Tropes around tech utopianism are attractive fictions that promise quick wins and deliver long-term pain, ultimately undermining our efforts at effective value storytelling (series recap, plus prior screeds against tech-fixated magical thinking here, here, and here)

A new bombshell lawsuit against a contract lifecycle management provider offers a stark reminder of the promise and peril of CLM—and therefore an unfortunate but instructive example of how tech-first solutioning can go terribly wrong.

Bad contracting processes have consequences. At the center of the complaint is a ~$5m contract for CLM services and tech. The plaintiff claim they terminated the contract early for alleged uncured breaches thereof and then mistakenly continued to make ~$1.7m in payments to defendant.

Isn’t it ironic (in the Alanis Morrissette sense of the word) that in a lawsuit centered around a disastrous effort to improve contract management a substantial percentage of the alleged damages are due to alleged failures in contract management.

The business value of better contracting is not in question. As discussed previously, a 20% improvement in contracting efficacy has, on average, 32x the business impact of cutting outside counsel spend by 20%. Tech has an important role to play. But tech should not be the star of the show, especially in the beginning.

When tech is not the primary problem (or the primary solution). The complaint begins its retelling in October 2019 when the defendant gave an in-person platform demonstration. In June 2020—seven months later “following a rigorous selection process”—the parties entered into the $5m contract only to terminate it in April 2021, ten months post execution. Suit was filed in November—more than two years after the demo (which is unlikely to have even been the beginning of this ill-fated journey).

Important for our purposes, the plaintiff specifically alleges only one tech-related misrepresentation giving rise to their claims (the ability to “apply a single contract amendment to multiple agreements simultaneously”). Beyond that, every issue raised in the complaint relates to the enormous amount of work required to properly implement CLM.

Characterized as inadequate in the complaint:

  • Staffing
  • Availability of key resources
  • Status tracking
  • Training
  • Documentation
  • Discovery
  • Design
  • Feedback
  • Data mapping
  • Data conversion
  • Data migration
  • Data validation
  • Template harmonization
  • Contract sorting
  • Clause matching
  • Implementation
  • Integration

The tech is not the central grievance. The gravamen of the complaint is the absence of expertise:

Many of these issues could have been resolved had [Defendant] provided a subject matter expert to lead discovery sessions with [Plaintiff] stakeholders.

Unfortunately, [Defendant] never provided a subject matter expert to lead a discovery session, and most sessions (led by [Plaintiff]) involved multiple [Defendant] resources repeatedly asking the same questions of [Plaintiff]. In total, [Plaintiff] estimates that at least half of all discovery session time was ultimately worthless, particularly because [Defendant] continually asked for information that [Plaintiff] had already provided or covered topics that had already been discussed.

Properly staffed discovery sessions could have prevented [Defendant]’s catastrophic decision to switch from running template harmonization and business requirements discovery in parallel to placing all emphasis on harmonization before discovery. This decision, agreed to by [Plaintiff] based on [Defendant]’s claimed experience and expertise, delayed the [contract management system] project for months. Only after considerable wasted time and effort did [Defendant] decide that its recommendation was unworkable.

The resulting extraneous effort is extraordinary. For example, the complaint alleges “Approximately 75 percent of [Defendant]’s deliverables needed reworking by [Plaintiff]. [Defendant]’s struggles with harmonization resulted in nearly 1,000 hours of wasted work by [Plaintiff] employees.”

Yet, according to the complaint, the lawsuit is all that remains of this effort: “the [contract management system] that [Plaintiff] and [Defendant] were working to build was designed to function using [Defendant]’s proprietary software and platform; [Plaintiff] is left with nothing tangible to show for months of work.”

There but for the grace of god go us all. I have not named names because the names don’t matter. The trainwreck reflected in the allegations is painfully familiar to anyone who has been in and around major implementation projects—with blame flying liberally in every direction. The complaint is only one side of the story.

