How Does Business Intelligence Improve Your Bottom Line?aderantuser
I’ve seen a number of stories lately proclaiming that big data is taking over the world, therefore your firm “must adapt or die!” While I confess to being a big proponent of integrating business intelligence (BI) products into your firm, the reality is that law firms around the world have been relatively slow to adopt the new data technologies. And they are not alone; a recent Gartner survey showed that only 30 percent of all organizations have invested in big data.
I don’t believe that scare tactics will convince firms to make an investment in BI. Instead, the benefits of BI speak for themselves once you appreciate the advantages they bring. In most law firms, technology has been considered a necessary evil, and it was rare for a firm to consider the value as additive. With improvements in business intelligence and data analytics, however, this perception is rightfully changing.
Since some lawyers aren’t really sure what BI entails, the Legal Technology Journal gave a good description when they wrote that “BI solutions combine software applications and business analysis content, drawing on best practices, enabling firms to better manage their performance and improve their bottom line. In simple terms, BI is an enabler for better strategic decision-making.”
At its core, BI provides analytics that can improve the way law firms operate, which ultimately leads to improved bottom lines. Like most businesses, law firms have preconceived notions on what is working and what is not working. These notions are simply guesses without the data to back them up.
For example, I can’t count the number of times I have analyzed a partner’s book of business under the guise that the only way to improve that book was to increase the number of hours the partner and team are working. In many of these cases, the issue was not hours but improving leverage, examining billing and collection patterns, or addressing discounts. Proceeding down the path of more hours would in fact have further eroded profitability. With data to illustrate what truly needed to be done, these books of business were instead put on the right track toward improvement.
For most law firms, a properly deployed BI strategy will give you immediate insight into your firm’s performance on every level. You can use BI to examine profit margins for clients, patterns in a partner’s book of business and the relationship between client age and client life cycle. You can also use BI for pricing models, staffing decisions, and frankly, nearly all of your firm’s strategic decisions.
Charles Christian, the publisher and editor-in-chief of the legal technology publication Legal IT Insider, summed it up when he stated that “data is the new oil, and law firms have an awful lot of data and don’t use it.”
So, will BI solutions ultimately transform the legal industry? The reports from other industries strongly support that they will. According to the IBM Big Data & Analytics Hub, major organizations in financial services, telecommunications, retail, healthcare, digital media, insurance, and other industries are “outperforming their competition by generating new, actionable insights from big data.” More specifically, a report from Legal IT Landscapes found that law firms that use BI tools are using them strategically. More than half were using BI for more than just costs, and 30 percent were tying BI to the key performance indicators in their firms.
If a law firm is not using BI to improve its strategic and tactical decision making, then it is already at a competitive disadvantage. If firms are not getting data into the hands of partners with the edict to drive action toward enhanced profitability, then they are already at a disadvantage. To appreciate how important BI really is, just look at the fact that clients are asking for matter budgets and pricing supported by data, as well as demanding collaboration and transparency.
Firms should realize that without business intelligence they miss out on, not just ways to improve their internal workings, but the opportunity to work with clients requiring a data driven mindset. Is your firm embracing business intelligence?