Strategic Legal Technology

I hope the cryptic title piques your curiosity. It’s inspired by Group Mentality: Lawyers Are Moving to New Firms En Masse on law.com and Rick Klau’s KM blog post The Long Tail and KM. They raise questions about institutional and personal motivation to do KM. 

In Group Mentality, The National Law Journal (2/23/05) reports the growing number of groups of lawyers moving firms. “Since the beginning of 2005, several firms have bulked up with groups of attorneys who have decided to find a new home… attorneys’ loyalty to their firms is diminishing… they also start to scrutinize their own firm’s future in the changing market.” Acquiring firms face challenges integrating new groups, from inaction leading to discontent, to motivating native partners to cooperate with laterals.

In the Long Tail, Rick explains that Amazon recognizes significant revenues from books not stocked by stores and asks what if “more than half of the institution’s knowledge wasn’t even captured, let alone leveraged?” The idea is that knowledge, like hard-to-find books, may not be used that often but is nonetheless valuable and should therefore be stored for re-use.

Groups of lawyers moving raise institutional KM questions: how important is KM to a cohesive group of lawyers and how important is it when that group needs to integrate in a new firm. Arguably, a relatively small group can probably do KM by talking to each other, so has little motivation to formalize efforts. But if the group moves, a formal effort can make the group’s expertise known to new colleagues. If, however, groups are increasingly portable, some lawyers may fear sharing too much, especially contacts, since the sharing could dilute the value in the event of another move. I would be curious to hear from readers if they have evidence of which way the sword cuts - does the move of a practice group cut for or against doing formal KM? (My Law Firm Mergers and KM post, which links to a good article by Shaw Pittman director Cindy Thurston, also addresses this issue.)

Rick’s post implicates the individual cost of doing KM. Unlike Rick, I see little incentive for individual workers to take extra steps to memorialize their knowledge on the off chance that someone else may find it useful some day. As I read his argument, making it very easy to memorialize know-how means workers will more likely do so. I suspect that unless a workers think they will personally need the info again or there is institutional incentive to capture it, they will think “why bother?” no matter how easy. Especially with desktop search options exploding, there’s a good chance a search of the hard drive will turn up a relevant e-mail or document. And personally, as someone who has had a lot of experience with search and retrieval, I worry that the more I save, the harder it will be to find what I really want!

Both items are good reminders that the key issues in KM are culture, process, and incentives.

A prior post reported on EDDix’s finding that the e-discovery vendor market would consolidate. Yesterday another acquisition occurred. 

FTI Consulting has acquired Ringtail, according to an FTI press release.

In my view, law firms need not yet worry about the reduction in number of vendors. FTI already worked with Ringtail, so this acquisition does not seem to change any market fundamentals. In any event, there are still numerous vendors from which to choose.

Though online legal services may have plateaued (see here), a Wall Street Journal article yesterday reports that online compliance training is booming. 

In Training Firms Find Niche in Compliance Needs (subscribers to online WSJ, click here), the Journal reports on systems to educate workers and protect against legal liability. A “growing number of small businesses… deliver ‘learning-management’ systems – software and content to train and certify employees on everything from how to write legally sound e-mails to keeping up with the mandates of the Patriot Act.” A major reason for the growth “is a renewed zeal among companies to show they’ve made a good-faith effort to promote an ethically sound culture.”

The article provides useful insight but, in my opinion, does not make sufficiently clear the distinction between a technology platform and content. It opens with a discussion about Pathlore, which is a learning management system. From the Pathlore web site, it appears to focus on a system to manage and deliver content and track learning, though the company has several content partners. The article also discusses LRN, which is familiar to many in the legal market. LRN, from what I understand, focuses on creating and delivering content and compliance, not on selling a platform per se.

I leave it to others to determine if Pathlore and LRN compete head-on (as the article seems to suggest). But lawyers and executives who seek compliance and ethics online training systems need to distinguish between platforms and content.

Judging by the entries on my list of firms with online services, a few firms have already taken advantage of this market opportunity. There is probably room to do more.

At Legal Tech a few weeks ago, I moderated a session on clients paying for KM (and posted about it here). Now, with the permission of panelists Christian Liipfert and Jeff Rovner, I am posting pre- and post- panel materials. 

Christian Liipfert of BP America and Jeff Rovner of Clifford Chance are speaking in their individual capacities and not for the institutions for which they work. Furthermore, both offer these as ideas for discussion only and do not intend to be bound by them.

