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.

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."

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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.

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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.

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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:

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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?

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And here we are with another update on 14 September:

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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)

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"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."

Learning vs. Performance

Could it be that "great teams are less productive?"

That's the headline that got my attention over at Harvard Business School's Working Knowledge.

As it turns out, there is understandable tension between "learning" and "performance," insofar as when you're learning something new you're probably not immediately very good at it. In other words, there's inherent tension between performance today (where you excel at doing what you've done before) and performance tomorrow (where, unless you're learning some new things now, you'll be behind the curve).

But back to the HBS research. 

Prof. Amy Edmondson started her research in the context of hospitals, where tracking and analyzing "errors" has been raised to a high science.  In hospitals, "errors" are an indispensable input to learning and organizational change.  So Prof. Edmondson assumed that she would find a positive correlation between high-performance teams and low error rates.

She found the opposite:  The more integrated, effective, and highly functional the team, the more error rates were reported.

And massaging the data in various ways only confirmed or amplified the result (for example, controlling for the severity of the patients' disease on the assumption that "better" teams might get harder cases just made the effect more pronounced).  Then the eureka moment:  In well-led teams, the climate of openness made it easier to report and discuss errors, as opposed to teams with weak or punitive leadership. 

Good teams, in other words, didn't commit more mistakes, they recognized and recorded more mistakes.  

If you're wondering how to transfer this from the operating room to the conference room, I have some thoughts:

• Poor communication, or an environment dominated by bullies and narcissistic perfectionists, will ensure that everyone in sight devotes tremendous energy to ensuring that mistakes are not recognized, or are blamed on innocent bystanders if recognized, or are turned into exercises in obsequious self-abasement if recognized and tagged to their owner.  A recipe for better performance next time?  Not.
  
• By contrast, a high-performing team, with a culture of openness and an "idea-friendly" approach, will acknowledge and make the most of "mistakes"—which, assuming beneficent intentions all around, are most likely just attempts to go the extra mile.
  
• When I say "making the most" of mistakes, I should clarify what I mean.  And to clarify that I need to explain that I think there are two fundamentally different categories of mistakes, or categories of learning opportunities, if you prefer:
  
  • Situations where someone fails at accomplishing a well-known task with ample precedents and a well-worn track record of success by others at different times and places.  These are failures to understand precedent:  To understand how to ride a bike, how to dance to a waltz in four-time, how to prepare for a deposition.  The learning opportunity here is simply to put the unfortunate under the guidance of a more experienced senior and let mentoring do its magic
    
  • Then there are situations where the "mistake" is because we're in unknown territory and you tried something that plausible might have worked but didn't in reality.  Here the learning opportunity is to de-brief, reanalyze what went wrong and what could have been done differently, and figure out how to do better next time.

Now, the question and the challenge for you as a senior manager is how to distribute the individual, high-performing, teams' learning across the firm. 

Sometimes, of course, it can't be done:  A new approach to summary judgment motions probably won't gain much traction with your tax lawyers.  But you can still celebrate the innovations and signal that your firm rewards creative thinking.

But your most important job may be precisely to help others walks that fine line between high performance today and stasis tomorrow. "Learning" is opposed to "performance" only in the temporal sense.  Learning today is an investment in performance tomorrow, but/and learning today distracts from performance today.

There's still one thing we know works:  Open lines of communication.  To identify mistakes as promptly as humanly possible, to diagnose the cause and apply the right "learning opportunity" paradigm, and to ceaselessly push into the future.

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	-->	search engine optimization
page views	-->	cost per click
screen scraping	-->	web services
publishing	-->	participation
content management systems	-->	wikis
directories (taxonomy)	-->	tagging ("folksonomy")
stickiness	-->	syndication

Some of the key concepts O'Reilly posits as characteristics of Web 2.0 are:

The Web as a Platform

In Web 2.0, you don't "surf" or look at things on the Web; you do things on the Web, and Web 2.0 participants such as Google provide services

Harnessing Collective Intelligence

For example, eBay is essentially an enormous platform for enabling, categorizing, and collecting the joint activity of all of its users, and like the web itself, it grows organically in response to user activity. 

Similarly, Amazon sells the same products as Barnesandnoble.com, with the same jacket photos, ISBN's, and Publisher's Weekly blurbs, but it has become extraordinarily adept at enabling visitors to contribute their own reviews, and to participate in a myriad of ways on virtually every page.  Through a virtuous feedback loop, Amazon uses the visitors' contributions to, in turn, improve its search and recommendation functionality.

Most spectacular in this area are the successes of sites like Wikipedia, entirely a creature of visitor contributions, or flickr or del.icio.us.  In a formulation at once cunning and appealing, this is known as the "architecture of participation."

Data is the Next Intel Inside

This signifies that every Web 2.0 initiative is tremendously data-dependent:  Google, Amazon, MapQuest, mashups (if you don't know what a mashup is, go here, which combines, or mashes up, Craigslist apartment listings with Google maps—right, you just got the idea).

The End of the Software Release Cycle

Google is famous, or notorious, for constantly releasing new functions, or applications, in "beta."  Sometimes they formally graduate from beta-adolescence, sometimes they disappear and sometimes they seem to remain in a sort of permanent beta purgatory.

