The Role of Data Analytics in Legal
Data analytics, as a concept, has existed in statistical terms for decades, telling us how to go from big piles of numbers to finding patterns to making inferences. Its use in the business world seemed to truly take off in the 1990s with the advent of computing power that could handle big data and Internet availability. Suddenly, you could collect data about your business through your customer interactions and use sophisticated algorithms to figure out how to do things more profitably. This made good business sense, as it put you ahead of your competitors.
Today, data analytics is used by all kinds of businesses, including law firms, to best understand their clients and their needs . Law firm data analytics may be used for anything from understanding your billing practices to understanding who in your organization needs what kind of training so that you can use your resources most effectively. To apply data analytics to the legal process, a firm must change the way it thinks about data. Adjusting the perspective of how we look at data in law firms is one of our main goals in presenting this material.
Data about clients, cases, costs, revenues and everything else is collected in the normal course of law firm business. What we need to do as a firm is take an integrated look across that firm at all of those pieces of data so as to be able to draw conclusions and gain insights that help us serve clients better and run our business more efficiently.
How Law Firms Can Leverage Data Analytics
The adoption of data analytics into firm practice elevates concern from regulatory bodies and clients alike. In-house, General Counsel and hi-tech leaders have begun to regularly question their law firms about their analytics and data management expertise.
Key Benefits of Data Analytics for Law Firms: A Distillation
Driving Profitability
Data analytics can direct process towards the most profitable assignments. This is often a surprise to law firms that think they already know their best and most profitable clients. The ability to determine the most valuable segment of client cases requires a closer analysis into realized value by client, case type, and a wide variety of other areas. This means looking at the results of multiple case outcomes, rather than a single case evaluation or simple margins calculations. So-called "least-pain" clients are often those that consume the greatest resources on the firm side, while less volatile clients produce the most consistent revenue for the practice in line with firm expectations. Strategic handling of cases by recognized "high pain" clients can avoid large spikes in effort to manage an outcome and provide a much more predictable and profitable workload.
Improving Internal Operations
Information culled from operational analytics should be used to allocate the firm’s resources more effectively. Access to big data leads to superior practices that drive a better quality outcome, on a timely basis that serves to meet a client’s expectation of service quality and cost. The result is greater client satisfaction. This is a key area of analytics. In fact, a firm’s operational success is directly related to the level of refinement of their operations analytic capabilities. Better data, through more sophisticated data collection and analysis procedures, will certainly be needed and firms should begin the process of implementing new measurement metrics now.
Responding Positively to Clients’ Law Department Needs
Law departments want to know if the law firm they hire is using the best possible technology and analytics to provide superior results. It is worth noting that the impact of data analytics tools and process within law firms now extends beyond internal decision-making to encompass all external communications with a firm’s clients. That is, law firms use analytics to assess their own operations and make decisions about resource utilization, but they also apply data analytics to their client facing communications and marketing strategies. As such, law firms now view data analytics tools as crucial to their successful client relationship development efforts. Firms are now using their analytics to set sales targets, plan key client development activities, and manage relationships among stakeholders in those accounts. Yes, law firms use data analytics to better understand their clients, and to proactively identify new opportunities that may have yet to be considered by the client. There are many law firms using analytics to forecast client needs (and thus improve client services) before the client even thinks of them.
Driving the Marketing Plan
In recent years, more law firms have invested in market research and business intelligence, so the market has become noisier and harder to interpret. Law firm executives have seen more data, yet they are working privately to decipher the meaning of the information they have. Law firms must be careful to use insightful planning data that includes external, objective, independent data sources, and not look only at the firm’s internal data set. Competition in individual markets is driving firms to leverage analytics: the majority of sophisticated law firms serving large businesses and leading corporations now use data analytics to define their marketing and sales targets.
Key Data Analytics Tools for Law Firms
Data analytics applications are becoming more sophisticated, resulting in a market full of applications that boast specific features to help law firms handle their data and legal matters from many different perspectives. The majority of these applications are produced by software companies, which offer a range of products that can be purchased separately or as a package or suite over time, adding functionality as needed. So whether your firm is looking for a single feature or a comprehensive suite, there are applications designed for every need.
Amlaw247.com lists the following platforms:
Contract Analysis – Analyzes legal documents and extracts relevant information using various techniques, functions, and algorithms such as Natural Language Processing and Machine Learning.
Data Visualization – Helps users understand complex data by representing information in a visual format.
eDiscovery – Provides comprehensive tools for discovery, review, and production.
Litigation Analytics – Involves statistical analysis of litigation data so that users can better predict the costs and outcomes of their cases.
Matter Management – Organizes data, documents, and notes for legal matters.
Research – Information discovery and sourcing.
