the matter teams is hidden from their clients. They are trying to provide greater client access to information about the work.
Clients most wanted financial information, project progress, and alerts.
They were also interested in current awareness and client training.
The security model is quite challenging. Making correspondence securely available to the client is critical.
They'll be introducing these "Dashboards" later this year.
At the top it lists the total and active matters (a number) and the number of unpaid invoices. Sometimes bills aren't paid because the general counsel doesn't know they are paid.
All links are active. Hovering over matter gives matter summary of financials. A person's availability (live!) is shown next to their name. Drill-downs also available.
a Search page provides access to drill down into projects through guided / faceted navigation (number of projects by category, location, partner responsible, etc.)
Financial information is shown in friendly form including "Aged debtors", 10 most recent invoices with a link to unpaid invoices, project estimates and which are over/under/near/ or no estimate. Making this visible makes project management start to happen inside the firm.
This was a very sophisticated approach to exposing client information, focusing on the information they expressed they wanted.
The project has seen pretty good adoption by clients. Using web 2.0 tool sets that are very rapid to fix makes it possible to change the technology.
*****
In the questions session, Susskind makes the point that you shouldn't base your decisions on having one reluctant client. If even half or three-quarters of clients want one of these then it is still probably worth it.
Rachelle Rennegal asked how Bryan Cave established pricing for the export tool. They now have sophisticated pricing tools. At first they took a guess at the economics and left the pricing flexible. The initial goal was to generate more high-end premium counseling business and break even on the software tool.
Susskind said that the skill and talent in chunking up the projects and planning outsourcing is significant.
I am putting up these notes with fairly minimal review as I am presenting on matter management in an hour.
What is disruption?
Susskind recommends "The Innovator's Dilemma"; Christianson. Technologies that come and challenge the way that business works. What are the implications of disruption for market leaders? Often they dismiss these technologies when they first appear. Sometimes the innovators end up challenging the market leaders. For instance, Kodak ignored digital cameras and for a while were able to argue that film was better. They lost market but now are invested in digitial photography as well.
For Whom is it Disruptive?
For innovators, disruptive technology can lead to competitive advantage. Most law firms are far more afraid of being left behind than they are of leading the pack.
It's hard to motivate lawyers. It's more persuasive to say that other firms are doing this.
He's surprised by the persistance of the billable hour. He offered to pay his 12-year old daughter by the hour for a chore and she smiled and said "Well I'll take my time then." (You really have to say this out loud with a Scottish accent to get the full effect).
About 50% of general counsel are still comfortable with it.
Ten Disruptive Technologies
The legal world does change slowly. It will take 5-10 years.
1. Automated document assembly.
A lot of work is still hand-crafted. There us a fair amount in small shops with commoditized work. Automation has changed only a few sophisticated practices (European bond market).
Making them available on-line changes the ball game. You can go from a production level of several hundred to several thousand.
The automatic assembly of documents is disruptive because it takes the lawyers out of the business of producing documents.
2. Relentless Connectivity
We'll never be less connected than we are today. 24/7 availability is scary for senior lawyers. You need to put in place systems to have someone be responsive or accessible. Email is not going anywhere. "The calls on our time electronically are increasing."
3. The Electronic Legal Marketplace
We know we can auction services on-line. Clients can more quickly find out what services are available at what price. The idea that clients can find out about the availability of resources outside those of the law firm is fundamentally disruptive. Can a corporation find out that a law firm in Ohio has a week's worth of resources to throw at a due diligence project.
4. e-Learning
The romantic vision of bespoke services draws people to the law but does not reflect the current practice of law. How should we be training them?
There are simulation and learning techniques that afford a far more realistic view of legal practice. A lawsuit simulation might include a large filing the night before a scheduled oral argument that attempts to totally change the argument (which happens in practice but not moot court).
5. Online Legal Guidance
Current websites are fairly crude but still provide some information. There's great potential to provide legal services to a much broader pool of people, cheaply.
6. Legal Open-Sourcing
This will be more directed at citizens than at corporations. If people are networked together they can offer each other much in a community spirit. We'll start to see people coming together who have similar problems.
7. Closed Legal Communities
By and large there aren't many truly new problems. Big London banks collaborated to force law firms to deliver their legal know-how in a portal. Clients are also starting to come together.
8. Workflow and Project Management
We need to systematize and organize our project better. Rigorously apply well-tested techniques to project management. It is laughable to think that a lawyer can become a project manager by at most attending a 3-day training course.
Project management in principle and practice reduces the time and cost in providing legal services.
Project management becomes more necessary with multi-sourcing. Chunking up projects is a separate type of challenging task and needs to be managed.
