How Big Data Will Transform Business Models in the Legal Industry

Co-written by Matthew Colon, Senior Consultant Big Data & IoT Consulting Dell EMC

For those of you of a certain age, you may remember “Class Action,” the 1991 movie with Gene Hackman and Mary Elizabeth Mastroantonio. Loosely based on the Ford Pinto case, it follows a small law firm (led by Gene Hackman) in its fight against big business attempting to keep a central fact hidden – that they knew about a fatal flaw in a car after it went to market.

There is a scene where the larger law firm representing the car manufacturer purposely misfiles a crucial piece of damning evidence in the discovery process. The smaller law firm searches in vain for the missing piece of evidence – hopelessly sorting through box after box of paper. In the end, only an attack of conscience from one of the corporate attorneys leads to the missing evidence and justice for those injured by the car defect.

Today, this scenario is much less likely to happen. With ubiquitous e-Discovery tools like kCura, Lexis Nexis and MS SharePoint among others, lawyers and legal investigators have much better access to digitized records and natural language search. If that missing “exploding gas tank” memo is there – chances are much better it will be found.

Providing evidence to opposing counsel (the “discovery” process) is only a small component of practicing law. Legal professionals in fact spend relatively little time in the courtroom and more time on contracts, torts, employee issues, mergers and acquisitions, etc. And while tools to help with e-Discovery are fairly mature, analytics and computer-aided techniques are only beginning to be applied to other areas of the law. The opportunities are massive, but only if law firms take a comprehensive approach. Think about the other areas of the legal profession (lumping all sorts of legal sub-specialties for the moment) and how getting more access to data and insights can be applied to improve outcomes for clients. Capabilities like:

• Case law and precedent research
• Predictive opinion or outcome research
• Real time verdict/judgment analytics

But analytics can also be applied for the law firm’s own benefit:

• Identifying and on-boarding new clients
• Cross-selling and upselling existing clients
• Right-sizing firms, SMEs, and identifying the appropriate leverage model
• Reducing operational costs

Law firms appear to be leveraging point solutions for client-facing improvements (e.g., Ravel Law, Lex Machina, Ross Intelligence); but there still exists tremendous opportunity to take a more comprehensive approach to data analytics – specifically by leveraging data to improve law firm profitability and operations.

Competition Makes Data Analytics Mandatory

Law firms are struggling. In its recent 2016 Chief Legal Officer Survey[1], the consulting firm Altman Weil reported that, among the 336 corporate CLOs responding to its survey, 35.2% planned to decrease their spend on outside counsel during the coming 12 months.

In a similar report, the Georgetown University Center for the Study of the Legal Profession[2], notes that firms are increasingly looking to alternative vendors to attend to pieces of previously bundled legal services, resulting in stagnating demand growth.

Other examples of the changing legal landscape include companies like Legal Zoom which is leading to the increasing offshoring and “Amazon-ification” of the law industry. Likewise, Artificial Intelligence (AI) is replacing thousands of lawyers at JP Morgan Chase[3] and elsewhere. This is a huge shot across the bow for the legal industry. JPMC replaced roughly 360,000 billable hours – at a conservative estimate of $200/hour, someone just lost $72m in legal fees…

Given these examples and countless others that together showcase (1) increases in low-cost competition, (2) replacement of humans with artificial intelligence and (3) the decreasing willingness of large companies to pay the way they have, the stage is set for law firms to either adapt to or face the consequences of these trends.

Adapting

Rather than implementing one-off solutions over time, law firms – like every other industry facing disruption in today’s economy – need to leverage their single best source of competitive advantage to compete: the data they have on their clients and their historic operations. Only by improving services, being proactive and providing more value, can law firms adapt and thrive.

So how can law firms get more proactive?

Leverage data and the insights it provides to become more valuable to their clients:

• Leverage unique and proprietary data – case notes, call center records, legal strategies, leverage models, practice profitability, resource expertise profiles
• Develop and deploy AI / automated solutions for clients before they deploy them for themselves
• Incorporate new, publically available and innovative data sources that will add value to clients (Product recalls? Consumer Comments? Social media comments? Construction permits? Road maintenance? Weather?)

The possibilities are endless…

Law firms should look at specific metrics to improve by accessing and leveraging data. Examples include:

Improvable Metrics

• Billable hours / day
• Partner / Practice profitability
• Cross-sell / Up-sell
• New lawyer recruitment
• Proactive practice management – what law is growing, what’s shrinking
• Identifying lawyers who aren’t producing
• Leverage model
• Fee structures
• New client intake

Leveragable Data Sets

• Case records
• Public records
• Time & Billing records
• CRM data
• HR data
• Demographic / education / recruiting
• Call center records

Matters / Outcomes

• Better management of operational costs
• More efficient resource and SME management
• Identification of new work / new client opportunities
• Expedited strategy analysis (case law, precedent, opinion or outcome research)
• Real-time verdict / judgment analytics

Law firms that invest in holistic data management, storage and analytics infrastructure can identify and take advantage of insights that firms without that technology (or with only point solutions) cannot. The technologies that enable access to this data are relatively cheap to acquire and maintain – and are also available as-a-service in the cloud. Once the technology is in place, law firms that identify and prioritize use cases and drive real ROI will start to improve outcomes for clients and operational metrics for the firm.

The Future of Law

The legal profession remains vastly underpenetrated when it comes to leveraging big data technologies and processes. Operating a law firm can and should still be a profitable business – but that business is changing. Banks are technology companies that happen to manage money. Law firms will have to learn they are technology companies that happen to practice law. They need to put their assets to work to maintain, or in some cases, re-establish their value with clients.

Law firms that invest in holistic data management, storage and analytics infrastructure can identify and take advantage of insights that firms without that technology (or with only point solutions) cannot. The technologies that enable access to this data are relatively cheap to acquire and maintain – and are also available as-a-service in the cloud. Once the technology is in place, law firms that identify and prioritize use cases and drive real ROI will start to improve outcomes for clients and operational metrics for the firm.

[1] Altman Weil 2016 Chief Legal Officer Survey

[2] Georgetown University Center for the Study of the Legal Profession

[3] JP Morgan Chase

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