Strategic Legal Technology

Legal Tech begins tomorrow and I am in position at the NY Hilton. With the show’s emphasis on e-discovery and enterprise systems, we can easily forget that personal productivity is still an important legal technology goal . So, before the din of reports on enterprise systems from Legal Tech coming this week, I report here on three personal productivity tools I’ve been using since the December holiday season, to excellent benefit. 

Desktop Search with X1. In 2009, I had to uninstall Google Desktop Search because it seemed to crash Outlook. (Well, that’s what my IT advisors told me and after uninstalling, the crashes stopped.) For some time, I lived without desktop search, which was painful. I’ve now been using X1 ® Professional Client Version 6.2.4 for about 5 weeks. I find it very useful and better than Google for the most part. It’s intuitive interface allows _fast_ searching of e-mail or files (a tabbed interface allows selecting other categories such as Inbox or music). Fields allow searching by meta data such as sender, subject, or date for e-mail and document type or path for files. X1 provides a viewer for most file types, though I personally don’t use it that much. Working from the search result list, it’s very easy to open files or the file directory in which the file sits. Personally, I like it better than Google Desktop. The only thing I can think of that it does not do that Google does is index web pages visited. (One tech note for install: I had some clutter in my Outlook profiles, meaning some old ones. X1 found these and wanted to index files that no longer existed. This forced me to clean-up old profiles, which is probably a good idea anyway.)

E-mail Autofiling with Xiant. I have long been impressed by Decisiv by Recommind, a product for automatically filing e-mail. That has not been available to me but late last year I read about Xiant Filer for automatically filing e-mail messages. Xiant is a company started by Microsoft co-founder Paul G. Allen. Xiant integrated easily with Outlook and saves me a lot of time filing messages (individual messages and threads, including replies, which means I now rarely need to file sent messages - a huge savings in time). I know some people think filing is a waste of time, that with products like X1, you can find messages. But I personally still find it useful to be able to scan a folder of related messages so that I can see the history of a project. I’ve used Xiant a few weeks and its recommended folders are typically good picks and seem to improve over time as it “reads” more of my e-mail and “sees” my filing choices. Though not billed as a feature, Xiant has the benefit of allowing me to find where in my extensive list of nested folders a particular folder sits. Can you tell I am splitter and not a lumper? [Tech note: At least for my install, the buttons Xiant adds to each messages for auto-filing do not work; I can only file from my inbox. Also, though I have three views / windows of Outlook open, the Xiant buttons appear only on one of them. I have not sought tech support to resolve these issues.)

Ease Tweeting with HootSuite. HootSuite is a web site that simplifies writing and reading Tweets across multiple Twitter accounts (and other social media though I only use it for Twitter). I like it’s multi-column interface better than the native Twitter interface, though I continue to use the latter in some instances (e.g., searching Twitter).

[As usual, the above are my opinions and I have received no consideration from any of the vendors / products reviewed here.]

The Posse List, an increasingly important resource for e-discovery generally and contract lawyers specifically, is publishing a series of interviews with EDD professionals. My interview appears today, An interview with Ron Friedmann of Integreon; the legal paradigm shift, predictive coding, document categorization, and more . 

In it, I explain my views of why the new normal will require law firms to deliver more value to clients. This will require more technology. In e-discovery, this means substituting technology for humans where possible. That said, my view is that it is “man and machine", not “man versus machine”. I comment on early case assessment (ECA) and predictive coding, suggesting that they are more points on a continuum than different approaches. Both require significant human input and share the goal or automating document review.

Several other interviews appear this week at the Posse List and are worth reading.

Risk analysis with decision trees is a rigorous way to analyze disputes and decide how much to invest in the litigation. An important threshold question is when does it pay to do risk analysis, which is not that easy and can take a fair bit of time. More generally, when does any legal question warrant an investment to answer? And how much work is “good enough"? 

A government lawyer who read my material on risk analysis asked these good questions. It’s the same questions in-house counsel should ask. For both corporations and the government, the surest way to reduce legal cost is to do less legal work. Improving efficiency or reducing rates is beside the point if skipping or reducing the work altogether is an option. And part of reducing work is to accept a “good enough” answer rather than a 100% answer.

