Why KM Matters. With Soundtrack.

Here at "Adam Smith, Esq." I've written about Knowledge Management a fair amount, since it's my belief that knowledge is what law firms sell.

But despite the (I believe) inarguable centrality of KM to what we do, there are three enormous problems with it:

• Too many lawyers don't understand why it's of value to them, or, more precisely, why the return they could get out of it would exceed the investment they'd have to put into it.  (Never mind the threat of "giving away" your core professional asset—what you know.)
• Too many technologists and IT types don't understand how lawyers work, and end up creating shockingly powerful but essentially useless applications.
• And even the most powerful and user-friendly system requires constant care and feeding because legal learning is in a state of constant flux:  In a sense, pure white ignorance beats obsolete and mistaken knowledge.

Because some of these obstacles are a blend of the intellectual and the emotional, a brief foray, presented in video, yields two of the best visceral explanations of why Knowledge Management matters.  

With a big fat hat tip to Matthew Parsons and Neil Richards of Knowledge Thoughts, then, our first (2:21 running time, sponsor's logo at the very end):

 

And our second (5:29 run time, academic credit and "CC" license at the end):

 

Enjoy.

And reflect.

"Legal Transformation Study" Released by Altman Weil

Today Altman Weil announced its release of The Legal Transformation Study:   Your 2020 Vision of the Future, published by Decision Strategies International:

“The comprehensive industry assessment identified 11 key global trends and uncertainties shaping the future of the legal industry, then developed four possible planning scenarios that the legal industry may face in the next decade,” said Paul Schoemaker, Ph.D., research director of the Mack Center for Technological Innovation at Wharton Business School, and the founder and executive chairman of Decision Strategies International.  “These four scenarios can be used as a framework for challenging current service models within the industry, answering key strategic questions, and helping stakeholders, including corporate law departments, law firms and legal service suppliers, identify proactive strategies to ensure future success.”

"According to Dr. Schoemaker, four possible scenarios for the delivery of legal services between now and 2020 are summarized as follows:

- Blue-Chip Mega-Mania: A model that emphasizes the global consolidation of legal service providers and the dominance of giant law firms with vast global presence and offerings spanning all legal areas.

- Expertopia: A scenario that envisions the increasing complexity of the law and challenges of corporations operating in multiple environments worldwide, thereby placing a premium on specialization and expert-driven cultures at legal services organizations.

- E-Marketplace: A model built on the premise that technology will be a catalyst, but not the core, for an industry transformation in which an array of Web-based technologies will make information more available and expert judgment more valuable.

- Techno-Law: A scenario that contemplates rising corporate investment in automation capabilities throughout the legal services industry, leaving only the high-end services to be delivered by legal professionals and potentially requiring a complete reconstruction of the traditional business models in the legal services industry.

“In the past, law firms and corporate law departments have frequently been taken by surprise by unexpected forces that directly influenced the practice of law,” said Jim Seidl, president of Legal Research Center and co-developer of the Study.  “The findings of this Study will empower legal service providers to proactively compete more successfully in the global legal marketplace, reduce the risk of unexpected business surprises and threats, and identify new opportunities for business growth in the next decade.”

“As a provider of services within the dynamic electronic discovery services arena, we closely monitor current trends and anticipate the future of our profession to help our clients make well-informed decisions and achieve favorable results,” said Greg Mazares, president and CEO of Encore Legal Solutions.  “The Legal Transformation Study is an important tool we can all use to prepare for any number of potential business scenarios.  We are pleased to have been a primary developer of the Study and look forward to sharing the results with our clients and other legal professionals across the nation.”

“This Study is a tool to test the resiliency of law firm strategic plans across a range of possible futures, or to develop new plans more likely to assure their success,” said Ward Bower, strategy consultant at Altman Weil.  “This is critical stuff for law firms.  If they get their basic direction wrong, they’re toast.”
 
“There can be no doubt that we are poised for significant change between now and 2020, with a wide range of business, technological and regulatory forces sure to have a major impact on the way that legal services are delivered to corporations worldwide,” said Mark Chandler, general counsel of Cisco Systems, and a Study contributor.  “This groundbreaking Study identifies the likely components of these industry changes and prescribes important guidelines for how corporate law departments, law firms and other legal service providers can start planning now to seize these emerging opportunities while protecting against competitive threats.”

Sponsors include of course Altman Weil, and Jomati, but also Encore Legal Solutions, Bridgeway Software, Inc., Deloitte Financial Advisory Services LLP, DuPont Legal, Eversheds, Intellevate, Meritas and Solomon Page Group LLC. 

You can order a copy here. 

IT Governance & Mergers

Yesterday I was privileged to run a session at Hildebrandt's Sixth Annual Forum for Law Firm Management—"Getting a Seat at the Table"—Aligning Technology to Law Firm Business Strategy here in New York. 

My session was on "Sorting out IT Governance in Mergers," and I want to share the learning with you.  But preparatory to that, you need to know that we had the benefit of the experiences (and the senses of humor) of several high-profile veterans of Big Firm Mergers, including Don Jaycox, now CIO of DLA Piper US LLP, and formerly CIO of Gray Cary, who now has nearly three years of perspective on that celebrated three-way firm merger (DLA + Piper Rudnick + Gray Cary).  Also, with barely three weeks of perspective on events, in attendance was the CIO of Dewey & LeBoeuf.

By the way, wondering when IT is brought into the loop on the merger? Answers ranged from after the deal was all but sealed to months and months in advance of any actual negotiations.

With the enthusiastic and even impassioned help of those in the break-out session, here is what we distilled out as lessons for a CIO or IT leader going through a merger.  [Editor's note:  The discussion focused almost exclusively on mergers of equals or near-equals.  A merger of Very Big with Relatively Small was viewed as an acquisition requiring only a solid dose of project management skills to get through the period of deep-sixing Small Firm's systems and importing Big Firm's.]

Ruthlessly Prioritize

Under no circumstances will you have enough time to do everything you want or even think you need to achieve, so make sure that your rigorous focus is on the things that matter most.

Short, Intense Pain Beats Mild, Extended Pain

Need to integrate two document management systems each containing millions of records?  How about doing it across all your offices over a single weekend?  (Yes, this is a true story.)  Need to integrate half a dozen disparate phone systems, running everything from Cisco VOIP to Avaya, Northern Telecom, and even Rohm?   Make sure it's done by midnight of the effective date of the merger.

Conversely, if you want your marketing or IT department (again, true stories) to be dysfunctional for 18 to 24 months, just make sure the pre-existing incumbents from both firms remain in limbo for that period of time while management dithers.  One CIO present reported that his reaction to an indication that "co-CIO's" would be in place for an extended period was to go to his Managing Partner and say, "Fire me if you'd like; but do not under any circumstances have co-CIO's."  (He ended up top dog.)

Rise Above Politics

In almost any system you can name, from document management to time and billing to KM, you will find yourself saddled with two points of view each arguing the clear superiority of the system that just happens to be theirs.  Get past it.  Not only do you need to pick "best of breed" (keeping open the possibility that the winner will be "none of the above"), but you need to cement your credibility with senior management.  Yes, even though your credibility might have been unquestioned at your predecessor firm, you will be an unknown quantity to a significant number of decision-makers at the new firm.  And never forget that, as one veteran in our session put it, "one 'oops' trumps ten 'attaboy's'." 

It's 90% People, 10% Technology

The first important piece of fallout from a merger—or even talk of a merger—is that people become uncertain, anxious, and desperate for information, to the point of glomming on to every rumor that comes down the corridor, plausible or otherwise.  The second piece of fallout from this is that productivity drops through the floor.  And the third piece of fallout is that your best people—with the best prospects—begin taking calls from headhunters and, unless you act fast, departing.  You will then be left with the mediocre and sub-par performers.

So stop it from happening. This means getting on the road (in the air) to reassure people—truthfully, of course—that their own jobs are secure and that in fact the future under the combination will be brighter, more prosperous, and more challenging than before.  There's no substitute here for one-on-one face time.

Achieve High-Impact, Psychologically Powerful Changes on Day One

Have one unified website, one email address protocol, one phone-dialing protocol.  Yes, yes, you're allowed to put the whole thing together under the hood with baling wire and duct tape, but the appearance to end users  must be of a one-firm firm.

And another thing:  Strive for a succession of small, visible, wins.  Nothing will reinforce your credibility more convincingly than showing you and your team can achieve designated milestones on time and on budget.  (Conversely,  nothing will undermine you faster than promises unkept, so make sure you're realistic about what you can achieve.)

