Data analytics has been the talk of the legal sector for a number of years; just enough time for the scepticism and myths to percolate and thrive. Seen by many as a threat, others as a side issue, and the remaining few as an opportunity they have little idea how to maximise, data analytics has yet to take hold.
But if the research firms and analysts are to be believed, big data and data analytics are here; and here to stay. The amount of data we produce is doubling every two years, according to research company IDC, and yet only 0.5% of that data is ever analysed. For the legal profession it is arguably even less than that. So why the reluctance to join the data analytics movement along with other sectors, such as technology and healthcare, that are already reaping the benefits?
We have put together a list of the seven biggest myths surrounding data and data analytics in the legal sector – and the reality of why data matters now more than ever.
Myth 1 – Data analysis won’t impact the legal team or my role as a lawyer, so why should we be interested?
Reality – any kind of information within an organisation whether financial, legal, marketing or sales, can be used to help improve the profitability and effectiveness of the company. For example, the finance team analysing the numbers can, at a basic level, help detect fraud or increase the bottom line. What data analytics does is give the finance team facts and intelligence on which to base a more solid financial strategy.
For a GC or law firm that produce data constantly, analytics provides a tool to help them make more accurate judgements about risk and compliance, for example. Currently, the likelihood of risk is based on yes or no; 0 or 100; but all risk is not created equal. Data analytics present a more balanced view, based not on an individual lawyer or GC’s own knowledge, but on a larger number of facts and data gathered from previous cases, contracts and profiles. This is then analysed to see what is ranked high or low risk. It means that lawyers and GCs can spend more time focusing on aspects of a contract that are higher risk, and less on those which are prioritised further down the risk spectrum. Therefore data analysis increases the value lawyers provide to clients or the business by ensuring they spend the right time focused on the higher risk terms.
Myth 2 – Data is a threat to my role and my expertise.
Reality – data is not going to replace lawyers or GCs. The point of quantitative data analysis is that it is a tool to provide actionable insight. An expert still needs to complete that action. Data analysis only complements lawyers and GCs, helping them to make more accurate decisions and predictions to clients or stakeholders. And, by making better decisions and being able to call up quantitative analysis to reinforce and justify those decisions, the value of lawyers and GCs will only increase. In fact, recent research shows that conclusions made by algorithms or groups of knowledgeable people are 20% more accurate than those made by individuals. Therefore, the threat to lawyers and GCs is not the danger of utilising data analysis, but the real threat will be not using it.
Myth 3 – Our data is dispersed far and wide; we have no way of aggregating it for analysis and I wouldn’t know where to start.
Reality – this is a real challenge, but that does not make it insurmountable. For most law firms, around 80% of their data is unstructured – ie. data that is kept in paper form, in unsearchable scanned documents or PDF format. If the data is electronic, then it resides on various systems, sometimes across the globe, making it seem like an impossible task to bring it together for analysis. But it doesn’t all need to come together at once, or even at all. Data analysis can be conducted on any level of information and still provide value. Start by digitising just one element of a contract portfolio or, alternatively, start by focusing on one area of the business, and then grow it from there.
Myth 4 – It would take too much time and too much resource to bring our data together into one repository.
Reality – it will take time and resource to bring the data together in one place, but not as much as one might think. The most important thing is to prioritise by value. Which areas can improved decision-making help bring the most value to the company or law firm? What are the areas where risk is the highest, and where data could be collated most easily? Start here; in our experience having the right project team and the right priority list expedites bringing the data together and helps drive value more quickly.
Myth 5 – Data analytics technology is expensive.
Reality – the cost of technology is decreasing, while the functionality increases. And, while the board might balk at yet another cost, with data analysis the return on investment can be proven. Once the data is analysed, even at a basic level, it helps to reduce business costs directly – including everything from supplier rationalisation, to renegotiation of leases or eDiscovery techniques as part of contract management. Spotting trends that can lead to better case outcomes, commercial gain or averting risk cannot be achieved by intuition alone. Data analysis provides the actionable insight and intelligence needed for lawyers to be able to detect correlations.
Myth 6 – Data analytics technology sounds complex and would be another thing to add to my list of things to do.
Reality – the technology is irrelevant – it’s what the technology enables lawyers or GCs to do that should be the focal point. Under no circumstances are lawyers expected to program, code or understand the intricacies of how the technology works. Architecting the right solution will be done by a technology partner who understands the challenges being faced. Automating various elements is essential and, once the solution is up and running, the ability to search, gather and use the data analyses provided by the technology will increase the confidence of clients and stakeholders in the legal team by helping to providing more accurate decision making, based on quantitative data-based facts.
Myth 7 – Data wouldn’t help to improve our business that much – ROI is not substantial enough to warrant the time and effort it would require.
Reality – margins in the Top 26-50 law firms have significantly declined over the past 10 years, falling from 30% to 23.1%, according to the latest PwC study. A trend the consultancy calls ‘unsustainable’. While technology and data analysis are no silver bullets, the proven value that it delivers can go some way to stemming this margin erosion. Data analysis informs more than just case- or risk-based decisions, it improves the business of law. By aggregating commercial information from inside contracts and making more informed commercial decisions, we believe 2-4% could be added directly to the bottom line.
To find out even more about how data analysis can improve profitability, efficiency and, most of all, your own role, look out for part 2 of our blog post: ‘Why data matters‘.
For more information on contract management please read more HERE