Global tax compliance efforts are underway at large accounting firms. It's worth hundreds of millions. Accenture won it by saying that it was a complex project that needed a strong management instead of tax expertise (that was subcontracted out).
Are law firms ready to implement and train on project management? No, not currently.
9. Embedded Legal Knowledge
Rules are embedded in systems like computer Solitaire.
Self-monitoring and self-assessing legal systems will reduce need for lawyerly attention.
10. Online Dispute Resolution
He asks, "are courts a service or a place?" Cybersettle uses "double-blind bidding system." to resolve dispute. Over 30 days you negotiate until you're within 10%. The State of New York (?) has resolved hundreds of personal injury suits through such a system. Moneyclaimonline is a UK based dispute resolution.
********************
You know there are other ways to deliver legal services. The economy has catalyzed the uptake of new ways. There are radical new ways of delivering legal services that will be enabled by technology.
*********************
John Alber of Bryan Cave then addressed an online service his firm provides in the trade/export restrictions area.
Automating Low End Legal Advice
A good opportunity has:
- a recurring legal problem (import/export restrictions),
- perceived value/cost disconnect where paying for solving the same type of problem every day
- high-energy practice group accustomed to tight publishing deadlines
Legal Advice for Clients: Import/Export Tool
They set up a client-facing decision tree tool for a client who needed information about import/export restrictions. Clients like it. They obtained all of the trade business for the first client. The service was completely repriced. They use it as a training toool.
Workflow for Due Diligence
They also applied technology to wireless spectrum sales. Radio station sales are very expensive, especially the due diligence.
They developed an automated workflow that walked 50 contract lawyers through a set of review steps and captures the information at issue. It has a significant reporting feature to track work. You can use Sharepoint workflow (it is not technically complicated). They put the people in large rooms and ran the paper flow through them.
The result is that the cost per unit of due diligence roughly by 2/3 and deal turn time is measured in months not weeks. Client's deal process is changed and they can do deals they could not have before. It's a real competitive advantage.
*****************
Gerard Neiditsch of Australia addressed "Mallesons Connect."
Mallesons did not want to provide "black box" services where what is happening with the matter teams is hidden from their clients. They are trying to provide greater client access to information about the work.
Clients most wanted financial information, project progress, and alerts.
They were also interested in current awareness and client training.
The security model is quite challenging. Making correspondence securely available to the client is critical.
They'll be introducing these "Dashboards" later this year.
At the top it lists the total and active matters (a number) and the number of unpaid invoices. Sometimes bills aren't paid because the general counsel doesn't know they are paid.
All links are active. Hovering over matter gives matter summary of financials. A person's availability (live!) is shown next to their name. Drill-downs also available.
a Search page provides access to drill down into projects through guided / faceted navigation (number of projects by category, location, partner responsible, etc.)
Financial information is shown in friendly form including "Aged debtors", 10 most recent invoices with a link to unpaid invoices, project estimates and which are over/under/near/ or no estimate. Making this visible makes project management start to happen inside the firm.
This was a very sophisticated approach to exposing client information, focusing on the information they expressed they wanted.
The project has seen pretty good adoption by clients. Using web 2.0 tool sets that are very rapid to fix makes it possible to change the technology.
*****
In the questions session, Susskind makes the point that you shouldn't base your decisions on having one reluctant client. If even half or three-quarters of clients want one of these then it is still probably worth it.
Rachelle Rennegal asked how Bryan Cave established pricing for the export tool. They now have sophisticated pricing tools. At first they took a guess at the economics and left the pricing flexible. The initial goal was to generate more high-end premium counseling business and break even on the software tool.
Susskind said that the skill and talent in chunking up the projects and planning outsourcing is significant.
Richard Susskind on "The End of Lawyering"
Legal innovator and passionate speaker Richard Susskind spoke in a "super session" this morning at ILTA. He is also spoke on a panel titled "Technologies That Will Disrupt Traditional Legal Practice."
His point of view is "radically different" from that of other lawyers.
Post revised September 11 to link to later post and fix a typo or two.
The Future
Black & Decker doesn't sell power tools. It sells something customers use to make holes in the wall.
Lawyers deliver 1:1 consultative services now. But what is the real value we bring? For what are we paid?
"We exist to turn knowledge into value." We bring insight to bear on customer's problems.
By avoiding discussing the means of service delivery in defining what lawyers do, you open yourself up to new methods of providing service.
You bring knowledge and experience to the situtation. Methods of capturing and sharing knowledge are therefore critical. KM has had pockets of success but has not changed the whole profession.