---

This discussion reminded me of an analytical model comparing alternative models of IT decision-making.  Here it is:

• Business Monarchy:  Highly efficient, but can lead to suboptimal IT architecture.
• IT Monarchy:  Leads to superb IT architecture and procedures, but may not align with business practices.
• Federal System:  IT, practice groups, office heads, etc., all have input:  Far and away the least efficient and also the most likely to generate the worst overall decisions.  But attractive to some participants since everyone has a seat at the table.
• Duopoly:  Business leaders suggest  what they need or want; IT responds with what they can provide, and a genuine dialogue ensues.  Typically a smart choice.
• Feudal:  Partners get what they want.
• Anarchy.

In general, the federal model is the least  effective, because it's the most time-consuming, bureaucratic, and prone to suboptimal politically-motivated decisions.  On the other hand, it's the most open in terms of  input (a/k/a "democratic") and therefore sometimes difficult to avoid in a law firm culture.

But if you can?  Strive for duopoly.  And:

• prioritize
• favor intense short-term pain
• eschew politics
• focus on people, and
• go for high-impact wins.

Knowledge Management Yesterday and Today

As I approach the 800th article I will have published here on "Adam Smith, Esq." (for those of you keeping score at home, this will be #797), I realize some topics are evergreen.  It may be because they're just intrinsically fascinating, as Woodward and Bernstein famously characterized the Nixon White House tapes:  "The gift that keeps on giving."   Or it may be that they're in something of a perpetual disequilibrium, oscillating on faster or slower cycles or being pushed and tugged as circumstances change from one antipode of the spectrum to the other (eat-what-you-kill vs. lockstep?).  Or it may simply be that we've yet as a profession to arrive at a settled way of addressing them.

In that last category I nominate marketing of our firms, and knowledge management.

Which is why it's instructive, and a bit of a closet relief, to look back at an article like Some Principles of Knowledge Management, published over ten years ago (fall 1996) in Booz-Allen's "strategy+business."    Assuming one can get one's mind past the archaicisms (the "World Wide Web" appears in the third paragraph), many of the ten principles enunciated remain true—for better and worse—today.

Let's take a quick tour back through the time machine.

1.  KM is expensive (but so is stupidity).

Did you know that McKinsey's objective is to spend 10% of its revenues on developing and managing intellectual capital?   It may sound a truism today to say that knowledge is what we sell, but how many years (decades?) did it take American industry to learn that quality was not an expense—it was a feature?  Ignorance and forgetting are costly in the same way that poor quality products and services are costly.

Last month I heard the keynote at ILTA 2007, delivered by Captain Jim Lovell, commander of the poxed Apollo 13 moon mission.  Aside from telling the enthralling tale of nearly a week's worth of nonstop improvisation by Houston Mission Control and the crew, using systems for purposes they were never designed for and relying on such high-tech tools as duct tape and an old sock to maintain their air supply, he dropped an aside that has stuck with me.   Noting the tremendous majesty of the three-stage Saturn V rocket launching them on their way to the moon, he remarked that, "It was a far far better launch vehicle than the shuttle:  More reliable, more powerful, more flexible, and even a smoother ride.   But you know what?  NASA couldn't build a Saturn V today.  We've forgotten how."

2.  KM requires both people and technology.

I can't resist, so permit me to start with this quote from the article:

"Computers that think are almost here," a Business Week article recently announced, adding that "the ultimate goal of artificial intelligence--human-like reasoning--is within reach."

And Brazil is, and always will be, the economy of the next decade. 

We all know that computers are superb at capturing, copying, and distributing information.  Just ask the RIAA.  But people are unmatched, and probably will be as far as the eye can see, at synthesizing unstructured knowledge.  As our KM tools within firms become more sophisticated, we've realized that one of the key functions has to be what the techies call "expertise locators," meaning the system has to be smart enough to point us towards our partners and colleagues who actually know something about what we're trying to research.  The system, in other words, has to have built in to it a function you want to use when the system fails.

3.  KM is highly political.

This flows directly from the observation that knowledge is power, to which I would only add that in a law firm, knowledge can be revenue.  It doesn't get more political than that (in the wrong sort of environment, I mean, which of course is not remotely the case at your firm.)

The other dimension to the "political" component of KM is the economic one of free-riding.  Why should I contribute to a knowledge base when, by hypothesis, the only material I can add is stuff I already know—which does me precisely no good.

4.  KM requires knowledge managers.

The Brits, of course, have known this for a long time, in the form of "professional support lawyers," and I'm not sure what has taken us so long to admit they have a point.  Interestingly, the author reports that even as of 1996 several companies had committed to establishing the post of Chief Knowledge Officer, and they're name brand companies:  Booz-Allen & Hamilton, McKinsey, Andersen Consulting, Ernst & Young, Price Waterhouse, Hewlett Packard, and A.T. Kearney. 

5.  KM benefits more from maps than models, markets than hierarchies.

This I take as the author's rather indirect way of saying (correctly) that one cannot anticipate in advance the rivers, streams, and byways through which knowledge will flow and it's best not to try to straitjacket it into fixed categories in advance.   Models and hierarchies tend to be brittle, whereas maps and markets are open-ended, flexible, and capable of evolution and even radical change.  One of my favorite examples of this is the trusty old Dewey Decimal System where the "200's" are devoted to religion. 

And of course, it is wildly Christianity-centric.  (A Scots Presbyterian, I can say this.)  201 through 289 are all related to Christianity (e.g., #232,"Jesus Christ and his family," and #254 "Parish government & administration").   Not until #290 do we reach "Other and comparative religions," and "Islam & religions originating in it" was deemed to have plenty of running room as it was assigned #297 all to itself.

6.  Sharing and using knowledge are often unnatural acts.

This may be my favorite—and the author wasn't even discussing lawyers.  (His case study was Hewlett Packard.)   I can't really improve on his summary of the problem here, so I'll let his words speak for themselves:

"If my knowledge is a valuable resource, why should I share it? If my job is to create knowledge, why should I put my job at risk by using your knowledge instead of mine?  We sometimes act surprised when knowledge is not shared or used, but we would be better off assuming that the natural tendency is to hoard our own knowledge and look suspiciously on knowledge that comes from others. To enter our knowledge into a system and to seek out knowledge from others is not only threatening, but also requires much effort."

7.  KM means improving knowledge work processes.

If this sounds a little too Delphic, recall that it's a business school professor talking, but let's try to unpack his meaning for a moment.   Essentially, he's saying that knowledge in firms is not created in a vacuum; it's created for a  purpose (drafting the brief, setting forth the terms of the acquisition, specifying covenants in a securitization indenture).  In corporations, it's things like market research, product design and development, and order configuration.

His point is that KM will be improved if the flow of "knowledge work processes" is improved.  Does the first-year associate take a stab at the first draft of the brief, or the third-year?  Who does edit #1?  Edit #2?  When does it go to the client?  These actually are business processes, and you're performing them today.  You might pause and give a moment's thought to whether they're optimal or whether they're "because we've always done it that way."

8.  Access to knowledge is only the beginning.

Libraries are ubiquitous, but they're not crowded.  (Have you looked at your firm's library lately? I predict it's almost empty.)

What's needed is what my friend John Alber calls "actionable knowledge;" knowledge you can use this very minute.  This isn't an academic exercise, after all; the goal is to get the work product out the door, having it reflect the impeccable quality your firm aspires to.

9.  KM never ends.

Despite the risk this principle runs of sounding slightly revolting, I'll just allude back to our Dewey Decimal System example and leave it at that.  Knowledge is—assuming  you're any good—a moving target, with ever increasing ambition in terms of scope, subtlety, and complexity.

Did you ever think back to something you did 10 or 20 years ago and ask yourself how you could possibly have ever been so young and dumb?   That's the point.

10.  KM requires a knowledge contract

I take issue with this.  It's irrelevant, and, as they say in the military, "OBE" (overtaken by events).  What the author was referring to, or fearing, was the issue of whether the organization, the individual, or the client "owns" knowledge, and he fears that a proliferation of policies will be required to specify what is whose.  He even offers this somewhat snarky remark:  "Perhaps the greatest problem with increased KM is the increased population of lawyers it will engender. Intellectual property law is already the fastest-growing legal field, and it will only grow faster."

---

Where does this leave us, back from our tour in the time machine?

Many of the challenges of KM are, indeed, timeless, lying, as they do, at the intersection of human nature, competitive dynamics, and the pressures of client service.  Our technological tools have surely improved, by orders of magnitude, and our cultural predisposition to acknowledging the value of KM to our firms and our own individual careers has also surely improved, albeit not by orders of magnitude.

