Strategic Legal Technology

“Growth – real growth – depends on innovation. Oh sure, a big acquisition can inflate a company’s top line, but it’s hardly fair to call this growth; agglomeration would be a better word.” So writes Gary Hamel and Gary Gets in the current issue (July-August 2004) of the Harvard Business Review to open their article, “Funding Growth in an Age of Austerity.” What does this say about large law firm consolidation and future growth prospects?  

This article and much of the issue argue that real growth comes from innovation. Even if a law firm merger works – and it’s unclear how many really do – and revenues grow faster than they otherwise would, that growth presumably comes from a better ability to cross-sell. Such growth probably reflects another firm’s market share loss rather than an increase in market size.

I suspect that recent large law firm growth stems from three factors: (1) increased demand for legal services, for example, new transactions, corporate investigations, or new regulatory requirements; (2) price increases; and (3) a gain in share relative to smaller firms. Lawyers may get lucky and experience continued demand growth stemming from business and legal developments. But growth by acquisition, pricing, and share gains may not continue unabated.

As the HBR points out, real growth ultimately stems from new demand (e.g., low cost flights, MP3 players, Starbucks, or online stock trading), which means innovating and building new businesses, tasks that are very difficult. Innovating in the legal market seems even harder than in other markets, which is why I suspect firms typically focus on combining or adding new practice areas.

Adventurous firms could try starting new businesses. Reasonable targets might be preventive law audits or fixed-price counseling services. I think the goal has to be to tap what Richard Susskind identified as the latent market for legal services, that is, the managers at companies large and small who need legal help but don’t get it. Exploring these opportunities may mean special dispensations, particularly, waiving billable hour targets for a few lawyers.

I am biased of course, but it seems likely to me that any new business opportunity for a law firm will have a big technology component. Whether it’s an Extranet, Web Service, or expert system, I can’t say. But given that law is so information-intensive, it seems likely that technology would be required to support any truly new business.

The challenge here is significant and discussed succinctly in a companion article, What Every CEO Should Know About Creating New Businesses. It’s a “top ten” list of the challenges in innovating. My favorite is “Starting a new business is essentially an experiment.” The author points out that “perfectionist cultures…are in for a rude awakening, since it’s seldom possible to figure product designs or business models fully in advance.” The drive for perfection and fear of failure runs deep in large law firms. Future growth may require confronting and overcoming these.

Regular readers of my blog know that I have a long-standing interest in the potential of full-text search technology for both litigation support and knowledge management applications in large law firms. With the seeming explosion of new companies offering advanced full-text approaches, I have been trying to sort out what is really new and what really works, so I have asked an expert. 

A couple of years ago I met Sharon Flank of DataStrategy Consulting. Sharon has a PhD from Harvard in computational linguistics, meaning she is an expert on full-text search technology (her bio is at the web site). The company offers technology due diligence and product strategy and technology planning consulting, especially in information retrieval, natural language processing (NLP), and visualization.

It occurred to me that she was the perfect person to ask about the underlying developments. Last week, I sent her an e-mail message asking the following:

“Has there been any conceptual break-through - at an algorithm level - in full-text and semantic analysis in the last 10 years? From 1990 to 1995 I looked at many products: PLS, Verity, Excalibur, Conquest, Fulcrum, and others I can’t now remember. It seems to me that those products did much of what current products currently do, except perhaps the extensive auto-classification (though that was less of a requirement back then). Clearly, the ability to process large volumes has gone up and user interfaces have improved. I’m not close to the computer science but am curious if the underlying advances have been significant, perhaps even quantum, or merely incremental. Thanks in advance for any thoughts.”

Sharon was kind enough to send back the following reply about the current state of natural language processing and full-text search:

“There are several underlying important developments over the last decade or so:

Incorporating user feedback to refine search results, usually indirectly rather than explicitly, making results better through machine learning. [Amazon.com is the most-often cited example of this with it’s “if you like A, you’ll also like B.”]

Assessments based on usage or referral. This is what makes Google so useful and popular. This approach gives higher rankings if other web sites point to a target or if that target gets a lot of hits.

Various approaches to using taxonomies. The better applications use taxonomies as a navigation guide but don’t force it or require administrators to implement it. Vivisimo.com is an example of interesting, automated clustering approach.

Better handling of phrases. Google automatically parses phrases and deals with search terms as phrases. This now seems natural but in the AltaVista days, you couldn’t tell a Venetian blind from a blind Venetian [example courtesy of Prof. George Miller, Princeton Univ. - too good not to cite].

Context-sensitive search is now an emerging trend. Systems track what users have previously searched for and infer interest in the same domain to refine search result. So if you look for “line” and a system knows you’ve just looked for “tacklebox,” then it infers you mean “fishing line.” Or if you search for bagels and the system knows you are in 20009, it tells you that you can buy them at Comet Liquors (which happens to sell bagels).