I have often wondered when—but not whether—this will pose a bedrock challenge to Microsoft's business model.

O'Reilly has a few other candidates for characteristics of Web 2.0, which tend to be a bit more geeky ("lightweight programming models," "software above the level of a single device," and "rich user experience," for instance), but I think the point has been made.

Great.  What has this got to do with you and your firm?

---

The usual suspect, McKinsey, has fingered Web 2.0 for a survey on how global businesses are using it.  With nearly 3,000 respondents, 44% C-level executives, the survey essentially constitutes a widespread, but careful, endorsement of Web 2.0 in corporate land.  Some numbers:

• Asked how satisfied they are with the financial return on their investment in Web 2.0 technologies over the past five years:
  • More than half are pleased
  • Three-quarters plan to maintain or increase investments in the coming years
  • Only 13% say they are disappointed
• Interestingly, those who described themselves as "early adopters" were more satisfied than those deeming themselvse "fast followers."  This confirms my own personal prejudice that in technology investments, speed is a virtue.

Separately, McKinsey asked the classic "hindsight" question:  Knowing what you know today, what might you have done differently to make your investments in Web 2.0 technologies more effective?:

• Invested at the right time but didn't invest enough:  42%
• Should have invested sooner:  24%
• Would do nothing different:  18%
• Invested at the right time but over-estimated potential: 10%
• Should have waited for technology to mature further: 7%

Back to what exactly "Web 2.0" means in the business context:  The most popular application is "Web services," which McKinsey defines as follows:

"Web services are software systems that make it easier for different systems to communicate with one another automatically in order to pass information or conduct transactions. For example, a retailer and supplier might use Web services to communicate over the Internet and automatically update each other's inventory systems."

In law firm land, one of the truly useful applications of "Web services" I've seen is the knowledge management system of an AmLaw 25 firm that draws from essentially every database in the firm—not just the document management or matter management systems—so that if you find (say) a brief of particular interest, you have simultaneous on-screen links to every pertinent piece of data related to that brief, from the lawyers who authored it to the client for whom it was generated, the number of hours billed against it, the office and practice group it emanated from, etc.

"Web services" are in use at 80% of companies surveyed.

Second is "collective intelligence," at 48% of firms, meaning methods of enabling online collaboration, for example by allowing multiple authors to edit a document in one space.

"Peer to peer networking," which enables efficient sharing of a file over the Net or to a selected group, by distributing copies of the file across many machines, was in use by 47% of firms responding. 

After that, the remaining technologies were all used by between one-quarter and one-third of firms responding:  These included social networking, RSS feeds, podcasts, wikis, blogs, and mashups.

But let's not exaggerate the penetration of these techniques:  Very few report that their companies are using three or more of these techniques, and more than a third labeled the entire sector "experimental."

Still, among firms using them, the benefits seem clear:   The key objective is to communicate more effectively and efficiently with customers, business partners (e.g., suppliers), as well as internally (think KM). 

Is any of this a surprise? 

Yes: Because the key source of dissatisfaction with Web 2.0 applications seemed to be adopting them too late, not too soon. 

But no:  Because business (as law) is all about effective communication with the people who matter:  Your clients, suppliers, and your own colleagues within the firm. 

"Web 2.0" is not, conceived that way, novel in the least.  It's simply another way to communicate.  If communicating is key, Web 2.0 is here to stay.

The Law Library of the Future?

This morning I delivered the keynote at the Ark Group's two-day conference starting here in New York, "Best Practices & Management Strategies for Legal Library & Information Service Centers."

My keynote was titled "The Law Library of the Future," and I want to share some it with you. But before I do: Many thanks to the organizers of the conference, as well as to the many attendees I had the opportunity to speak with (some of whom I knew and some of whom were new). Here's how the conference materials summarized my presentation:

9:15AM KEYNOTE: The Library of the Future
 
As information resources are increasingly delivered in digital format and online, and as new generations of lawyers show increasing preference for, and adeptness at, employing powerful search technologies to engage in “self-service” research, the role of the law library in the 21st Century is seen by many as threatened.  Indeed, comparing the physical footprint of a library designed ten years ago to one planned for tomorrow will show drastic down-sizing and profound functional changes.  In light of these trends, many are questioning whether the library can maintain its central role in the life of a firm.

However, what law firms sell is knowledge; and libraries, above all, are purveyors of knowledge.  Therefore, the library of the future will move from a tactical to a strategic resource, from a static repository to dynamic, on-demand portal, from one-way delivery of assets to vibrant communities of practice, and from a “one size fits all” commodity to a focused, adaptive resource tailored to the precise needs of your firm today.

Libraries are environments for learning, and human beings learn through conversations within their social networks.  This means that the mission of the library of the future is to sustain and foster these social communities.   The implications of this are that libraries move to the forefront of a firm’s knowledge management initiatives, that to provide the on-demand, highly targeted answers lawyers are relentlessly seeking, effective libraries will adopt Web 2.0 techniques, and that libraries will become increasingly central to differentiating a firm from its competitive set, and providing strategic advantage in the marketplace.

Bruce MacEwen
AdamSmith, Esq.