KM remains essential to us because knowledge is what we sell.  It remains problematic because computers can't do it alone (come on, admit it, you wish they could, don't you?), and because the qualities that distinguish the competent journeyman from the counselor extraordinaire are ineffable. 

Here's hoping they always will be.

---

Update, 11 September:  A reader from the UK, who has spent his career in knowledge management at name-brand firms, writes:

As ever Bruce a good article and some of the issues in KM are timeless.

However I believe that in a few years time in-house legal PSL's may well become a dying breed. Over in the UK - I understand that a lot of the PSL recruiting is being done by the likes of Lexis-Nexis and Butterworths as they are steadily looking to do on line precedents for the law firms.

From my experience they aren't there yet but in 2-4 years they will be. I think PSL's will want to go and work there - maybe for a sense of a proper career structure - but also for work life balance which we hear so much about.I think that David Jabbari at A & O's comments on PSLs and them developing a career structure but also getting more involved in Business Development will be the way for most of the major London law firms to go rather than just as legal researchers.

I still also believe that law firms don't fully understand knowledge management and are looking for an IT solution as much as possible so that they don't have to deal with the people based issues.

They also I think want closure and have something solved and put to bed - they don't want it to be an on going process - so maybe that is why they dislike KM.

Sharing knowledge is an unnatural act - but as I have mentioned before people do share knowledge for a variety of reasons - but primarily in my view they do it based on reciprocal altruism - or as I call it the Godfather approach -i.e.they expect the person who has received the knowledge to return it at some time in the future when asked for it.

They also need to look at the way that they appraise their staff - although they may say that they appraise people on a range of issues - effectively and this is borne out by my own research the culture of the firm usually drives it to have its lawyers appraised on how many billable hours they achieved and that they didn't have too many black marks against their name.

A lot of partners are not very good at being coaches of growth and learning - but perhaps the short term view that a lot of partners have by being rated on their PEP figures in a league table doesn't help to look to developing the future.

I'd also like to add that I think that good knowledge sharing in a firm can also help a firm to innovate. I spoke about this at a conference in April about the barriers that firms put up that stop knowledge sharing are the ones that also are a barrier to innovation.

---

I thank readers for writing most sincerely; do not think this remotely smacks of a throw-away line.  Indeed, reader feedback is one of the most professionally rewarding aspects of life here at "Adam Smith, Esq."  So if any of you have had a thought and hesitated or sat on it without writing me, "snap out of it."  (Yes, the immortal line delivered by Cher in Moonstruck.)

Update: 13 September.

Another regular reader from the UK writes:

---

I have been mulling over your article on KM for the past few days, but was brought up short by the comment you added from a reader yesterday.

One of my current projects is to take a long hard look at our PSL group. Not because there is a perception that they are not useful, but because they, like everyone else in the firm, need to deliver better value year on year. The firm's expectations are not constant. The PSL role here will, I think, be different in 18 months time, just as the roles of associates and partners have already altered to fit the needs of more demanding clients in a tighter market. However, I think it is a leap to say, as your commenter does, that the PSL is dying out. Rather, the role is evolving away from providing generic know-how towards activities that add more value to the firm. This is healthy.

Some of his other comments about law firm KM suggest either that my firm is more enlightened than I thought, or that your reader has only been exposed to very traditional (and hide-bound) attitudes in other firms. I have always found it difficult to reconcile the widely-held view that "lawyers don't share" with my experience of people who are dedicated to client service. That dedication is not always reflected just in the work-for-fees relationship. Sometimes it is altruistic. I also regularly see altruism between colleagues -- sharing pieces of critical market or legal knowledge in order to allow someone else to improve their client relationship or work quality. That is one reason why we work in firms, rather than as sole practitioners. (If you haven't already read it, John Roberts's book on The Modern Firm makes this point much better that I could.)

On the IT point, I have noticed that in firms that are dominated by IT lawyers tend to identify KM with IT, rather than being a question of personal engagement. Again, I suspect that attitude is changing, as is the notion that KM should be a closed process. However, if firms do take that view, they are significantly out of step with KM thinking elsewhere. There is a long and dishonourable history of lawyers (in practice and academia) being too inward-looking and ignoring critical developments in other areas, but my impression is that we are getting better at seeing value in what other professions do.

Coming back to your reader, I think the behaviour he describes would find no favour with Adam Smith. Surely firms that turn against better KM behaviour (effective sharing of know-how and practice experience, sensible focusing of staff on value-bearing activities, humane management of elevator assets) will generate more value for themselves and for the wider economy in the medium and long term?

---

And here we are with another update on 14 September:

---

Great post Bruce, probably should be required reading for law firms everywhere.

I'd like to add that from my own experience, I think that most law firms have fallen into the same failure patterns as the rest of the corporate world. Closing the knowledge gaps then closes performance gaps and improves processes. Lack of knowledge strategies designed to close knowledge gaps results in lack of any real successes in KM. And that's why for example, with some of the most expensive search appliances in place, law firms still struggle with basic problems like finding the right document.


Dr. Dan Kirsch
COO & Board Member
Knowledge Management Professional Society (KMPro)

---

 

A Talk With Steve Agnoli, CIO of K&L Gates

CIO Magazine recently announced its 20th Annual CIO100 Awards, recognizing 100 CIOs deemed most  effective at transforming their firms through IT innovation .    The winners included CIOs from Bryan Cave, Foley & Lardner, Goodwin Procter, King & Spalding, and K&L Gates.

Notably, K&L Gates also captured one of the five "Plus One" awards, for Business Innovation.  (The four other firms taking home Plus One Awards were: Hilton Hotels for customer satisfaction, Johnson & Johnson Pharmaceutical Research and Development for competitive advantage, Marriott International for security excellence and Merrill Lynch for improved productivity.)  Notably, K&L Gates had an earlier 3-years-in-a-row run of CIO 100 Awards, from 2002 through 2004.  All in all, I thought something noteworthy might be going on in the IT arena at K&L Gates..

Accordingly, a few days ago I had a chance to catch up with Steve Agnoli, CIO of K&L/Gates, to learn about the background to the awards and explore how K&L Gates approaches IT in general.

Here's what I learned.

---

Steve arrived a little over nine years ago, at the then Kirkpatrick & Lockhart, and was the first CIO the firm had.  Why hire a CIO then?

"The firm had decided to move forward with a more aggressive growth strategy, and they realized that entailed building out their IT systems and the marketing infrastructure." 

Steve had never worked at a law firm before, but when friends asked him why he'd want to go to a law firm, his response was:  "Why wouldn't I?  It's a business like any other.  It has to get IT done right; it realizes IT is a key component of the business, with internal and external impacts."  And today does he still feel that way?  "Absolutely:  The whole firm feels that way, not just the IT department."

Not surprisingly, once Steve arrived his first order of business was getting the infrastructure right and making it scalable and reliable.  "That's always the key thing."  But once that's under control, you have the freedom to take a more outward-facing approach.  If Steve could describe the overall trajectory of his time at K&L Gates, it's been from "plumbing" and nuts and bolts initially, towards a more client-oriented focus in recent years.

And the "Business Innovation" CIO Plus One award?  "It was for our Legal Information System and our extranets.  LIS is a reusable infrastructure component, or application, which we can roll out across different industries and practice areas.  The goal of LIS is to provide a forum for K&L Gates lawyers' commentary and insights into cases, statutes, regulatory developments, and so forth, which we present alongside the primary sources.  The idea is to provide a 'one stop shop' for clients with legal issues in that area.  It's not just the raw material, it's our opinion, interpretation, and commentary."

I note that K&L Gates has been, shall we say, active in mergers, and ask Steve about their strategy for integrating systems across formerly separate firms post-merger.

The key, he says, is that they started preparing a long time ago for integrating combinations of firms.   Essential to the processs is to standardize:  Standard technology, standard procedures, standard processes, and a standard platform.  The pieces of that platform are:

• A Microsoft-based infrastructure
• Windows XP clients
• Lenovo brand PC's everywhere
• A consistent image on all PC's
• Servers that are all the same:  Same brand, same OS's, same patch levels
• Microsoft Exchange email
• A single provider of WAN hardware
• Similar equipment across all offices to provide WAN and LAN connectivity
• BlackBerry's as a default smartphone device (although they will support Windows Mobile units on request).

In other words, as Steve puts it, a "very boring" philosophy of equipment and infrastructure.  "Why learn two things when you can learn one?" 

Understandably, there are times immediately post-merger when hardware will not be standardized, but integration is accelerated by insisting on a standard user interface "on top" regardless of hardware differences "underneath."   For example, Steve notes, take phones:  With the Preston Gates & Ellis combination, PG&E used Cisco VOIP hardware and K & L used Siemens.  Nevertheless, on the day the merger became effective, dialing the prefix "101" got you the Seattle office no matter what equipment you were on.

