Big Data: Big Deal or Big Win?
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Big Data for Law Departments
Most law practices are by nature reactive. The in-house counsel don’t know in advance what products liability suits will be filed or what transactions management will pursue, so the lawyers stand ready to tackle whatever might come their way. But some in-house counsel are looking into the business itself for leading indicators. One in-house lawyer I recently interviewed reviews production quality control data with manufacturing line managers in order to better understand that nature and frequency of product defects that are likely to have shipped. She combines this with customer service call histories, which are coded by product lines and model numbers, to chart the emergence of these potential defective products. This insight allows her team to develop proactive strategies, from product recall to settlement analysis to hiring defense counsel in advance of the first suit. Another General Counsel sits periodically with his colleague, the VP of strategy, to review the list of potential acquisitions, and then his team compiles a very brief dossier on each target indicating the relative legal complexities of the transactions. Not exactly deep analysis, but a step in the right direction.
More advanced legal departments seek to identify patterns related to positive legal dispositions, and then redirect outside counsel in related matters to apply the techniques that have worked elsewhere. Others employ predictive analytics to more quickly identify when a case should be settled rather than litigated, and employ other predictive analytics toaccelerate the settlement negotiation process. Craig Raeburn of TyMetrix, which provides data and analysis to law departments and law firms, confirms that “using benchmark analytics to improve performance and transparency and create competitive intelligence is the next great frontier in the legal industry.”
Big Data for Managing the Law Firm Business
One of the more ridiculous tenets of law firm business generation is that “all revenue is good revenue.” In a disciplined corporate environment, many top rainmakers might be perceived as marginal contributors because the deals they bring in, while numerous, may incur high costs to service and therefore the contribution margin of the work is dilutive. But law firms typically reward origination, not profitability, so a partner generating $5 million in new fees with a profit contribution of $0.5 million often will be rewarded far more handsomely than a partner delivering $1 million in profits on a $2.5 million book of business. By adding the cost of delivery and the cost of pursuit (what it takes to win the work) to a matter’s hard costs and allocations, and then comparing this against the top line revenue, law firm leaders are better able to identify the matters, and the lawyers, who contribute the most to the bottom line.
Read original articleTags: defective products, Law Firm, Predictive Analytics