“More generally in natural language processing, the statistical and linguistic approaches are converging in a new way: use massive amounts of data (i.e. the Web) to get statistical answers to deep linguistic questions, like “How do we figure out what the most likely referent is for the pronoun ‘they’?” Or “How do we determine the correct sense for ambiguous words?” These things aren’t in search engines yet, but you can expect to see more “intelligent” features coming out of this approach.

“Looking at this list, you can see that the conceptual changes (breakthroughs?), with the exception of better phrase handling, are primarily focused around Web searches. When dealing with one-of-a-kind document collections behind the corporate firewall, many of these developments turn out not to add much to older approaches. So, at least for enterprise search, I too remain partial to some of the older products you mention, though I am disappointed that most of the old-time vendors have not updated their approaches beyond adding taxonomy support.”

I appreciate Sharon taking the time to provide this insight. The bottom line for litigators and litigation support professionals: you need to keep your eye on emerging technologies and not necessarily take a “one-size-fits-all” approach to managing large volumes of documents.

Remember all the talk about “disintermediation” during the dot-com boom? It means that the Web allows producers to connect directly with consumers and eliminate intermediaries. It may be back as potential threat to legal publishers. 

In Law Professor’s Web Log is Jurists’ Must-Read, the Wall Street Journal reports today (7/19/04, p. B1) that law professor Douglas Berman’s web log (blog) on the Blakely decision concerning sentencing guidelines has become the “go-to” source for up-to-date information on that decision and its ramifications. Though blogs are “small fry” compared to commercial sites, the article points out that for niche interests like Blakely, blogs can be a “must-read for the particular community interested in every bit and piece related to the subject at hand.”

What if many lawyers - whether professors or partners at large firms - started blogs on their own niche specialties? The bloggers could use both the Web and commercial services to find the most current decisions (or legislative action or other legally significant action) and post both “raw material” and their learned interpretation and comments. Since most of the raw material of law is government created, copyright would not seem to be an issue. So bloggers can (and Prof. Berman does) post cases and other materials of interest. A well-maintained blog can become both a running commentary on the latest developments and a searchable repository of source materials.

For lawyers doing research, turning to certain blogs would be like turning to treatises or monographs - authoritative and comprehensive treatments of niche areas, only constantly updated. Of course, there is always the issue of validation of the material, but in many instances, the reputation of the blogger would probably suffice.

With enough high quality, niche legal blogs, legal publishers could, at least on the margin, lose some usage. But there are potential business opportunities as well. Having a reliable, central directory of all the niche blogs would be valuable to legal researchers. Fees and/or advertising might sustain such a service. It would probably also make sense for that central service to provide services to the bloggers as well. One example would be the sale of advertising. It strikes me that advertisers would be more willing to pay for placement across multiple blogs than paying for one at a time.

As a dot-com casualty myself, I recognize that it’s one thing to outline this vision, another to make it happen profitably. But it seems to me that focused legal blogs have the same potential to shake-up today’s legal research as computer-aided legal research eventually had on traditional print research.

Most of us working on knowledge management say that KM is 80% culture and process and only 20% technology. That is true, but sometimes the technology can be a challenge. 

I was looking through some of my files and came across a grid I developed a while back. Click here for grid. It illustrates, for common types of explicit (written) and tacit (unwritten) knowledge, the possible computer file formats and computer storage locations. I have indicated primary and secondary file types and locations using a solid and empty block. The many file types and locations illustrate the potential challenges of gathering knowledge artifacts into a single system. Perhaps the complexity of this grid explains what appears to be a growing interest in “federated search,” that is, the ability to search multiple repositories of information simultaneously.

Viewing the grid also helps explain the challenges of dealing with tacit know-how. The relative sparseness of the lower half of the grid illustrates that tacit data, unlike the explicit, cannot merely be copied or searched. It often has to be created from scratch.

Apologies for not including the grid in the post itself. I created it as a Word table and my blog software seems not to like the HTML code Word saves. For the same reason, the formatting is not perfect, but I think the point is nonetheless clear. RF

Jeff Beard, aka LawTech Guru, has an interesting post today about KM. In KM Thought of the Day he argues that KM should shift its focus to individual effort in place of institutional effort. I disagree. 

I agree with Jeff that doing institutional KM is hard. I also agree that there is much value in personal KM and personal productivity (along these lines, I recently started a new blog category, Personal Productivity). If we concede Jeff’s point, however, I fear that we will confirm that large law firms are nothing but a collection of solo practitioners sharing some overhead.

In my view, a large firm should offer several benefits to its client, including a broad range of service, deep expertise, and an ability to deploy to large numbers of lawyers on deals or litigation. KM supports offering the range of services and deep expertise. If I were a client, I would not be happy retaining a large law firm if I could not benefit, at least indirectly, from the know-how of the partners and associates of those lawyers with whom I happened to be working directly. Furthermore, if I were a lawyer at a large law firm, I would not be happy if I could not tap into the expertise of my colleagues.

