“It is a capital mistake to theorize before one has data.”—Sherlock Holmes
Digital business runs on data. It is a multidimensional asset whose value transcends internal functions, supply chain, enterprise, customers, competition, society— even the planet. Perhaps that’s why a 2017 Economist article dubbed data the world’s most valuable resource.
Data is critical to rapid, informed, decision-making, prognostication, and risk assessment. Advanced mining and analytics provide critical insights into talent, operations, performance, competition, markets, customers, risk, and a legion of other critical areas. Data, in concert with change management, technology, collaboration, diversity, talent, and customer-centric corporate purpose and execution, is central to digital success.
Data does not render judgment; it informs and enhances it. Data provides a distillation of collective experience providing insight to the past, navigating the present, and projecting the future. Carly Fiorina, former CEO of Hewlett Packard HPQ 0.0%, observed, “The goal is to turn data into information, and information into insight.” Data is only as relevant as what it measures, and data mining and analytics, likewise, are only as material as the quality of human judgment applied to problems worth solving. Data is not about report generation and flashy dashboards but material, actionable insight that makes things better for customers. Like evidence, data must be relevant to a material issue, challenge, or opportunity.
How important is data? A McKinsey report found data-driven organizations are 23 times more likely to acquire customers; six times as likely to retain customers; and 19 times as likely to be profitable as a result. How valuable is data and the ability to interpret it? Salesforce paid $15.3 billion to buy Tableau Software, a Seattle-based maker of tools that convert arrays of numbers into understandable charts, graphs, and maps. Tableau converts data into information that is critical to informed, rapid business decisions.
Data’s impact is elevated when it is embedded into enterprise culture. Data mining, analytics, and protection are central operational elements within and across business units. The most digitally mature (read: successful by any business metric) companies and organizations have done just that. Two notable examples are Amazon and the Bill & Melinda Gates Foundation.
Jeff Bezos’s obsession with customers is legendary. So too is his fixation on data. The two are interconnected; data analytics provides critical information that is foundational to customer insights. Bezos architected a culture of customer-centricity and measuring everything that could be measured. He believed that things don’t improve unless they are measured. The Amazon culture democratized data access across the enterprise and workforce to promote frequent and early-stage testing, exchange of information and ideas, and innovation.
The Gates Foundation adopted a similar open, data-backed culture that extended to its funded partners. It reasoned that sharing high-quality data promotes better understanding of problems worth solving and facilitates more effective and efficient ways to do so. Data sharing blunts bureaucracy, hierarchy, and fear of failure.
A Fit-For-Purpose Legal Culture Is Data-Backed
The legal function, unsurprisingly, lags business in data mining and analytics.
A study by the business analytics RELX Group polled 1,000 U.S. senior executives across the health care, insurance, legal, science, banking industries as well as government. Law finished last among industries—just ahead of government—in utilizing big data in some form. This compromises the legal function’s ability to operate as a business and to collaborate effectively with other business units for whom decisions are data-backed.
Law’s failure to harness the power of data mining and analytics is one of several interconnected factors widening the digital gap separating it from business. The 2021 EY/Harvard survey found that 61% of CEO’s are pushing for a more data-backed approach to risk management and 57% of business development leaders responded inefficiencies in the contracting process negatively impact revenue recognition.
Law’s insular, lawyer-centric culture, idiosyncratic language, technological primitivism, lack of internal and cross-functional collaboration, fiscal accountability, value creation, speed, agility, transparency, proactivity, and customer-centricity all contribute to its misalignment with business. This not only negatively impacts the legal function’s performance but also adversely impacts the enterprise and its customers.
What’s to be done? There is no quick, one-size-fits all solution to solving law’s digital gap. There is, however, much it can learn, borrow, and adapt from business and its digital journey. Here are a few examples focused on data.
Create A Data-Backed Culture. Legacy legal culture is as outdated—if not as happily anachronistic— as the quill pen. It prizes experience and longevity that supports its pyramidal structure, hierarchical organization, and economic model. Experience is usually derived from the individual perspective, not institutional or industry knowledge; is not widely shared; and is related ad hoc. Legal recommendations and prognostications frequently derive from anatomical parts—“my gut tells me” or “my nose tells me.” They are seldom offered in the early stages of an engagement but after a protracted process of contract negotiation, litigation, or other torturous legal gymnastics. Legal culture assiduously protects its protracted, uncertain, costly, opaque, and artisanal modus operandi. Such a culture is inimical to satisfying the needs of digital business and its customers.
The legal function must undergo a cultural transformation that starts with customers and satisfying their objectives, not with lawyers and the preservation of their guild. The purpose of legal services is not to produce the best possible legal product but to provide actionable, data-backed insight that proactively identifies and/or mitigates risk, extinguishes it quickly when it occurs, and alters processes and behaviors to avoid recurrence. A data-backed legal function is one that advances these objectives. Data is an essential element of customer-centricity and a cornerstone to providing fast, efficient, informed, predictable, accessible, cost-effective, and fit-for-purpose legal services and products.
