9/29/14

The Exponential Law Firm - Part 2

The following is the second part of a 4 part post that expands upon a short introduction I gave to an ILTA session entitled, Do Robot Lawyers Dream of Billable Seconds? If you have not yet listened to the full session (and you have nothing better to do for the next 90 minutes), you should go listen to it now. If you would like to download and read the entire 4-part post you can get it here.

Ryan

The 6 Ds: An Exponential Framework

Image from Peter Diamandis' presentation to ILTA.
On the first day of this year’s ILTA conference, I attended the keynote session presented by Peter Diamandis. Diamandis is the founder of the X-Prize and Singularity University. In corporate-speak, Diamandis is not just an “outside the box” thinker, he tore the box apart, set the pieces on fire, and urinated on the flames. I watched his speech in rapt attention, increasingly fired up by what he was saying. I imagined the headlines that would appear in the news the following day, “Angry Nerds burn down Gaylord Opryland Hotel!” or, “Diamandis Sparks Legal Geek Riot”. But strangely, at the end of his talk he received polite smattering of applause and the assembled nerds quietly stood and shuffled out of the ballroom toward the first coffee break of the day.

It was clear that not everyone heard what I heard. Because I heard Diamandis say, “Most of your firms will not exist in a few years. Much of this conference is a waste of time. You should all go find new jobs.” Of course, he didn’t put it that bluntly, but if you pull his remarks together and add up all the pieces, I think that was the underlying message.

One slide in particular had a profound effect on me. So much so that I scrapped the introduction I had written for my session later in the week and instead talked about this one concept: The 6 Ds.

Diamandis calls the 6 Ds an Exponential Framework. I struggled with that name for a long time, but I couldn’t come up with a better one either. It’s not a process; the Ds don’t necessary happen sequentially. It’s not a workflow, or an organizing principle. Model, pattern, and path don’t quite fit either. It’s just a framework that industries begin to take on once they cross the threshold of the first D.

Digitization

Perhaps you can begin to see why I needed such a lengthy preamble to this post. We have already crossed, or we are at the very least currently crossing, the digitization threshold in the practice of law. Diamandis’ framework suggests that crossing that threshold has entirely foreseeable consequences and that if we want our firms to survive, we must prepare them to exist in a completely different industry than the analog one we have lived in to this point.

The premise is that digitizing a product or a service throws an entire industry onto the Moore’s law bandwagon. Change within that industry immediately becomes exponential as processing power doubles and prices halve every 18 months.

I will cover each of these in turn, but the remaining 5 Ds that follow from this initial act of Digitization are:
  • Deceptive (initial change)
  • Disruption
  • Dematerialization
  • Demonetization
  • Democratization

Deceptive

This D is tough because it is the only one that describes a state of being rather than an action or direct change. The idea is that even though change immediately begins to happen exponentially, it still appears to be slow or even non-existent. This mis-perception is a product of our human inability to intuit exponential change. In real terms, even exponential growth appears static at very small levels. For example, without a high powered microscope, you would have a difficult time recognizing the initial exponential growth of bacteria in a petri dish. One cell becomes two, two become four, eight, sixteen, thirty-two, and so on.  For a long period of time, you would swear nothing is happening at all, and then BAM! an obvious explosion of growth. The rate of growth in that example is constant, but our perception of it is that it happened all at once; out of the blue.

Arguably, this is where we currently are in the legal industry. We are digitizing our practice and we have begun the process of exponential change, but that change is still small and very hard to see.

Disruption

Disruption is the elbow in the graph; the point at which change goes from near horizontal to near vertical over a very short period of time. That’s the point at which it becomes impossible for anyone to seriously argue that a significant and industry altering change has not occurred. The horizontal underline that turns into the letter L in the word “exponential” on the image above was created in Excel. It is an actual graph of steady exponential growth. You can see conceptually how deceptively small change can sneak up on an industry and give way to massively large disruption.

Diamandis argues that we have seen many industries crossing the digital threshold and that they all begin to follow this same framework. The last 3 Ds represent the post-disruption world.  They don’t necessarily happen in any particular order; they are more like directions that a digitally disrupted industry begins to head.

