Strategic Legal Technology

New technologies and processes abound in the legal market: e-discovery, portals, customer relationship management (CRM), knowledge management, practice group profitability analysis, matter-centricity, online training, to name a few. What can we learn from the past, both to predict the future and to guide how we manage the new? 

I wish I could answer this question. For the moment, I have just begun to consider it by looking at other technologies. I have not done any research on how long it took lawyers to adopt online research, but my sense is that it took well over two decades, from about 1975 to about 1995. I think that the adoption of PC-based word processing happened much faster - about one decade. And internet browsing and e-mail seemed to happen faster still, probably about 5 years. One could of course quibble with the data (after all, I don’t have any solid numbers), but I suspect most would agree that adoption rates accelerated, at least with respect to these technologies.

We cannot, however, conclude that adoption rates are increasing for all new technology. My “counter example” is litigation support. I believe that many litigators - including those at some of the largest firms - have still not adopted clearly superior document management practices that were identified as early as the late 1980s. It seems obvious to me that in most large matters, lawyers should cause a document database to be built early on to manage and analyze documents yet this is still a struggle in many matters. The explosion of e-discovery and the ramifications of doing it wrong may finally cause lawyers to pay attention in this arena.

How can we explain the history? “Necessity” does not seem to be a factor. There are malpractice considerations, if nothing else, that arguably should have driven adoption of online research and appropriate discovery document management faster and deeper. The only consistent theme I see is the impact of client demand. The fact that clients started using e-mail forced lawyers to do so. The fact that clients adopted Word caused most law firms also to adopt Word over the course of about 5 years (in spite of reasonable arguments that Word Perfect is the better word processor for lawyers). Clients may now be driving the adoption of e-billing, though the outcome there is still uncertain.

For those who strive for change in law firms, it may be that the only “sure thing” is that if you can connect client demand to a proposed change, you will have a better shot at succeeding than if you can’t. I would love to hear from anyone who can take our historical experience and draw different or better lessons.

Large law firms have used document management systems for over a decade. What are the lessons for knowledge management? 

Originally, I and many others thought that DM would solve the work product retrieval problem. That turned out not to be true but we have learned many lessons about knowledge management from DM. Fellow legal technology consultant Dennis Kennedy and I discuss the lessons in a mini-roundtable format.

For our published discussion on this, see Strategies for Successful Knowledge Management in Large Law Firms: Lessons Learned from Experiences with Document Management Systems in Law Practice Today (June 2004), published online by the Law Practice Management Section of the American Bar Association.

Matthew Parson, in connection with Joy London’s Excited Utterances, has conducted a knowledge management survey. Share the knowledge in LegalIT.net reports a summary of the findings.  

“The objective of the research was to investigate current practices, roles, leadership turnover, resources and structures for KM in law firms.” Based on some of the summary findings reported, I suspect that there is a fair bit of sample bias toward large law firms. The findings are nonetheless interesting and worth reading. Key take aways for me:

Only a minority of firms with KM program use outside consultants. [Bad news for me]

I recently wrote about Trends in Online Legal Services. One of my legal market friends offered some interesting comments that help explain why online services have so little traction.  

Here is my friend’s analysis:

“1. Law firms aren’t equipped to provide ongoing content. The internal reward system at most firms doesn’t adequately compensate the expert for his time on such pursuits over the long haul.

2. Law firm turnover is around 20% at most big firms. That means the fellow who spearheaded or maintains the content site isn’t likely to be around for long. In fact, because of point 1 he’s likely to get kicked out.

3. In-house counsel, like everyone else, are used to getting web-based content for free. To get them to pay for it would require substantial marketing outlays, which most firms are unwilling or unable to make.

4. Those firms who have tried to do this right, by hiring dedicated staffs, spinning off side businesses, incenting them to provide great content, creating content that doesn’t require constant maintenance, and marketing the results properly – e.g., Littler Mendelson’s labor training modules – have lost money on the venture, and scared others away.

5. There’s little evidence that a firm’s creation or maintenance of sites of this sort improves the likelihood that it will get premium business from top clients, so it’s not demonstrably worthwhile as a loss leader. Nonetheless, those who have already made the investment to create an online business sometimes keep it in the hope that it will yield indirect benefits.

Assuming I’m right, it’s scarcely surprising that big firms have backed off. Still, I believe there’s an opportunity for small firms, boutiques or entrepeneurs to come at this successfully with an entirely fresh business model – e.g., Greg Siskind’s development of his immigration practice via VisaLaw.com, or Milberg Weiss’s use of its website to attract plaintiffs to its class action cases.”

In Making a Market in Knowledge (The McKinsey Quarterly, 2004 Number 3), author Lowell L. Bryan suggests that for KM to succeed, organizations must create an internal marketplace. The framework proposed is interesting but ultimately, not that useful I think. 

Bryan begins by noting that specialized knowledge can create competitive advantage but that it is very hard to share in large organizations. Companies have tried several KM approaches, none of which have achieved great success. The key problem he notes is that the workers with the most valuable know-how “will be unlikely to exchange their knowledge without a fair return for the time and energy they expend in putting it into a form in which it can be exchanged.” Bryan suggests that companies can create an internal market place that will motivate the knowledge holders to share.

The user (or “buyer") of knowledge will only use the know-how if it is easy to use and understandable. So suppliers (meaning experts or authors) must be motivated to produce useful documents with sufficient contextual information. The motivation is to increase reputation and visibility. To ensure this requires adequate recognition, pay, or promotion as well as ensuring that credit is not stolen. Bryan argues that with the right structures in place, “competition among authors for recognition” will keep the knowledge banks supplied.