He finds that general counsel "don't want dispute resolution, we want dispute avoidance." They want a fence at the top of a cliff instead of the ambulance at the bottom.
Knowledge capture and management and legal risk management are really important.
Automation v. Innovation
Automation is systemetizing some aspect of your work. Applying technology to preexisting processes is automation. The most dramatic impact of technology is where it has allowed you to do things that previously weren't possible. We're just warming up in legal technology.
We have to look at ways in which IT can change the way we do things.
The ATM is an example of an innovation. It was a very different way of delivering that service.
Our challenge is to change the way legal services are delivered.
The Client's Three-Part Dilemma
In-house lawyers have been asked to reduce internal head-count and external spend as well at a time when compliance pressures and changes in the law are raising the complexity of their challenges.
Clients Want More For Less
It is simply not the case that clients will be going back to the old ways, at least with respect to "shareholders at a board meeting."
How Can This Be Done?
Susskind belives that the two paths to providing more for less are the efficiency strategy and the collaborative strategy.
Efficiency Strategy
He believes that routine and repetitive legal work can be done differently. It doesn't need expensive lawyers.
In 1996 he said that email would be the primary way of communicating in law firms.
"Bespoke" services are those customized and tailored to the particular situation just as a spoke suit is tailored to the wearer.
Lawyers project the idea that most problems are bespoke. But clients come to you because you've faced similar problems before.
There are five levels on the path to commoditisation.
Bespoke / Standard / Systematised / Packaged / Commoditised.
Pckaging is a radical step. Packaging is the delivery of a system that lets the client come in and produce the solution or document required themselves.
Another example is the term sheet generator by Wilson Sonsini and Allen Overy.
Deloitte's tax practice lets their clients come in and use their tax system on a licensed basis. "We exist to turn knowledge into volume." Not the way we learned to practice but clients will go for it. Deloitte has 70 of top 100 clients using their tax software.
There is a red line in his diagram before commoditisation. The costs of commoditised work rapidly drop towards zero. The marginal costs of delivery are reduced as you move towards commoditisation. There are huge opportunities in the standardization level.
No decent firm is not standardizing.
Work can be "chunked up"
The clients want to move towards commoditisation because it enhances certainty of cost. Some clients want certainty of cost even more than lower cost.
Standardization can be of very high quality.
He's predicting a fundamental move of the amount of work towards commoditisation.
Collaborative Strategy
You can divide litigation into different chunks. It's hard to argue that a law firm is uniquely qualified to source all of them.
There are many ways of sourcing the work:
He recommends Ray Kurzweil, "The Singularity is Here." We have an exponential curve in technology. Kurzweil claims we are in the "knee" of the curve.
By 2050 the average desktop machine has more processing power than all of humanity.
Web 2.0 and Disruption
Technology is now changing the way we relate and work. We've seen this most in social networking.
We're no longer passive recipients of news. We're now participants. He knows general counsel who are on Twitter. Half of the people in most firms are on Facebook (just not the partners).
Sermo
A hundred thousand doctors on-line, sharing knowledge in a cross of Facebook and Wikipedia. Clients and in-house lawyers are sharing costs in a similar way. These resources (Legal OnRamp?) may become the first place in-house lawyers go.
eBay
There are dispute resolution mechanisms on eBay. Why won't they spread?
India
Outsourcing different kinds of work to English-speaking India or South Africa may be a real challenge to Western law firms.
Cisco
85% of their external spend is fixed fee. When they negotiated the deal the external lawyers wanted to start attending meetings that involved legal risk. Cisco said that was what they wanted--to have the lawyers participate in managing risk and avoiding the disputes.
What is the profitability model?
Huge amounts of lawyers' work can be done more cheaply and effectively.
We can be confident that some lawyers are going to be adopting the new ways of doing business.
In this room, there are significant advances in technology that would already change the practice of law. These are just not evenly distributed yet.
Conclusion
"The best way to predict the future is to invent it." It's up to lawyers to fashion their own future. The message today is to legal technologists. We typically support existing strategy. But now information technology can change the very business model that underpins law firms.
We live in a time of flux and pressure for law firms. Technologists can help our firms adapt. "Our time has now come."
His point of view is "radically different" from that of other lawyers.
Post revised September 11 to link to later post and fix a typo or two.
The Future
Black & Decker doesn't sell power tools. It sells something customers use to make holes in the wall.
Lawyers deliver 1:1 consultative services now. But what is the real value we bring? For what are we paid?
"We exist to turn knowledge into value." We bring insight to bear on customer's problems.
By avoiding discussing the means of service delivery in defining what lawyers do, you open yourself up to new methods of providing service.
