“Data is the oil of the digital era,” proclaims a 2017 Economist article. Big business—especially tech giants like Alphabet (Google’s parent), Amazon, Facebook, and Apple among others—are mining data like Standard Oil processed petroleum a century before. Why is the legal industry still running on gut and instinct while the businesses it serves are propelled by data?
A recent survey by business analytics powerhouse RELX Group polled 1,000 U.S. senior executives across health care, insurance, legal, science, banking, and government. Law finished last among industries—just ahead of government—in utilizing big data in some form. Of the law firm leaders surveyed, only 44 percent said they offer employee training on big data, artificial intelligence, and machine learning. Law also lagged in its use of AI/machine learning and automation adoption.
How can a trillion-dollar global industry that serves the largest, most tech-savvy businesses remain a data wasteland in the digital era? Short answer: legal culture and the myth of lawyer exceptionalism. Law has
- A traditional labor-intensive, leveraged approach that supports the traditional partnership model, sustains profit-per-partner, and is the cornerstone of its resistance to change.
- A growing misalignment with business, especially its reliance on data.
- Limited investment.
- Spurious correlation between data and confidentiality. (For an extreme example of this, see the recent French Government ban on the publication of statistical information about judges’ decisions that carries a five-year prison sentence for violation).
No matter the source of law’s resistance to data, legal consumers—especially corporate ones—are increasingly demanding that legal providers base their recommendations on data, not hunch. Their counsel must also be proactive, predictive, holistic in assessing risk factors, fast, differentiated, and cost-effective. Data is crucial to satisfying clients’ mandate.
Why Data Matters
Data is critical to rapid, informed decision making. It is essential to understanding an organization’s customers—their changing needs, threats, competition, objectives, and satisfaction. It is also essential to streamlining internal operations, proactively identifying and mitigating risks, gauging performance and reward, and fashioning individual and collective benchmarks from which to measure and catalyze constant improvement. Data is a resource of and energy source for business. But not all data is of equal value. It must relate to relevant information and be collected and analyzed in ways that help drive rapid, fact-based decisions. This is where data and technology intersect with human analysis. This process is essential in today’s warp-speed business environment. Law has been slow to adopt data analytics, but that’s changing.
How important is data? A McKinsey report reveals 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 just
ponied up $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 is big business—and not just for tech giants. Consider that the fastest growing segment of the global gig economy relates to data-based jobs once performed by white collar workers in prosperous countries that have migrated to workers in poorer ones. This is often referred to as “the human cloud.” The Economist reports it is a $50B per year industry that is growing rapidly. Data is transforming labor sources and democratizing the ability to generate actionable information.
Why should law be immune to this global transformation? It’s not—except in the minds of many lawyers for whom data is something they eschewed when they chose a legal career. It’s ironic that lawyers—steeped in burden of proof, evidence (vetted information), and persuasion—would not be among the first industries to embrace data mining and analytics not only for internal purposes but also as a basis for competent and zealous representation of clients.
Why do lawyers generally resist data? There are several explanations: legal culture, lawyer hubris, conservatism, an economic model that has historically rewarded input (labor intensity) not output (results), lack of investment in new resources (both human and machine), and resistance to melding the practice of law with the business of delivering legal services.
Data, like technology, has no intrinsic value. It acquires enormous significance, however, when it is mined, parsed, and turned into information that is analyzed and crystallized by data analysts. Carly Fiorina, former CEO of Hewlett Packard, noted that: “The goal is to turn data into information, and information into insight.” The business world derives much of its insight from this process; the legal industry does not. This is one of the central points of misalignment between most legal providers and the clients/customers they serve. It is also a key reason why the Big Four, UnitedLex, and other data-centric legal providers are capturing increased market share: They are data driven.
Law’s Data Sources—A Sampling
Nicholas Bruch, a former Senior Director at ALM Legal Intelligence said, “The legal industry is getting better at using data, but we are far from where we need to be. To tackle its big issues, legal providers—whether in-house, firms, or new providers—need data and smart people who have a data analytical background. This involves financial investment, cultural change, and a willingness to rethink long-held beliefs when the data suggests those beliefs are misplaced.” Bruch has written thoughtfully and extensively about data and the need for more broadly-based legal industry adoption. He is now, to borrow from LeBron James, “taking his talents to Ernst & Young” and it’s a safe bet they will be leveraged as EY and its Big Four compatriots expand their legal industry footprint.
Lisa Hart Shepherd, CEO of Acritas, founded the survey company in 2002 exclusively to service the research needs of professional services firms. Acritas has been running a 12-year-and-counting global GC research study comprising over 2,000 telephone interviews a year across 50 countries. The data amassed has enabled firms using it to profile how the needs, behaviors, and attitudes of legal services buyers have changed and how their firms measure up in meeting those needs.
Acritas has collaborated with the likes of Thomson Reuters, Major Lindsey & Africa, and the International Bar Association, among others, to provide market intelligence on a wide array of topics including: standout talent, corporate law departments, new-model providers, diversity, sexual harassment and bullying in the legal industry, and legal department metrics among a wide array of other topics that shed light on the industry and its culture. The company’s impressive client base and global reach evidences the growing appetite that leading providers—and that includes law firms, in-house departments, and new-model providers—have for leveraging data for internal and client-facing advantage.
Ms. Shepherd offers useful perspective on data, noting that it can be “that guiding light that enables leaders and other decision-makers to cut through debate and add evidence to support chosen direction. Without it, the requirement to drive change becomes an impossible challenge.” She notes that while leadership tends to be more receptive to embracing data, the problem is often in rank-and-file adoption. This is emblematic of law’s deeper cultural issues and the resistance of most legal professionals to change.
Jason Ku, founder of London-based Aspirant Analytics, is a pure-play data analytics company that launched three years ago with a focus on law firms and talent management. The company already boasts a roster of top-tier firms that include Allen & Overy, White & Case, Shearman & Sterling, and Dentons. It has plans to move into the in-house and new-model provider space as they have a similar need for its services.
Ku, a McKinsey alumnus, asserts that “”Data analytics, done right, provides a wealth of actionable insights into your business. It is a different kind of storytelling, one that is new to the legal sector but well-established in other industries that rely on it as a basis for internal and client-facing decision making.”
Data/analytics, like technology, is not a panacea. It requires a use case that is material to advancing efficient, reliable, fast, and scalable processes that, ultimately, benefit the client. Data/analytics and technology are no longer elective courses; legal providers must adopt, embrace, and utilize them to service clients in the digital age. Data and technology are essential components of internal and client-facing delivery.
Data analytics will shine a bright light on, and ultimately remove, the dark cloud of incumbent legal culture and its client misalignment. The questions are: will providers invest in it both on a technological and talent management basis? Will they adapt to the data and use it as a basis of making decisions that will drive internal change and more effective client delivery? These are existential questions for all legal providers, ones that many have yet to answer much less to focus on. One thing is certain: in the digital age, legal providers that fail to make this investment will be unable to compete with those that do.