BI or Die
Business Intelligence Can Turn Big Law Into New Law — Or Not
This work appeared as a chapter in the new Ark Group publication Strategic Intelligence for Law Firms, available here.
“Truth is, most BI investments are wasted. They produce dashboard eye candy alright. But they don’t truly add the kind of intelligence that changes a business’s course. And the reason for that is an almost complete lack of attention to the question of why we seek business intelligence in the first place.”
Change or Die. The decision to implement BI doesn’t always get the scrutiny it needs. And the name may have as much to do with it as anything. “Business Intelligence,” after all, is such a delectable term, ripe and full, suited to almost any business setting. Take a budget meeting, for example. When asked why you want to spend a half million dollars on a piece of software and still more on implementation and staff, “business intelligence” is an ideal rejoinder. Just serve it up and wait for the cash to follow.
Because who doesn’t want to be intelligent about their business? And that desire seems a sufficient end in itself, something that forecloses all further inquiry. So, what better than spending a sizable chunk on BI and throwing up a dashboard — or twenty — as a means of being more…intelligent about your business? Because, obviously, BI means smart.
Beware the obvious. More than most technology investments in business, buying a BI suite needs careful thought at the start, and ongoing attention as it is used. In law, we have only to look around to see why. Many firms have by now invested in CRM and other BI software and staff. But how many can claim to have transformed their relationships with clients or dramatically improved their businesses as a result? Can you name one? Is the delivery of legal services any different as a result?
Truth is, most BI investments are wasted. They produce dashboard eye candy alright. But they don’t truly add the kind of intelligence that changes a business’s course. And the reason for that is an almost complete lack of attention to the question of why we seek business intelligence in the first place.
We buy BI to survive. Today’s highly dynamic global marketplace grinds through businesses faster than at any time in the history of business. The average lifespan of a Fortune-500 corporation now may be as little as 15 years. And smaller businesses die sooner. Smaller businesses like law firms?
You would think so. In Big Law, the principle of stare decisis applies far beyond legal precedent and well into business practice. Lawyers, we often say, are resistant to change, and perhaps even inimical to it. Status quo forever!
So, as Fortune 500 lifespans move from 50 years to as little as 15, why haven’t we seen a Big Law extinction event? Perhaps it’s because of the insulating effect of the billable hour. That cost-plus business model excuses a lot of obliviousness — and disguises mortality.
But, notwithstanding the billable hour hiatus Big Law has enjoyed, all businesses begin to die the day they are founded, even law firms. And the highest mortality rate arises in those businesses that resolutely stick to their business plans no matter the circumstances. Like Big Law.
Peter Drucker, perhaps the most esteemed management theorist in all of modern business, explains why in his book Management Challenges for the 21st Century:
[I]in a period of upheaval, such as the one we are living in, change is the norm. To be sure, it is painful and risky, and above all, it requires a great deal of very hard work. But unless an organization sees that its task is to lead change, that organization — whether a business, a university, or a hospital — will not survive. In a period of rapid structural change the only organizations that survive are the “change leaders.” It is therefore a central 21st-century challenge for management that its organization become a change leader.
So, Drucker says, the lesson of businesses in all sectors is change or die. Adaptation assures survival.
In the wake of the Great Recession, law is in a period of great upheaval. And radical change is rampant, both in the economics of practice and in the how of accomplishing everyday tasks. But that change in the how of practice is not coming from inside the profession; rather almost all significant innovation emanates from outside traditional firms.
Services such as RocketLawyer and LegalZoom are redefining the infrastructure for the delivery of legal services. Virtual entities such as Axiom, Counsel on Call and VLP are reformulating what it means to be a firm. Blockchain-based technologies are restructuring that most basic of legal instrumentalities — the contract — and offering up electronic contracts that are lawyerless, smart and self-enforcing. Alternate dispute resolution services are springing up to remedy the cost, delay and unfairness inherent in an overloaded court system. And all of this is clearly just a beginning. Watson and his yet-to-be-thought-up companions are waiting in the wings.
From all of this, it’s clear that law firms of all sizes will have to change too. We’ve seen that lesson over and over in other industries. Law firms that don’t change will get Kodaked, or Blackberried, or Blockbustered. They’ll simply fade into irrelevance as the market redefines itself around them. Because change or die is the way all business works.
