Business Intelligence: Deploy It, Use It

Business Intelligence: Deploy It, Use It

For the past several years, Business Intelligence (BI) has been listed among the most important initiatives in law firm technology and finance departments.  There are a couple of good reasons for this.  First, the volume of information requests by law firm clients has grown considerably, and the volume of information collected by law firms has also grown.  Secondly, the legal industry has "globalized," and firms are multi- practice, multi- city and often multi-national organizations.  

Simply, BI is technology in support of decision making.  In its most basic form, BI is reporting, but it has evolved to where it can also help forecast future outcomes with predictive analytics which show what will happen if current trends hold.  Firms frequently use BI in the area of finance to understand past performance, yet the application's potential is far greater.  Client retention analytics is one of the most fascinating business development strategies along with alternative pricing.

Business intelligence benefits law firms by getting beyond "what happened?" to "why did it happen?" and provides improved outcomes along the way.  Well-structured BI platforms allow for analysis on multiple levels, using intersections of data and relevant metrics for performance measurement. 

For example, an analyst looking at a firm's billing realization numbers might notice the litigation group lags the firm's average by 5 percent.  With a well-designed BI platform, the analyst could quickly quantify lost billable revenue from this underperformance, and then he can "drill in" to the litigation group's performance by looking at billings by lawyer for clients to identify specific elements attached with lower realizations.  The analyst may see that one lawyer consistently bills at a lower percentage of standard amount than his peers.  Or, perhaps one client has a history of write-downs which causes underperformance, or one large matter was billed at substantially less than the firm average, dragging down the performance of the entire group.  Whatever the situation, the analyst quickly moves from the known result to the cause of the result.  The firm can then focus on what opportunities exist to address any issues. 

Redwood Analytics has been helping law firms deploy and use BI since 2000.  Many approaches and models have surfaced that help define BI best practices:

  1. Define business goals. BI gives visibility to many trackable metrics; without focus, your firm's ROI could still be zero.  Focus on the two or three most pressing objectives, and use BI to support such efforts in a targeted and systematic way.
  2. "Don't make Best the enemy of Good."  Because data is not 100 percent accurate from an accounting perspective due to bad inputs (what is?) is not a reason to dismiss or discard the entire endeavor as "useless," something lawyers are prone to do given their low tolerance for uncertainty.  A business cannot be managed by the standards of a courtroom, and because something can be "litigated" does not necessarily compromise its utility.  BI is primarily a management tool, and information that is "directionally correct" is useful.
  3. Build a system to support the typical situation, not to accommodate outliers. Building a system to deal first with "special" situations can lead to an unstable or unreliable model, and a reliance on Excel, introducing all kinds of control and risk issues, as well as inefficiency.
  4. Put a focus on growing the firm's profits, not dividing them.  Profitability and performance conversations are sensitive topics.  BI and profit models should not be substitutes for judgment or management.  Nor should they become part of the compensation process until there is comfort and widespread adoption with how firms think about profitability.

Technology advances make BI tools available to just about anyone.  The days of needing skilled report writers with advanced SQL knowledge or "power users" of cubes as the only way to produce information, are no longer.  While still a large part of BI now and into the future, good information is readily available via dashboards, easy-to- use-query tools, visualizations, and modeling applications. 

At Redwood Analytics, BI is our primary focus and law firm profitability via alternative fee arrangements is an unfolding area posing opportunities. At the core of Redwood's approach to BI is the law firm business model and the drivers that impact performance and profitability. Regularly, we'll offer commentary about the latest legal industry trends and issues, BI's potential to solving them, and news about Redwood in general.