Dematerialization

Once a product or service is digitized, the materials (physical goods and associated services) begin to disappear. Kodak learned this the hard way when most people decided that the crappy digital camera attached to their phone was good enough. They stopped carrying dedicated cameras, and buying and processing film. Sales of physical books are down since the Kindle debuted. Who buys CDs or DVDs anymore? Physical media is wasteful, and expensive, and unnecessary. Just enumerating the physical goods that have been supplanted by the “phone” in your pocket would take pages.

Demonetization

Disrupted industries have seen the total amount of money that customers are willing to spend for non-material goods decrease significantly post-disruption. That is not to say that there is no money to be made, simply that the players who survive are often fighting over a smaller pool of available revenue or they have to grow significantly in volume to make up for the decrease in per unit cost. For example, digital music and movie downloads can no longer command the same premium prices that CDs and DVDs once did. Entire secondary industries based on distribution of physical media have dried up. Virgin Mega Stores and Blockbuster Video, once multibillion dollar juggernauts have disappeared and been replaced by digital distributors, like Spotify and Netflix, selling monthly unlimited access to entire libraries of media for the former price of a bargain bin album.

Democratization

Finally, the 6th D follows naturally from the 4th and 5th. If a good or service is now digitized and available online, and its price is now affordable to most people, then it is democratized.  Everyone can have access to it. This is the digital publishing revolution of which we at 3 Geeks have taken terrific advantage. Fifteen or 20 years ago, we could have published a newsletter that might have reached a couple of hundred people within a small region of the US. We would have had publishing and distribution costs. We would have probably charged a subscription fee. We would have needed someone to manage all of that for us, because frankly, we’re too lazy to do those things ourselves. Today, however, we have readers all over the world who read our non-sense daily and it costs us nothing but our time.

(Tomorrow: What does this mean for legal service delivery?)

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9/28/14

The Exponential Law Firm - Part 1

The following is the 1st part of a 4 part post expanding on my short introduction to an ILTA session entitled, Do Robot Lawyers Dream of Billable Seconds? If you have not yet listened to the full session (and you have nothing better to do for the next 90 minutes), you should go listen to it now. If you would like to download and read the entire 4-part post you can get it here.

Ryan

Computers

During World War II, a “computer” was a person who calculated ballistic trajectories and published the results in books and sets of tables that were given to artillery units and battle ship commanders. These computers were mostly women who manually processed the calculations applying complex mathematics and their substantial brain power to the task. They worked in teams, checking and quadruple-checking each other’s work, as incorrect results could quite literally affect the outcome of the war and lead to the deaths of many soldiers on the front lines.

After the war, many of these computers were instrumental in programming and debugging their brand new, building-sized, electronic namesakes. Today, the term computer is never used to refer to a person.

These women were certainly not the first laborers to lose their jobs to machines. The industrial revolution had seen many manual labor positions replaced by newly developed engines, from coal powered steam shovels, to electric sewing machines. But these “computers” were probably the first knowledge workers (people that rely on their brain processing power rather than their physical skill) to lose their jobs to machines.

Over the last seventy years that process has continued unabated, with ever smarter electronic computers tackling more complex and complicated knowledge work. And at every step of the process the next profession in line had a million and one reasons why “a computer could never do what they do.” But today we live in the world of IBM’s Watson. Watson is not a miracle, it’s the natural progression from those World War II era computers, to ENIAC, to the Personal Computer revolution, to the Smartphone, and eventually to a computer that beats the best humans at the most difficult of human games; Chess two decades ago, Jeopardy a few years back, and Settlers of Catan every night on my iPad.

More impressive than my iPad beating me at a popular German board game is the Watson victory on Jeopardy. Computers are now exhibiting what were once considered uniquely human abilities: parsing and processing natural language, understanding puns, and double meanings, and then determining the intention of the questioner in order to select a correct solution from many plausible answers. That is not terribly far removed from parsing the exact meaning and intention of legal documents and then determining an appropriate course of action based on precedent and prior analysis. The legal profession should be on notice: the computers are coming.

What do we sell?

A few years ago I asked a number of my friends and colleagues from other firms three questions:
  1. What do Lawyers think they sell?
  2. What do Law Firms think they sell?
  3. What do Clients think they are buying?
While none of the respondents gave the same three answers, they all agreed that there were separate answers to each question. That kind of confusion leads to all kinds of marketplace chaos and I tried to suggest a common answer, that we were selling “access to the collective knowledge and expertise of the firm.” That was not a satisfying answer to me, even then. The question has continued to nag at me ever since, and after much consideration, I am ready to suggest a new answer: We sell Legal Processing.