Christian wrote an article for the panel that was available on the conference CD; because it has wider interest, I wanted to make it available here: Christian Liipfert’s KM Article (PDF will open in new window).

In advance of the panel, Jeff prepared a list of 20 KM activities. The idea here - and a good one indeed - is that in talking about “clients paying for KM,” it’s useful to examine specific KM activities. Below is a table with Jeff’s list of KM activities on the left and Christian’s response as to whether he’d pay for it on the right. (Don’t stop with the table; there’s more below it.)

KM Activities and One View as to Whether a Client Might Pay

Jeff Rovner KM Activity		Christian Liipfert Response
Classifying a matter by its legal topics and industries		No real value for me
Adding metadata to a document to describe any important knowledge included in it		I might pay for something here, but am not sure without more information
Classifying a document by its legal topics		Maybe 25%, maybe 50%; show me an example
Adding a document from a client’s matter to an area of the firm intranet devoted to that client’s preferences and forms		This looks like 30 seconds. Am I missing something?
Providing news about the client		To me?
Providing updates on important legal developments		May be worth something; the more general, the less value. If specific to my industry, possible value. People pay firms for tracking specific issues. Baker Botts’ Texas Industry Project is one example. And look what you can do through a Trade Association.
Repurposing client work product as a form for use with all clients		No
Repurposing client work product as a form specifically for use with that client		Yes
Repurposing client work product as a document assembly tool for use with all clients.		No; and let’s talk about works made for hire and the obligation not to disclose or use my confidences
Repurposing client work product as a document assembly tool specifically for use with that client		Yes
Producing a physical or CD bound volume at the conclusion of a deal/case		For me, yes; I prefer electronic; I don’t have the storage space for the books
Producing an online bound volume at the conclusion of a deal/case		See item above
At the conclusion of a deal, producing a summary document that explains how to administer the deal documents		May have large value for me; let’s discuss first
Memorializing the business and legal lessons learned from the deal		Maybe; more likely if we do it together; not sure you have the skills to do it. You may. I fear a major elephant wash, and I want focus.
Conducting a post-mortem review with the client to learn whether the client was satisfied by the firm’s work on the matter		No
Creating a checklist or other analytical tool to improve the firm’s work on a particular type of matter		No
Distilling the firm’s legal knowledge in a given area for use by clients		Maybe, depending on how focused; subscription basis; see the LRN model
Distilling the firm’s business knowledge in a given area for use by clients		Less likely, but maybe

---

In follow-up to the panel presentation, Christian further refined his thoughts, providing the following lists:

Christian Liipfert Will Pay For

• AAR’s [after action reviews] at the end of appropriate stages
• Doing an outline before doing the memo
• Memos re phone calls (one)
• Memos re meetings (one)
• Lessons learned re the other party, maybe
• Deal book for me (preferably in electronic form)
• Consolidated briefing (1) of entire team on appropriate topics
• Digests of agreements I’ve requested (the digests)
• Working manuals I’ve agreed to have prepared
• Attending the legal training of your associates
• Review of prior lessons learned you have about the judge, the opponent, the opposing lawyer
• Customizing your standard form for me
• The Learning Before that we discuss in advance
• A full blown retrospect if I commission it
• Some instruction by the expert to the non-experts (but only some; and do it efficiently; better yet, let me sit in)
• Things I’ve agreed to in advance (hint: let’s chat before you do it)
• Usage of materials from your form files

Christian Liipfert Finds Questionable

• Multiple memos on the same phone call or meeting
• Briefing new additions to the team who could have been anticipated at the time of the initial briefing
• Access to your form files

Christian Liipfert Will Not Pay For

• CRM entries about me or my client
• Lessons learned re the judge
• Lessons learned re opposing counsel (most of these, anyway)
• Collecting deal books for you
• Turnover of an associate who’s been trained on my clock (whose risk is that?)
• Training associates in basic legal skills for this transaction/matter
• Your DMS (it’s overhead)
• Your computer
• Your library
• Converting what you did for me to a standard form
• Right to use your ‘prior art’
• Overstaffing to collect KM for you
• Fundamental legal research on basic points
• Memos not for me (if I didn’t ask for it and I don’t get as copy, why should I pay for it?)
• Conflicts checks
• Papering the file?

