Last updated on August 12th, 2015 at 02:38 pm
With many law firms deciding they will “go digital,” they are plunging ahead because it’s this week’s new thing that everyone else is doing. But many firms were not taking the time first to develop a vision and using it to form a coherent strategy. Perhaps even worse, many firms didn’t even establish a definition of what they were doing or why they were doing it by going digital.
The result has been a lot of confused back-and-forth on how best to proceed, leading to prolonged discussions in many firms around secondary questions such as “Do we do eDiscovery?”
So a new think piece from McKinsey & Co. poses an intriguing and timely question: What does it actually mean when law firms and other businesses as diverse as heavy manufacturers, insurance companies and corner dry cleaners all say they are “going digital”?
For some managing partners and firm leaders, it’s about technology. For others, digital is a new way of engaging with clients. And for others, it is seen as a different way of doing business.
“None of these definitions is necessarily incorrect,” write Karel Dorner and David Edelman in their white paper. “But such diverse perspectives often trip up leadership teams because they reflect a lack of alignment and common vision about where the (firm) needs to go.”
In fact, it needs to mean all three for law firms.
In reality, digital simply is about defining ways to unlock growth by connecting with clients as part of meeting their rapidly shifting needs and expectations.
How a firm might interpret or act on the definition will vary: A global gant will come up with quite a different answer than may a local firm with one office and 30 lawyers. But by starting with a clear understanding of what digital means will enable a firm’s leaders to develop a strategy of how it can be used to capture value. Yet as is the case with many things in the NewLaw era, “value” will be – must be – defined by clients, not the firm.
In other words, digital needs to be viewed less as a thing and more a way of doing things.
Dorner and Edelman say there are three attributes to adopting this approach as a way of doing business in the law firm.
One is to create value around the edges of the legal profession. Another involves creating value in the processes that execute a vision of the client experiences. The third entails building capabilities that support the entire structure.
“Being digital requires being open to re-examining your entire way of doing business and understanding where the new frontiers of value are,” the pair of McKinsey consultants write.
For some law firms, this may be about developing entirely new businesses in adjacent categories. For example, we recommended to a firm we worked with in 2014 that it address this complicated question by splitting itself into five business units. One piece included its current high value, premium work. Then, it hived important files but which clients perceived of as having a low value into a new unit with lower operating costs. Then it launched a third unit where some routine work could be commoditized and monetized. A fourth business group was created solely to look for ways digital and other innovations might be developed and exploited by the firm to add value to its clients.
Yet other firms may find a much simpler answer that could simply involve identifying and going after new value pools in existing sectors.
Creating Value 101
Dorner and Edelman suggest the one common denominator in “going digital” means being closely attuned to how a client’s journey in decision-making is evolving. The implications of this are self-evident: A firm must truly understand how the expectations of its clients are developing regarding the firm and its lawyers so they can get and stay ahead of trends that, in the client’s mind, can deliver or destroy value.
At its core, digital is about implementing a dynamic where processes and capabilities are constantly evolving based on inputs from the client, fostering ongoing loyalty.
According to the McKinsey paper, making this happen requires an interconnected set of four core capabilities:
- Proactive Decision Making – Relevance is the currency of the digital age. It requires making decisions that deliver content and experiences that are personalized and relevant to a client. Like nature, digital abhors a vacuum but some law firms are notoriously slow at making a decision because they still rely heavily on first find consensus. This makes managing difficult and when it comes to “going digital,” it can be disastrous because by the time something is approved the technology – and clients – have moved in another direction.
- Contextual Interactivity – Analyze how a client interacts with the firm, then modifying their interactions to improve the client’s experience. But this requires a much deeper understanding of the client than many firms have, mostly because they don’t take the time to ask key questions. “I know everything about my best client” is a statement I’ve heard over the years, but the answers aren’t so glib when I ask about a lawyer’s third- or fourth-best client.
- Real-Time Automation – To help clients complete a routine task where they don’t require the help of a lawyer requires extensive automation. Automation of how a client interacts with their lawyer can boost the number of self-service options that help resolve business issues quickly, personalize communications to be more relevant, and deliver a consistent client experience no matter the channel, time, or device. Savvy firms have been looking for ways to commoditize and monetize routine legal work – standard regulatory filings come to mind – and find ways to utilize lawyers, including junior associates, who had been spending much of their time billing for services clients are no willing to pay for.
- Journey-Focused Innovation – Serving clients well gives a firm permission to be innovative in how they interact with and sell to them. This represents a marked change from how the client-lawyer relationship has been for 100 years, and requires a fundamental shift in thinking.
There remains a key open question: Can lawyers do this? Via education, training and experience, lawyers tend to think linearly. Fact A plus Situation B equals Deal C. “Going digital” means starting with the desired end result – Deal C – and asking what is the easiest way to get there. Working backwards is a very different way of dealing with both clients and many firms’ internal decision-making process.
There are a pair of organizational, technological and organizational processes that law firms will need to adopt that will allow them to be agile and fast – something else “going digital” requires.
Mindset – Going digital is about using data to make better and faster decisions. This requires devolving decision making to smaller teams, and developing much more iterative and rapid ways of doing things. Many law firms will find these changes extremely difficult to integrate because it runs against the grain of how they have governed and managed themselves for as long as a century.
Whether any given firm has collected enough data to be able to employ it in decision-making, and whether it is willing to share what it has, is an open question.
Architecture – Going digital requires decouples legacy systems such as Word and precedent directories and files from those that support fast-moving, often client-facing interactions.
A key feature of digitized IT is the commitment to building networks that connect devices, objects and people. Done properly, it can be used to increase fees and profitability.
But like marketing, often technology is seen as a necessary but unpleasant expense in law firm that reduces a partner’s quarterly distribution and should be limited as much as possible. Over the years, I have heard some partners with lush seven-figure incomes say they won’t vote for an expenditure if it cuts their draw by $1,000 this month, so approving a costly line item that “supports fast-moving, client-facing interactions” is likely to be problematic in some firms.
Despite all of the built-in objections, reluctance and reticence that “going digital” in the proper way are likely to raise in many firms, one ace leaders hold if client retention and development.
There isn’t a lawyer practicing who is unaware of the increasing competitive nature of the business. Thus, smart managing partners and senior management in firms will be well-served to always keep linking a digital evolution with competitive pressures arising from shifting client needs, demands and expectations. In a way, it is part of the same process that is seeing mounting client pressure for Alternative Fee Arrangements or leaner law.
Firms that recognize digital requires as much of a client-driven strategy as deciding to enter a new practice area will not only end up with a better service offering, they will save money along the way and, in the end, provide something of genuine value to their clients.
If you missed it, read this column on why lawyers should embrace content marketing.