That doesn't feel emotionally satisfying either, but the more I think about it, the more convinced I am that that should be the simple answer to all three questions. Clients typically come to us with legal problems and we run those problems through our legal processing engines (attorneys, established workflows) to produce advice, documents, in person counsel, or any of the other things we commonly produce for clients. So, my original answer wasn't wrong, it just didn't go deep enough. Lawyers are selling their legal processing time, law firms are selling their collective legal processing ability, and clients are buying the legal processing that they cannot or do not want to do internally.

Much like the computers of World War II, the lawyers of 2014 continue to do most of that processing using their biological processing units. These brains, as we call them, are extremely energy efficient and fast, but are slow to train, prone to fatigue, often make mistakes, and are notoriously difficult to network (not to mention the hardships of managing them).

Digital Legal Processing

In recent years, we have entered a new era for the practice of law, the digital era. The digital era probably began in earnest with the explosion of e-discovery solutions in the last decade. These tools were not simply technological means of improving the analog workflow, like a Document or Contact Management System, these applications were beginning to do the actual work that previously required lots of young associates with a great deal of management supervision. With predictive analysis, many fewer associates could do the same work in much less time, more accurately.

I have seen no fewer than 5 contract review applications in the last few months that promise to reduce processing time and to increase accuracy by large percentages. Eventually, these tools will most likely replace biological processing units entirely. Even now, a large document review that relied entirely on human ability, engaging no computer assistance at all, would most likely leave a firm open to a malpractice suit. It is not a huge stretch to imagine a time in the near future, when biological processing interference of any kind, might do the same.

E-discovery and contract review applications are one type of digital legal processing. They are essentially highly skilled and ever improving pattern recognition tools, but obviously the practice of law does not boil down to simply better pattern recognition. It also requires an understanding of current laws, an ability to apply a client’s particular circumstances to the current laws, and to make inferences, calculations, and recommendations based on that understanding of the law. This is where Expertise Systems enter.

Expertise systems allow firms to capture an individual lawyer’s (or an entire practice group’s) knowledge and understanding of a particular law, in a way that allows other lawyers or clients to use that knowledge, even if they do not have access to the original lawyer(s). In other words, with an expertise system, it is possible to build legal processing engines that handle the routine aspects of practicing law, leaving the novel and unique to be handled by the firm’s biological legal processing units (attorneys).


Everything to this point is preamble to the next concept.

(Tomorrow: The 6 Ds: An Exponential Framework)

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9/26/14

Do Robot Lawyers Dream of Billable Seconds?

I had the privilege and pleasure of moderating a terrific panel at the ILTA conference this year.  The title of the session was the title of this post.  And the intention of the session was to explore, not WHAT new technology was coming down the pipe, but HOW that technology would fundamentally change lawyers, law firms, and the practice of law itself.

I am indebted to Jess Hutto-Schultz and the ILTA Committee for suggesting the topic and for allowing me to pick a truly ALL-STAR panel.

The panelists were:
Joshua Lenon, Lawyer in Residence at Clio (blog)
Noah Waisberg, CEO and Founder of Diligence Engine (blog)
Stuart Barr, Chief Operating Officer at HighQ (blog)
and Michael Mills, President and Chief Strategy Officer at Neota Logic (blog)
Each of the panelists have already posted their personal accounts of the session and I urge you to read them via the blog links above. This was truly an amazing session and I'm not just saying that because I was involved. Take a look at what some of the attendees said:
"Another fantastic session with a great panel. Please bring them back for more."
"Can't emphasize enough how superb this session was. Excellent and well-informed panel with excellent moderator..." (Bonus points for whomever said this one. - RM)
"This should have been earlier in the week"
"Fantastic! Best session at ILTA!!"
"Great panel. Very thought provoking."
"Great session that used the panel format well to put forward alternate views."
"INCREDIBLE SESSION!! All speakers were amazing. Content was relevant, informative, interesting, and fun!"
"Outstanding panel, wide scope, though-provoking but realistic."
"Thoughtful and provocative. I especially enjoyed Michael Mills' commentary."
Lest you think I cherry-picked only the best comments, those are ALL of the comments.  Some of them went on much longer and I shortened them so as to not completely embarrass our brilliant and humble panelists.