Large law firms CIOs and IT managers frequently benchmark their operations against the competition for their own purposes or in response to firm management. The International Legal Technology Association (formerly LawNet) has recently released an excellent IT staffing survey to help in this regard. And it has some provocative findings. 

ILTA’s IT Staffing Survey (January 2005) offers one of the best legal IT staffing surveys that I have seen. As both a “consumer” of and “responder” to such surveys, I have frequently been troubled by questions or analysis that do not allow “apples to apples” comparisons. The authors of this survey have taken significant strides toward providing more uniform data. As well, they have provided interesting analysis. (One of the three authors is fellow blogger Tom Baldwin.)

For anyone interested in the details of law firm IT operations, the survey is a must read. One key finding is that large law firms have a higher ratio of IT staff to lawyers than do smaller firms. The ILTA study analyzes staffing ratios by firms in 9 size categories. I re-worked the numbers to three categories:

Ratio of Users to IT Staff by IT Category

USERS	Network	Help Desk	Training	App Dev	Tele/AV	Lit Supp	IT Mgmt	Total IT
<100	75	100	419	300	763		208	40
101-500	145	99	397	318	627	388	248	35
>501	137	77	368	244	468	390	198	30

The key finding: larger firms have fewer users per IT staff person than do smaller firms. That is, relatively speaking, large firms have more IT support per user than do smaller firms. So, for example, the largest firms have 30 users per IT person whereas the smallest firms have 40. The differences are especially noticeable for help desk and training.

The study authors report that factors they had considered - geographic spread, practice scope, or specialization - do not explain the difference in staffing. My hypothesis is that the relatively rich staffing of the largest firms stems from the size and complexity of matters on which they work. My guess is that the larger law firms have higher leverage (more associates and staff per partner) than do the smaller firms. This higher leverage allows the large firms to work on complex, fast-moving matters. Just as these firms typically have higher associate to partner leverage, so to they have higher leverage of IT staff. The richer staffing ratios help large law firms keep highly profitable large deals and litigation, which genuinely do require armies of smart and dedicated people.

Lawyers use evidence to prove a case. Why not apply that same discipline to law practice itself? Medicine is adopting an evidence-based approach, relying on well-controlled studies to determine which diagnostic tools and treatments work best. An article about contract attorneys makes me think the same approach is necessary in the legal market. 

Calling Up Reinforcements in The Legal Intelligencer describes the extensive use of contract attorneys to review documents in litigation. It reports that at least in some instances, clients ask law firms to use contract lawyers to lower costs.

Determining the most cost-effective way to review documents is an empirical question. I have previously suggested that offshore lawyers might be able to review documents. Another option would be to rely on advanced full-text engines to perform a first-pass cut, reducing the quantity of documents humans must review. (For more on full-text, see here and here.)

To be sure, the offshore and technology options raise issues. In addressing these issues, lawyers too often rely on uninformed reactions - “we have not done that before” or “there may be ethical issues” - rather than on solid, empirical data. Perhaps a consortium of clients (as suggested recently by Cisco) could muster the resources to collect and analyze data. It would not be that hard. One would need a set of documents reviewed by the “gold standard” of associates. Then take that set and run it through contract attorneys, offshore attorneys, and various full-text engines. Have a statistician determine the comparison criteria prospectively and then compare outcomes. Be prepared to run the test more than once. Use the outcome to establish a best practice and periodically re-validate that process.

Lawyers may never conduct such tests but if e-discovery costs keep rising, a time may come when corporate CFOs step in, commissioning an empirical study and and imposing the findings on their law departments. And if the CFOs are in charge, lawyers may have less influence in how various concerns are weighed in reaching a business decision concerning the best way to review documents.

Has the time come to create a Zagat-type service to rate AmLaw 200 firms and their lawyers? 

Do clients sometimes feel that, in spite of overall good results, large law firm service is just not what it should be? I started thinking about this question after multiple service incidents in expensive hotels led me ultimately to give up on complaining. It’s not that my stays were terrible; it’s just that for the price, there were too many problems (e.g., not receiving a replacement light bulb after 4 requests). So are clients the same? Do they even bother complaining and at what point do they give up and switch firms?

I don’t have answers, but with web technology, one could create a service that let clients rate firms and lawyers. To be sure, many issues would need to be resolved: authentication, confidentiality, and accuracy among others. But just as many consumers rely on Zagat guides, “the clients’ guide to the AmLaw 200″ could be invaluable. Clients could rate outcomes (normalized for difficulty), costs, communication, budgeting, speed of responding to e-mails or calls, and other elements of services.