Similarly, the website, attorney and professional staff bios, email addresses, stationery, billing templates, etc., are all standardized and consistent on day one post-merger.

So that's Phase One of merger integration.

Phase Two is integrating the key infrastructure itself:  WAN and network connectivity, key business processes and applications, HR, finance, time & billing, document management, litigation support, backup/disaster recovery, etc.  Phase Two, interestingly enough, commences before the merger is formally consummated and continues well after. 

Since Phase Two is largely inward-looking, there's more flexibility in timing.  For  Phase One, by contrast, the firm's self-imposed and self-enforced deadline is that the standardized user interface be in place the morning after the merger takes effect.

Phase Three is integrating the application inventory.  Ultimately, the goal is complete standardization across the entire firm regardless of office and regardless of user.

What other initiatives are on his plate?

Consolidated data centers is #1, he replies.  The firm is consolidating key computing infrastructure in primary and secondary facilities in a few regions around the world including the US, Europe, and later, the Far East.  Consolidation is "not just good IT hygiene," Steve opines, "but it serves the goal of freeing staff to serve our lawyers and their clients and spend a lot less time on just 'keeping the trains running on time.'"

I ask Steve who he reports to, and he gives me the right answer:  He reports to Pete Kalis, Chairman of the firm.  Why, Steve asks, is that the right answer?  In my experience, I relate, CIO's, be they in law firms or corporations, who report to the CEO or Chairman, have the proverbial "seat at the table," whereas those who report to the CFO, COO, or Executive Director, are viewed as well-paid plumbers, responsible for a utility like electricity or a dial tone, but not strategic partners in the firm's success.

While we're on this topic, Steve elaborates that the management committee has been "very supportive" of IT initiatives.  The firm "recognizes and offers sponsorship of IT.  Two things have to come together to enable IT to have a lasting competitive impact.  First, the actual ability to implement important initiatives, but equally important, the willingness of the firm to let it be done." 

What's the hardest part of your job, and what's the most rewarding?

Hardest is recruiting talent—"especially to a law firm.  People know that there are extremely high customer-service level expectations, at all times and at all levels, even in the back room."  Recruiting talent is an ongoing struggle, one that seems to be more of a challenge all the time.  Steve belongs to a Pittsburgh area council of CIO's from companies ranging from about $100-million to $5-billion in revenue, and at the most recent meeting everyone reported recruitment and retention of talent was their single biggest challenge.

The second challenge is staying relevant from a business perspective:  "Being more than a utility or a service provider—being a true client partner."  And third is obvious:  Scale.  As the firm grows, there's "a simple issue of magnitude."

The most rewarding?

Taking IT out of the back room and into the front office, all while supporting growth.  It may be challenging to retain people, but it's immensely rewarding to be viewed as a key part of the business.

So?  Take one energetic and disciplined CIO, add deep and enduring management support, sprinkle with clients willing to appreciate technology initiatives by their law firm, and, with luck and perseverance over a course of several years, you win a CIO100 award.  "Plus One."

The History of Allen & Overy: 1998 - 2007

We conclude our three-part history of Allen & Overy with the years 1998—2007, the decade surrounding the turn of our current century.

These years are, for my money, primarily the story of A&O's investments in internationalization bearing fruit.  Indeed, Volume 2 of the history of the firm (A&O at 75, Allen & Overy: London (2005)) is arranged not chronologically but by city.  The frontispiece to the volume says simply, "An international practice at home everywhere - this is our story..."

And the list of contents is impressive:

• London
• New York
• Madrid
• Paris
• Brussels
• Antwerp
• Amsterdam
• Luxembourg
• Turin
• Milan
• Rome
• Frankfurt
• Hamburg
• Prague
• Bratislava
• Budapest
• Warsaw
• Moscow
• Dubai
• Bangkok
• Singapore
• Hong Kong
• Beijing
• Shanghai
• Tokyo

Looks impressive, to be sure, and sounds strategically indisputable.  But not so fast:  We say that from the vantage point of  hindsight.  All was not so obvious at the time the investments had to be made.  From the preface to the second volume (Richard Rowland, qualified in 1969, speaking):

"A fundamental point about the internationalization, you have to remember, is that there was a strong body in the firm who felt that we should not be anything other than English lawyers and that we shouldn't have offices overseas.  When it was first proposed in 1980 that we should have an office in Hong Kong, it was turned down."

In the event, the firm recognized that doing cross-border transactions required local law expertise.  Only when the US became a serious entrant in global capital markets in the late 1980s and early 1990s was the die cast.  With the disclosure requirements imposed by US and other local law (Rule 10b-5 is specifically mentioned), "we then needed overseas lawyers to be part of the team, and if they were part of the team it didn't work very well if they were not also part of the organization."

From the preface, other observations about how matters have changed and what are the contours of the current competitive landscape:

• "The culture of the American firm and the way the firms work is extremely strong, and colors their whole attitude, I feel. [...]  The US law firms are also adapting.  T here are more and more US law firms in London.  They are recruiting English lawyers and they are expanding aggressively.  They have huge resources behind them.   And so they represent a challenge."
• "If you ask what is going to happen now [in terms of international financial capitals], I think that New York may come into its own again.  [But the obstacle is] that people are more circumspect about the legal system which has populist elements.  It doesn't necessarily have the goodwill that London has and it is still too closed."
• [On the impact of technology]:  "When I started as a lawyer (which wasn't that long ago), people were still sending telexes.  You had days between turning around drafts.  Now you actually have to have everything at your fingertips if you are going to play at the highest level. We are living in the world of 24/7, of always being accessible.  One of the challenges is to know when you can turn to your client and slow things down to take stock.
  "Pretty much on every deal I got involved in during the 1970s, the first document I pulled out was the airline timetable, because inevitably it meant actually traveling to the place where the deal was being done."

Internationalization

While the challenges to international growth can be daunting, the lesson of the past decade at A&O can be summed up thus:  "It's worth it." 

But again, that was less clear when commitments were being made, and the road in some markets—especially New York—has not gotten easier.   Nevertheless, a robust New York capability was seen as essential: 

"Eighty per cent of economic activity in the United States, by far the world's biggest economy, is purely domestic, and, if you add in Canada and Mexico, more than 90 per cent.  ... Then consider that our top 30 clients are doing at least a third of their business in the US and you can see why it is so vital that we have the resources and the capability to be able to advise them.  Put the other way, it's a gigantic disadvantage if we can't play where more than a third of their business is."

It's still a slog.  According to Dan Cunningham, a marquee partner brought over from Cravath, "We have to develop our reputation case by case, deal by deal and client by client.  There is no other way.  We have to do the deals to win the hearts and minds of the legal decision-makers in the big institutions for whom we are likely to act."

Similar stories are told of opening in Moscow, in Hong Kong, in Frankfurt, and in Eastern and Central Europe.  Each and every office presented its own challenges, opportunities, and time-lines.  There's no such thing as a cookie-cutter approach to internationalizing a law firm.

For example, to cite the ups and downs of the Moscow office alone, they have included:

• Opening not in an office building proper, but in a flat, where the fax machine was in the bathroom and meetings were held in the kitchen.
• Surviving the October 1993 storming of Parliament ordered by Boris Yeltsin, when A&O's Russian staff ignored strict instructions to the contrary to remain indoors and mounted barricades on the streets to forestall the Russian Army from storming the building.
• Similarly surviving the August 1998 moratorium on all foreign currency debt repayments—the first time since the Ottoman Empire that a sovereign nation had defaulted on domestic debt—and the immediate collapse of the ruble.   Ultimately the firm had to retrench from three floors to one.
• Even today, the Russian economy is scarcely the smoothly running well-oiled machine Westerners might be familiar with.  Power is excessively concentrated; the rich/poor gap is dramatic, shocking, and growing; the entire country is far too depend on oil and gas wealth; and the fundamental notion of the rule of law enforced by independent courts remains alien.

The Warsaw office also opened in an apartment, but with an added sleight of hand.  The senior partner at the time, John Kennedy, remained convinced that A&O should limit itself to English lawyers practicing English law, so the solution was to open with a Polish lawyer—and the first from any civil law jurisdiction— "Andrzej Siemiatkowski in association with Allen & Overy."  Also onboard was A&O's association partner, the French firm Gide Loyrette  Nouel.  In the three-room apartment, Gide took the nicest room, A&O another, and the secretaries the third.  One early obstacle to efficient communication was that there was only one phone, typically prompting a rush to answer.