My personal thoughts, inspired and informed by this session, will be posted here starting on Monday morning. And yes, I do have a tendency to go on a bit, so those thoughts will continue through until at least Thursday.  But for your Friday afternoon and Weekend enjoyment, I present the full presentation of Do Robot Lawyers Dream of Billable Seconds? from ILTA 2014. 

The video is about 90 minutes long, so go get some popcorn. If you are interested in the future of law, or robot lawyers, you will not regret it. If you are not interested in those things, I'm not sure how you stumbled onto this blog, but welcome!

(If the embedded video is not working, go to YouTube.  It is working there. )

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9/18/14

We Cannot Keep New Business Intake In a Vacuum

736-hp VW Golf
Toby Brown and I have had a number of discussions over the past few months on how law firms gather information during the new business intake (NBI) process. Toby comments that all of the focus on NBI is process driven, and that we are speeding up the process, but not really doing a great job of creating better information that can help the firm create a competitive advantage at a later time. Very little in the NBI reform/reinvention process is about better data. It focuses more on faster input of information to speed up the time to open a new matter, thus creating a faster turnaround on when attorneys can start (legally) billing time to a matter. It's kind of like putting a huge engine in a Volkswagen Golf. Sure, it looks impressive, but if keep the same overall structure of the vehicle it doesn't matter that you have amazing horsepower, if you can't get those wheels to actually stick to the road. The same is true with the NBI process improvements.

Of course, with any of these process improvement projects, the idea is to solve problems that actually exist. Problems that "keep partners up at night" are usually the best ones to solve, and with NBI, the time it takes to open a new matter tends to be the biggest issue that partners dislike. Moving the NBI process from paper to electronic (even if the work flow process remains exactly the same) usually will speed up the time it takes to open the new matter. Tapping into existing client information, human resources, and accounting databases can help normalize some of the data, as well as auto-populate some of the fields. However, the information being gathered is essentially the same as you would get if you still had a paper-based system. Speed and accuracy have improved, but quality and better strategic data gathering has not.

So are we putting too much emphasis on the intake process, and not finding ways to improve identifying key data points of the matter? Once the matter is opened, no one wants to go back and update the data again. What if the matter type was wrong? What if the summary of the matter was wrong? What if the estimates of what this matter's estimated costs were wrong? The typical reaction that I've seen to these questions is, "So what? If the matter is open, and we can bill... then let's bill!"

Many of us depend upon the information gathered in the NBI process. Toby's group attempts to analyze matter budgeting, matter management, and costs to take on a matter using details gathered in the NBI process. Marketing uses the data gather during the NBI process to determine big matters for Public Relations news releases, and submissions to third parties like Chambers. Business Development uses this information to determine what types of work the firms is strong and weak. Conflicts uses the information to determine what work we may not be able to take on in the future. Incomplete, or bad information gathered during NBI can have a long-range negative impact on the firm.

Let's just call the new NBI process what it truly is: A way to open a matter quickly and ethically. Now, let's identify what new NBI process is not: A competitive intelligence, business development, knowledge management, big-data tool. At least, not by itself. Perhaps if you combine the data from the NBI system with other pieces compiled along the timeline of the matter (e.g., billing data, financial data, personnel data, document records, docket information), you can improve the ability to make good decisions and streamline other processes, but bad data in the beginning can cause a domino effect down the line. If a matter type is mislabeled during the NBI process, it can cause a shift in results in later analysis. So, what do we do?

I'm reminded of a post we did a couple years ago on firms needing to do After-Action Reviews for matters. If we don't ask ourselves what happened, and how can we get better, we tend to continue to act in a similar fashion (good or bad) in the future. If we misidentify information, and never incentivize partners to correct that information, we'll continue to misidentify. Most firms have absolutely no incentives for partners to identify when information gathered during NBI process needs to be clarified or corrected. We also give almost no incentives to close matters. Yet, both of those processes are key pieces in our quest to better know our clients (KYC), gather BI/CI information, assist in identifying cross-selling opportunities, and gathering historical information to better plan how we price and staff similar matters in the future. I would think that the return on investment in beefing up a mid-matter review (MMR), and the closing matter process (CMP) would be substantial.

