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."