Nevertheless, progress was possible.  The firm moved out of the apartment in 1992, and by 1994 had trebled in size to 35 people and achieved profitability.  By the mid-1990s Warsaw was the firm's third largest office, after London and Hong Kong.

But to bring our perspective straightaway to today, let us conclude by reflecting a moment on A&O's latest (2006 fiscal year) numbers, and the just-released Legal Week UK 50.  (The full chart is here, and I strongly commend it to you; it's fascinating.)

As A&O puts it:

"Strategic investment across the globe has helped fuel record 2007 revenue and profits, clearly positioning Allen & Overy among the top six law firms in the world.

"Highlights:

• profit before tax up over 36 per cent to GBP 395 million
• turnover up 20.5 per cent to GBP 887 million 
• total number of lawyers worldwide increases by 10 per cent to 2,600
• presence in key global financial markets strengthened with new offices and capabilities in Middle East, Europe and Asia

"Following another outstanding performance across all practice groups and jurisdictions in the year ended 30 April 2007, Allen & Overy reported a 20.5 per cent increase in annual turnover to GBP 887 million resulting in an increase in pre tax profit of 36.3 per cent to GBP 395 million."

And need we add that PPP exceed £1-million for the first time?

The key, for A&O as for its Magic Circle brethren, has been the payoff from their investment in internationalization:  "Clifford Chance (CC) managing partner David Childs said the results vindicated a decade-long run of foreign investment by the big four firms. [Clifford Chance, Linklaters, A&O, and Freshfields.]  He told Legal Week : “Our foreign offices are now maturing. We are seeing significant revenue increases from these offices and they are becoming more profitable. The model is proving itself.” "

For some who were initially skeptical, this comes as a surprise.  Tony Angel describes it thus:

“The US firms are quite surprised,” argued Linklaters managing partner Tony Angel. “When we and other global firms began investing in building networks there was a real sense that scale was incompatible with top-notch work, but the fact that all the firms have done so well shows you can do well and stay focused.”

The moral of the story today is simple:  The large gambles, and gambles they were, that the top UK firms put down a decade ago on the concept of a global legal marketplace are now beginning to seriously pay off.  The top four firms racked up £4.18-billion in fees last year, accounting for 40% of the UK's top 50 firms' income.    US firms have not made similar investments in internationalization (with a very few exceptions).

Simultaneously, the top UK firms have accomplished all the financial and managerial engineering needed to boost their PPP numbers up into the stratosphere, stretching leverage, restructuring, conducting rigorous partnership reviews, and holding associates' feet to the fire.   My question would now be:  Is it time to dial back the pressure on "managing to PPP"?  As the editor of Legal Week notes, "such gyrations have pushed cultures and businesses near to breaking point."

I will close this extended history of the 75+ years of Allen & Overy with some insights from some of the more prominent heads of London-based firms.

• David Childs, managing partner, Clifford Chance

  On the magic circle pulling away

  "Our offices outside of London are now maturing. We are seeing significant revenue increases from these offices and they are becoming more profitable – the model is proving itself."

• Tony Angel, managing partner, Linklaters

  On the market

  "A number of facts have driven the profits of the magic circle firms. It may be that the UK domestic market has not been as buoyant as the global market and within the global market the UK, and international law firms, have been increasing their share. Investment in growing international networks and the growth of London as an international finance centre have provided real opportunities to firms like ours. The sort of deals being done benefits firms with strong financial markets and cross border transactional practices."

• Konstantin Mettenheimer, co-senior partner, Freshfields Bruckhaus Deringer

On the US

"As a capital market centre, London has been increasingly important, with a very large number of IPOs compared to New York’s very few. There has been a lot of capital flow and economic activity between Asia and the Middle East, not necessarily via London and New York. The jury is out on whether we will see the development of a third financial centre on top of London and New York, be it Dubai, Mumbai, Shanghai, Hong Kong or Tokyo."

• Nigel Boardman, corporate partner, Slaughter and May

On the US

"The City has gained significant market share in the world financial and legal scene. Part of this is Sarbanes-Oxley. Also Arab money doesn’t like to go to the US, where it cannot necessarily get money back out again. New York is not as good as London for Asian companies to be headquartered in."

On London

"Ten years ago we were talking about Paris and Frankfurt being significant threats to London, this is no longer the case. As long as there remains differential treatment of personal tax, this will continue to be the case."

On equity/leverage

"Partnership culls will have hit leverage significantly. I would imagine that the magic circle has shed 600-700 partners worldwide recently."

We have indeed come a long way from coal stoves.

The Data-Centric, Empirical "Law Firms Working Group"

My friend Professor William Henderson at Indiana University School of Law—Bloomington just sent word of a new initiative the law school is launching in conjunction with the American Bar Foundation. 

Called the "Law Firms Working Group," the project includes no fewer than 14 research teams comprising 38 scholars in all, who will have access under a special license to the archival data of American Lawyer Media, which "includes cross–sectional and longitudinal information on law firm structure, financial performance, lawyer demographics, branch office size and location, lawyer mobility, associate satisfaction, relative law firm prestige derived from lawyer surveys, practice group prominence, and other facets of modern law firm practice."

What precisely are they researching, and what makes this initiative different from yet another set of academic papers on our complicated profession?

First, what promises to make it different is that the "LFWG" researchers will actually be working with data.  In other words, their work will be far more empirical than the usual armchair-observing and abstract-pontificating (and no, I'm not naming any names, thank you).

Second, their proposed projects include several that promise to be of genuine interest to those of us who are long since out of the academy and into the actual nitty-gritty of management and leadership.  Here are a few that struck me as particularly "real world" in focus:

• Lawyer Mobility:  "The investigators will study the volume of lawyer lateral mobility, and the and factors influencing it. They will explore the importance of a strong firm culture in the quality of client service, firm profits, firm stability, employee satisfaction, and associate attrition. After this analysis has been completed, Marc Galanter and William Henderson will utilize this dataset to study the relation of mandatory retirement policies to lawyer mobility."
• Interaction Between Law Firm Structure, Hiring, and Partner Promotion:  "John Gordanier will study the empirical relationship between the structure of law firms and the characteristics of associates and partners. His focus will be on whether a multi-tiered partnership structure [with equity and non-equity partners] changes the composition of a firm's associates and whether it affects the quality of the partners."
• Globalization Strategies of U.S. Law Firms:  "Carole Silver and Nicole DeBruin will combine Law Firms Working Group data with their own prior research into non-U.S. offices of U.S. law firms to analyze the consequences of different approaches to global expansion. They will examine a variety of factors, including the ways that offshore offices reflect or differ from their domestic counterparts, and the relationship between offshore office growth and financial success."
• The Professionalization of Large Firm Management:  "Elizabeth Chambliss will track the emergence of full-time ("professional") managers in law firms, focusing on the managing partner and law firm general counsel positions. Her research will examine the relationship between professional management and the economic success of the firm, and the sources of managerial authority for full-time versus part-time/practicing managers."

Other projects will look at the relationship between firm performance and a commitment to pro bono, the changing geographic footprint of global law firms, career trajectories of young lawyers, and race and gender in large law firms.

For some time now, Bill Henderson has been one of the rare law professors with a dominant "quant" gene and I for one will be fascinated to see the fruits of these various research projects.

And of course, you know that "Adam Smith, Esq." will be one place where you can read about those results as they materialize.

The FT's Second Annual "Innovative Law Firms" Awards

The FT is out with its second annual "Innovative Lawyers" Survey and much has changed since I reported on the original survey a year ago.  Primarily, the survey is far more ambitious in scope this year:

"The 2006 report covered only UK lawyers working in private practice. This year the scope has been broadened to cover mainland European law firms, in-house lawyers working in European companies, lawyers in the UK’s public sector, the UK Bar, US law firms operating in Europe and individual legal innovators. In addition, we looked at the UK judiciary to see if there are any judges changing the mould or standing out for their innovative work."

Here's the entire list; the top 5 firms are:

• Allen & Overy
• Clifford Chance
• Linklaters
• Eversheds
• Wragge & Co.

Among US-rooted firms, the only ones represented are:

• DLA Piper (#6)
• Latham (#10)
• Baker & McKenzie (#20)
• White & Case (#24)
• Dechert (#42)
• Skadden (#43), and
• Greenberg Traurig (#48)s

The top-line findings are hard to argue with, but worth summarizing since it is, after all, the Authority of the FT now underscoring what many of us already believed:

"The UK legal profession is more advanced than its mainland European counterparts: law firms are moving from being professional organisations to legal businesses. This sometimes controversial shift has been going on for more than a decade in the UK, but it is still in its infancy in mainland Europe. [...]