But change how? Here is where BI pays dividends. Because BI’s sweet spot lies precisely in answering questions like “How should we change?” BI is a compass for the business. It helps define the path toward change.
Unfortunately, just buying BI software doesn’t automatically create a compass. Someone has to decide what questions to ask, questions that pave the way for change. BI software sometimes comes equipped to ask certain questions. “Are we profitable?” for example. Or even “Where are we profitable?” All it takes is little wiring into existing enterprise systems and those questions can begin to be answered.
And, of course, profitability is one of the core inquiries of any successful business. But just how well does profitability or unprofitability answer the question “Where shall we change?” It may begin an inquiry, but it by no means ends it.
Design Thinking Discipline. So if BI software can’t answer the most important questions right out of the box, how do business leaders in general and BI analysts in particular begin to know what questions to ask to lay in a path for change? How do they even know where to start?
Just as there is a discipline to parsing data, understanding data distributions and undertaking regression analyses, there is also a discipline to designing or redesigning a business. And that is exactly what BI undertakes to do. When we ask what needs to change, we are by definition designing something to take the place of the status quo.
And there is a discipline to design that we can make use of in asking these fundamental questions. Over the past several decades, businesses have begun to notice that professionals in design fields — architects, urban planners, industrial designers, and other “creative” types — solve problems in a fundamentally different way than scientists, businesspeople and lawyers. They exert just as much discipline as more conventional analytical thinkers, but often wind up in very different, and very much more productive, places. Design Thinking, as it has come to be called, is a translation of the methods used by the most successful designers into language that can be applied in other settings.
Design Thinking is a catchy name, but a little misleading, given our understanding of the term “design.” When we speak of design, we often attach an article to it, referring to “a” particular design as being beautiful, or elegant. The smooth metallic surface and radiused edges of the iPhone, for example, fit that understanding of design. In that sense, design refers to a particular physical aesthetic and it seems to fall far outside realms like business and law.
But design is also a process, a methodology used to arrive at a superior end state. And it goes far beyond the physical aesthetics of product creation to encompass the entire user experience associated with a product or service.
As attractive as the iPhone’s physical design was, the revolution it spawned had much more to do with how users interacted with a wide range of services, from telephony, to email to music to photography and videography.
And to get to that required a most extraordinary kind of inquiry. Because had you asked conventional phone users whether they needed something like the iPhone, they would have said no. They might have quarreled with this or that bit of functionality in their phones, but they were not asking for iPhones.
To get to the iPhone, something else had to happen during the design. This “something else,” this way of inquiring that is so different from the way in which businesspeople and lawyers typically approach problems, can prove revolutionary when applied to business problems. And, more particularly, it can serve as an underpinning for the ever-present BI questions: “What shall we measure?” and “What shall we change?”
Empathy? At the core of Design Thinking is something utterly outside the toolset given lawyers in law school and businesspeople in business school — empathy. Empathy goes beyond simply trying to understand a problem. It asks you to put yourself in the shoes of the person who will use your product or service, and to try to understand that person in ways that transcend logic, that draw upon intuition and emotion as well.
Design Thinking recognizes the first-level importance of the emotional content of a successful design. When we think of traditional value propositions, we often bring to mind some emotionless notion of utility. This product or service will accomplish a certain thing. Lawyers think like that. We will provide you with advice, and it will be correct. BI analysts think like that too. We will tell you your billing speed and collection speed and it will be correct.
But the most successful designs go beyond mere utility. If you buy a Tesla, the automaker promises that you will receive the safest transportation in the world, that you will be transported in a sumptuous surround, that you will feel pampered, affluent, intelligent. In other words, the design of a Tesla is loaded with emotional content. So too with the iPhone. It’s hip exclusivity is as much a part of the design as its elegant user interface. All of the best designs are founded first on human considerations.
Clients have been telling us for years that they want more than utility in their law firms. One of the most common complaints about lawyers is that they take no time to understand their clients’ businesses. That complaint certainly relates to the utility of advice — abstract advice is less valuable than that given in a specific business context. But the complaint also has just as much emotional content as a “you don’t pay enough attention to me” statement in any other human relationship.
That untapped resource, the as yet unasked questions that open up the workings of our clients’ businesses, presents an extraordinary opportunity for BI. Helping lawyers understand their clients’ businesses, or even better, helping clients themselves better understand their businesses, represents the foremost opportunity of BI in law.