Let me flesh out what I talked about.

I opened by telling the (true) story of walking through an AmLaw 25's library with a junior and a senior partner, examining the space given to the library

with an eye towards reconfiguring it for the firm's pending move to new offices:

Junior Partner (adamantly): "We need to get rid of all of this."   Senior Partner (wistfully): "Well, maybe not all of it...."

The fact remains that:

• The books are going away (nearly two-thirds of firms surveyed by The American Lawyer last year had cancelled West reporter subscriptions).  And
• The space is going away.  New offices designed today never feature the "monumental" library behind plate glass off the reception area.  In fact, one of the leading commercial real estate brokers in the country (in terms of law firm clientele) told me just last week that space planners' biggest worry about the library area is not that it will be too small but that it will be too big.  To hedge their bets,  new library areas are planned in advance to be flexible enough to be able to serve other functions, such as litigation "war rooms."

In general, the model for the new library is not the reading room at the Library of Congress or the British Museum, but:  Starbucks.  In other words, not the sacrosanct temple, but the drop-in, get away from the phone, casual environment ideal for reading in solitude or meeting informally to sling ideas around.

In pursuing this type of model, librarians need to understand that they are dealing with four generations of lawyers in terms of attitudes towards media, technology, and research.   This is roughly how I characterized it:

Traditionalists/ -Silent Generation	Boomers	Gen X	Millennial's
Born <1946	1946—64	1965—81	1982—2000
Patriotic, loyal, risk-averse	Idealistic, competitive, driven	Self-reliant, skeptical, risk- takers	Civic-minded, collaborative, realistic
Case reporters, treatises	law reviews, mainstream legal periodicals, Google	work product of trusted colleagues, focused legal online resources	blogs, RSS aggregators, Wikipedia
ABC, CBS, NBC	CNN, PBS	Fox, MTV, Comedy Central	YouTube
Letters	voice-mail	email	IM, SMS

Reflecting on this topic spurred me to look up one of my favorite quotes on attitudes toward technology, which comes from Douglas Adams' Hitchhikers' Guide to the Galaxy:

• "Anything that is in the world when you were born is normal and ordinary and is just a natural way the world works.
• "Anything that is invented between the time when you are 15 to 35 is new, revolutionary, and exciting, and you can possibly get a career in it.
• "Anything invented after you are 35 is against the natural order of things."

Still, it remains the case that while the books may have gone away, the demand for knowledge has not—if anything, the demand is more voracious than ever.    This is actually good news for librarians, if they can transform their role from passive custodians of information to active champions of knowledge resources.  I portray it as follows:

20th Century	21st Century
Information was scarce, hard to find, a treasured resource	Information is ubiquitous, overwhelming, impossible to sift through
Requiring professional trained searchers to locate it ("librarians")	Requiring sophisticated guidance to find the needle in the haystack ("librarians")
Status conferred by shelf-feet of books, grandeur of space	Status confirmed by "a seat at the table" in key law firm activities
Isolated from the firm	Integral to the firm

Ultimately, I believe the law library of the future is Knowledge Management.  If I'm right, this is terrific news for librarians who can adapt themselves to this role and ensure that the conversation with the executive committee about resource allocation is cast in terms of scholarship, professional development, client and business intelligence, and competitive advantage through astutely marshalling the firm's intellectual assets:  And not in terms of overhead, square footage, the price of subscriptions, headcount, and non-fee-earners. 

If so, the library of the future will evolve:

• from a tactical to a strategic resource
• from static repository to dynamic, on-demand portal
• from one-way delivery of assets to home for communities of practice, and
• from a "one size fits all" commodity to an adaptive resource tailored to the needs of your firm today.

Such was my message, in any event, for those willing to re-imagine the the library's fundamental purpose, its clientele, the services it offers, and the firm's level of satisfaction with those services.

---

Update: 22 Feb.: Stephen Rosenberg of The McCormack Firm, LLC (Boston) wrote me with the following thoughts which he has given me permission to publish:

"Adam [he knows my name is actually Bruce], have long enjoyed your posts (long being a relative term in light of when the age of blogging dawned), but today's post was the first to provoke me to comment. Yesterday I posted an essay on the death of the law review, arguing that new sources of information - and the preference of younger lawyers to use them over traditional library sources - were replacing them in terms of relevance and usefulness. The post is at: http://www.bostonerisalaw.com/archives/people-are-talking--law-reviews-are-dead-they-just-dont-know-it-yet.html.

"Your post today seems to make the same point, only on more of a macro level: that technology is and will completely transform the entire legal research model, eliminating the old fashioned library in its entirety, and not just, as per my post yesterday, law reviews (at least if they do not change their DNA in a manner that allows them to join the on-line interactive world)."

I agree with Stephen entirely. Indeed, I would submit that if your firm has not yet "re-engineered" your library, your peers who have are in a position to steal a march.

"New Delivery Mechanisms That Will Be Highly Disruptive"--Clayton Christensen Is Talking To You

Mark Chandler, a Senior Vice President and the Secretary and General Counsel of Cisco, gave a speech last week in San Diego at the Northwestern School of Law's 34th Annual Securities Regulation Institute, which has been getting a fair amount of play online, and deservedly so.