"The research for the FT Innovative Lawyers report also showed the cultural differences between US and UK law firms. In general, US law firms tend to be more lightly managed than their UK counterparts. Typically they are more akin to traditional models of law firm partnership, and they are largely organised as a group of individual partners running their own practices. Along with UK firms such as Slaughter and May, these US firms tend to focus their energies more on legal innovation than on the way in which they do business. [...]

"Another facet of the legal world that still shows no sign of radical change [besides the ongoing struggle for diversity] is the way in which law firms bill their clients. As in last year’s report, Billing & Fees was the least subscribed category. The hegemony of the hourly rate remains – although there were some notable exceptions of firms willing to share risk with their clients, or – as in the case of Norton Rose – to introduce third party funding to foot litigation bills.

"Lawyers in every branch of the profession are beginning to look forward and outward. Even the UK Bar, often described as “Dickensian”, is showing signs of a willingness to change traditional ways of working. Commonplace now are transparent bills, marketing and an ethos of client service."

So. to the awards:  What did these firms actually do  to garner awards?

The sheer variety is what's most impressive to my eye.  Linklaters came up with a way of helping finance vaccination programs overseen by the World Health Organisation and Unicef, among others, under which $1-billion of bonds have been issued and another $3-billion are expected to be issued over the next few years.  (The World Bank acts as treasury manager for the issues.)   Clifford Chance took on climate change by attempting to do for carbon and emissions trading what Michael Milken and Drexel did for junk bonds:  Standardize the disclosure and documentation to make the market more liquid.  CC also claims to have invented the world's first convertible Islamic bond, consistent with Sharia law. 

As for individuals, we have some truly impressive souls.  Mahnaz Malik, age all of  28, graduated in law from Cambridge in 1998 and is now tri-qualified to practice in England & Wales, New York, and Pakistan.   While at Simmons & Simmons—which she left 18 months ago to serve as a full-time advisor to governments on their relations with NGO's—she set up a  program to provide legal representation to children "detained in appalling conditions" in Pakistani jails; it now represents 92% of the children in Lahore jails.  Oh, and did I mention that she's published two novels and made a film?

Then we have Jim Rice, a  securitization partner at Linklaters, who spear-headed the global vaccination initiative noted above, and has a track record of inspiring teams of young lawyers pursuing ambitious pro bono projects.

Or Chris Perrin, the general counsel of Clifford Chance, who is a thought leader in the ever-more-important area of conflicts, now chair of a working committee to draft new conflicts rules for England and Wales.

Lastly, one of my perennial favorites, Tony Angel, managing partner of Linklaters since 1998, who the FT calls "a visionary and strategist in a sector that is not known for sophisticated management. He was one of the first law firm managers to take the job seriously," and rebuffs criticism that he has turned the firm into a corporation:  Rather, he insists, the partnership ethos is alive and well within a smoothly functioning and profitable environment.

Speaking of management, there's a separate category of awards for that, as well as for IT, HR, and client service.

Management

Regular readers know that I think benchmarking is a merely the starting line at best and a tar-pit of assured mediocrity for the vision-impaired at worst.  So I thoroughly endorse the piece on management:

"“Are we normal?” Law firms are always asking me this question. When I assure them that their organisational and interpersonal challenges are fairly typical of firms in their sector, they seem relieved. But they are missing the point. Being “normal” is not enough. To achieve competitive advantage these firms must aspire to being abnormal – in a good way.

"Very few of the submissions in the management category this year could be described as genuinely innovative (click here for rankings). Most clients would be unimpressed if they ever read their law firms’ submissions in this category. What feels radical and innovative to a law firm may seem like standard management practice to their corporate clients."

Eversheds takes first place for introducing "a sea change" in how partner compensation is calculated: 

"Eversheds has abandoned lockstep altogether but has done so in a particularly creative way. It has used the new method of partner remuneration as an opportunity to define and embed the most valuable elements of the firm’s strategy and the partnership’s ethos. In other performance-­ related pay schemes, an individual partner’s profit share is based entirely on retrospective performance. Eversheds’ scheme also takes account of expected future performance, recognising and rewarding an individual’s commitment to modify or fundamentally change behaviours in support of five defined criteria (of which only one is profit)."

To my mind, nothing, absolutely nothing, is more important to enlisting "hearts and minds" support for different behaviors than to embed rewards for the desired behaviors, and penalties for the same-old-same-old behaviors, into the compensation system. 

IT

Many of the entries here were of the to-be-expected variety.  For example, DLA Piper  allows clients to post advertising material for clearance by their lawyers; Baker & McKenzie has an IP database repository with, they claim, more than a quarter of a million trademark records under management; Mills & Reeve offers a free online healthcare law resource; Linklaters created a leveraged term sheet generator to cut production time from eight hours to 30 minutes; Simmons & Simmons offers an online age discrimination training guide; and Clifford Chance has a reasonably mature suite of online services now being used by over 20,000 people in 270+ organizations in 50 countries and eight languages.

But then we had the truly innovative.  Number one here is the creation of Derek Southall, a partner and head of strategic development at Wragge & Co., who has come up with a partly automated and partly human (with four IT specialists) system to advise clients on their own internal IT infrastructure needs.    One reason it wins?  This client quote says it all:

"Ian Leedham, senior counsel for the National Grid and an enthusiastic supporter of the Wragge & Co initiative, agrees. He points out that Mr Southall’s strength is that he was a lawyer before he became an IT expert: “This means that he really understands what the business needs.”"

90% of lawyer/IT miscommunication could be eliminated, I've often felt, if you can find one key person who truly understands what both sides of the table are talking about.  There's no substitute, here, for having a former or current practicing lawyer who's at least reasonably, if not intimately, conversant with IT. 

Human Resources

The adage that "people are our most valuable asset" is, as we know, honored too often in the breach.  This observation sums up the disconnect:  "“In a lot of firms, there is a reticence on the part of partners to engage staff in discussions in early stages of their careers,” says [David Miles, a partner at BDO Stoy Hayward, an accounting firm]. “For firms that do start engaging associates at an earlier stage, it actually forces them to identify what they are looking for in terms of making partner. But firms are only just waking up to the fact that they need to do that.”

Ashurst and Allen & Overy, among others, have taken the remarkably common-sensical step of compensating associates   not based on years post-graduation, but on actual competence, skills, personal attributes, and behavior.   Cobbetts has established a "leadership development center" focused on a two-day off-site program in which partners explore different business-focused activities designed to identify their relative strengths and weaknesses.

Latham, characteristically, has come up with one of the more "differentiating" programs of all—and one, of course, which is blindingly obvious in hindsight.  Rather than relying on the ad hoc approach, often dependent on chance hallway encounters, of finding associates on their way out posts in-house, Latham has formalized it to  include partners, departing associates, and firm alumni, all run through the firm's intranet.   Why on earth wouldn't your firm do that?  We all know that happy alumni can become your best clients.

While you're at it, don't ignore staff.   If your firm is roughly typical, you have at least as many staff as you do fee-earning lawyers; to ignore them could be crippling and is certainly morale-sapping.  This doesn't have to be expensive; the most popular benefit is career development programs—which, need I remind you, actually make them more valuable employees?

Client Relations

I've saved one of my favorites for last.   Impeccable legal expertise is now taken for granted; but clients want more.  The trend, roughly, is from detached advisor to business partner.    Critically, this has to go beyond online tools such as client relationship management systems, or KM systems with expertise-finding capability embedded.  The goal is to fundamentally change the way lawyers think about clients before, during, and after engagements.

For example?  At Addleshaw Goddard, 40 or so client relationship partners and their client relationship team members are being trained in business analysis tools at Cranfield School of Management—with a view towards enlightening them as to how the client might actually be thinking about their businesses. 

Wragge & Co. did something more innovative:  It offers free counsel to companies struggling to consolidate and downsize their "panels."  Or, as they slyly put it, "we became poacher turned gamekeeper."  The advice  covers the waterfront, from whether a panel is advisable in the first place to what criteria should be applied, how to handle firms' tenders, and how to get panel members to obey the ground rules.

But Linklaters wins for "the shift in approach with potentially the farthest-reaching consequences for the legal industry."  They fielded a pitch team for a global corporation's work outside the US that was made up of two lawyers—and one client relationship manager and one IT specialist.    We can end with no more apt tale than this:

"The firm says: “The client relationship manager and the managing relationship partner in charge of the team were something of a double act, which was unconventional by industry standards, yet highly effective. There were some conversations which Linde needed to have with a lawyer and other conversations which were easier with a senior person outside the legal team.”

