This is a live post from a private large law firm knowledge management meeting. This session, Change and the Growing Importance of KM, was also presented at the just completed CIO conference held in connection with Legal Tech. 

The Actors:
Oz Benamram, White & Case
Michael Mills, Kraft Kennedy, formerly of Davis Polk
Brent Miller, Cleary Gottlieb
Jeff Rovner, O’Melveny

Act 1: It’s a Mad, Mad World – Challenge to the Way We Used to Print Money

Abbreviated – we all know that the printing press is not working the way it used. Rates can’t keep going up. Profits likely to remain flat. Realization is down. Alternative Billing is expected to grow. Still a gap in surveys of GC v law firms. Former expect more than latter but e-billing folks say it is actually still only 5%. Hildebrandt says billable hour is not dead but is shrinking in importance.

Act 2: The Devil Wears Business Casual – The Impact of Millennials on Legal IT and KM

Baby boomers: Born 1946-64
Gen Xers – born 1965-79
Millennial or Gen Y – born post 1980

Millennial Attitutes:
– Prefer smaller ogganizations
– Look f or’good’ employers
– Skeptical and question rhetoric
– Not as focused on work

Millennial Learning Styles:
– Networks, teams, searms (leaderless)
– Multimedia / tech savvy. Intuitive. But can’t drive a stick shift.
– Engaging / stimulating methods
– Strategy guidesand visualization, not throughg experts and bosses
– Segmentation – stick ‘newbies’ together, let the ‘gamers’ advance at different rates
– Failure is ok
– Want to be included
– Want constant feedback

Audience Comments:
– Military is using games to teach but CLE certification would not allow games.
– Meritocracy replaces bureaucracy
– Those who go into law may self-select to be more like boomers
– As Millennials gain work eperience, they may become more like older generations
– Millennials want KM check lists and guides because they are used to getting instructions
– Information sharing is part of their culture (think Facebook and Twitter) so they support KM; but they won’t pick up the phone and talk

Millenial Associates
– Higher attrition (even before lay offs)
– Less committed to partner track
– Tend ot communicate online instead of in-person
– Expect greater work flexibility and options to work remotely
– Fewer boundaries between work and home

Law Firm Economic Implications
– Traditional motivators less important
– Training more important
– Rise of alternative career paths
– Demise of time-based billing likely a positive

Law Firm Technoloy Implications
– Comfort with social media mean firms need to adapt. For example, think social tagging and additional communication and collaboration channels
– Constant connectivity
– Reduced toleratnce for hierarchy
– Expect coll interfaces. Without a good user interface (UI), your app is dead
– Want more tools and toys (multiple monitors, gadgets, options)
– IT and KM may have to allow work outtside firewall and outside of firm-controlled content
– Rethink training / planning: this gen may be more tech savvy than the trainers

Knowledge Grid in Millennial Era
– Tacit to Tacit (Socialization): online networking and teaming
– Tacit to Explicit (Externalization): tagging, crowd sourcing, auto categorization
– Explicit to Tacit (Internalization): search based precedent, reliance on wikis, blogs and other unapproved resources
– Explicit to Explicit (Rationalization): smart search; page-oriented; personaolzied and small gorup data management, Web 3.0

Audience Comments:
– Millennials attuned to how advertisers are collecting behavioral data. Watch the advertiser to learn how to bring info needed when it’s needed.

Act 3: Fixed Fees Magic – Change to the Way Law Firms Deliver Legal Services

The Grim Reality
– Business model is in peril
– Imagine a law firm that does one litigation matter in a year, for which it gets $100
– Assume 40% margin on this. $60 is salary and other costs
– Realization has fallen so what used to be $100 is now $85
. Clients getting discounts
. Auditors chopping bills
. Clients refuse to pay for junior associates
– Now, assume revenue base is $85 >> that means profits go from $40 to $25 (absent changing cost base)
. That means margin drops by more than one-third
– So firms have tried to lower cost. But this is hard to do quickly
. Firms have cut lawyers and staff and outsourced but the model has not really changed
. How can firms lower cost base without further cuts
– Reduce admin costs
. Can firms cut these further after 2009? Seem unlikely
– So firms need to think how to reduce the cost of delivering legal services
. Perform tasks in less time
. Perform work with lower-cost personnel
. Reduce low-value effort that gets written off
. But firms need to profit from improved efficiency
– For law firms, fixed fees are better than discounts
. With fixed fee and efficiency, firms can maintain margin
. With discounts, impossible to maintain margins

How can law firms improve efficiency? Consider Orrick’s fixed fee deal with Levi-Strauss. Doesn’t Orrick have an incentive to be more efficient?

Challenges to efficiency
– Many lateral partners, each trained differently
– Lots of litigation teams, each with its own ‘way’ (vendors, processes, resource mix)
– Each associate plays for multiple teams, so can’t learn to be efficient

Efficiency Requires
– Firm-wide model to conduct litigation
– A common and efficient tech platform
– Ease of adopting new tech and process
– Substantial saving to pass along to clients

Ways to Improve Efficiency
– Adopt a production-lline mentality
– There is more to learn from manufacturing than service businesses think
– How would we litigate if we were starting from scratch
– Example: invention of mutual funds to simplify building diverse portfolios without high transaction ccosts

My firm gets a lot of pitches from outsourcers for administrative work. It’s not that they are smarter or better. But they’re willing to follow processes, and we’re often challenged to do that consistently.

Deconstruct the current Litigation Approach
– What does a firm produce? How can you produce the truly necessary components more effectively?
– Use tech to streamline processes
– Litigation consists of many sub-processes or modules
– Subject each sub-process to a best-practice analysis
– Replace sub-processes with cheaper or better ones as developed
– Outsource or insource sub-processes as competitive pressure dictates
– Each sub-process dictates personnel needs.

Fixed fees are a way to lock-in revenue as you improve the overall process.
– Firms may need tools to support fixed fee analysis
– Baker Robbins is developing a good tool

Act 4: The End of Lawyers? – The Efficiency Game

Where do we find places in our practices to improve efficiencies?
Consider replacing KM with “practice engineering”
Richard Susskind looks across practices to to find areas where lawyers can practice more efficiently
Lawyers in large firms believe all they do is bespoke but most is actually not
Even in a truly one-off deal, many elements can be systematized
. No matter what the deal, if big, there will be many routine filings and processes
Susskind model:
One-off > Standardized > Systematized > Packaged >|> Commoditized

Truly one-off work starts with a blank piece of paper. So, in theory, all a lawyer needs is a word processor.
But in fact, most practice relies on either standard forms or prior similar documents
Where there are enough similar deals, firms can develop check-lists, some automated
Lawyers can go still further with document assembly to automate commonly used forms
Davis Polk Netting system is example packaging expertise for delivery online

Efficiency Tools
– Enterprise search
– matter info and analytics across life cycle
– Project management tools
– Auto-categorization and entity extraction
– Communications and collaboration
– Cloud computing (possibly the client’s cloud)
– Social media, transparency,
– Doc automation