In these challenging times, the use of analytics is certainly not the highest concern for most law firms or for their clients. Amid health concerns and economic fallout, combating the virus is priority one. Close behind are concerns about being able to pay employees and keeping organizations afloat.
When this crisis passes, a new normal will emerge. In fact, it is already taking shape.
In this new post COVID-19 environment, analytics will become an even more critical tool for surviving and thriving in the law industry. But the data sources and the way in which data is used may very well be changed for good.
Before the Crisis
People and businesses have been pursuing data analytics for quite a while now.
Slicing information in new ways was especially exciting in the early years. Client data, firm data, industry data… you name it.
Trends that have long been hidden within all of that historical data became remarkably clear with data visualization techniques. This kind of clarity enabled the data to deliver what once felt like unimaginable insights. Insights about clients. Insights about industry trends. Insights about the firm itself.
It was amazing and everyone wanted it.
But very quickly, new techniques emerged and models that considered only internal data that was, for the most part, backward-looking became “very 2006”.
A shift began to happen at many started realizing that:
- forward-looking analytics, rather than backward-looking analysis, would soon be a must
- driver-based, forward-looking analytics becomes even more effective when elements of external data are also considered
As firms embraced the idea of moving toward external data and forward-looking analytics, opportunities opened up. Alternative data sources began gaining traction. Now, these external alternative sources are being more widely understood and used.
During the Crisis
And then this happened. COVID-19. A crisis like no other.
Data enables the virtual experiences that keep us connected and collaborative. Remote access to banking, the gym, groceries, virtual meetings, has been critical during this difficult time.
During times of crisis, however, economists have traditionally used historical data to forecast market activity in order to design stimulus and recovery plans. The unprecedented and unpredictable nature of the pandemic renders historical data largely useless.
When the crisis began, inexperienced business leaders were tempted to hunker down, thinking that tightening their belts would protect their businesses. Many who have chosen this route are bound to lose opportunities, market share, trust and see their businesses fail.
Maybe during the time when land, labor and capital were the most important resources, this strategy was more understandable. However, good data has superseded those traditional items as the most valuable resource.
More experienced firm leaders, who make the decision to leverage technology to take advantage of information in ways that humans cannot, are seeking ways to work through the crisis.
These leaders realize that data provides answers during times of uncertainty and they know that investments in data and analytics should be accelerated rather than abated.
Like it or not, decisions are increasingly being made by data rather than humans. And alternative data is proving to be the best decision maker by far.
Here are just a few ways that alternative data sources provide insights:
How well do your clients understand their supply chains? There can be as many as eight or more participants in a supply chain? What if one of those participants falters?
What kind of technology integration options are clients expecting from firms? Understanding the array of economic factors that impact your firm and your clients at any given time is essential. You should know when changes occur in industry conditions, expectations and benchmarks, as well as competitor pricing and service offerings.
The same concepts apply to diversity. New contenders like accounting firms and consulting firms are taking business away from law firms. New information is constantly emerging for diverse products like mutual funds. Law firm business models are evolving every day. External data is a must.
After the Crisis
Now that COVID-19 has changed the world for the foreseeable future, hindsight analytics are even less valuable for businesses.
As economic conditions change, KPIs and financial goals must also change. In order to demonstrate and instill confidence in employees and clients, law firm leaders must understand the wide array of financial risk scenarios. Doing so requires – again – deep, broad, forward-looking and external data.
Why Should Our Firm Embrace Forward-Looking Analytics?
To understand the benefits of leveraging external analytics, consider the two examples below.
Social Media Marketing – Embracing Change
Social media marketers embraced a learning curve.
They gradually moved from analyzing only incoming data about client brands, products or services, to incorporating analysis of external data about competitors and the industry in general.
This was a game changer.
Reports can now uncover trends in whatever topic is important to the target audience. Whether it’s industry trends for job titles, job growth or salaries, public data can be turned into gripping and insightful information. In today’s world of information overload, data like this can be powerful in shining a spotlight on important opportunities.
Taking the transformation one step further, you can find the most sophisticated players leveraging external data to perform outreach in reaction to any mentions of the brand or products.
Law Firm Mergers – Not So Much
In 2018, there were 106 law firm mergers and acquisitions in the U.S. This is a record high, according to the ABA.
Blane Prescott, a management consultant and CEO of MesaFive LLC, says, “Mergers work best when they cross-fertilize with better clients and better work. Mergers should create partner-initiated cross-selling to access new market segments.”
Prescott admits that law firms tend to underperform when it comes to the due diligence for such mergers. Now is the time to change that.
The best and most effective due diligence will incorporate forward-looking external data.
Here’s the thing:
Because so many law firms resist change, the few that take advantage of this opportunity to leverage data in a more effective way can gain tremendous competitive advantage with relatively little effort.
Organizations that have already realized that hindsight analytics don’t move the needle for them are pivoting toward alternative data sources. They are developing economic and analytic architecture that provides visibility to firm leaders by creating prospective income statements that will redefine the future of their companies after the global crisis.