"Should this become standard practice, and be taken up by other firms, it would truly be an innovation that could revolutionise the way law firms deal with their clients. It might also be part of a wider trend towards senior non-lawyers having greater power, and more exposure to clients, within law firms. And that is uncharted water for the legal world."

Trusting non-lawyers, indeed!?  Now that is true innovation.

"IT Commoditizes Everything." Discuss.

Sometimes we take our IT infrastructure for granted—too much so. In the last few weeks I've encountered a succession of stories where client relationships were strongly reinforced by astute deployment of IT assets. Call it the intersection of marketing and IT.

A useful starting point is Legal Week's recap of its annual Strategic Technology Forum, held this year (hard duty no doubt) at Portugal's Penha Longa resort. The "keynote," if you will, was an hour-long video of the UK IT consultant Richard Susskind interviewing three high-profile managing partners: David Morley of Allen & Overy, Neville Eisenberg of Berwin Leighton Paisner, and Tony Angel of Linklaters. What did we learn?

Without IT, globalization would stop dead in its tracks. For example, at Linklaters (and this is becoming increasingly common), any lawyer anywhere in the world can access their own desktop, with all the systems they'd have at the office, securely.

A&O has developed a centralized information repository named, somewhat menacingly, "Omnia," that gives lawyers access to one virtual file wherever they are and whatever they're working on.

IT increasingly participates in new business pitches. According to Eisenberg, senior IT staff have helped BLP win some critical assignments, while Morley makes the same point in the obverse, noting that law firms are increasingly expected by clients and staff to be at the cutting edge of technology. “If you are not at the leading edge, clients will begin to melt away from you.”

For all the copious amounts of ink that have been spilled on the topic, it remains true that there's a generational shift underway as each new crop of lawyers arrives more and more familiar with technology. Eisenberg put it this way: “As you go down the generations, the dialogue between technologists and other professionals gets better.” The payoff is that having a greater proportion of lawyers who understand technology means teamwork between IT, knowledge management and lawyers improves.

Moreover, it's not just a better or deeper facility with current law firm technology—it's pushing the frontiers into technology that's novel (certainly for law firms). For example, I've been talking about the intrinsic fit between what lawyers do (collaborate on written materials) and wikis for a few years now, but at last it's actually being embraced:

"We are seeing a step change here, the full implications of which we will not know for a while,” predicted Angel. Morley agreed, adding that changes to the way people collaborate will be profound. A&O has been promoting wikis on the firm’s intranet for a some time — a move that has sparked informal communication with clients that has gone down well on both sides. “There is a very intuitive feel to this — the technology is less clunky and it is more obvious what to do,” said Morley. With clients increasingly demanding that their advisers share their knowledge with them, the use of wikis in this way seems set to explode in popularity.

The increasing embrace of IT, and its true embedding within the essence of what firms do, comes, I hasten to add, with one enormous challenge which no one to my knowledge has yet answered in a satisfactory way that might yield a long-term equilibrium solution: That challenge is commoditization.

Its sources are various, but primary among them:

• In the online world, we increasingly expect information to be free; why should clients expect otherwise from their law firm?
• Technology fuels arms races: If it is true that "among UK firms, however, there are a number of examples where firms have generated revenue through subscription-based, lawyer-light projects," then how long will it be before those services begin to invade practices higher up the value chain?

My view is more sanguine, primarily because I believe the phrase "commoditization" is flung around far too loosely and generates free-floating fear divorced from real-world implications. I'm closer to the position articulated by David Jabbari, Allen & Overy's head of knowledge management, who believes that “Clearly, any information that can be commoditised is going to be, and will be free,” but who also pointed out that we've known for a hundred years, since Henry Ford introduced the assembly line, how to efficiently build a car, and yet the auto industry is one of the most hotly competitive and least "commoditized" around.

Taking a more recent example, in concept few consumer electronics goods are more generic in nature than an MP3 player, but the iPod has turned the category on its head. Ultimately, the march of technology cannot—and should not—be resisted. Neil Attree, Beachcroft's head of IT, gets it right:

“If a piece of technology makes the kind of work you are going to do easier and better, then go for it. It is the packaging and the end product that matters, and that comes down to quality assurance.”

Meanwhile, over at The New York Times, the University of Chicago Graduate Business School economics professor Austin Goolsbee writes that "the US has kept the productivity playing field tilted to its advantage" through superior deployment of IT and its beneficent effect on productivity.   He's not writing in the abstract, but reporting the results of a new study coming out of the Center for Economic Performance at the London School of Economics. 

The context is, as usual, globalization and its discontents, and the question posed is whether the US will be able to succeed in an open world market or whether the feared competitive advantages of other nations would erode the US standard of living. 

Now, as a general matter, economists (and I subscribe to this as well) believe in the theory of "convergence," which is a rather grand name for the common-sensical notion that since it's easier to copy something someone else came up with than to innovate on your own, eventually the laggards will tend to catch up with the leaders.  The practical consequence of this is that the growth rate of the "laggards" may temporarily exceed that of the leaders, only to inevitably slow down once they catch up.

This brings us back to IT.

The London School of Economics study that Goolsbee discusses, “Americans Do I.T. Better: U.S. Multinationals and the Productivity Miracle,” asks an intriguing question.  Granted that there was a spike in US productivity in the late 1990's thanks to our rapid adoption of IT and the astonishing decline in costs of technology (30%/year by some accounts), why was—or was that?—unique to the US?

To try to answer this, the authors ask an ingenious question:  Was there any evidence that the American advantage with information technology transfers to locations outside the United States?  "If American companies turn computers into productivity better than anyone else, can businesses in Britain do the same when they are taken over by Americans?"  After all, the price of IT assets fell precisely as fast in Europe as it did in the US, and it was just as readily available for sale.  Yet there was no EU productivity miracle in the 1990's.

Here's the Abstract of the paper:

"The US has experienced a sustained increase in productivity growth since the mid-1990s, particularly in sectors that intensively use information technologies (IT). This has not occurred in Europe. If the US “productivity miracle” is due to a natural advantage of being located in the US then we would not expect to see any evidence of it for US establishments located abroad. This paper shows in fact that US multinationals operating in the UK do have higher productivity than non-US multinationals in the UK, and this is primarily due to the higher productivity of their IT. Furthermore, establishments that are taken over by US multinationals increase the productivity of their IT, whereas observationally identical establishments taken over by non-US multinationals do not. One explanation for these patterns is that US firms are organized in a way that allows them to use new technologies more efficiently."

As an example, Wal-Mart acquired the "middling fourth" supermarket chain in Britain, Asda, in 1999, after which it proceeded to grow smartly and is now #2. As tough as it can be to compete on a global stage, somehow the US seems more flexible and effective at adjusting as the landscape shifts. It's become a truism to observe that the rate of economic and technological change is accelerating. If you believe that (with exceptions, I do), then selection pressure will be exerted in favor of the more nimble and adaptable. Goolsbee concludes, tongue only half in cheek, with "something most Americans clearly understand: The world economy may be tough on your industry but look on the bright side: you could be French."

We need not endorse the notion of US IT triumphalism to conclude that IT, properly understood and deployed, can provide competitive advantage for individual firms.

This in turn brings us to a more strategic perspective on IT and its role in a firm. Here, the challenge is for the CIO to move the IT planning horizon from a single year to a multi-year perspective, and to move the focus of IT strategy from "supplier" to the firm to "alignment" with the firm to "competitive differentiator" of the firm. According to a Spring 2007 McKinsey survey of senior IT executives in North America, the basics are largely in place for IT to assume a truly strategic role. Whether they're actually taking advantage of that opportunity appears a closer question.

First, the good news:

• 83% say their company's IT strategy is developed collaboratively with business leaders.
• CIO's are visible: 44% report directly to the CEO and another 42% (making 86% in total) report to the COO or CFO.

And the not so good news:

• Only 43% say they are very or extremely effective at identifying areas where IT can add the most value.
• A mere 34% say they are more effective in introducing new technologies than their competitors, and an almost equal 29% admit they are "not at all" better than their competitors in innovation.

This, then, leaves us with something of a paradox:

• Leaders at the Legal Week technology summit underscored the critical role IT has to play in the 21st Century;
• The Americans Do IT Better study provided further ammunition, if any were needed, to the belief that IT can be a competitive differentiator; and
• McKinsey's survey tells us that CIO's by and large have the proverbial seat at the table—but that they're not exploiting it as effectively as they could.

I choose to view this not as a failing but as an opportunity.