So, is there a structured way to decide how much to invest in legal questions? That is, when a legal question arises, how can a lawyer assess its magnitude and rationally decide how much to invest to address it? Some lawyers believe every question merits thorough analysis. From an economic perspective, however, the client should first know the order of magnitude of the problem. Problems come in different sizes - a pebble, rock, boulder, hill, mountain, or asteroid - and the effort should depend on the size?
Because formal risk analysis incurs a cost, one might reasonably apply it only to problems that are say, at least boulder-size.

A reasonable economic / business decision might be to ignore pebbles and rocks. Certainly treating every problem as if it were an asteroid or boulder is uneconomic. I am not aware of any systematic and documented in-take process designed to assess a legal question and how much to invest in it.

Of course this assessment, intake process, or “gate keeping” happens; I just don’t see evidence that it is systematic and documented. No matter how experienced the gate keeper lawyer, questions will arise outside the scope of experience. What then?

If business and government are to reduce legal expense, then we need a systematic gate keeping approach. A knowledge management professional might suggest that every incoming query be captured in a database, along with its disposition. Then, once there is enough data, the gate keeper can search for similar past questions. The problem with this approach is that the range of legal issues is enormous, as is the language describing them. So I’m not convinced this would get us very far (aside from the challenge involved to collect and maintain the database).

Some of my peers likely would suggest a “crowd sourcing” approach. If the gatekeeper cannot answer with confidence, he or she could use a variety of technologies (inside or outside the firewall) to seek the opinion of other lawyers and experts. Those opinions could help gauge the severity of the problem and how much to invest.

Perhaps my suggestions take us in the wrong direction. Does anyone have examples of a systematic gate keeping / intake approach, one specifically designed to assess the level of investment appropriate to answer a legal question? And does anyone have views how government lawyers should deal with this given that many legal issues they face may have as much to do with policy as with dollars? I welcome your comments here or on Twitter (flag @ronfriedmann).

Update (26 Jan 2010): Steven Levy of Lexician references the above post in his very helpful Simple Risk Analysis blog post. He presents a simple but systematic way to assess risk. I agree with his view that just the act of getting a group to write down, working collectively, what the risk are is very valuable.

Just when lawyers thought it was safe, the Economist comes along to pronounce it’s not. 

Laid-off lawyers, cast-off consultants (21 Jan 2010) reports on the impact of the economic crisis on lawyers and management consultants. The Economist writes that

“the legal profession seems likely to undergo the most profound structural changes. For the first time—long after IT and finance departments went through the same experience—the corporate legal departments that hire law firms are under great budgetary pressure, and are thus demanding much better value from them.”

One consequence of the shift according to the article is “a growing gap between the best firms and the rest.” Another is that “legal-process outsourcing is booming, as law firms parcel out some of their more basic work to reduce costs.”

On legal matters, lawyers argue a point until the Supreme Court rules on it. For economic matters, the market is the final arbiter. It does not debate whether to to grant a writ of certiorari; it simply does its job of selecting winners and losers. If I were a managing partner, I would listen to the Economist and assume the worst. If you wait until we know for sure, it likely will be too late.

Bad news for law firms could be good news for legal technology managers. The reality of the new market will require delivering more value. This could usher in a new chapter - maybe even a new volume - in legal technology. As firms get serious about process improvement, project management, and alternative fees, they will need to be creative in deploying new technology and using old technology more effectively.

Since not everyone reads Twitter, I reproduce here a selection of my recent Tweets. 

RT @stephenseckler 58% of corp counsel think law firms too profitable http://bit.ly/6JMHKx || Answer is easy: shop around

RT @IntegreonEDD The Big (Legal) Picture by Beaton Consulting http://bit.ly/66ztcQ | Integreon Blog || Great video re future legal market

Hammonds moves to 4:1 ratio with DDS, Orange Rag (@ChristianUncut) http://bit.ly/7d9W71 || How many firms won’t be at 4:1 soon?