Legal Document Automation – Used to draft and assemble contracts, agreements and legal documents.
Knowledge Management – Storing, searching and retrieving the vast amount of information law firms collect.
Business Intelligence – Analyzes data to track performance, trends, opportunities and risks across the organization.
Some of these platforms stand alone as single applications, while others are modules within a comprehensive product suite. One area that stands out as separate from the group is data visualization, since it’s primarily used to display data in a range of compelling visualization formats without processing or analyzing the data itself (although data analytics platforms can usually create compelling data visualization). Data visualization software is useful at every stage of the legal process, from displaying the eDiscovery process visually (like a flow chart) to organizing the final contract drafts so clients can clearly compare between versions.
These tools often have subscription pricing based on the number of users, licenses or volume of data as well as the range of features. With the growth of innovative legal technology, strategic use of data analytics is a growing priority in law firms, so review and research the options that will best meet the needs of the firm now and in the future.
How to Go About Implementing Data Analytics
To embark on the journey of harnessing data analytics to revolutionize law firms, companies must first address the fundamental question of what information and insights they want from the analytics initiatives. The primary objectives should be clearly defined to ensure that the data collection process becomes precise and targeted. After clarifying your objectives, the next step is to identify the data sources that contain the most relevant information. From docket data to financial information, marketing data, and management reports, the goal should be to centralize these disparate data sources into one convenient platform. Once you’ve identified data sources, the next step is the selection of an analytics software . Thankfully, a plethora of data analytics and visualization services exist for the legal sector, including business intelligence dashboards and specialized legal technology analytics. This enables organizations to glean insights from data without worrying about the technical details of extracting, cleaning, or merging the information. No matter how good the software is that you choose, it won’t matter if no one is willing to use it. Ensuring the effective implementation of data analytics would not be complete without a plan for communicating the benefits of the analytics project to staff and convincing them to use it. This may involve holding meetings with employees at all levels, further developing use cases, designing training programs, and establishing guidelines for documenting the usage of the analytics system.
Common Obstacles and Considerations
Considerations and Challenges for Law Firms to Consider in Harnessing Data Analytics to Revolutionize a Law Firm
As with anything, there are challenges in using data analytics in a law firm. Some will resist changes from the old way of doing things. While comfort with the status quo is natural to some degree, people in your firm will need to be willing to try new things and get over their fears of the new normal. Privacy and security issues abound with respect to data collection and how that data is used. You will need to develop your own internal policies on data privacy and security. Your clients may have issues with data privacy and security. You will need to work to address these concerns and help assuage their fears about the risk to their data. Financial considerations are also key. How much can you afford to spend to use data analytics? How much are you willing to invest on this technology? Some will argue that this is another expense that will take away from the bottom line, but those who see the value will persevere. On the other hand, those who view the benefits of data analytics will learn to adapt to it over time and see it as a way to improve their competitiveness and profitability.
The Future of Legal Data Analytics
As law firms have invested more into data analytics and have begun putting together sophisticated systems of client relationship management, assessing their own performance, predicting case outcomes, and overall being able to make data-based decisions faster and with greater accuracy, the next phase of this technology is bound to happen. Existing technologies tend to direct you towards the next obvious decision based on historical data. Future systems will directly prompt you with scenarios that require a choice to be made to advance a case or the representation of a client. That is when these tools will actually start freeing up lawyers as opposed to simply making them more efficient.
Imagine having a legal depositary of all past cases/data from every lawyers in your firm and external information as well. These systems using artificial intelligence and machine learning would generate a list of possible actions to advance a case and allow you to filter by title (partner, senior associate, junior associate). Your job would be to review the options and have a conversation in real time with your team (and potentially even the client) to select the next action and its priority. Similar to our "game plan meeting" in interpersonal settings (but much more efficient). This advancement is on the horizon , and will be much more valuable than any technology currently available on the market.
We’re not quite there yet, and for many firms, the current implementation of data analytics may be more than sufficient. It simply depends on how each law firm intends to use the technology of not only handling a case but also handling the firm as a whole. A bloated firm would benefit from a simple system that could predict when a person might be self-promoting to partner, while a leaner firm (with no promotion tracks) could be more productive using systems that analyze workflows and internal efficiencies. There is not a one size fits all solution when it comes to data analytics. But more clearly; more quality data means more quality analysis and predictions. Investing time and resources into gathering data and creating a sound system around it, should yield return on investment for many years.
Not only do these systems advance the quality of legal representation for clients, they advance the legal profession. Lawyers who often find themselves in a situation where not all the facts are reported or known, will be able to investigate so much deeper and get closer to the correct outcome. This will undoubtedly make law firms more effective which, over time, will raise the standard of representation as a whole. The legal industry will evolve, and those who embrace the evolution will be leading the pack.