You bring knowledge and experience to the situtation. Methods of capturing and sharing knowledge are therefore critical. KM has had pockets of success but has not changed the whole profession.
He finds that general counsel "don't want dispute resolution, we want dispute avoidance." They want a fence at the top of a cliff instead of the ambulance at the bottom.
Knowledge capture and management and legal risk management are really important.
Automation v. Innovation
Automation is systemetizing some aspect of your work. Applying technology to preexisting processes is automation. The most dramatic impact of technology is where it has allowed you to do things that previously weren't possible. We're just warming up in legal technology.
We have to look at ways in which IT can change the way we do things.
The ATM is an example of an innovation. It was a very different way of delivering that service.
Our challenge is to change the way legal services are delivered.
The Client's Three-Part Dilemma
In-house lawyers have been asked to reduce internal head-count and external spend as well at a time when compliance pressures and changes in the law are raising the complexity of their challenges.
Clients Want More For Less
It is simply not the case that clients will be going back to the old ways, at least with respect to "shareholders at a board meeting."
How Can This Be Done?
Susskind belives that the two paths to providing more for less are the efficiency strategy and the collaborative strategy.
Efficiency Strategy
He believes that routine and repetitive legal work can be done differently. It doesn't need expensive lawyers.
In 1996 he said that email would be the primary way of communicating in law firms.
"Bespoke" services are those customized and tailored to the particular situation just as a spoke suit is tailored to the wearer.
Lawyers project the idea that most problems are bespoke. But clients come to you because you've faced similar problems before.
There are five levels on the path to commoditisation.
Bespoke / Standard / Systematised / Packaged / Commoditised.
Pckaging is a radical step. Packaging is the delivery of a system that lets the client come in and produce the solution or document required themselves.
Another example is the term sheet generator by Wilson Sonsini and Allen Overy.
Deloitte's tax practice lets their clients come in and use their tax system on a licensed basis. "We exist to turn knowledge into volume." Not the way we learned to practice but clients will go for it. Deloitte has 70 of top 100 clients using their tax software.
There is a red line in his diagram before commoditisation. The costs of commoditised work rapidly drop towards zero. The marginal costs of delivery are reduced as you move towards commoditisation. There are huge opportunities in the standardization level.
No decent firm is not standardizing.
Work can be "chunked up"
The clients want to move towards commoditisation because it enhances certainty of cost. Some clients want certainty of cost even more than lower cost.
Standardization can be of very high quality.
He's predicting a fundamental move of the amount of work towards commoditisation.
Collaborative Strategy
You can divide litigation into different chunks. It's hard to argue that a law firm is uniquely qualified to source all of them.
There are many ways of sourcing the work:
- Multi-sourcing
- in-sourcing
- de-lawyering
- relocating
- offshoring
- outsourcing
- sub-contracting
- co-sourcing
- leasing
- home-sourcing
- open-sourcing
- computerising
- no-sourcing
He recommends Ray Kurzweil, "The Singularity is Here." We have an exponential curve in technology. Kurzweil claims we are in the "knee" of the curve.
By 2050 the average desktop machine has more processing power than all of humanity.
Web 2.0 and Disruption
Technology is now changing the way we relate and work. We've seen this most in social networking.
We're no longer passive recipients of news. We're now participants. He knows general counsel who are on Twitter. Half of the people in most firms are on Facebook (just not the partners).
Sermo
A hundred thousand doctors on-line, sharing knowledge in a cross of Facebook and Wikipedia. Clients and in-house lawyers are sharing costs in a similar way. These resources (Legal OnRamp?) may become the first place in-house lawyers go.
eBay
There are dispute resolution mechanisms on eBay. Why won't they spread?
India
Outsourcing different kinds of work to English-speaking India or South Africa may be a real challenge to Western law firms.
Cisco
85% of their external spend is fixed fee. When they negotiated the deal the external lawyers wanted to start attending meetings that involved legal risk. Cisco said that was what they wanted--to have the lawyers participate in managing risk and avoiding the disputes.
What is the profitability model?
Huge amounts of lawyers' work can be done more cheaply and effectively.
We can be confident that some lawyers are going to be adopting the new ways of doing business.
In this room, there are significant advances in technology that would already change the practice of law. These are just not evenly distributed yet.
Conclusion
"The best way to predict the future is to invent it." It's up to lawyers to fashion their own future. The message today is to legal technologists. We typically support existing strategy. But now information technology can change the very business model that underpins law firms.
We live in a time of flux and pressure for law firms. Technologists can help our firms adapt. "Our time has now come."
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