How does a law firm or inhouse team decide to purchase a piece of legal technology? One key factor is their perception of value. The challenge is that ‘value’ is not one thing. In fact, as you explore the term it slips and slides in a dozen different directions, making ROI calculations and the use of standard metrics hard to achieve.
This is because the term value, by its very subjective nature, is open to wide interpretation. Moreover, it’s a very human habit to buy things without always consciously knowing why you have done it. Yet, there has to be some scaffolding of reason, of logic, upon which to base buying decisions, or at least to judge them with afterwards. Here’s some thoughts.
As you’ll see, the reality is that ‘value’ is a basket of attributes, rather than a single thing. A legal tech product may represent to a buyer one or two of these or all, as well as others.
Clear Functional Need
Let’s start with an overriding, explicit awareness of the need for something. The use-case is crystal clear and understood, the demand for it is viscerally felt by the lawyers, the IT/KM/innovation teams know exactly what is needed to meet this need. There is direct value in having that thing, as to not have it leaves a clear unmet ‘want’.
That said, an ‘overriding, explicit awareness’ of exactly what you need is not always there. Sometimes it is, e.g. a business really knows it needs a DMS. There is zero doubt. It’s such a ‘hygiene’ issue, like having desks and chairs in an office, there can be no debate. Just being a company that sells DMSs creates value in the eye of the buyer.
But, not every tech tool is like this. E.g. Someone at a potential buyer says: ‘I was at an online conference the other day and I saw a demo for this great new contract negotiation tool that uses NLP to automatically provide the right language for our contracts.’
Sounds great. But, there was perhaps not an overt and expressed need for this thing, this capability. The business had not ground to a halt because of a lack of it. So, functional need, while it may sound ‘obvious’, is not always apparent.
Surely economic value is a slam dunk in terms of value perception? Not always, in fact very often not.
First, what is economic value? Even that is not simple. There are multiple aspects:
- tech that reduces your production costs of legal products or services you intend to sell (or provide to an internal client), e.g. doc automation or contract review tools.
- tech that reduces production costs on activities that are not explicitly sold, e.g. legal research.
- tech that is part of basic hygiene (see above), e.g. a DMS.
Some of this work above can be billed out, some cannot. And then there is the question of how you calculate economic benefits. It’s likely that most law firms never calculated the economic benefit of having a physical law library, so how can they then compare the outputs of having a great digital legal research function? Comparison needs an A and B. No real comparisons means no real ROI calculation.
That’s not to say you cannot calculate the actual financial benefits of using tech tools. You can. It’s just a complex process that most firms won’t have the time to do.
One other value aspect that should be a slam dunk is speed efficiency, (i.e. I can now do X faster), rather than economic efficiency (i.e. I can now do X for the same outputs at a lower cost).
Clients demand deals are done quickly. Tech can help there, (so can ALSPs that are dedicated to process work). Selling on speed is also easier to do because it’s more measurable. I.e. with a team of associates using this tool we can do X in Y time, which is Z times faster than before.
Although, that said, you can even game this one by a law firm throwing lots of people at a problem. A doc review exercise with two dozen paralegals on it will finish the job way faster than a team of three – so, even here tech’s impact isn’t 100% cut and dry.
Of course, then we end up back with economics. How much human labour is the client willing to pay for to get the job done at speed? How much profit do different approaches generate for the firm?
And taking another direction, speed can be part of understanding the value of things like research tools. E.g. this may not be billable work, but the improved outputs of this new NLP-driven KM tool speed up this part of a lawyer’s work, allowing them to be more productive in a very literal economic sense. I.e. speed efficiency in itself can produce both better insights – as more and deeper research is possible, and it in turn creates an economic gain as lawyers can then focus on more productive, (or more billable), activities.
Never underestimate the power of convenience. Law firms may be very serious businesses, but the people who work there are…well….people. And we need some convenience in our lives to smooth out the drudgery, the complexity, the awkwardness so often found in modern life.
E.g. a tool that helps you to visually map a deal could provide huge convenience value, helping M&A lawyers to more easily move through a merger. You can’t bill it to the client. It doesn’t necessarily give a huge economic boost to the firm, but it certainly makes a certain type of activity so much more convenient. It may also help to reduce risk by showing everything that needs to be done, and provide the above speed bonus, but what may clinch it for the buyer is convenience.
Should lawyers be focused on convenience? Yes. Law is a demanding job. Burn out is real. Tech that makes people’s lives easier clearly has real value. But again, try putting that in an ROI spreadsheet. And yet, it’s a clear value.
Service and Reliability
Why do people buy Toyota vehicles? One reason that is often given is reliability. Why do people choose John Lewis (a well-known British department store) to buy a sofa? One reason given is great customer service.
When comparing similar products there is a ton of value in these interconnected attributes. I.e. if something breaks or is not understood then you need customer service.
Again, calculating ROI on this is hard. A legal sector buyer does not know how many times they will need customer service from a tech vendor, but a lawyer knows they want any problems they have with the tech solved very easily by helpful people. You could perhaps create a spreadsheet that covers lost working time because of tech issues, but to be meaningful you’d still need something to compare it to. Perhaps in time such data will become available as firms use different providers and can then compare results.
And then we move into some of the more nebulous areas. Now, it would be great to say that no law firm or inhouse team has ever bought tech because it looked cool and then never really used it…..but that is not the case. Although, this is less prevalent now.
Moreover, is it wrong for a law firm to buy tech to ‘send a message’, even if they don’t use it? Clearly the answer is that this is not a great strategy, and yet some firms do feel the need to buy some types of tech to tell their clients they are up to date, are ‘innovative’, and can meet new demands. That in turn may provide some marketing results.
As said, this is a perverse use of tech. But, it’s no different to someone who lives in Chelsea buying a massive new Land Rover that has the ability to scale a mountain, but is only used to go to the local school. I.e. it’s sending a message, it’s a ‘fashion statement’ if you like. Not a great ROI one would say, but people do it.
Also on the more nebulous side is experimentation. This isn’t for show, but it is an area where the firm or inhouse team really doesn’t have any solid evidence for having it….yet.
The reality is that paid pilots or extended ‘test’ periods for new tech are common in law firms, with the tech being used in live client matters. ROI here is initially out of the window….after all, it’s a test.
And to bring us back to the beginning, the goal here is to ascertain value: does it provide economic gains, speed efficiency gains, convenience gains…?
Conclusion: Value is a Basket of Attributes
First, it’s clear that ROI for legal tech can sometimes be hard to explicitly show. But, it is there. Also, if we are going to consider tech in terms of its ‘value’ to a buyer then we have to look at a basket of attributes. And that in turn makes ROI calculations even more complex.
But, that is where we are. Human appreciation of value is an intricate, subjective and fickle thing, and so it is for legal tech as well.
No doubt the search for explainable value in legal tech will continue to evolve because somehow, whatever our cobbled together ROI calculations may tell us today, we somehow instinctively know that legal tech truly is valuable.