The right structure is not trivial to create. It includes standard formats for knowledge objects, a taxonomy, adding contextual information, and a knowledge review process. This is in turn requires “facilitators.” Bryan suggests that a large investment bank would need about two dozen (I wish he had expressed this as a ratio). “The alternative—relying upon authors and knowledge seekers to follow protocols and standards and to regulate themselves—simply does not work: they lack the familiarity, the interest, or the time.” Also necessary are “knowledge domain owners,” who are senior executives for particular business units.

I have to say I find the article interesting but disappointing. To me, it seems to take some of the issues with which KM professionals have long struggled and with the voodoo of marketplaces, make it all seem simple. Don’t get me wrong, I am a big believer in markets (for example, two of my articles A Marketplace Trial and Federalism & Foundations, rely on market-based arguments).

The problem is that Bryan does not really explain how the market would work in sufficient detail. Assuring adequate recognition, pay, and promotion for knowledge contribution is difficult to implement and, in a real market, why not use real currency? (Some organizations have indeed experimented with micro-payment systems for internal knowledge sharing.) Moreover, deploying facilitators (which, in law firms, would be practice support lawyers) is expensive and the return on that investment is hard to quantify. Bryan likens facilitators to brokers in other markets; but brokers in other markets are revenue and profit centers while here they are cost centers.

On balance, unless I’m missing something, it seems to dress old problems in new clothes without really providing new solutions. Moreover, many law firms have tried going down the path suggested and encountered numerous obstacles (e.g., changing compensation systems). But I applaud Bryan for the effort to frame KM as an economic and market issue.

In Law Firms Offered Outsourced Support Staffs the New York Law Journal reports (6/7/04) that consulting firm Hildebrandt has inked a joint venture with the outsourcing group OfficeTiger. 

I could not find a reference to this joint venture on either the Hildebrandt or OfficeTiger web sites, though Hildebrandt has previously indicated its intent to enter the business (see my Hildebrandt Report on Outsourcing posting). According to the NYLJ article, the joint venture will focus on administrative functions but “also will be able to provide staff for legal and non-legal research functions.” It will not offer outsourced lawyers, though holds open that possibility in the future. A Hildebrandt director who will manage the JV estimates that “30 percent to 60 percent cost savings in support tasks” is possible.

Hildebrandt is widely known and trusted among many large law firms, so in my view, its backing of outsourcing could significantly affect the decision in at least some firms. One question is what role Hildebrandt will play in the operation. My sense is that outsourcing works best in connection with re-engineering how work is performed; perhaps Hildebrandt will help with the process and cultural changes that may be required to support outsourcing (for more on the process issues, see my Article Offers Practical Tips on Offshoring posting).

I am eager to see the impact of and on technology of outsourcing. Technology is a critical enabler of outsourcing and I expect it will play an important role in moving and managing work. Outsourcing can also directly affect technology operations, for example, by outsourcing network operations or help desk functions. The entry of Hildebrandt in this space bears watching.

In my prior post, Online Legal Services List Updated, I reported that in the last 18 months, there has been little apparent overall activity in online legal services. Updating the list of online legal services, however, did reveal some trends and tidbits.  

A Caveat. Please note that I base all information here on past and recent Web sites visits. Given the possibility that I missed pages, my comments my not be entirely accurate. Please let me know if you spot errors.

Online Compliance Training. Online compliance training seems to be an active area. Four firms – Blake Dawson (Australia), Clifford Chance (UK), Eversheds (UK), and Mallesons (Australia) – have added online compliance training in the last 18 months. This is in addition to several other firms and private companies already listed as offering compliance training. (Note that I “de-listed” Proskauer and Orrick Herrington; I had included them based on WeComply press releases saying the firms were offering online training but now find no current references on the two firms’ websites.)

Trademark Monitoring. Another area seems to be trademark and domain name monitoring. Some firms had already offered it and a couple of more have added these services in the last 18 months.

Document Assembly. I “de-listed” three firms - Ballard Spahr, Dykema Gossett, and Strook – that, according to e-Cogniata press releases, had purchased “e-Cognita’s Streamloaner™ Closing Management software” to automate commercial real estate finance practice.” These firms do not reference this product on their web sites and the e-Cognita web site is no longer active. On the related, more general topic of document assembly, I have read articles and heard stories suggesting an increase in the uptake of document assembly software among large law firms. If that is true, it seems the firms are using the software internally rather than exposing document creation services to clients. Please let me know if you know of client-facing document assembly services.

Contract Management. I have also “de-listed” companies that offer contract management software (hosted or packaged). I decided these are not really online legal services. I do, however, list contract management as a category on the list of useful software I maintain, which is distinct from online legal services.

I have updated the list of online legal services that I maintain. (I have also cleaned up the format a bit as well). The last full update was about 18 months ago. It’s fair to say the space is fairly quiet. 

I and many others have long thought that law firms and private companies would offer legal advice and guidance over the web. A combination of technologies allows creating systems that can advise, create documents, take users through intelligent checklists, route information via workflows, and present in-depth and well-organized content. (For purposes of this discussion, I do not include extranets, deal rooms, or matter management systems as online legal services.)

From about 1998-99 to around 2002, there was indeed a flurry of activity as many firms and companies developed online services. Since then, my impression, based on maintaining this list, is that there has been much less activity. For the most part, it seems that firms that created systems maintain them, but both “line extensions” and new entrants seem relatively rare. My impression is confirmed by casual conversations with some of those involved in creating or maintaining these services,

I find this a surprising result. Given the tremendous cost pressure inhouse counsel face, I thought that online services would be a growth market because it is a fairly sure way to reduce cost. Moreover, the “latent legal market,” identified by Richard Susskind, of corporate employees who need legal guidance but do not always receive it, is still present and presumably large. I have previously speculated on the Paucity of Online Legal Services and cannot add more now.

In my next posting, I will report on some of the trends and specific changes I noticed in updating the list.