Bringing Empathy to BI. So, what might it look like to begin applying Design Thinking to the question of how to use BI to improve the delivery of legal services?
First, let’s get this out of the way. There’s some work involved. As you might expect with any discipline, there is a good deal of structure to Design Thinking and a real learning curve. And you’ll need to work you way up that curve. A good way to get started is to use the resources compiled by the Stanford Design School, one of the leading proponents of Design Thinking in the technology sector. Stanford’s D School is especially influential on designs emerging from Silicon Valley. The D School’s Bootcamp Bootleg will get you off and running in applying Design Thinking to your work.
But before we do all that work can we test run what empathy-based design feels like? Sure! One of the most approachable answers to that question comes from Warren Berger, who in the Harvard Business Review’s The Four Phases of Design Thinking describes the sort of mental states that arise during Design Thinking. Berger’s observations, arrived at after consulting with and watching closely as over a hundred designers did their work, nicely deconstruct empathy and summarize the ensuing design steps. To quote Berger, when you do Design Thinking successfully, you:
Question. If you spend any time around designers, you quickly discover this about them: They ask, and raise, a lot of questions. Often this is the starting point in the design process, and it can have a profound influence on everything that follows. Many of the designers I studied….talked about the importance of asking “stupid questions”–the ones that challenge the existing realities and assumptions in a given industry or sector. The persistent tendency of designers to do this is captured in the joke designers tell about themselves. How many designers does it take to change a light bulb? Answer: Does it have to be a light bulb?
Berger notes that it can be particularly difficult to ask those “stupid” questions, because they can make the questioner seem naïve. And he wasn’t talking about lawyers, who may be more skeptical and cynical than the average business person. Lawyers, he might agree, constitute the Design Thinking acid test. But skeptics and cynics or not, Berger emphasizes that the telling question is the heart of Design Thinking. So summon your courage and get to the soul of the matter. Be willing to ask even the most fundamental questions, ones as fundamental as “What business are we in?”
Care. Focus groups and questionnaires don’t cut it; designers know that you must care enough to actually be present in people’s lives.
Berger’s second step urges you to care enough about the problems your users face to get out of your cube or office and meet them face-to-face. And this is more than a matter of commitment. Unless you’re physically present, you can’t pick up the non-verbal clues to meaning that are so essential to Design Thinking. You can’t see that people are pretty frustrated with their flip-phones and Blackberrys and that some other kind of interface might help them.
Connect. Designers know that you must “think laterally” — searching far and wide for ideas and influences — and must also be willing to try connecting ideas that might not seem to go together. This is a way of thinking that can also be embraced by non-designers.
Berger says that connecting ideas is a shortcut to innovation. You can meet users’ needs without inventing a solution from scratch. Here again, the iPhone is a model of connection. The email, telephony and other services it embodied were not new, but they were connected in a new way.
Commit. It’s one thing to dream up original ideas. But designers quickly take those ideas beyond the realm of imagination by giving form to them. Whether it’s a napkin sketch, a prototype carved from foam rubber, or a digital mock-up, the quick-and-rough models that designers constantly create are a critical component of innovation — because when you give form to an idea, you begin to make it real.
Committing early raises the specter of failure, because early designs have rough edges. They may even head off in the wrong direction. But Berger notes that committed designers cultivate a tolerance for failure, because they know that failure is on the path to success. They’re committed to fully meeting the needs that they uncover in the course of their empathetic inquiry.
Lawyers, of course, are trained never to fail, which means that you may need a deeper level of commitment to endure the skepticism lawyers bring to napkin sketches and other rough ideas. So commit with a vengeance!
OMG. If you’re a normal BI professional, by this point in the chapter, you should be thinking “OMG, what have I gotten myself into? Let’s just screw in the damn light bulb, O.K.?” But stay with Design Thinking a little longer to see where it might lead.
We see from Berger that the fundamental thrust of Design Thinking concerns getting to the smart question, the really telling question. And the most telling question might appear at first to be a dumb question. But you can’t get deeply into somebody’s life without dropping assumptions and presumptions and just asking about what you don’t know. And these most fundamental questions aren’t dumb, because at the foundational levels of someone else’s work, you can’t know without abandoning your ego and asking very, very basic things.