The most forward-thinking proponents of Knowledge Management within firms are beginning to move the function from support of the firm's practice to support of the firm's strategy. The first—practice support—involves hygienic expertise in such things as sophisticated document management, "enterprise" (firm-wide) search, and cutting edge technological tools. But the latter—strategic business support—can bolster client-company and industry awareness, business development efforts, and client relations. It turns KM from inward and lawyer-facing to outward and client-facing.

One powerful way to open up your firm's KM function to clients is to introduce internally accessible and (carefully selected) client-accessible blogs and wikis, as is being done at Allen & Overy. These dynamic online fora can provide meeting places for practitioners with shared professional interests to virtually assemble and exchange viewpoints on the meaning of new developments in their area of expertise. If your firm has professional support lawyers, as the more sophisticated UK firms do, those PSL's can take a lead in such fora and move from a role of research and marshaller of precedent to analyst and provider of business and legal insight.

This moves the KM function from "on call" delivery of static repositories of information to interactive fora where opinions and perspectives can be cultivated and evolve. And this comes naturally to lawyers: How many times have you seen even the most senior people (especially the most senior people) drop whatever pressing matter they're pursuing to engage in a free-wheeling discussion of some new development whose immediate implications are difficult to discern?

If the leadership of your firm, from the chair or managing partner on down, endorses these social and professional experiments, imagine how far they could go. Ultimately, the goal is to unlock the expertise, both tacit and explicit, within your firm in transparent ways that clients will come to see as defining your true competitive distinction.

This is not your father's IT. And it's not a "commodity."

Law Firm "CIO 100's:" This Is Harder Than It Looks

I've been following the CIO 100 awards for several years—they're just out—and I've never seen so many law firms represented as this year.  To wit:

• Bryan Cave
• Foley & Lardner
• Goodwin Procter
• King & Spalding, and
• K&L Gates

What are the "CIO 100?"  They are the most innovative and effective CIO's, who have had the greatest  positive impact on their organizations.  According to the press release:

“The 2007 CIO 100 award recipients serve as industry role models for business and IT excellence,” said Abbie Lundberg, editor in chief of CIO magazine. “This year's winners demonstrate extraordinary results in a variety of important areas, including business transformation, collaboration, customer innovation and top line contributions.”

I cite this rather remarkable showing by law firm CIO's—snagging 5 of the 100 slots, while law firms represent nowhere near 5% of GDP—for two reasons:  First, it's a truism to say that ours is a knowledge business, but even truisms are occasionally correct. If we're a knowledge business, we are therefore, in the 21st Century, an IT business.

Second, we too little appreciate how extraordinarily hard it is for IT to have a meaningful—and creative, differentiating —impact on how we get our jobs done.    Inventing new technological tools—word processing, BlackBerry's—is actually the easy part.  Figuring out how to use them to transform the way we accomplish what we need to do is the hard part.

Lest you doubt the time-lag between technological invention and its having an actual impact on productivity, consider the following lesson from this week's "Undercover Economist" column from The Financial Times (a must-read, by the way).    The columnist is Tim Harford, author of the eponymous book, The Undercover Economist, who deserves the success that Freakonomics has scored, and then some. 

"Electric light bulbs were available by 1879, and there were generating stations in New York and London by 1881. Yet a thoughtful observer in 1900 would have found little evidence that the ”electricity revolution” was making business more efficient.

"Steam-powered manufacturing had linked an entire production line to a single huge steam engine. As a result, factories were stacked on many floors around the central engine, with drive belts all running at the same speed. The flow of work around the factory was governed by the need to put certain machines close to the steam engine, rather than the logic of moving the product from one machine to the next. When electric dynamos were first introduced, the steam engine would be ripped out and the dynamo would replace it. Productivity barely improved.

"Eventually, businesses figured out that factories could be completely redesigned on a single floor; production lines were arranged to enable the smooth flow of materials around the factory. Most importantly, each worker could have his or her own little electric motor, starting it or stopping it at will. The improvements weren't just architectural but social: once the technology allowed workers to make more decisions, they needed more training and different contracts to encourage them to take responsibility."

The lessons are two-fold, I think. 

First, getting IT right is a lot harder than it looks.  Have vision, but also have patience.

Second, understand that it's not only, or even primarily, about IT.  It's about culture, and transforming the way we work.  All IT can do is open the door.  But if we can't see our way past the massive steam engine model, we're wasting our time to replace it with an electric dynamo. 

"Think different?"  Indeed.  At least five of our CIO brethren seem to be doing just that.

Legal OnRamp: "Law Firm 2.0"?

Eagle-eyed readers of my article reporting on my conversation with Ralph Baxter may have spotted where Ralph's essay that I referred to was published:  On Legal OnRamp. 

For the rest of you, if you haven't heard of Legal OnRamp, I intend to remedy that here and now.  Consider what follows one small step in the unveiling of Legal OnRamp.

A collaborative service of leading law departments and law firms, it's intended to pool and build upon the knowledge and experience of these two key constituencies of the legal community and, by doing so, to provide a 21st Century tool to help get work done faster and with higher quality.

Ambitious? Yes, but taking a page from the finest and most venerable traditions of the legal profession, insofar as the goal is essentially to help lawyers and their clients collaborate more effectively. Ten years ago I embarked on an attempt to achieve a similar goal as CEO of the late Pro/Se Systems, Inc., which was designed to:

• Bring together the combined legal content of willing members of the AmLaw 100—the tons and tons of client alerts, advisories, updates, briefing papers, backgrounders, presentations, etc., which is now sitting on shelves in 3-ring binders in major metropolitan areas—and digitize it, making it plain-text searchable;
• With the Fortune 1000 as subscribers to this massive content repository, able in seconds to find the most germane articles addressing their legal question du jour.

In other words, bringing together supply (AmLaw 100) and demand (Fortune 1000) to provide a sophisticated online service for answering day to day legal questions all for the price of a subscription:  "I own restricted (Rule 144) stock; what can I do with it?"  "I have to fire a 60-year-old; what do I need to know?"  You get the idea.

Legal OnRamp is that idea—and far far more—a decade later. For one thing, it's a reflection of how companies are doing things fundamentally differently now, with far deeper learning available from sectors outside the law such as CAD, web, and enterprise systems.

Here's just some of what it has to offer:

• Content: FAQ's on the law, updates and publications from firms, "blogs from legal thought-leaders" (yours truly is a member), and standard forms and templates.
• Community:  Designed to facilitate communication and business deals between the members of "LOR," with forums and online discussions.
• Collaboration: A way to get work done between outside lawyers and in-house professionals.

Other features include real-time flagging of who among the members of your personally selected community are currently online on the site ("Facebook" for lawyers), private and secure collaborative workspaces and wikis, with more to come.

Who's behind it?

Cisco, first of all, as foreshadowed in this earlier article of mine.   But on the law firm side, some names you are familiar with:

• Allen & Overy
• Baker Botts
• Cooley
• Eversheds
• Fenwick & West
• Frost Brown Todd
• Littler Mendelson
• Morgan Lewis
• Orrick
• Pepper Hamilton
• Pillsbury Winthrop

Curious to learn more?  Contact LOR, or email me. 

Whether or not it will be as seminal and as ground-breaking as it aspirations, I think it's not too soon to say:

• It's an idea whose time will come.
• The odds of success today—for a host of reasons ranging from dirt-cheap servers and open-source software to more creative thinkers in our profession as a whole—beat those of a decade ago, with a stick.
• It has deep-pocketed backers, a conservative growth model, and with its modest spending rate and some early revenue streams, can survive for a long time without needing to achieve escape velocity.

Part of my fascination with Legal OnRamp stems from an observation many have made about our profession: That law firms won't fundamentally change until clients demand it. Legal OnRamp invites firms to change—at least in some respects—in anticipation of where clients are going: To go where the puck will be, if you will.

If, like me, you're intensely curious about ways in which our profession can evolve, while staying true to its roots of placing client service front and center, you'll want to know about Legal OnRamp. I can tell you that it's a ride I've signed up for. 

As they say in Times Square, "check it out."

"Web 2.0?" Letters? Phone Calls? Email?

Heard of "Web 2.0?"  Good; I thought so.

Care to define it?  Right; I also thought so.

It can be a slippery concept, unusually prone to the "eye of the beholder" syndrome, but the uber -article about Web 2.0 was written by Tim O'Reilly, founder of O'Reilly Publishing and one of the truly thoughtful writers about our evolving online world.   Here are some of his thoughts about it:

Web 1.0	-->	Web 2.0
DoubleClick	-->	Google AdSense
Ofoto	-->	Flickr
Akamai	-->	BitTorrent
mp3.com	-->	Napster
Britannica Online	-->	Wikipedia
personal websites	-->	blogging
evite	-->	upcoming.org and EVDB
domain name speculation	--> <