Called "The State of Technology in the Law," it's actually far far more than that; it's his vision of how our industry will be transformed by technology—and client demands—as the 21st Century unfolds:  Indeed, as some of us who hope to have decades left on our career will experience ourselves.

I'm quite confident I've never used the phrase "must-read" on "Adam Smith, Esq.," but this is my first nominee.  I'll attempt to highlight some of his key points and give you my take on them; but you should, to be sure, read it all.

Chandler frames his talk thus:

"I offer you three questions for our discussion today.
"First, how is technology driving change in knowledge-based industries?
"Second, what are the key areas of vulnerability in the legal services business to these technological changes?
"And third, what will it take to succeed in this changed environment?"

Chandler runs a "metrics-driven" law department, which is required to run that way "just as other corporate departments are run." 

And because he's driven by the imperative of productivity improvements, he expects the legal department's share of revenue to get smaller as Cisco grows. And he's brutally dismissive of law firms that have a different agenda:

"Letters from law firms telling me how much billing rates are going up next year are therefore totally irrelevant to me, or as we say in Silicon Valley, orthogonal to my concerns. Think about it: not one of the CIOs of your firms expects to get a letter from Cisco explaining how much more our products will cost next year. And not one of our suppliers comes to us to tell us how much their prices will go up next year. So from my perspective, I don't care what billing rates are. I care about productivity and outputs."

You may think this is spoken like a procurement manager in disguise, but he's barely getting started.   The transformation of our industry is a subset of the transformation of access to information, which is moving from centralized, command-and-control hierarchical dispensers of content, to zero-marginal-cost transmission and duplication.  (What did in Tower Records?i ITunes and Kazaa; and recording industry revenue is down 25% in the last 5 years.)

Michael Spence, co-winner of the 2001 Nobel Prize in Economics, has said that the worldwide networking  of computers is the most important development in economic history since the opening of the trade routes between Europe and Asia in the late Middle Ages.  Why?  Because it changes where and how people can work.  And Chandler reels off a litany of Old World entities built on the information-is-scarce paradigm, suddenly made obsolete by information-is-free upstarts:

• Encyclopedia Britannica vs. Wikipedia
• Frommers and Fodors vs. ePinions and TripAdvisor
• Corner bookstores vs. Amazon
• Newspapers vs. eBay and craigslist

And then he turns to law-firm-land, meaning to question #2, "key areas of vulnerability."

The heart of the matter is that devil with nine (or ninety) lives:  The Billable Hour.  "Put most bluntly, the most fundamental misalignment of interests is between clients who are driven to manage expenses, and law firms which are compensated by the hour."

And while the Baby Boomers may have bought into the model of toiling ceaselessly for a decade or so in an attempt to win the tournament for a chance at toiling ceaselessly for a few more decades, today's associates aren't buying it:  Associate attrition rates are 20%/year and higher, and Chandler adds that "The chairman of one firm told me that only people in their 50s and 60s are willing to put in long hours these days, that associates regularly turn down the chance to work on major deals if it interferes with social plans or a vacation."

This, may I hasten to add, is not the associates' problem:  It's your problem.

Would you rather bemoan it?  Fine:  Be my guest.  Denial is always a superb adaptive strategy.

But as Chandler puts it: 

"Upending one's life to support inefficient means of communication, driven by a billable hour system, to maintain a relatively slim chance of making partner, just doesn't cut it. And when the next generation heads for the exits, it's a sign of a business model under stress."

"Under stress" happens to be my own nominee for best single turn of phrase in the entire piece.

Here on "Adam Smith, Esq.," and in my life in the real world, I devote a fair amount of attention to knowledge management:  It is, I believe, at the very core of a high-performance firm, living at the intersection of professional development, marketing, and client service.  A firm with a frustrating or ineffective KM system is at a serious competitive disadvantage.

But KM can be a double-edged sword, as Chandler astutely observes.

His problem is that clients cannot benefit from firms' KM systems without going through the tollgate of the hourly billing model:  "The legal industry has spent millions on IT to up speed access to information. But the only way I can get that information is through an individual billing me by the hour."  Chandler is fed up, and he's not going to take it any more.

The issue is that the gatekeeper, the one-on-one relationship of client and lawyer, is profoundly obsolete:

"My contention is that the very source of success for firms today – the ability to manage client access to information and require clients to use bespoke 1:1 systems – will be the source of failure in the future.

"So my answer to question number two is that the greatest vulnerability of the legal industry today is a failure to make information more accessible to clients, to drive models based on value and efficiency. The present system is leading to unhappy lawyers and unhappy clients. The center will not hold."

Chandler foresees a world with law firms sorting themselves into a "dumb-bell" distribution:  At one end, a group who are able to commoditize and standardize services to manage costs and ensure predictability, "where very good is good enough."  And at the other end, providers of top-notch bespoke services.  Rare will be the firm that can pull off both.

Don't count Chandler an ingrate.  He understands the integral role of outside counsel, and proudly (and rightly) cites Cisco's record of "no records with its stock options, minimal comments on our 10-Ks, and only one piece of litigation listed in the last 10-Q, and that one has subsequently been resolved."  He's proud of our profession.