Systematic ratings of law firms and lawyers would likely lead to better utilization of technology. Why? Client efforts to control outside counsel costs notwithstanding, it seems to me that the market is inefficient and operates on scant information. Arming GCs with outside counsel ratings would bring discipline to the market. Discipline would likely, over time, cause firms and lawyers to adopt more efficient ways of working. And that would lead to viewing technology in a different light, shifting it from mere tool to competitive necessity and differentiator.

I have previously written about the relative scarcity of large law firms blog. This week, another large law firm has launched a blog. 

The Antitrust Review Blog by Sheppard Mullin covers, as the name suggests, antitrust developments. The blog is attractively designed and the entries appear quite substantive. In addition to topical articles, separate links on the left lead to updates by agency.

As I have indicated previously, blogging by law firms seems a no-brainer to me. Firms already generate content and send it to clients. Blogging that content makes it more accessible and provides a way to monitor hits. Until not that long ago, lawyers scoffed at the idea of a firm brochure. Now, it is commonplace. In my view, the question about blogs and large law firms is not if, but when.

When your only tool is a hammer, everything looks like a nail. Arguably, litigation support has been a one-tool affair to date. What I saw at Legal Tech this past week suggests the possibility - if not necessity - of expanding the toolkit. 

To be sure, litigators have long been able to choose from multiple tools. But the differences among them have not been that great. More importantly, both law firms and litigation support processing vendors typically use a single tool to do their work.

At Legal Tech this past week in NYC, I saw several interesting and potentially very useful new ways of processing or analyzing the now ubiquitous vast volumes of digital data. Various full-text and semantic engines work in different ways and may produce different results. My guess is that there will be a market shake-out, but that several software developers and consultants that offer distinct approaches will prosper.

Consequently, litigation support professionals may need to change their mindset about how they process and analyze documents. The single tool approach may not longer suffice. The nature of a matter, the types of data and documents, and the goals of the analysis may all require a case-by-case determination of which tool is best for the circumstances. The hammer may be supplemented with screw drivers, wrenches, awls, etc.

Of course, firms should not lightly buy (or even rent) one of everything. But the differences in technologies and processes warrant staying aware of the options and preparing for the possibility that a single solution may not suffice in the not-too-distant future.

On Monday I moderated a session on clients paying for KM (see prior post). Turn out was excellent and the discussion lively. 

Jeff Rovner (KM at Clifford Chance) and Christian Liipfert (senior lawyer, BP) were the panelists. We had a standing-room-only crowd with a mix of law firm and law department and lawyer and non-lawyer attendees. We showed NO slides; instead, the three of us, with much input from the audience, covered a range of issues around whether clients should pay for some KM.

One conclusion is that future discussions will need to focus on more specific KM activities. For now, we laid out some of the general issues. Overall, the willingness of clients to pay for KM seems limited. As moderator, it’s a bit hard to take good notes, but some of the highlights for me were:

• Clients really want expertise more than anything else. This means firms need to focus on expertise location. Clients will pay top dollar for real expertise, but are less likely to pay for many KM activities, especially tangible KM artifacts (that is, documents)
• KM is a “way of being” so it’s hard to imagine paying for it. The other side of the coin: even when clients are willing to pay for KM by the hour, it can be hard to motivate lawyers to actually “do KM” (whatever flavor you chose).
• Firms should be willing to invest for KM where they face a lot of competition or offer services on a fixed price basis. That’s ok as far as it goes, but large law firms tend to “move up the value chain,” meaning as practices commoditize, they tend to do less work in that area and move to new, higher value areas. So the impetus for KM is rarely that great.
• Firms should ask clients what they want, not just in the way of KM, but generally. The in-house counsel present reported that their outside counsel rarely ask them what they want. For me, the lesson on this point is that the right KM strategy is unlikely to emerge until law firms fix relationship management more globally.
• The greatest willingness to pay for KM is probably during a matter, to capture intermediate results for re-use during the matter. Perhaps a more accurate way of saying this: sessions to review what worked and what did not and why.
• There is an argument that law firms do not own the work they produce for clients and, unless they distill it (at their expense) to non-client-specific learning, it cannot be re-used without client permission. (The work for hire doctrine.)

If any readers were present and have other or different take-away points, please comment or e-mail me. I hope to post some material from the panelists in the near future.