Law firms are doing a fine job collecting massive amounts of data about their customers and own operations, but are failing to make good use of it, according to speakers at a series of panels on Big Data at the Legal Executive Institute’s recent COO & CFO Forum.
In fact, law firms and their more entrenched senior partners actually don’t comprehend the data analytics process even though its implementation could result in increased firm efficiency and profitability, several panelists said. “There is a sense of urgency at law firms over Big Data because they know it’s important, but many may not know how to even approach it,” said James Michalowicz, president of Michalowicz Consulting, adding that it is vital for top firm management to get the “buy-in” from partners if any effort to employ Big Data analytics is going to succeed.
But that is difficult, Michalowicz acknowledged, because most lawyers would view Big Data as a threat to their jobs, their security and their expertise. “Most would see it as a threat, but the key is to make them see it like an opportunity.”
Another panelist, Oz Benamram, Chief Knowledge Officer at White & Case, put it more succinctly, saying: “Lawyers see Big Data like they see Global Warming. Some say it’s not happening and others say the consequences will only be felt after I retire.”
Dr. Christopher Zorn, a Research Professor at Penn State University and Principal at Lawyer Metrics, said lawyers need to better understand what Big Data is and how it can be used to improve their performance and that of their firm. Speaking on a panel called The Implications & Value of Data Analytics, Zorn described that Big Data can best be understood by three Vs:
- Volume — the amount of data;
- Velocity — the speed at which data is generated; and
- Variety — the type of data generated and collected.
As much as 80% of all data is unstructured and that presents lots of challenges since such data is not in small, nicely compact sets, Zorn said. Once data is collected, however, its use can be very beneficial. For law firms, data can be analyzed to see which lawyers work together best, who is most efficient, etc. But unfortunately, Zorn noted, too often collected data is seldom used at all by law firms. “Firms are behind the rest of the world when it comes to data analytics, and they need to do a better job using data to inform their strategic choices,” he said.
White & Case’s Benamram echoed that sentiment later when he pointed out that many firms are engaged in a “small data” approach to inform strategies on certain markets, projects or individual tasks, but there is no overall strategic employment of Big Data. “Once you connect the dots, you can see the efficiency,” Benamram explained. “However, it’s an expensive process to get ready for Big Data.”
“Lawyers see Big Data like they see Global Warming. Some say it’s not happening and others say the consequences will only be felt after I retire.”
— Oz Benamram, Chief Knowledge Officer at White & Case
Indeed, one hurdle faced by law firms in their approach to Big Data that many panelists identified is convincing firm leaders that data analytics is an important and profitable tool that needs to be incorporated in the firm’s strategic planning. “The conversation that every firm should be having on Big Data should be centered on firm improvement and efficiency — not on Big Data,” said Ralph Baxter, Chairman of Legal Executive Institute and one of the Chairs of the event. “Those advocating for more data analytics within a firm need first to talk about ways to better serve the client, then introduce technology and data analytics as a tool toward that end.”
Justin Ergler, Director of Alternative Fee Intelligence and Analytics at GlaxoSmithKline, agreed, adding that before companies or firms can get the commitment from management to leverage Big Data, they need to demonstrate the value of analytics to management in a very real way. “Many managers see Big Data as this black hole where you throw money in because you have to — we have to do a better job demonstrating how we can turn it from a cost to a value-added.”
It in an important and necessary task, however, because the stakes for continued disregard of data analytics are very high. Dr. Daniel Katz, Associate Law Professor at the Illinois Institute of Technology, said one Big Data problem lies in the failure of companies and firms to use analytics to uncover legal or compliance situations before they become serious problems.
For example, he demonstrated that recent “rogue agent” scandals, like the emissions tests with Volkswagen or the product defects with General Motors, didn’t occur in a vacuum. There had to be some trail — like emission tests or product testing results — that had that data been collected and analyzed, could have identified the trouble early on. “The problem is that companies or their law firms don’t find out about these issues until it is too late,” he said.
Right now, Katz said, the vast majority data is out there in a collectible form, but nothing is being done with it and there are no analytics being performed on that data to interpret or understand it. “This is why more analytics are needed — to flag these events in advance, and really help clients ahead of time.”
If law firms could create a system of data analytics that could be used to ferret out potential legal or compliance problems at a stage when those problems can be much more easily remedied, that law firm would have an unbeatable business edge. “Of course, that’s the biggest question — how does a firm create information systems to identify these problems?” Katz asked. “But the solution to that question would give firms the ability to sell their services to clients in this way.”