But:  New technology has resulted in new business realities.  Clients are demanding greater value.  Associates are demanding greater engagement. 

As tempting as denial may be, I for one do not believe it's an equilibrium solution.  Personally, I don't even believe it's remotely tempting—not in the least.

Let me propose a vision for a law firm that Chandler would hire, and hire enthusiastically:

• A powerful and supple knowledge management system is its key competitive weapon.
• The firm is not afraid—indeed, it trumpets—sharing this system with key clients (obviously, within the bounds of confidentiality, privilege, etc., etc.).
• Lawyers are freed to work on truly higher-value work.
• For which they bill based on a measure of value-received instead of by "cost of production," a/k/a the billable hour.

What does this accomplish?

• It aligns the firm's economic interests with its clients'.
• It separates the firm from the pack, which means
• The firm can (honestly, truly, deeply) tell its clients that it understands what they've been through in terms of
  • down-sizing
  • outsourcing
  • streamlining
• And that it's doing the same things its clients have been doing.

Let's face it:  Corporate America (corporate-world, for that matter) has gone through the looking-glass of rationalizing every process they execute into as streamlined, efficient, and cost-effective a posture as they can possibly imagine; and they're still challenging costs every day.  Law firms haven't even thought about it.

But the Mark Chandlers of the world are telling us that we'd better start reading from the same playbook they've been using for a decade or more.

Is this the opportunity of a generation, or what? 

Imagine if your firm was not pushed kicking and screaming into this absolutely positively inevitable future, but if it led the way?  What competitive distinction would that be for you?  How enduring would the advantage to your reputation be?

I was discussing Chandler's piece with a good friend a few nights ago, a fellow who works for an AmLaw 50 in a senior managerial slot, and his reaction was:  "I wish we had more clients like that; imagine what we could do for them."  He's ever so right.

You read it here first.

---

Update: Feb. 13:

Doug Caddell, CIO of Foley and Lardner, and a friend, writes as follows and asks me to include this as a comment. If you don't know Doug, yes, he's droll.

I generally agree with the above comments of Mark Chandler, GC of Cisco. However, I do take exception with one statement in particular.

Mark says, "Letters from law firms telling me how much billing rates are going up next year are therefore totally irrelevant to me, or as we say in Silicon Valley, orthogonal to my concerns. Think about it: not one of the CIOs of your firms expects to get a letter from Cisco explaining how much more our products will cost next year."

I thought about it: I don't know about my peers, but I receive a "letter" from Cisco every year informing me of my increased cost of doing business with Cisco. While these "letters" are not printed on stationary, the do arrive on Cicso invoice "letterhead". And each year the topic has been price increases. This is especially true with Cisco Smart Net, their maintenance "insurance" on routers, switches, etc. What used to be reasonable has gone the way of first year associate salaries. So much that we now only put critical gear on Smart Net, and "self-insure" the rest.

I'm waiting for this year's letter from Cisco. But, I don't need to open it to know what it says.

Doug Caddell, CIO Foley & Lardner LLP

---

Update, Feb. 13:

Marco Antonio P. Goncalves writes me from Rio de Janeiro with these thoughts:

"Bruce, congratulations on the post. The subject is really interesting and has lots in common with something I wrote in a book on legal marketing that I'm co-authoring with another Brazilian legal marketing consultant. The book is not yet finished, but I try to explain the increase need by companies to look up to law firms that operate like them, like a business, as "corporate mirroring" (I believe this is the best translation from the Portuguese term I have used). In other words, companies want to see them reflected in the law firms they do business with. If they don't get this "reflection", they will simply look for another law firm who does."

Marco raises an insightful point: As the pressure relentlessly increases on Fortune 1000 GC's to operate their departments more and more the way marketing, manufacturing, finance, etc., operate—like a business—GC's and their teams will naturally look more and more for law firms that follow the same philosophy. The question is not whether your firm will get there, but when: And I invoke the bromide (in this case, truthful): "Lead, follow, or get out of the way."

My Favorite Law Technology News Award Winner

I'm pleased to be able to be able to announce the winners of the 2007 Law Technology News Law Firm and Law Department Awards.  If you're going to be at LegalTech, I understand tables for the awards dinner are still available.   (As a member of Law Technology News' Advisory Board, I'll be there.)

While all the winners deserve congratulations for their efforts, I need to highlight one in particular, the award for " most innovative use of technology in a law firm," which goes to Morrison & Foerster's Chief Information Officer, Jo Haraf, and the firm's Knowledge Management Counsel, Oz Benamram, for their development of "AnswerBase," a one-stop intelligent search system designed to present users with information drawn from every significant system within the firm, starting of course wit the document management system, but also including personnel and human resource records, financial and accounting data (down to the individual time-sheet level), client and matter databases, and even records of alumni.  Perhaps because AnswerBase draws from so many different data sources, its nickname is the "Googlification" of Morrison & Foerster.