One-sided stories can be revealing without being accurate. I do not pretend to know what really happened. But I hear these accounts all the time, all across the spectrum, from both the client and vendor perspective. I’ve lived through a few such kerfuffles myself in prior lives. We all reside in glass houses, and I am not over here throwing stones.

Yet, I could not ignore the complaint. It makes manifest a contention I was struggling to articulate. I’d written most of this already, as the second half of last post. But I split that post in two, both in an act of mercy (the word count was crushing) and because I was failing to make a compelling case for my thesis that we are too quick to to turn to tech—as an avoidance mechanism for addressing process and culture. The complaint brings my thesis into the real world.

This is all too familiar. Again, I know nothing of the actual facts underpinning these allegations. But, unfortunately, I am an aficionado of the genre. The CLM nightmare is an exceedingly common legal-tech-horror plot device where no participant escapes unscathed.

Based on first-hand experience in previous roles, I often plead with potential customers to hold off on looking at CLM. I expressly recommend against starting with CLM despite the fact it is, literally, part of my day job to support a CLM company in going to market (Agiloft, LexFusion, and Factor were finalists for 2021 The American Lawyer collaboration award for a successful CLM implementation paired with managed services). It is incumbent upon me to ensure our customers are on the righteous path—we’re in the trust business. But it is also my obligation to our member companies to set them up for success.

Indeed, I’ve so frequently warned against jumping straight to CLM, and had so many variants of the same dialogue, I decided I should write about it (“oh, I have a post on this” is a great way to shortcut repeat conversations, if you ever wondered where much of my writing originates—and why I consider the complaint above so impactful).

CLM done well is phenomenal. It warms my geeky little heart. But bad CLM is a Lovecraftian hellscape of needless suffering. Some differences are a matter of tech selection (problem/solution fit matters) but the most common demarcation between heaven and hell is whether the enterprise is ready for tech—i.e., whether we have done, and are ready to do, the necessary work on process and culture.

In the last post, I highlighted how our understandable reluctance to be transparent about our technical, process, and cultural debts impedes value storytelling (series recap). Herein, I want to emphasize why much our technical debt is a consequence of poor sequencing. We start with tech instead of process and culture because tech “seems” simpler.

As a continuation of last post where I tackled delays caused by onerous liability language, I again lever off the superb case study from my friend Alex Hamilton’s must-read Sign Here (reprinted with his generous permission).

Dreams are good except when they are nightmares. The second finding in the case study—delay caused by approvals, signatures, etc.—seems like a gift to legal ops nerds and in-house innovator types (you know, my people). For many, the friction of securing approvals and signatures screams out for the new hotness in legal tech: CLM is having a moment with smart money investors for comprehensible reasons. There is considerable opportunity to drive business value by making contracting tech enabled.

But as Lucy Bassli observes in her excellent four-part series on Legal Evolution introducing her own book, CLM Simplified (near the top of my reading queue): “There’s a lot to do before jumping to technology.”

Slow is smooth; smooth is fast. To put it bluntly, most current contract processes are terrible. This is often no one’s fault because it is often no one’s responsibilities. Contract processes frequently grow organically, with everyone doing their best to solve local problems as they arise. Expediency introduces kludges and compromises. Process, cultural, and technical debts accumulate and compound.

We need not blame anyone for the mess to recognize it is in fact a mess. Acknowledging the mess is a key first step. Yet acknowledgment can bring accountability. Naming a problem is an act of ownership.

Gravitating to tech-first solutioning is understandable. Tech is fun. Tech genuinely solves many problems. And centering tech can allow us to reframe our mess as a matter of absence (we need just one more thing) rather than as a morass of clutter and disrepair. And while procuring tech can be painful, procuring tech is often considerably less painful than addressing process and culture debt, especially when process and culture cross departmental lines. Unfortunately, implementation must follow procurement, and that is when our debts become due.

