Profit-CenterFour years ago, a person parking in the company parking lot dinged the door on my new  truck. He or she opened their car door too wide. At the time, I thought, “wow, I could file a lawsuit for damages and become the new profit center for my family.” Okay. I thought something else (which I will refrain from saying as this is a family blog). But, had I thought the “family profit center” idea it would have reflected a popular idea circulating in the legal industry. Consultants and some general counsel advocated turning law departments into profit centers. I thought this nonsense had died. But, I saw a new white paper on the topic so I guess we need to work harder to kill this bad idea.

Alchemy and the Law Department Profit Center

The white paper, whose author I will refrain from identifying, focused on some tired oldies with the profit center pitch. We can run through them.

1. Pursuing wrongdoers. Someone harms the company. The law department pursues the perpetrator. The recovery effort works. The company wins damages or secures a settlement payment. The recovery exceeds the law department’s costs. The net amount is profit to the company. The law department is a profit center.

Um, no. Ignore the risk (claims against your company), the disruption (document gathering, depositions), and the general distraction. The idea suggests: let the harm happen, wait as long as you can to let damages build, then recover. That strategy would optimize the company’s and law department’s profits. Abusing the legal system is different than running a business. Recoveries compensate for harm (no harm, no recovery, no profit). Sometimes they remind the wrongdoer that harming others does not pay. Better strategy: identify risks and prevent them lowering the company’s overall cost.

2. Improving efficiency. This is a strange notion. The idea is simple: reduce the company’s waste, which lowers cost, which increases profit. Whoever reduces waste becomes, ta da, a profit center.

Um, no. Strange as this may seem, doing your job does not convert you from a cost center to a profit center. Everyone in a company, even the lawyers, should work to reduce costs. One could construct a fiduciary argument that lawyers and other employees owe shareholders a duty to reduce costs. Profits increase as you lower costs. But, a lower cost law department remains a cost center. Better strategy: incorporate waste reduction as part of your organization’s ethos and focus on productivity.

3. Helping procurement do better. This idea builds off the waste reduction idea. Lawyers work with the procurement group. Lawyers can help procurement improve at what it does. As procurement does better, costs drop, profits increase and, ta da again, the law department becomes a profit center.

Um, no. This is a wacky notion. Lawyers doing their jobs turns the law department into a profit center? Part of the job of an in-house lawyer is to help other departments do their jobs, even procurement (unclear why they were singled out). Yes, procurement helps the company with major purchases, but every department buys things so the law department should help all departments improve their operations. Better strategy: look for ways to reduce friction through legal process improvement.

4. Turning IP into gold. This is an oldie, but a favorite. Every company has IP. Others must want your IP. Maintain an active licensing program run by the law department and the law department—you guessed it, ta da—turns into a profit center.

Um, no. Other departments took risks, invested in people, equipment, and materials leading to inventions. If what those departments created has value through licensing, they should benefit (minus the costs of the licensing program). The law department does not become a profit center by recovering those investments. And, what does it do as the pipeline runs dry? Better strategy: partner with all departments on ways to maximize asset efficiency.

Maybe those were bad ideas. Could a law department become a profit center? Sure. If the law department invests in people, equipment, or materials that lead to ideas it can license, it can become a profit center. Imagine a law department that develops a contract management program. It licenses the program to other companies. One could question whether that is the role of the law department and whether those investments should go to other departments. But, those are policy questions. The law department made the investment and if it recovers value in excess of the investment, the law department earned the profit.

Aim to be a Competitive Advantage

Where should a law department focus its time? A law department should focus on becoming a competitive advantage for its parent corporation. IT departments, human resources departments, finance departments, and other service departments should do the same thing.

What does being a “competitive advantage” mean? Start with basic law department functions. A law department should aim to reduce its spending per lawsuit dropping below competitive law departments. They should keep risk at an equivalent level or lower it. If company A’s cost per slip-and-fall lawsuit is $50,000 and it is $40,000 for company B, company A’s lawsuit costs put the company at a competitive disadvantage. It should bring its cost below $40,000. The cost includes expenses, settlements, and disruption costs (e.g., time of employees taken away from work). A law department wants the cost of its functions at or below the industry average. Even better, they should aim for the bottom quartile of the industry (on a risk-neutral evaluation). Getting to that competitive advantage by increasing risk is unacceptable.