The reason I need to highlight it is that I was retained by Morrison & Foerster to lead an analysis and review of AnswerBase vis-a-vis its predecessor Knowledge Management system during last summer and fall, and reached the resounding conclusion that AnswerBase was strongly superior to the firm's legacy systems, by providing highly relevant documents and discovering genuine subject-matter experts within the firm with impressive accuracy.   By interviewing a broad cross-section of lawyers at the firm's New York offices, I was able to determine that the design and functionality of AnswerBase essentially replicate, as I put it in my report, "the way lawyers think" rather than reflecting technical considerations or limitations.  Also as I put it there, the key challenge to any knowledge management system is to understand this fundamental truth:

Associates look for documents; partners look for clients.

So, for example, one associate had this experience:  "I had been researching the requirements for establishing a broker-dealer for a few days with little to show for my work; when I turned to AnswerBase, I found a firm memo outlining all the actual steps within a matter of minutes."

And a partner (and practice group leader) told me simply:  “Clients are very interested in knowing what else you’ve worked on that’s similar.   Why?  They don’t want to pay for you to go learn it:  So it’s very very helpful to find that stuff through AnswerBase.”

Recommind, the firm that provided the fundamental "MindServer" technology underlying AnswerBase, has built an online ROI calculator which lets you enter actual numbers for your firm (such as number of associates, median number of hours they bill, blended hourly rate, etc.) and see what they might mean for your firm.

Recommind has also published my whitepaper on AnswerBase, together with the Appendix which explores bases for calculating ROI.  I invite you to take a look, and again congratulate Jo, Oz, and their team for a fascinating solution to an age-old problem. 

To learn more, including seeing an online demo of AnswerBase in action, click on the Morrison & Foerster logo:

Do's and Don't's in IT: Never the Twain Shall Meet?

CIO Insight, in partnership with Baseline Magazine, is featuring a year-end review of nearly 230 case studies done over the past five years to distill out the "Top 10 Lessons for IT Project Success."  Reading that piece in conjunction with "Top 10 Project Pitfalls You Can Avoid" is a fascinating exercise in realizing how the obvious sometimes bears re-stating and—I am quite confident this perspective is entirely unintended by the writers—also gaining insight into why so many IT projects do, indeed, fail spectacularly:  Because many of the top 10 "do" recommendations are perilously similar to many of the top 10 "don't's."

But first, let's rehearse what we really do seem to know about IT projects:

• Technology cannot set the agenda; business processes must.  For example, while Toyota relies heavily on technology at its manufacturing facilities, one senior VP at the Boston Consulting Group who has studied Toyota observes "What strikes me about Toyota is, if you were to ask them if they have a technology strategy, they would probably say no, we have a business strategy."   The result of that insistence on the primacy of the business objective?  Merely that Toyota is the most efficient, highest-quality car manufacturer in the world.  To be sure, there are some valuable cultural overlays to this—including just-in-time supply chain management and, famously, kaizen, or continuous improvement; but my favorite of them all is genchi genbutsu, which literally translates to "Go and see for yourself."  In other words, at Toyota you're not permitted to just hear about a problem and try to act at a distance; workers, team leaders, and executives alike are required to go see the problem directly and work collectively  on a solution.  My recommendation?  Steal this practice.
• Track IT projects across the entire enterprise. Unless you're doing this, you have no hope of ensuring that your IT resources (human and financial) are devoted to the highest-priority, biggest-payoff projects.  Don't let IT descend into the chaotic pit of "emergency response central."
• Get everyone who matters in one room.  Or else the "solution" you design and start to build, at great cost, will irritate, offend, or simply not work for some critical constituency.
• Clean up your data—and keep it that way.  This seemingly obvious statement actually covers an entire landscape of IT project failure modes, including:
  • tolerating aging and incompatible systems which do not communicate with each other and cannot be integrated
  • the dog-chasing-its-tail syndrome of trying to retroactively fix erroneous information after it's been propagated across multiple systems
  • living with systems that routinely disclose bad information outside your firm
  • and recognize that one reason data gets dirty or noisy to begin with is poor design—of the screens, prompts, language, and choices available to users entering or updating data.  A confused user confronting an ambiguous or unclear choice cannot be counted on to read the developer's mind.

Now we get to the fun part:  How much family resemblance is there between the "do's" and the "don't's?"  Turns out, a lot.

#1:  "Get everyone in the same room" (do) but "Projects are impeded because they require approval across multiple divisions" (don't).

#2:  "Biting the bullet and migrating off an older technology can pay off" (do) but "A project's scope is too monolithic and gargantuan" (don't).

#3:  In one of my very favorites,  we have duelling "do's":  "The easiest solution isn't always the best" vs. "Don't use complicated, expensive software when a clipboard and pencil will do."  (I told you —how juicy is that?)

#4:  "Give users what they want" (do) but "Access rights are undocumented" (don't).  How are these at odds?  Simply in the intrinsic way that security and convenience are almost always at odds.

So that was fun, but what can we take away from all this sport?

Lesson One:  There's a reason the IT landscape is littered with the corpses of expensive projects.

And, far more important, Lesson Two:  If you're about to dive into the deep end of the IT pool, don't imagine for a second that you can rely on staff or vendor reassurances, untested assumptions, user omniscience, or management's heedless assent to pave the way.  You are in charge:  Navigate with crystal clear eyes.