If we try to automate rubbish, we, at best, get automated rubbish (though, more likely, partially automated rubbish, if we produce anything salvageable at all). There are few quick tech fixes. We must pay down the process and cultural debt first and then find tech fit-to-purpose. But the inverse is exceedingly common. We are inclined to start with tech, assuming we will work out our process along the way. This is a terrible plan that tends to end poorly.

Tech magic is an appealing story. But it is appealing because the deus ex machina allows us to skip over the hard parts. That’s fine for fiction. But quality nonfiction makes complicated truths digestible rather than trafficking in palatable lies. Value storytelling is only good if it can persuade people of that which they are not already persuaded and then survive contact with reality.

Tech ≠ Process ≠ Culture. Returning to the case study. If the delay in execution is being caused by a manager studiously ignoring the approval requests in their inbox, it does not matter whether the requests came from a flesh-and-blood member of the in-house legal team or was automagically generated by a new CLM system. The request will be ignored just the same.

The process question is whether this person really needs to sign off. In a narrow sense, the answer is likely yes because that is what the approval matrix says. Digging down another layer, however, it is astounding how often approval matrices prove ill-suited to the present configuration and circumstances of a company, even when well crafted at the time of inception

But changing an approval matrix moves us from the technical to the cultural, where politics can become fraught. Some managers will be delighted by a story in which they have ascended to the point where the threshold for their attention (i.e., sign off) must be correspondingly raised. But others will be triggered by the prospect of surrendering control.

And that is if the approval matrix is the issue. In many scenarios, we genuinely need senior stakeholder sign off, and the senior stakeholder is the bottleneck. The cultural challenge becomes convincing the senior stakeholder(s) to consistently prioritize our ask over many other important items clamoring for their scarce attention. A tall, and sometimes impossible, order.

Resist temptation. So why waste a crisis? Why not use slow cycle times to bolster a request for additional resources (as we did here), especially if we are confident that a CLM project is inevitable and worthwhile? Because we are setting ourselves up for failure that could haunt us for as long as we remain in seat.

Good CLM is incredibly labor, attention, and expertise intensive. It demands considerable cross-functional collaboration. Bad CLM is not just a resource suck. It is also a branding catastrophe. The high business impact and high visibility of contracting means a CLM disaster can do lasting damage to our credibility as competent allies in driving business value.

It’s not just that it’s almost always cheaper to do it right the first time. After CLM-related trauma, the appetite to fix CLM missteps, let alone start over from scratch, is nearly nonexistent. CLM, even bad CLM, tends to be sticky. Poorly designed systems endure, causing us chronic pain. We should not start down the path unless we are prepared to go all the way because, otherwise, we may find ourselves trapped in the in-between—a situation far worse than the one we set out to improve.

Better not to do it than to do it poorly. There is nothing special about legal’s preference to seek refuge in technology in an attempt to avoid addressing entangled process and cultural debts. Legal is not the primary pushers of contract automation. The infatuation with CLM can originate with sales or procurement or anywhere else that might be justifiably frustrated with the contracting status quo.

But legal remains a CLM stakeholder. As stakeholders, our posture should be “yes if” rather than a “yes and.” Yes, we should pursue this if it will be properly resourced, including the cross-functional collaboration required to address process and cultural debt. Much of this work should precede the search for technology because finding fit-to-purpose technology requires properly defining the problems we are working to solve.

The literature on tech-first failures is ample. And the conclusions are always the same. For example, I commend this report by A21 and the accompanying presentation entitled Technology is not the answer: Why “digital” is not the most important aspect of your digital strategy. The summary: “answers as to why digital strategies succeed or fail are complex, but… people, culture, leadership, and organizational alignment are more important for digital transformation than data and technology.” (also see this report from McKinsey citing culture as the most significant barrier to digital transformation)

CLM is extreme, not unique. Bad CLM is extreme with respect to the damage it can inflict on the business and law department brand/resources. But CLM is not unique. Tech-first solutioning and the resulting trip down the innovation rabbit hole are all too common.