Beginning with the Prosaic. OK, so we’ve gotten a rough feel for the “telling question” approach of Design Thinking. How does it work in practice? We could throw you off into the deep end, right at an inquiry that goes to the heart of law practice. But let’s start with something simpler first. We’ll begin with the truly prosaic — a business measure likely to be found inside many law firms — and work some Design Thinking on it to see what happens. As we do this, we’ll be shortcutting a good deal. We can’t trace all the question taxonomies that are necessary to elicit these results. Moreover, Design Thinking goes far beyond merely asking questions of interviewees, and includes the close observation of subjects to capture important verbal and nonverbal clues to deeply held beliefs. But these questions will give you the idea how Design Thinking inquiry flows and just how far you can get by starting with “dumb” questions.
Bill speed is as prosaic a measure as we’re likely to find. It’s the number of days it takes a lawyer, on average, to issue a bill after work is done on accounts he or she bills for. Now, there are probably a dozen different ways to handle the nuances of bill speed. But why don’t we skip that? And you can throw up bill speed on your dashboards any number of ways. Should you use a speedometer dial? Because we’re measuring bill speed! Clever, right? Or not, so maybe a bar graph? Let’s skip that too.
Instead, why don’t we begin looking for the telling questions about bill speed? Like, why do we measure bill speed? Is that a “dumb” enough question to qualify for Design Thinking? It’s a starting point, anyway — an entrée into the bill speed question taxonomy.
Note that here we are directing questions towards ourselves. Doing full scale Design Thinking, we would extend the inquiries deeply into the user population and “pay no attention to the man behind the curtain.” But to get a feel for the kinds of questions that flow from Design Thinking, these “thought experiments” on ourselves will do for now.
So, again, why do we measure bill speed? Is it because it’s important to revenue streams? Indeed, to push the inquiry, might we do a little research or maybe even examine our own data, to find if there is a correlation between the speed with which a bill is issued and the percentage of the bill that gets paid. If you bill sooner do you get paid more? Do we measure bill speed because we want to reduce it and thereby increase revenues?
If you’re good at BI, these questions are probably natural and you work through them all the time with different measures. But you can go much further using Design Thinking techniques.
For example, who is the bill speed measure meant for? Upper management, right? They’re probably the one who asked for it. But is it really for them? Why, again, are we measuring bill speed?
Aren’t we really trying to influence the behavior of those lawyers who prepare the draft bills, to get them to do it faster? So, we care about what’s in their head, right? Design Thinking would tell us they’re the real customer here, so we should be inquiring about their emotional state, their deepest feelings and beliefs. They’re the ones we really ought to be interviewing.
We can go a long way plumbing the depths of lawyer experience. And, in the limited space of this chapter, we don’t have time to work through all the possible questions we might ask, much less actually chronicle the interviews. So let’s cut to the chase. Here’s what you’ll find if you did do those interviews.
After we got deeply enough into lawyer headspace, we’d find that law school was a fiercely competitive grind and that it has left a permanent mark. It both preselected candidates who are sensitive to relative positions in their cohort and it further conditioned graduates to be even more sensitive to relative rank. We would see high levels of sensitivity in connection with LSAT rankings while applying for school, in class rankings during school, and in the most certain ranking method found inside law firms after school is done — compensation. Not all lawyers are driven to maximize compensation. But a close enough study of lawyers would reveal that all are attuned to their relative rank in the firm, just as they were in law school. Once you bang around in lawyer heads long enough, you can see that relative rank evokes powerful emotions and can therefore act as a powerful force for change.
And understanding that about lawyers gives you another question to ask. In influencing lawyers to change habits like bill speed, what if we measured in relative terms, just as was done with the LSAT and in law school? What if we measured bill speed in, say, percentiles, with the fastest lawyers in the highest percentile rankings? Might that make a strong emotional connection with our users, something strong enough to influence behavior?
That’s the kind of question that let’s you begin an experiment — exactly the kind of experiment contemplated by Design Thinking. What you may find, if your lawyers are like the lawyers at the firm where we tried this experiment, is that relative ranking is a very direct way into the heads and hearts of lawyers. They care about it and will change behavior significantly to alter rankings. In our experiment, while absolute measures of bill speed remained essentially unchanged for years, relative ranking improved firm wide bill speed averages by more than seven days within the span of six months. And that drops money to the bottom line, both as a function of the time value of money and of increased collections percentages. Using empathy to find emotional tipping points pays.