Globalization, IT, and the Baby Bust

At the intersection of:

• technology
• globalization, and
• demographics

we have, according to Robert Reich (Secretary of Labor under President Clinton and now Prof. of Public Policy at Berkeley), the challenge of "the economics of people" for the next few decades.  

I would probably not be the first to observe that Reich, famously short at 4'10", has generated more controversy per inch than almost anyone since Napoleon (and even CIO Insight, the magazine interviewing him, calls him one part "polemicist"), but he's saying something important here, reasonably well divorced from his ideological premises, and it's worth pondering.

Reich's first observation is that "globalization" is less about trade than it is about direct investment.  The result is that it's not just IT, help desks, and such that are being "outsourced," but rather that "all management is becoming globalized: Wherever something can be done cheaply and at the right level of skill, it will be done there."

Now add in technology, which permits, enables, and ultimately compels the following:  "In the future, anything that can be done routinely or can be reduced to software code will not be done by a person. And software is becoming ever more sophisticated."

Last is demographics:

"The baby-bust generation, people born in the U.S. between 1965 and 1990, will be in relatively short supply. Companies will have to worry even more about recruitment and retention than they do now. Immigration will become an ever more contentious issue."

In law firm land, still after all these years measuring contribution by hours worked, the "baby bust" statistics combine with the anti-workaholic attitudes of Gen Y to wreak a double whammy:  Fewer people, who are each inclined to work less, given their druthers.  Reich cites both "recruitment and retention," and "immigration" as germane to this.  The first is self-evident, but I want to highlight the second.  Instead of (just, or only) moving document production to India, should your firm start looking at importing Indian lawyers to New York, San Francisco, and Chicago? And training them as you would Harvard, Stanford, and Yale grads?

If you haven't thought about this already, my prediction is you will—or at any rate, your competitive set will.

Over the next few decades, as technology and globalization make it increaingly irrelevant where work is performed, and as "direct investment" (vs. trade) grows in importance, the competitive differentiator for firms will, more and more, be the sheer level of their talent.   Being down the block, or in the same time zone, or in the same country—out the window.

Reich expresses it this way:

"The competitiveness of any place in the world, including a place called the United States, depends less and less on the profitability of companies headquartered in that location, and more and more on the capacity of the people that live there to add value to this increasingly integrated global economy."

If you believe that (I do, in spades), you will know intellectually and rationally what I hope you've long known emotinally and in your gut:  Your firm's only irreplaceable asset is its people.  It's not capital assets, which scarcely exist and certainly aren't material, and it's not even client relationships, although this could be sounding heretical.   High-quality professionals will attract clients; high-quality clients will not suffer mediocre professionals.  (And I recently learned of a study finding that some typical AmLaw 100 firms lost 1% of their client billings per month through personnel changes, attrition, and the general effects of entropy:  This may not sound like a lot, but I characterize it as one-fourth of your client base every two years, you might have a different view.)

Is there any good news in what sounds like an increasingly Darwinian, not to say jungle-esque, landscape?  I think so:  The good news is that if you have those highly talented professionals, they can build your firm's reputation off each other.  Reich puts it this way:

"Relational capital is one of the most important and yet most neglected areas of capital formation. Companies need to utilize IT so that everyone in an organization can take maximum advantage of everybody else. It used to be called knowledge management. It's more complicated than that, as we've all discovered. But because all other entry barriers are dropping so fast, we need IT systems that rapidly connect the right people to each other so that there are real synergies."

Today I was privileged to see a prototype of a new KM system at the New York headquarters of an AmLaw 10 firm, and Reich's comment about "rapidly connect[ing] the right people to each other" could be taken as the design thesis for this system. (I hope to be able to report more on this in the near future.)

So it comes down to:  Intelligently deploying technology to deal with the ineluctable onrush of globalization and thereby to surmount the challenge of demographics. 

"Knowledge Management 2.0"

Among the numerous obstacles to an effective and comprehensive Knowledge Management program are (a) lawyers' reluctance—actually, make that absolute refusal—to spend 10 seconds in the active "care and feeding" of the KM system; and (b) the daunting information technology challenges typically associated with ambitious, top-down-driven and firm-wide installations of complex, sophisticated systems.

Nevertheless, achieving excellence in KM can actually be a competitive differentiator, and as bad a name as KM has periodically had, firms continue to come back to the trough to see if they can, at long last, get it right.

The confluence of two stories, one the cover story of last week's New York Times Sunday Magazine, and the other from the current issue of CIO magazine, compel me to share with you a proposal I made to an AmLaw 30 firm eighteen months ago designed to overcome the two barriers to KM cited above.  (Nothing immediate came of the proposal, although the firm and I are still best of friends.)

The Times piece, titled "Open Source Spying," highlights some of the fundamental reasons our national intelligence agencies famously failed to "connect the dots" prior to 9/11—and, one has the stomach-wrenching suspicion, still can't or don't.   In a nutshell, the reason is they're using "1995 technology," and the solution is bringing them into Web 2.0 as of 2006:

"Indeed, throughout the intelligence community, spies are beginning to wonder why their technology has fallen so far behind � and talk among themselves about how to catch up. Some of the country�s most senior intelligence thinkers have joined the discussion, and surprisingly, many of them believe the answer may lie in the interactive tools the world�s teenagers are using to pass around YouTube videos and bicker online about their favorite bands. Billions of dollars� worth of ultrasecret data networks couldn�t help spies piece together the clues to the worst terrorist plot ever. So perhaps, they argue, it� s time to try something radically different. Could blogs and wikis prevent the next 9/11?"

