How Law Firms Can Win the Business Development Battle
As law firms try to shift from reverse in 2009 to forward in 2010, they should remember that the easiest way forward is to win more business from existing clients, not get new clients. A new tool, Client Profiles by LexisNexis, is a promising way to help improve growth from existing clients. This product is going into beta testing this quarter.
Last month I talked to Norman E. Mullock of LexisNexis to learn more about Client Profiling and subsequently read a LexisNexis client profiling white paper. (Note: Vendors regularly offer me demonstrations. I sometimes say yes for interesting ones, for which I receive no compensation. Separately, I have not checked if other products offer similar features or potential benefits.]
Client Profiling comes from Redwood Analytics, which LexisNexis acquired about two years ago (see my post LexisNexis Acquires Redwood Analytics). Redwood is perhaps best known for improving firm profitability through sophisticated business intelligence (BI). With the new tool, Redwood now offers a way to systematize business development.
Redwood conducted extensive background research on law firm business development (BD) efforts. The research identified BD functions that are distinct from marketing and marketing communications:
- Client / prospect research
- Relationship management
- RFP/pitch management
- Competitive intelligence
I think these distinctions are critical. While marketing and marcom can play a critical role, the enumerated functions are more important to snaring new business, at least short term.
Key features of Client Profiles include:
- Aggregates data from the multiple internal and external sources
- Analyzes the lifetime value of existing clients with a systematic, data-driven approach that creates a quadrant chart segmented by billable hours total on one axis and consistency of hours over time on the other axis.
- Provides a nice software interface to analyze data and help draw conclusions
- Identifies the 100 clients with the most growth potential and focuses analysis and development of an action plan on this subset
Redwood spends six weeks in a consultative approach with the firm to produce the quadrant analysis, then provides software for the firm to use to continue and refine the analysis. The benefit is that firms can focus BD activity where the yield likely will be greatest.
Redwood’s white paper cites examples of how Client Profiling can help a firm:
(1) Identify clients whose billing vary a lot year to year and then focus on the ones the firm has a decent chance of making consistent big billers.
(2) Understand which practices really feed new business and which do not.
(3) Highlight older clients whose work may have dropped off but with potential to grow again
A data-driven, structured approach to BD is a far superior than one based on gut feel or a big rainmaker’s whim. Malcolm Gladwell’s Blink notwithstanding, an emerging body of business literature shows that companies do better basing decisions on detailed, reliable data and careful analysis. To illustrate the danger of the nonchalant approach, consider “share of wallet”, that is, the percent of a client’s business the firm has. It provides insight into how a firm stands with a client, independent of the dollar volume of business. For example, a firm may be pleased that client billing has increased 10%. If, however, the client’s total legal budget grew 25%, the firm’s share of wallet has decreased – often a bad sign. Conversely, shrinking billings may not be so bad if wallet share is on the way up and the client will have a bigger budget in the future.
Overall, I am very impressed with what I saw. Some additional comments and thoughts:
- My sense is that, just as with Redwood’s BI tools, it will take firms time to adapt to Client Profiling. This is a comment about law firms, not Redwood. I suspect some firms simply do not have the analytic horsepower in place – yet – to use this tool. Those that do not will suffer long term.
- The market is moving to alternative fee arrangements, which might affect the analysis. I did not have a chance to ask about this but short-term, AFA is so new it seems unlikely to affect the historical analysis. In any event, Redwood can likely adjust the analysis for AFA.
- Last decade, knowledge management, IT, and library professionals in law firms struggled with how to access and integrate relevant legal work product and data spread across multiple systems within the firm. In my view, Recommind changed the playing field as the first widely adopted enterprise / federated search product in BigLaw. I have the sense that Client Profiling can do the moral equivalent for the many databases that BD professionals need to access and tie together.
I have long been a believer in business intelligence and in evidence-based decision-making (see my BI and best practices blog posts). Redwood software blazed the trail with BI software for law firms. I did not ask how Redwood prices this service and software. If I were managing law firm BD, I would want to be among the beta testers for Client Profiling. And if I were a managing partner, the one area in 2010 where I would unquestionably invest more is in systematic, data-driven BD.
[Update 7 Jan 2009:] For a great account of why you should rely on data to make decisions rather than intuition, read The Future of Decision Making: Less Intuition, More Evidence by Andrew McAfee in the Harvard Business Review, 7 Jan 2009. Hat-tip to Mark Gould (@markgould13).
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