Tech, data, innovation and breaking down walls between legal and business

I spent this week in balmy New York City with thousands of other legal technology, business and practice professionals for the annual LegalWeek gathering. I’ve made this trek for nearly 20 years, but the vibe and content this year was very different.

I did not spend much time at the LegalTech conference itself, but it seems to have been covered quite well via social media and elsewhere. Instead, I usually take advantage of all the concentrated expertise and experience by meeting 1:1 with clients and colleagues and attending targeted events such as the annual KM summit (my ~16th year) and this year’s inaugural Inspire.Legal conference. Both were excellent, but to me the latter showcased a material change in thinking, change in the industry, and in some cases a changing of the guard.

My brain is overflowing today, so I need to spill some thoughts and highlights on paper before I shift focus to the New England Invitational tomorrow.

Innovation is a growth strategy, not a branding strategy

I’ve written about this before and I’m sure I’ll write about it again. Building on some of my recent writing, I gave a rapid fire and somewhat provocative talk on innovation to a group of KM professionals. I’m sure the audience was divided on my message as increasingly KM pros are adding “innovation” responsibilities to their role. I hope they invite me back :)

I’ll summarize with a framework and three points, but first a thought on KM’s role in innovation. Knowledge management leadership often has a unique perspective in their firms that spans business, practice, technology and content. They often have more practice and client awareness across the portfolio than most other professionals in the business. This is needed to truly innovate and adapt with the market. But, with all due respect to my KM peers, knowledge management often lacks management knowledge (h/t to Augie Rakow for this quip). I think this can and should change, but it’ll require new thinking. Read on.

1. Corporations look at innovation as a growth investment and a business strategy to compete, not a branding effort to appear competitive.
2. Commercialization is innovation’s “end zone”, and most law firms and legal innovators are on the wrong side of the “innovation gap”. This is primarily due to lack of investment in business talent that can convert innovation and change into commercial value.
3. The innovation wars to come won’t be fought and won over tech, data or marketing; it will be a battle for talent, tools and techniques that can target and create this value.

Breaking down walls between legal and business

Speaking of Augie, Atrium was a hot topic this year. If you are in #biglaw and do not know them, then perhaps you can stop innovating for a moment and pay attention.

Much has been written about them (see Ed Sohn and Joe Borstein’s coverage on ATL) so I won’t go deep here. Lyman Thai, counsel at Atrium presented to the same group of KM’ers, and I had the pleasure of spending time with Augie, managing partner of the law firm half of the Atrium whole. I was very skeptical of the Atrium model, mechanics and target markets heading into this week, but after learning more I now consider them a real competitor and one to watch closely. And did I mention they have $70M+ in venture funding?

Some quick observations:

• In conversation with the KM group I described Atrium as a “business by design, but a law firm by regulation”. Their LLC/LLP structure that separates the ops/tech and legal halves of the business is necessary due to ABA and state bar rules on law firm ownership, outside investment, etc. It is not the first time it’s been used (RIP, Clearspire), but Atrium appears to have very carefully designed it to better align short and long-term incentives, ownership, capitalization and collaboration between the two. They act as one business and one team, despite the structural complications.
• What is more interesting to me is their redesign of the law firm organizational structure. They have cleaner role separation (and more sensible/scalable, IMO) with professionals dedicated to sales, account management, team management and of course expert counsel and service delivery. These teams collaborate directly with technology and product management experts that constantly look for ways to improve operations and client experience. No other firm I have worked with operates this way.
• Augie also talked about interesting approaches Atrium is taking to share expertise between legal and business professionals. Atrium lawyers can select a business area to focus on, much like “picking a minor”, and they commit time to working with and learning from their colleagues in that area. Conversely, business and technology professionals work side by side with the lawyers to gain a deeper understanding of the practice and client needs. IMO, this addresses one of the biggest obstacles to change; the gap between business and legal staff is often wide and deep. Closing it will open new opportunities to grow and change for all involved.
• And one other small but interesting point that stirred quite a debate is that Atrium attorneys do not enter time. Instead, they charge for products and services on a subscription and/or fixed-fee basis and focus on and measure contribution margin at levels that make sense, just like a “real” business might. They did say, however, that they are exploring methods to better capture input and effort metrics in order to measure and improve products and services, which may include some level of time capture, but the motivation for this is very different.

We need more data on data analytics

Which segues nicely into my final thought (for now) on data analytics and the quest for answers.

First, the problem. 2019 is my 20th year in the legal industry. Yeah, I know. I’ve built and sold technology and technology businesses; I’ve advised the largest law firms and legal businesses in the world; I’ve launched consultancies, tech practices and have tried, failed or succeeded across all of these dimensions. But I’ve always been focused on data. I’ve collected, cleaned, curated and analyzed every form of data and content possible in this industry, inside and outside of firms. I’ve tackled enterprise data architecture and integration challenges from almost every angle possible. It’s been my mission to solve the “data problem” for two decades YET IT REMAINS A PROBLEM!

So what is the solution? I joined an all-star panel of business, technology and data science experts at the Inspire.Legal event to talk about this. (H/T to Evan Parker, PhD, Jae Um and Ed Sohn for making me smarter, and to Christian Lang for putting together such an excellent event overall.) We began with the meta-question “if analytics is the answer, what is the question?”. If this team couldn’t find the answer, then surely no one can. But sadly, we did not — because there is no single answer. Until firms and clients can bridge the gaps between problems that can be solved or decisions that can be made using data and understanding of what is possible using data, we’ll be stuck in chicken-egg mode.

Data analytics must start with a problem to solve or question to answer. Only then can you think about what data, available or otherwise, would help. Many conversations, and many firms and businesses, tend to start the opposite way by looking at data available to them and asking “can we do something useful or valuable with this stuff?”

We need to flip this thinking and learn new approaches to analytics and problem solving methods that utilize data. This is too big a topic to cover when exhausted, but I commit to covering this in more detail as it remains my mission to solve this “data problem” once and for all.

One last note on analytics. Gina Passarella, editor at ALM, published an article during the event titled “GCs Are Offering Work on a Silver Platter and Law Firms Aren’t Taking It” in which she said “over and over again, general counsel talked about the one thing they were consistently not getting from their outside counsel: data, and more specifically, data analysis.”

Everyone is talking about how the business and practice of law can be improved with data analytics and data-driven decision making, and how “clients want it”. I believe that this goes beyond just improvement, and that many legal business solutions simply ARE data solutions. It is clear to me that smart businesses will find ways to measure and predict legal, compliance and governance risk and will apply operational analytics to optimize “run the business” legal activity. And they will do this with or without incumbent firms. This is a huge opportunity, but also presents a threat as new, streamlined competitors such as Atrium size the prize and position themselves to win.