That said, I recognize that institutional KM is a struggle. UK and Australian firms have been doing it with pretty good success for quite some time but not US firms. It seems to me that US firms recognize that they should be doing KM, hence the interest in automated solutions (e.g., Westkm, Recommind, or LexisNexis TotalSearch) if not in more staff-intensive approaches. Also, in my anecdotal observations, which span quite a few large law firms, I see many signs that even firms that say they are not doing KM and are not interested in it and actually have pockets of KM activity operating under other names (or no name).

I agree the challenges are many. But I think the answer is to continue to work at institutional solutions. This does not, of course, preclude supporting individual lawyers’ KM efforts or ways to aggregate those efforts.

Blogs Help You Cope With Data Overload – If You Manage Them in the Wall Street Journal (7/8/04, p. B1) Personal Technology column focuses on using a newsreader to aggregate content from multiple blogs. 

The columnist explains that to “juggle all those blogs” one should use a newsreader to “bring together the latest postings from your favorite blogs in a single place.” In my prior post, Reading Multiple Blogs with a News Aggregator, I explained why I use Bloglines. The columnist reports that he tested several aggregators but had “the best experience with a service called Bloglines.” I was happy to see my choice seconded. The column also addresses a concern I’ve had, which is how Bloglines will make money. It reports the service will “use unobtrusive Google-style ads to bring in revenue.”

Now, here’s a question: how often does a new technology have to be reported in the general or business press before it is safe to assume that the typical partner has heard of it? The answer matters for those who manage law firm technology. In my experience, many partners do not internalize that a new technology exists until it is virtually ubiquitous. That means technology managers or advocates in law firms should not presume the typical partner is aware of much new technology (numerous news reports notwithstanding) and therefore should be prepared to explain it in simple terms, focusing on the benefits and utility.

Online Auctioneers Struggle to Attract In-House Counsel in the July 2004 issue of Corporate Legal Times suggests that online auctions and match-making services such as Procuri and eLawForum for legal services have not gained much traction. 

“Beyond a handful of early adopters who have dabbled with online bidding for legal services, the process hasn’t yet become standard operating procedure in the legal world - and may never find widespread acceptance.” So concludes the article. This conclusion is consistent with a recent American Lawyer article about “Five Big Ideas,” discussed in a prior posting.

I still hold out hope for the ultimate success of this approach (if not these specific players). It seems to me that if general counsel adopt e-billing more widely and, more importantly, analyze the data generated, they will begin to get a handle on how much cases should cost. Even for unique matters, it should be possible to assign a subjective weight to the matter importance and use this to “normalize” across matters so that they are comparable. A more data-driven approach to analyzing past matters might allow a broader range to go to auction.

I realize that auctions are not a panacea. Interestingly, the same issue of the magazine reports on Annual Survey of General Counsel (pdf format) and a key finding that GCs biggest concern regarding outside concern is reducing cost. In my view, GCs have to take a more active approach to controlling costs. It’s not obvious to me that enough have tried the auction route to conclude that it does not work.

A key element of personal productivity is tracking one’s tasks. I use Microsoft Outlook and it strikes me that doing so is harder than it should be. And from dealing with this apparent limitation, we may be able to draw a lesson about personal productivity more generally. 

Lawyers are busy and typically need to keep track of a myriad of tasks. For those who are organized, it can be handy to track task by a priority, client, date, degree of completion, who requested it, and so forth. Some tasks may be linked to one another or sub-tasks of others. In techie terms, this means one can view tasks as either a database or a hierarchically nested outline.

A product - now defunct - called Ecco Pro allowed organizing tasks both as a database and as an outline. That was in 1994! Today, Outlook provides what are, in my opinion, primitive features for managing long task lists. Last year I spend a fair bit of time pushing Outlook features. The best I could come up with was to re-name some native fields for projects (matters), importance, and comments. Then, using the “Group by Box” feature and different views, I can see tasks arranged by my fields. Confusing? Of course it is. It took me a while to figure out these features.

I found investing the time to do so had paid off, but this raises questions. First, have I missed something basic about using Outlook? Second, am I crazy to want to organize my tasks along these multiple dimensions? Third, should I have looked for a different software package? And fourth and most importantly, what does this say about personal productivity?

That last question really subsumes the first three, so let me take a crack at answering it. Sometimes improving personal productivity means making a reasonable investment of time. But sometimes the better approach is to accept inefficient ways because the software is too hard to learn. The key is to know when the problem is the software and when the problem is user inertia. Unfortunately, it is not always so easy to know which is which. I have argued previously and still believe that users need to do more to improve their own know-how. But there are clearly areas where software developers can do better.

By the way, I welcome any feedback on the question of how to manage tasks better.