With costs under control, the law department can focus on real drivers of competitive advantage. Doing things the same way and just as good (or bad) as everyone else does not provide a competitive advantage. If the industry average time to sign a new distributor agreement is 90 days, streamline processes so that your company can get them signed in 60 days. The 30 day saving translates into revenue, a competitive advantage. Do the terms and conditions of your contracts create greater friction than terms and conditions in competitor contracts? Simplify the terms and reduce friction. Make it easier to buy from your company.

Law departments that form relational structures with their legal services providers have advantages over departments pursuing transactional relationships. A transactional relationship is the structure we see today. Hire a firm for a matter and move on. Use RFPs to excess, bargain for the lowest price, and forego enduring relationships. Law firms have no incentive to invest in innovation for the client. The law firm will not spend resources finding ways to increase the client’s competitive advantage.

Relational structure clients look for enduring relationships. In a relational structure, the client and the law firm re-work processes to cross organizational borders. By integrating processes across borders, the client and firm achieve greater process improvement than either can achieve on its own. They work as one rather than as distinct entities. Both have incentives to invest in the future of the other. The law firm looks for ways to give the in-house law department that competitive advantage. The advantage could come from new ways of doing things, new things to do, and even new business opportunities for the company (such as new financial products).

The client benefits from innovation and the law department demonstrates greater value. The law department may drive new business, but at a minimum it reduces its drag on the existing business. No one tries to turn the law department into something other than a cost center. But, the law department focuses on becoming a competitive advantage.

Be Comfortable in Your Skin

The “law center as profit center” idea came out of law departments looking for ways to show they add value. They made a mistake; they thought value equalled profit. Get comfortable living in the “cost center” skin. But be wise. Spend money to avoid lawsuits rather than prosecute or defend lawsuits. Preventing lawsuits reduces cost and friction.

I have argued for the competitive advantage view without discussing certain challenges of becoming a profit center. But, I should mention them. First, profit centers approach challenges from a different viewpoint than risk management centers. Corporations need checks and balances. As a law department moves from risk management to profit, the incentives change. Is it in the best interest of the shareholders for law to make that move? Who watches the henhouse?

Second, as a profit center, the law department moves from service provider to competitor within the organization. It must demonstrate an equal or higher return on investment in the law department than other departments. As a service department, it should consider return on investment, but not as part of that competition. The ROI question is whether it uses the resources given it efficiently. Focusing on reducing antitrust risk may have a higher ROI than focusing on reducing contract risk. That information helps as the law department considers ways to spend its resources.

Law departments can and should demonstrate value to their parent corporations. Many metrics will do that. Showing the law department’s competitive advantage is consistent with risk management, cost management, and adding value. Leave the profit center concept to your clients.

TrashIn my neighborhood, it happens on Wednesdays and Thursdays. It is a muffled sound in winter. But, in spring and summer with windows open, you can hear the heavy duty diesel engines as the trucks patrol the streets. Wednesday and Thursday are  trash collection days.

Each day, my wife and I take our constitutional in our neighborhood. This is in part a holdover from walking our family dog. He died last year, but we stayed with the walk. Because we have circled our neighborhood one or two times a day for 10 years, we know the patterns. We can predict, with amazing accuracy, what will happen and at what time.

Trash days are easy to predict. The main variables are trash hauler, number of buckets, and recyclables or no recyclables. Several trash haulers work our neighborhood (the subject of many pricing discussions on the neighborhood social media site). We have identified the factors that tell us which hauler works which houses. Certain houses use two large buckets, but the majority use one. And, depending on the hauler, the pattern for collecting recyclables varies (e.g., one time a week or every other week). We rock at predicting our neighborhood’s trash patterns.