Axiom wins British Legal Award for innovative firm http://bit.ly/7wfHCJ || leave it to legal market to wait 10 yrs to recognize innovation

LPO, re-engineering, tech to reduce need for lawyer time. Hildebrandt http://bit.ly/8OSnpQ || Efficiency at last. Next: demand control?

3rd party litigation funding broker Calunius to launch private fund LegalWeek http://bit.ly/8l3A66|| Drives efficiency http://bit.ly/5aeCKb

RT @ReesMorrison Trivial cost-reduction steps commonly reported by legal departments in survey http://bit.ly/8Ko5Yd || Nero fiddled…

I am striving to perfect my ‘nano op-eds’ - 2 to 6 word comment on a re-Tweet

Thanks @denniskennedy for the Blawggie award and selecting other top blogs http://bit.ly/4X3IvA (thnx also @lancegodard, @VMaryAbraham)

Just installed X1 search by @X1Technologies. So far, I like it a lot. Had to clean up old Outlook profiles but that needed doing anyway.

@michmahon re busy year for laterals: are partners moving to maximize income or to seek a better, more stable biz model? Former seems likely

Not Yet A Gartner E-Discovery Magic Quadrant, But Still A MarketScope’ EDD 2.0 post http://bit.ly/4mWTNl || convergence at hand?

Pfizer doing alternative fee arrangements. Corp Counsel Mag. http://bit.ly/8uxFJF || Big AFA news. Legal tech angle: www.codeflow.net

LegalWeek.com Global 100 law firm results out today http://bit.ly/4w69zo || Likely new ‘world order’ not yet apparent in listings

Will 2010 see lawyers working virtually more often… to reduce occupancy cost? Anyone know of firms planning this as they move? #in

Comcast’s top lawyer calls the workload shots Phil Inquirer http://bit.ly/8NSnro || GCs act at last? But why pay rate increases at all?

Aric Press of American Lawyer: ‘2010 survival for those who aren’t retiring’ http://bit.ly/8wjTTh || ‘disaggregating and re-engineering’

Contract lawyer paid $35 charged out at $250. ABA J http://bit.ly/8brYf4 || Bad enough ever. Why do clients tolerate now?

Michael Mills - formerly legal IT, KM, and EDD guru at Davis Polk - joins Kraft & Kennedy, Inc. - email press release || Wow

ValueNotes launches proprietary LPO ratings http://bit.ly/6Hyp3R || Like Gartner Magic Quadrant for legal outsourcing

Eversheds gears up to launch its own outsourcing business LegalWeek http://bit.ly/7SMxSg || LPO or low cost co-counsel / office?

Legal process outsourcing facing a ‘watershed’ year Law Gazette http://bit.ly/6Bpi3U || My imagination or is L/G an LPO skeptic?

Just noticed that Google Docs now allows uploading, and optionally converting, any file type. 10 gig limit.

I only occasionally hear law firms talk about legal technology and knowledge management investments to keep and attract lawyers. At least to some lawyers though, it makes a difference. 

Jones Day Practice Head Joins Winston; Other Lawyers Likely to Follow (ABA Journal, 13 Jan 2010) reports on a lawyer moving firms in part because his new firm has a “commitment to streamlining its legal work with the help of new technology” and “a knowledge management department that collects good pleadings and good research so you don’t have to reinvent the wheel when you take on a client issue.”

Given how much firms invest in recruiting and vetting laterals, I wonder how much they have thought about the “equipment” they offer to practice as a recruiting tool.

This year will likely see stable instead of shrinking legal demand. Firms have to adopt to a new reality of clients who want more value. With the crisis over, it will be interesting to see how legal IT and KM fare. And whether this article represents a blip or a trend.

Consumers routinely seek estimates for many services, for example, buying a new roof, replacing an HVAC system, repairing a car repair, and even obtaining some medical services. The logic behind this should also drive general counsels to seek estimates for the cost of legal work. 

