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Law Firm Strategy: Decision Making for Tech

I've spent the last two years talking to the heads of Global 100 law firms about joining PartnerVine. For the firms that are adopting PartnerVine, they had to make a strategic decision that is fundamentally disruptive to the way Big Law does business. That's a tough decision to make, and led me to three pieces of advice for my colleagues that manage law firms, which I've outlined below.

The conclusions are based on my experience founding and launching PartnerVine, a Legal Tech start-up. I think my experience was uncommon because I was an MD at a major PE firm for many years, so I had access to decision-makers at many firms in the Global 100. Founders with less of a network wouldn't have that kind of access, and now that PartnerVine is up and running I'd like to share what I've seen.

If you want to manage a large law firm strategically, here are three points to consider:

  • Appoint a CEO. The CEO model wins over a managing partner not because CEOs necessarily make better decisions, but because decisions are more likely to be made. Although there are politics in every firm, managing partners were more likely to be criticized for a lack of transparency by their partners, and CEOs had more leeway to make a decision (or empower their team to do so). There are always exceptions, but those exceptions were usually because a partner (or managing partner) had special status in the firm - like being a founding partner. If you're thinking strategically about your law firm, a CEO is one step up on the delegation of decision-making from a managing partner, and one step better prepared for the kind of decision-making innovative technology requires.

  • Establish an innovation team. The best model is a supportive CEO with a team focused on innovation. A common strategy for a law firm is to have a CIO that also covers developments in tech, and that role is going to have bandwidth problems and probably doesn't have the professional incentive to take risks.

    Bandwidth is critical. The two ways CIOs filter opportunities when they have limited bandwidth is by focusing on partner referrals and covering trendy topics. In terms of partner referrals, many CIOs won't speak to tech businesses unless there is a partner referral--which was good for me because I've been an MD at a PE firm for years, but bad for a law firm that wants to have any kind of strategic overview of technology. CIOs focus on partner referrals to avoid complaints from partners, but that's a poor proxy for thinking strategically about tech. CIOs with a broad portfolio also have pressure to speak to the most recent trends, like ICOs for instance. You can sell a lot of legal advice with ICOs, but it's not thinking strategically about technology for your law firm. 

    Professional incentives for your tech lead are important, and mean you should split security responsibilities from innovation. A CIO that's got security on his annual review is going to have a tough time as a key sponsor of innovation. If they've had a security issue, which is increasingly likely if a CIO has been in the role for any amount of time, they're going to have a hard time switching roles and taking risks with innovation. Even if innovation is part of a CIO's annual review, the certain risk of a security failure is always going to be a priority compared to a business case for innovation. As a result, you are more likely to get a CIO that's going to do safe innovation by following the herd. This year safe innovation may be an AI partnership, next year it may be joining a blockchain standards-setting group, but that's not strategic thinking, and it's certainly not a way to advance relative to your peers.  
  • Don't make strategic decisions by committee. Partnership committees are not a good way to make strategic decisions. For a strategic decision like joining PartnerVine, the current interests of each partner on a partnership committee are opposed to the long-term interests of the firm. In PartnerVine's case, each partner will have to invest time, money and effort in automation which will reduce their profits in the short term for a comparatively uncertain larger gain. What's more, the best way to pursue PartnerVine is at scale, and every partner is going to have the additional uncertainty of other members in the partnership contributing equally. In my experience, partnership committees are much more likely to focus on the certainty of a current expense than the promise of a strategic business case. 

As a bit of background on why PartnerVine is disruptive, read Exari's blog here. The Innovator's Dilemma for law firms considering PartnerVine is that law firms sell their automated documents on PartnerVine for a fraction of what they would have earned if an associate had done the work. The law firms participating in PartnerVine can sell their automated documents at a relatively low cost because they can recoup their investment by selling the document to the public on PartnerVine - and capturing the higher margin work. The model favors firms that invest in technology and are not afraid to scale, and that is fundamentally disruptive to a law firm focused on maximizing the sale of their services in the short term. 

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