Ask Dr. Paola: Do I Need to Use Data Analytics in My Law Firm?

Topics: Client Relations, Corporate Legal, Data Analytics, Efficiency, Harvard Law School, Leadership, Legal Innovation

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In our new column on the Legal Executive Institute blog, we are honored to be working with Dr. Paola Cecchi-Dimeglio, a behavioral economist and senior research fellow for Harvard Law School’s Center on the Legal Profession and the Harvard Kennedy School. Each month, Dr. Cecchi-Dimeglio will be answering questions about how law firms and legal service firms can navigate a dramatically changing legal environment using data analytics and behavioral science. (You can follow her on twitter at @HLSPaola.)

On to our first question…

Ask Dr. Paola: We hear that using data analytics is the future of the legal industry, but realistically, can data analysis make our lawyers better or more efficient?

Dr. Cecchi-Dimeglio: This is a good question because I think many law firms are thinking about data analytics in this way. To remain competitive, law firms are looking for better strategies and want to have better informed choices. In addition to that, the legal profession is evolving more dramatically than ever, and the pace of that change is accelerating even more than before.

In the last 10 years, we have developed a better understanding of what can be achieved with data analysis and behavioral science. Much of business analytics is about gaining insights from patterns in data to inform business planning. The “behavioral science” movement revolves around the idea that human beings are not rational, and we have to look for opportunities to design their choices in ways that are in line with the actual psychology of good decision-making. Data analytics and behavior science combine to form a strong, data driven decision-making approach that can provide competitive advantages for law firms.

Dr. Paola Cecchi-Dimeglio

In my work, I talk about “nudges” which is based on behavioral economics and data analytics. It is a method of economic analysis that applies psychological insights into human behavior and human beings’ economic decision-making. In a nutshell, while there are quite a few versions of nudges, basically it’s the application of findings from psychology and behavioral economics to prompt people and organizations to make decisions that are consistent with their long-term goals.

And to identify those nudges, of course, is a primary goal. But first, you should ask two questions — what is the design of the organization? And what works and what doesn’t work at the firm? That knowledge will allow the business analytics and behavioral economy to come in; and once the data can be gathered, you can identify patterns in a firm’s behavior. Then the nudges can be designed around certain behavior, and where that behavior is harmful or inefficient, it can be changed.

This isn’t a quick fix— it’s a process. The best firm leaders know this. They bring in experts to help them inform their decision-making and to prepare their firm to be competitive in the changing legal industry. “Okay enlighten me,” they’ll say. “What does the data say and how I can use the knowledge I gain from it to be more competitive and innovative”. In other words, “How can my firm be one step ahead?”

Some leaders, to be honest, are more ready to have that conversation than others.

But if they are willing to accept my or another expert’s help, then what happens is that I go about forming — through both data collection and by talking to people in the organization — a good picture of what is going on in the organization. I sort of map out the health of the organization, with the initial goal of being able to say, “This is the current situation of where you are, and this is what happened in the last five years, and this is where you are going to be in the next five years.”

Certain firms already actively collect the data and have a sense of the problems they have, yet they still don’t know how to fix them. Others are much less aware of the real issue at hand. You can really see the disparity between firms — some of them will spin their wheels and spend millions of dollars to do an action simply because it may have worked somewhere else or because they may have read that it could work.

But that is not how you create effective incentives for positive behavioral change — you must start with what your data are telling you about your own firm. The data tells you everything!

And that’s where I think there is a real difference in how people get ahead of the curve. Because data analytics and behavioral science can help to prepare for the future — not by copying what others have done but by developing tailor-made solutions. That’s how they became the first, and that’s how they stay ahead.