Merging large law firms say that they offer clients more and deeper expertise. But do mega-firms effectively tap their collective wisdom? 

Knowledge management professionals and legal technology consultants see how hard it is to identify who knows what in a BigLaw firm. Much KM work these days focuses on systems to find experienced lawyers within the firm.

Beyond “experience location systems” lies a potentially more valuable way to tap collective know-how: an internal predictive market to reach the best collective answer to tough client problems. Business Solutions: How to Decide? Create a Market (Wall Street Journal, 6/19/06, $) describes a relatively new class of software that allows tapping “the collective knowledge of an organization by letting employees bet on future events, such as forecasting sales or betting on the most promising new product.” It’s not a big leap to apply this idea to predict the outcome of litigation, to find the best transaction structure, or to decide on the best argument.

Why do internal markets work?

“To understand why these markets work as well as they do, consider the usual alternatives companies have for aggregating this sort of knowledge: committee meetings, polling, reports or focus groups. Meetings are often dominated by the person with the best arguments or most forceful personality, not necessarily with the best information… While each player may have very little information, collectively, they have a great deal.”

Moreover, the market approach allows far more people with expertise to contribute than other approaches. GE, HP, and Corning have tested the internal market approach.

Granted, predictive markets are still embryonic. And getting lawyers to participate raises challenges. Markets, however, declare winners, which would appeal to most lawyers’ competitive sensibilities. In fact, cash rewards are even an option.

All that said, were I a general counsel facing a bet-the-company case, I’d sure like the collective wisdom of several hundred lawyers thinking about the best solution to my problem. In fact, I might even pay my outside firm a fee to motivate the lawyers not working daily on my case to spend some time to review my situation and participate in the market. Of course, law firms could help persuade a GC this is worthwhile by doing some testing first.

Sound interesting? Then you might want to check out the software vendors the article mentions: Consensus Point, Inc., Inkling, Inc., and NewFutures. And you might also find interesting A Marketplace Trial, an article I wrote (American Lawyer, Fall 2003) about creating a financial derivatives market to help hedge outcomes of high stakes litigation.