Data Architecture Should Reflect Corporate Purpose: A Better Customer Experience. Data is a means to an end, not an end unto itself. The legal function, like business, must create a data-backed culture and architecture designed for customers and society. How can legal access, analyze, apply, share, and protect data to enable faster risk detection, mitigation, and early-resolution as well as better-informed decision-making that positively impacts the enterprise and its customers? One way is to anonymize data and share it across different industries to aid in the development of predictive models that help manage legal risk more effectively. This will positively impact business and its customers.
Data Enhances Judgment; It Does Not Substitute For It. Many lawyers regard data as a threat to their livelihood, not as evidence to back their recommendations. Data does not replace professional judgment; it enhances it. Harnessing the power of data requires professional judgment and collaboration of legal, data analytics, business, tech, and other professionals. For law, this is principally a cultural issue. It must morph from a mindset of “lawyers and ‘non-lawyers’” to an agile, multidisciplinary, cross-functional, business function that is aligned with corporate purpose, integrated with other corporate functions, and focused on customers.
Data and Legal Operations. Legal operations— applying the basics of business tools, processes, and metrics to the delivery of legal services and products—is an amalgam of data, multidisciplinary expertise, process and project management, technology, agile workforces, and a customer-centric mindset. It uses data to streamline internal operations, benchmark, and provide insight to legal practitioners. To be effective, legal operations must have the support of those leading the practice function. Legal practice and operations must be seamless, integrated, and aligned in a common purpose: to serve the business and its customers (the end-users of legal). Data plays a critical role in this process— in the business of law, the practice of law, and the legal function’s collaboration with other business units.
Data and Legal Practice. Data-driven legal functions not only streamline the business of law, but they also transform its practice. This involves applying data to challenge existing practice paradigms. Examples include litigation, contracts, and risk management, the three largest areas of legal spend.
Advanced data mining and analytics in litigation enables early-case strategy formulation, accelerates meaningful settlement discussion from the back to the front end of the process, and reduces late-case surprises. In the contract area, data streamlines drafting/negotiation process—thereby enhancing sales and customer relations— by identifying key points of contention as well as causes of litigation. Data use can also play a key role in compliance by facilitating proactive problem detection and remediation.
Data-backed legal practice will not marginalize lawyers, but it will require fewer of them to engage in “legal” work and elevate the importance of those with differentiated skills, expertise, and judgment. Most importantly, it will benefit business and its customers by compressing protracted legal processes, making them more predictable, and enabling lawyers to focus more on value creation and less on avoidable problem remediation.
- Data and Value Creation: Data mining and analytics enables the legal function not only to better defend the business but also to collaborate with other business units to create value. A data-backed, digitally-mature legal function is not only internally efficient (see legal operations, above) but also collaborates with risk management, compliance, HR, sales, marketing and other business functions to create enterprise value. A recent data study by the World Commerce and Contracting Organization (WCC) examined the business impact of advanced data analytics and data flows. The study revealed groups that employ advanced data analytics and data flows are more than twice as likely to gather and use data that contributes to the management of risk – specifically:
- Risk management indicators based on portfolio analysis
- Contract leakage and cause analysis
- Risk mapping and scoring
- Advanced approaches to knowledge capture and sharing
Legal Is Sitting On A Vast, Untapped, Data Mine. The legal function is sitting on a vast, untapped gold mine of data. “Legal data” has application to other business units—HR, Compliance, Risk Management, Sales, and marketing, among others. Likewise, data stored in other business functions can have efficacy for legal and other business units. Data is an enterprise resource whose optimal value is achieved when it is accessible to cross-functional teams collaborating to tackle “wicked problems” or opportunities.
Benchmarking. Benchmarking is rating one value by comparing it to a standard or point of reference (i.e. best-in-class, top quartile, industry average, or a specific competitor). It occurs on three levels: past present, and future. Benchmarking substitutes performance for pedigree, objective for subjective comparison , and insight (into internal, competitor, and industry norms and variations) for conjecture and speculation. Benchmarking is essential to creating a culture of continuous improvement that positively impacts business and its customers.
Data And Talent. Law has relied on subjective criteria to evaluate talent. Pedigree, longevity and input are its focus, not skillsets, impact, and output. The legal function is in the early stages of a talent war. This presents a challenge as well as an opportunity to reassess what talent means in a fit-for-customer purpose legal function. Data will play a critical role in talent assessment—for providers and customers. Why should we have access to performance data on our Uber UBER -2.8% driver but not our lawyer?
Data And Customer Satisfaction. Net promoter score (NPS) is an established business market research metric. It rates the likelihood respondents would recommend a company, product, or service to a friend or colleague. Law has historically assessed its own performance. Business is now its judge. That means that the legal function must use data to measure the satisfaction of the business, not lawyer self-satisfaction. A data-backed legal culture will improve customer satisfaction by elevating the legal function’s contributions to business, its customers, and society.
The Romans had a saying: “experience is the best teacher.” Data provides insight to collective experience that helps interpret the past, shape the present, and predict the future. Data will not put the legal function out of business. Failure to use it will.
This article originally appeared on Forbes.com