So frustrated was the CIA with its inability to connect "subject matter experts" in real-time that it sponsored a competition called the Galileo Awards: Any employee at any agency could submit an essay describing a way to improve intelligence sharing, and the best would receive prizes. "The first essay selected was by Calvin Andrus, chief technology officer of the Center for Mission Innovation at the C.I.A. In his essay, “TheWiki and the Blog: Toward a Complex Adaptive Intelligence Community,” Andrus posed a deceptively simple question: How did the Internet become so useful in helping people find information?"

"The Wiki and the Blog" has now been published on SSRN, where you can read the whole thing, but this is the key predicate:  "US policy-makers, war-fighters, and law-enforcers now operate in a real-time worldwide decision and implementation environment. The rapidly changing circumstances in which they operate take on lives of their own, which are difficult or impossible to anticipate or predict. The only way to meet the continuously unpredictable challenges ahead of us is to match them with continuously unpredictable changes of our own."   And wikis and blogs, he proposes, are the answer.

But isn't this all a little airy-fairy?  When you're talking about national security—forget that RFP for the new client that you thought was a big deal—you're really going to trust a "blog" or a "wiki"?!  Well, we have a case study:

"[Andrus] was particularly intrigued by Wikipedia, the "reader-authored" encyclopedia, where anyone can edit an entry or create a new one without seeking permission from Wikipedia�s owners. This open-door policy, as Andrus noted, allows Wikipedia to cover new subjects quickly. The day of the London terrorist bombings, Andrus visited Wikipedia and noticed that barely minutes after the attacks, someone had posted a page describing them. Over the next hour, other contributors � some physically in London, with access to on-the-spot details � began adding more information and correcting inaccurate news reports. �You could just sit there and hit refresh, refresh, refresh, and get a sort of ticker-tape experience,� Andrus told me."

Need I add that some of the best coverage of challenging events, from Kosovo to Baghdad, has come from local bloggers-on-the-ground? 

Blogs and wikis have another stunning advantage, one nicely captured by a Sun Microsystems Senior VP who commented from a deep reservoir of chagrin and skepticism that they didn't depend on massive enterprise-wide system upgrades and extensive user training:  "They're like pencils and paper;  people just know what to do with them."

From the perspective of eliminating the daunting IT challenges of installing a Google-like search that hooks into the dozens and dozens of incompatible databases your firm doubtless has, or even rolling out "Lotus Notes" for 1,000 people, blogs and wikis are also unbeatable.  As a friend of mine counseling a severely technophobic head of a small firm said, when asked how someone as Luddite as he could possibly set one up, said, "If you've got half an hour and a credit card, you're there."

We all recall the FBI's massive effort to overhaul its case management software, finally culminating in 2005, after $170-million spent on the project, in its decisive abandonment because it had proven simply too complex and bug-ridden to salvage. 

Which brings us to the CIO article, called "Knowledge Management 2.0." 

It starts from the premise (which I resoundingly endorse) that conventional "big iron" approaches to KM have been remarkably unsatisfying:

"So why haven't enterprisewide knowledge management tools caught on like wildfire? There's one main problem, says Gartner VP of Research Jeffrey Mann: Users and IT administrators hate them. Sophisticated KM products like EMC Software's Documentum put the burden of management on the users, who must take additional steps to access documents and register them with the system. And some IT departments dread the arrival of Microsoft's more user-friendly SharePoint because of its hunger for in-house server and support resources."

Northwestern Mutual, not normally thought of as an "early adopter" in any sense of the term, decided that a blogging platform provided by iUpload (which archives content in a particularly friendly manner, necessary for regulatory purposes)

would be worth rolling out on a trial basis. Within a few months, it had already began "changing the corporate culture." As one executive put it:   "This is the first time we've had a grassroots application that allowed employees to share what they're working on directly."

Or consider this case study from P&G, which emulates the experience of Dresdner Kleinwort Benson (which uses wikis to coordinate its globally-spread bankers' work on pricing deals, with a 90% reduction in email traffic):

"One of the driving forces behind Web 2.0 is the virtual office�teams of far-flung experts collaborating online to create a whole greater than the sum of its contributors. When Denise Senter-Loyola, a principal with business consultancy Milestone Group, needed to get her virtual marketing and sales team members to collaborate on creating some key documents, she first used a Web-based intranet for document management. That failed as content grew and folder hierarchies became cumbersome. Soon, team members stopped contributing content. "People gave up because they had to log on and make all of the decisions about categorizing," Senter-Loyola says.

"Finding the most recent version of a document required extra work as well�resulting in productivity losses and missed deadlines when team members mistakenly worked from the wrong version of a document. She found a better take on Web-hosted document management in Koral, a newly released Web-based tool that lets users share and collaborate on documents from any location. Koral is notable because it does much of the heavy KM lifting for you, categorizing documents and notifying collaborators of new versions automatically.

"