This example is not to tout a particular way to measure bill speed. Rather, it illustrates the process by which that way of measuring was arrived at. And note that empathy doesn’t always mean doing something a customer wants. Remember, no one was asking for iPhones and no lawyers were asking for relative rankings. But empathy does entail getting as deeply into the point of view of your subject as possible — becoming them in some sense of the word. And that skill has as much a place in BI as it does in any design discipline. Indeed, if it’s not present in BI, it may be that you only wind up measuring things you can’t change.
Back to the Why of BI. We don’t think of bill speed as a change or die proposition. Well, maybe — if your firm bills so slowly it’s in danger of starvation. But remember, we were talking about questions that go to the heart of the delivery of legal services. What might applying Design Thinking to those most fundamental propositions look like?
Let’s start with a really stupid question, one that’s highly likely to provoke acerbic responses from the lawyers themselves, particularly if you’re senior enough that they think you should know this.
What does a lawyer do?
I would contend that question is so basic that even most lawyers can’t answer it, because they think they already know the answer. If you asked a lawyer “What do you do?” They might say something like “I represent high technology companies in the acquisition and protection of their assets,” or “I litigate complex disputes, mainly in the financial sector.”
And those answers would be right, but they’re incomplete. They certainly don’t go far enough to give you any hint as to what you might begin measuring to foster needed change.
So, again, what do lawyers do? If you worked your way through all the firm lawyers and back to a law department, you might get a different answer about what outside lawyers do for the companies they represent. A law department lawyer might say that outside law firms help them avoid problems and manage the problems that do occur. And by problems, mostly law departments mean lawsuits, regulatory hurdles and the like. Those are the day-to-day concerns of in-house lawyers. They might also say that outside lawyers spend their company’s money.
Legal spend, you must know, is something everyone measures, inside and outside lawyers alike. But you can go much deeper than that and begin to get to real meaning.
Once you plunge deep inside a corporation, away from lawyers altogether and into the heads of those who create strategies for our corporate clients, you begin to get at what lawyers really do. A Peter Drucker-trained manager might say that lawyers help companies manage risk. Every day businesses continually encounter, create, trade and arbitrage risks. In some senses, risks are the real currency of business. As Ducker said:
“Strategic planning is the continuous process of making present entrepreneurial (risk-taking) decisions systematically and with the greatest knowledge of their futurity; organizing systematically the efforts needed to carry out these decisions; and measuring the results of these decisions against the expectations through organized, systematic feedback.”
Notice how central information gathering and measurement are to the management of entrepreneurial risks. Those are BI functions and they need not stop at the boundaries of the corporation. Indeed, because lawyers help companies manage risks, it would seem imperative that law firms also measure their impact on pools of risk.
We see some firms beginning to do this when handling large litigation portfolios, mainly in the financial sector. The notion of “risk weighted exposure” is an effort to arrive at a present value risk exposure for a single suit all the way up through an entire portfolio.
That’s an important undertaking in that it permits the client corporation to make large-scale decisions in the process of managing risk. Once it is quantified, risk can be leveraged, hedged or mitigated in any number of ways.
And here again, law firms who ask stupid questions can begin to aid the corporation in managing risks. Here’s a stupid question you might ask: “As against a multi-billion dollar portfolio of risk weighted exposure, are there any causes of action, defenses or counterclaims that markedly increase exposure out of normal ranges?”
Experience shows that, at least in some portfolios, the answer is yes. Some defenses, for example, have out-of-scale impacts on both cost and schedule. And that bears on the type of legal advice a firm might want to offer. If fraud counterclaims or defenses have an extraordinary impact on cost, might a firm consider not raising every colorable fraud claim it encounters?
Apply that kind of filter across an entire portfolio and a firm might begin to reduce overall risk-weighted exposure by significant amounts. Similar approaches might work after running regression analyses against deal terms and litigations, or various regulatory undertakings. And all of this arises from the question of what lawyers do.
The simplest questions, the stupidest, if you will, are the ones that present the most opportunity. And the canvas is still largely blank, waiting for a BI artist to finally do something transformational to the relationship between lawyer and client. All you have to be willing to do is think like a designer, and ask stupid questions.
It may be that you’re not in a position now to take questions all the way past the law department and to high officers inside client corporations. But you can begin applying a Design Thinking methodology even on the most prosaic measures and achieve sometimes stunning results. The key is to be willing to venture past yourself and your own cohort and delve deeply into the heads and hearts of the people you most need to understand.
The key is empathy. And it unlocks transformational change.