Again, tech presents a palatable story. The idea that we can just plug, play, and reap the benefits is another one of those attractive fictions. It enables us to perpetuate the illusion that nothing is wrong with our current state. Rather, we are simply augmenting what we already do well through additive technology that was not previously available. Palatable. Also inaccurate and on a collision course with reality.

Tech remains essential. Tech is not an essential starting point. Indeed, it is often the wrong starting point. Our penchant for technological moonshots is often grounded in a misunderstanding of the outsized impact of reducing low-end friction through low-tech solutions, like taking less onerous starting positions in our contracts or streamlining processes. But, ultimately, tech is a necessity.

The productivity imperative I outline here demands a level of industrialization that incrementalism cannot deliver, as Jason Barnwell explains in his magnificent post on Legal Evolution:

We will need more capacity and new capabilities that mere conservation of resources cannot deliver. Our evolutionary path needs improvements on how we do work today that range from whole-multiples to orders-of-magnitude. This is transformation.

Transformation is system-level change. Transformation can start with point solution investments. These help us explore, validate hypotheses, and create investment cases. But system effectiveness is limited by the least capable component upon which the system depends. If your computer has a very fast processor but inadequate memory and slow networking, the processor cannot contribute at its full capacity. Legal work has a similar challenge. We need many elements to evolve simultaneously to produce coherent complements. We must start walking in the same direction to transform.

….

As shown in Figure 1 below, treating these as compounding curves and projecting them out suggests law departments must manufacture almost 4 times our current leverage within the decade. I believe this understates the necessary leverage…

 ….

Integrating with client decision-making processes and scaling to demand is getting harder as the business substrate converts to digital and the legal substrate remains analog. Modern organizations are increasingly data-driven. This requires influencing business decisions with data and hypotheses that help ask the right questions. These businesses can generate an astounding amount of work volume built upon machine-based leverage as they transform. See Post 210 (open source practices result in 1000x gain in productivity).

Because our clients are pursuing value creation in increasingly complex business spaces accelerated by machines, the net impact on legal includes:

  • Increasing work volume (number of units)
  • Increasing complexity (unit cost)
  • increasing velocity (unit clearing time)

Demand will accelerate because many clients are chasing an exponential growth curve. And I suspect we are underestimating the true cost of demand growth because we are not factoring in increasing complexity and the requirements for rapid clearing times. Increasing complexity typically requires more effort to do the same work because the solutions are harder. And faster unit clearing times typically require more peak capacity to allow parallel effort.

Translated to the physical realm we are trying to operate a modern city with 19th-century transportation infrastructure. This will not work.

I expect 10x leverage scenarios by the middle of the decade driven by demand with increasing complexity and velocity characteristics.

Tech is necessary. Not sufficient. But necessary.

Tech must be part of our story. Yet never the whole story, if we want the story to end well.

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Photo of Casey Flaherty Casey Flaherty

I am the co-founder and chief strategy officer at LexFusion, the go-to-market collective of legal innovation companies (tech and services). I am also the co-founder of Procertas (competency-based tech training). I was a BigLaw litigator and then in-house counsel who went into…

I am the co-founder and chief strategy officer at LexFusion, the go-to-market collective of legal innovation companies (tech and services). I am also the co-founder of Procertas (competency-based tech training). I was a BigLaw litigator and then in-house counsel who went into legal operations consulting before one of my BigLaw consulting clients hired me full-time to help them build the biggest and best legal project management team in world. A Lean Six Sigma black belt, I tend to think in terms of scalable systems that properly leverage people through process and technology. I am deeply experienced in legal operations, legal tech, strategic sourcing, process improvement, systems re-engineering, and value storytelling, in addition to spending over a decade in the legal trenches as a practitioner. I’ve long served  as a mesh point between law departments and law firms to promote structured dialogue that fosters deep supplier relationships (read about that here). I am a regular writer and speaker on practical legal innovation.