Lawyers have long viewed law practice in mythical and mystical ways, which supports the belief that predicting cost is impossible. Myths die hard but desperate economics have a way of changing minds. Several trends - alternative fees arrangements (AFA), project management, and process standardization - work to de-mystify law practice.

So I disagree with Brad Smith, GC of Microsoft, who writes in his January 1, 2010 column in Inside Counsel, Alternative Arrangement, that “Some legal assignments are too unique to estimate in advance. Paying by the hour for such services can make good economic sense.” I agree with everything else he writes and was impressed to see he expects 45% of MS legal spend to be AFA.

Perhaps what he really means is that some matters are so complex that estimates are not reliable enough for either side to feel comfortable using AFA. If so, that does not warrant skipping estimates. Rather, it means variances between estimates and actual spend will be bigger than for more routine matters.

The right approach for one-off matters is to refresh estimates as the work progresses and to estimate by stage, taking into account the many discrete activities of each phase. Sophisticated clients and law firms should be able to combine personal experience with analysis of prior billing data to produce reasonable estimates at any given point in a matter.

We may need lawyers who specialize in estimating. And to avoid potential economic and other conflicts, it likely makes sense to have an estimate prepared by someone who will not work on the matter. This would be true even for work done purely internal to a law department. “Legal estimators” might add to cost short-term but over time, the discipline of making estimates and then comparing them to actual costs would add to lawyers’ understanding of complex matters and how best to manage them.

Lawyers like precision. As a result, they often let the perfect be the enemy of the good. The new economic reality may force them to live with approximation and ‘good enough.’ 

First, a story. After graduating NYU Law I worked for Bain & Company as a strategy consultant. Consultants, like lawyers, consume much information. Unlike lawyers, however, they accept ballpark estimates. So I was in for a surprise when I subsequently switched to practice support for a law firm.

I needed to know the average rate for documents reviewed per review. The firm had no data so I asked several lawyers. All said “I don’t know” and said they could not estimate the rate. OK, I thought, time for new tactics. I asked some other lawyers, this time saying “I’ll assume the review rate is 100 docs/hour” to which they replied “no, that’s way to high”. OK, I said, then I’ll assume it’s 5. No, that’s way to low. Back and forth we went - all the conversations converged to a rate between 10 and 15 docs/hour. (This was 1989, paper docs, with issue coding.)

This was a valuable early lesson for me, one not taught in law school: for lawyers, silence is better than a chance of being wrong. Silence is better than approximation. The thinking and fear that underlies this mindset - I’ll call it ‘perfection thinking’ - has consequences.

And I’m not sure we can still afford it. Clients often want to know if there are any major risks: “let me know if there are any boulders in this playing field.” Lawyers often hear that and think they need to find not just the boulders, but also the pebbles. The fear of being wrong - and of malpractice - runs deep. ‘Perfection thinking’ makes it hard to approximate, to apply to 80-20 rule, to guide in the right direction but with some imprecision.

And this, I think, is a big reason corporate legal costs are so. And why consumers can’t get affordable legal service. A Nation of Do-It-Yourself Lawyers, a New York Times op-ed piece by two state court chief justices, on 2 Jan 2009, argues that the profession should support “unbundled legal services and other innovative solutions — like self-help Web sites”. Unbundled here means limited-scope representation. “Perfection thinkers"want absolutely correct answers, always; most people, however, would settle for just a bit of guidance.

My hypothesis is that firms that overcome ubiquitous ‘perfection thinking’ will do better. They will be the ones to communicate clearly with clients to learn the client’s risk parameters (not their own). Of course we need general counsels who think this way too. They must understand the risk their companies are willing to take. How else can they limit the demand for lawyering? Of course, all this means living in the universe most of the rest of us inhabit - one full of approximations and imperfections. Welcome to the real world.

As law firms try to shift from reverse in 2009 to forward in 2010, they should remember that the easiest way forward is to win more business from existing clients, not get new clients. A new tool, Client Profiles by LexisNexis, is a promising way to help improve growth from existing clients. This product is going into beta testing this quarter. 

