It’s getting harder for law firms to meet their clients’ demands and maximize profitability by doing the same old, same old. The competition is too fierce, the move to alternative legal service providers and Big 4 consulting firms is too tempting, and many organizations are choosing to keep legal work in-house. So, what’s a law firm to do to maintain—and even grow—profitability and client satisfaction in 2019?
Hire more data scientists.
That likely would not be the answer most firms would give, but the trend line is changing in favor of the data scientist. Specifically, more firms are waking up to the fact that the way they manage, analyze and use their data can be a business driver that helps them compete in the rapidly changing legal landscape. And if there is one thing law firms don’t have a shortage of, it’s data.
Data Analytics Roles Aren’t Hard to Find Anymore
Data may or may not be “the new oil,” as the now-clichéd metaphor goes, but it is undoubtedly the fuel that will separate the law firms that succeed in the not-too-distant future from those that don’t. But just having a lot of data isn’t enough. The challenge is bringing it all together, telling the full story, and integrating data culture into the grain of a firm. Five years ago, firm rosters rarely included titles like data scientist or chief analytics officer. Now these roles, at all levels, proliferate within firms. According to the International Legal Technology Association's 2018 Technology Survey, the data analytics role has grown rapidly, in some instances even surpassing head count for security staffing.
Supporting this “hire more data scientists” assertion is research recently conducted by LawVision in partnership with Intapp regarding the rise of the data scientist within law firms. The survey was sent to C-level executives responsible for firm innovation, information, client value, marketing, pricing and finance. Sixty-five firm executives responded from across the large law firm spectrum.
The Rise of the Data Scientist, Supported by Data
At a high level, the survey showed that, while data analytics plays an increasingly important role in law firm operations, its process maturity remains in the early stages. That’s good news for legal industry risk-takers, as first movers will undoubtedly see a competitive advantage. Of course, risk-taking is not in the DNA of the vast majority of law firms, but data analytics will help them take better-informed risks.
Key findings include:
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While 80 percent of the respondents indicated that a data analytics function was useful, only 53 percent have incorporated data and analytics into their firm's strategy.
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More than 70 percent of firms are using analytics and data science applications predominantly for internal solutions, including pricing, profitability and firm configuration. While this is important, firms must realize the potential of applying data science toward improving relationships with clients—a move that will have a far stronger impact on their business models.
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When asked about their primary data uses against the backdrop of Gartner’s stages of data analysis model, 59 percent are mostly performing descriptive analyses (the lowest-level use case), and another 30 percent claim to be playing in the diagnostic category (the second-lowest level).
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More than 50 percent of the firms with positive revenue growth in 2018 employed a data scientist or plan to do so within the next 12 months.
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None of the firms with neutral or negative revenue growth in 2018 currently employ data scientists, and only 33 percent plan to hire one in the next 12 months.