Just off of the top of my head I could think how a quick MMR and a sustained CMP process would help trim down the time it takes to identify key matters to be used for PR purposes. How it would accurately identify which attorneys are experienced in certain matter types. And, how it would assist in business intelligence gathering when pitching for client RFPs or new firm industry business pushes. I understand that the MMR and CMP procedures require billable attorneys to take time out from billing and actually identify the business development and overall matter management needs of the overall firm. Our first instinct would be to place this responsibility on the shoulders of the Billing Partner or Relationship Partner. We all know where that would lead... well, actually, that's probably why were where we are at the present time. Instead, how about we look at this as a Professional Development, or as a Mentoring, or as a Succession Planning process? The MMR might be handled by a Senior Associate or Junior Partner and allow them to see how a matter is being staffed, and determine what has happened between the opening of the matter and the current state of the matter. The CMP could be handled by another Partner that worked on the matter, and allow them to also review what could be handled better the next time a similar matter is opened. A quality MMR and CMP structure allows for better data, better matter management, and a better leader for the next matter.

Perhaps we stop thinking of the New Business Intake in a vacuum. Instead we combine the NBI, MMR, and CMP into an overall process of cradle-to-grave matter management. The NBI is step-one, and should be improved to help speed up the process of getting matters opened, conflicts checked, people assigned, and have the firm start working on behalf of a client. But it is step one only. If we ever want to leverage our prior work in order to improve or gain new work, then the NBI cannot be the first and only step.

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8/12/14

Let CI Be Your Guide

Someone asked me recently why I think more and more law firms are creating CI roles or increasing their CI capacity, encouraging their BD and Library staff to work more closely so forth. I didn't really have a good answer on the spot, "cause it makes good business sense, or because market competition and consolidation is increasing" seemed all to obvious and do not address this specific moment in the evolution of the modern law firm.  Last month, I participated in a webinar presented by Ann Lee Gibson, long time law firm CI consultant as a part of the IntelCollab webinar series and unknowingly, Ann Lee answered the question in part.  Her presentation was titled How Competitive Intelligence Helps Professional Services Firms Succeed, and you can view the entire presentation here.  The focus wasn't specifically on law firms, but by not focusing, certain things became clear.  To begin the various US based professional services firms are compared  by revenue, number of employees and number of professionals.  According to the data, law firms had the highest revenue in 2013, but also the greatest number of employees (costs) but NOT the highest growth rate, nor does the profession represent the largest number of businesses in the professional services.  Furthermore, when compared to Accounting firms, the 2013 data  points out that 75% of revenue in law firms comes from 53 firms, whereas in the Accounting sector that same percentage of revenue is drawn from four firms.  So putting on the CI analyst hat here, what do the numbers tell you? Not surprisingly, especially if you follow any of Toby's posts, law firms are running inefficient organizations, with leverage issues as a result of the many many owners. I am not the economist so won't get into the numbers except to say that law firms are increasing CI as way to minimize the impact of the figures.  But even forgetting the economics for a second, you can see from the literature, the blog posts and the new titles that are popping up all across law firms that something is happening.   

Twenty, even 15 years ago firms only had to worry about appeasing clients, doing good work and getting more work from the same or other clients. Few firms were concerned in any systemic way about their competitors and even fewer were thinking about clients in terms of their needs and wants. Today, that landscape has entirely changed.  Clients are driving change at firms by demanding attention be it through: AFAs, LMP, LPO, and/or e-billing. Add to that the growing impact of technology on both the business and practice of law, industry consolidation nationally and internationally, growing in house legal teams, changes to the ownership rules for law firms and firms are forced to be more competitive.  How a firm chooses to be more competitive can (and does) come in varied forms.  Some are shrinking administrative costs and reducing overhead by creating pools of assistants rather than the traditional 1:1 of firms, shrinking headcount or budget for things like KM, Marketing and Library services. Others are taking a different approach choosing to focus on understanding their clients, their markets, their competitors and their own business savvy better.  That's where CI enters the mix and helps to set the course.  CI is a strategic endeavour in understanding the market condition, the forces of pressure and their impact while also being tactical in informing RFP responses, filling the pipeline and providing colour in addition to background information.  CI, when done well can be the centre point for collaboration and competitive advantage within in a firm. 
There is no denying that the legal industry is changing. The speed of the change depends on where you sit, what you see, and where you want to go, but no one can deny that as the legal industry ship is steering in a different direction, and firms are realizing the power of CI as the compass to help navigate the waters. 

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