Last month I talked to Norman E. Mullock of LexisNexis to learn more about Client Profiling and subsequently read a LexisNexis client profiling white paper. (Note: Vendors regularly offer me demonstrations. I sometimes say yes for interesting ones, for which I receive no compensation. Separately, I have not checked if other products offer similar features or potential benefits.]

Client Profiling comes from Redwood Analytics, which LexisNexis acquired about two years ago (see my post LexisNexis Acquires Redwood Analytics). Redwood is perhaps best known for improving firm profitability through sophisticated business intelligence (BI). With the new tool, Redwood now offers a way to systematize business development.

Redwood conducted extensive background research on law firm business development (BD) efforts. The research identified BD functions that are distinct from marketing and marketing communications:

• Client / prospect research
• Relationship management
• Prospecting
• Pricing
• RFP/pitch management
• Competitive intelligence

I think these distinctions are critical. While marketing and marcom can play a critical role, the enumerated functions are more important to snaring new business, at least short term.

Key features of Client Profiles include:

• Aggregates data from the multiple internal and external sources
• Analyzes the lifetime value of existing clients with a systematic, data-driven approach that creates a quadrant chart segmented by billable hours total on one axis and consistency of hours over time on the other axis.
• Provides a nice software interface to analyze data and help draw conclusions
• Identifies the 100 clients with the most growth potential and focuses analysis and development of an action plan on this subset

Redwood spends six weeks in a consultative approach with the firm to produce the quadrant analysis, then provides software for the firm to use to continue and refine the analysis. The benefit is that firms can focus BD activity where the yield likely will be greatest.

Redwood’s white paper cites examples of how Client Profiling can help a firm:
(1) Identify clients whose billing vary a lot year to year and then focus on the ones the firm has a decent chance of making consistent big billers.
(2) Understand which practices really feed new business and which do not.
(3) Highlight older clients whose work may have dropped off but with potential to grow again

A data-driven, structured approach to BD is a far superior than one based on gut feel or a big rainmaker’s whim. Malcolm Gladwell’s Blink notwithstanding, an emerging body of business literature shows that companies do better basing decisions on detailed, reliable data and careful analysis. To illustrate the danger of the nonchalant approach, consider “share of wallet", that is, the percent of a client’s business the firm has. It provides insight into how a firm stands with a client, independent of the dollar volume of business. For example, a firm may be pleased that client billing has increased 10%. If, however, the client’s total legal budget grew 25%, the firm’s share of wallet has decreased - often a bad sign. Conversely, shrinking billings may not be so bad if wallet share is on the way up and the client will have a bigger budget in the future.

Overall, I am very impressed with what I saw. Some additional comments and thoughts:

• My sense is that, just as with Redwood’s BI tools, it will take firms time to adapt to Client Profiling. This is a comment about law firms, not Redwood. I suspect some firms simply do not have the analytic horsepower in place - yet - to use this tool. Those that do not will suffer long term.
• The market is moving to alternative fee arrangements, which might affect the analysis. I did not have a chance to ask about this but short-term, AFA is so new it seems unlikely to affect the historical analysis. In any event, Redwood can likely adjust the analysis for AFA.
• Last decade, knowledge management, IT, and library professionals in law firms struggled with how to access and integrate relevant legal work product and data spread across multiple systems within the firm. In my view, Recommind changed the playing field as the first widely adopted enterprise / federated search product in BigLaw. I have the sense that Client Profiling can do the moral equivalent for the many databases that BD professionals need to access and tie together.

I have long been a believer in business intelligence and in evidence-based decision-making (see my BI and best practices blog posts). Redwood software blazed the trail with BI software for law firms. I did not ask how Redwood prices this service and software. If I were managing law firm BD, I would want to be among the beta testers for Client Profiling. And if I were a managing partner, the one area in 2010 where I would unquestionably invest more is in systematic, data-driven BD.

[Update 7 Jan 2009:] For a great account of why you should rely on data to make decisions rather than intuition, read The Future of Decision Making: Less Intuition, More Evidence by Andrew McAfee in the Harvard Business Review, 7 Jan 2009. Hat-tip to Mark Gould (@markgould13).