What I mean, of course, is that we are good at predicting trash. The training has been valuable—we are healthier for the walks. But, the actual information we generate has no utility. Who cares what the trash hauling pattern is for our neighborhood? No one, even the trash haulers, wants the information.

Welcome to predictive analytics in the legal industry. We have many companies pushing their data analytics skills, with some focusing on predictive analytics. One popular area is predicting legal spending. The analytics may focus on entire law department budgets or on individual matters. For many, the idea is to train the learner (computer speak for teach the software) to look for spending patterns by looking at invoices. The problem is that spending data in the legal industry is garbage. And, as we all know, garbage in, garbage out. So, studying past spending patterns to predict future spending patterns is similar to knowing the waste hauling patterns in my neighborhood.

Examining the Garbage

Legal spending data is garbage. That is a strong assertion so you may ask what I have to support it. Start by breaking the billable hour process into components. It begins with each timekeeper recording what he or she does in the timekeeping system. We know there is variability in the system. Timekeepers enter time at their leisure. Some do it contemporaneously, but most do it in batches. For example, some enter time at night, some in the morning for the prior day, and some at the end of the week. The greater the gap between the time worked and the entry, the greater the inaccuracy of the time entry.

Even if the timekeeper enters time at the end of the work (say, every hour), timekeepers vary on how they code time. Some enter basic text descriptions. A basic text description has insufficient information to do a granular analysis of the work. “Draft letter” gives me nothing to analyze or improve a process. Those who use the UTBMS (Uniform Task-Based Management System) codes force their time into boxes and the descriptions match the boxes. As with any taxonomy, the gross level of data keeping does nothing beyond time buckets. Surprise! Most time in litigation goes to discovery.

All this is to say that timekeeping varies and each timekeeping entry is unique. But that is the tip of the timekeeping iceberg. The real problem lies in the processes captured by the timekeeping. As my example shows, processes vary from timekeeper to timekeeper.

Consider this simple example. Two lawyers share an office. Both receive the same assignment: review this contract. The processes the two lawyers follow, the time each takes, what changes each recommends, will vary. Play the role of the client and decide which revised contract you use. Translate that work into timekeeping, and you have a mess.

Apply analytics to that mess. You will produce statistics. The mean time to review a contract, the median, the standard deviation. You can produce nice metrics. The greater the number of data points (the number of contracts reviewed), the greater the accuracy your metrics. But, those metrics measure chaos. Some lawyers spend lots of time on irrelevant aspects of the contracts. Some focus on key parts. Some use inefficient processes (lots of waste built in). Some use efficient processes. The list of variables grows and grows. The metrics accurately measure nothing. We can calculate the mean time for a person in the United States to commute to work. But, that tells us nothing given all the variables underlying that metric and the lack of standardization in the processes.

Predicting Waste Has No Value

A counter-argument says that the data we have may be garbage, but it is the data we can collect. It is better than nothing and running predictive analytics on the data does give us information. That information is that our current, waste-ridden, chaotic process for doing contract review takes, on average, a certain amount of time. We know the mean, the median, and the standard deviation. If the process to review contracts stays the same, those statistics will help us predict the cost of future contract reviews, as wasteful as it may be.

That argument has merit. But, if that is all we do—predict waste—we look like the colorful wheel that spins as you wait for the computer to process your command. We need to move past predicting waste and gain control of the processes. With that control, we can go beyond predicting waste, we can reduce the cost of matters by eliminating waste. We can save money rather than predict waste.

A common client complaint is that they have metrics, but fail to get the improvement they expected from using the metrics. This is the “half equation” story. It is the ability my wife and I have to predict trash collection in our neighborhood. That ability has nothing to do with the volume of trash generated each week, the important half of the equation. To help reduce trash collection costs in the neighborhood we need to reduce the volume of trash generated. By doing that, we could reduce the frequency of trash collection and that should reduce the cost of trash collection.

Clients want to do the same thing. They want to work with their legal services providers to reduce the trash. As a team, they want to capture the process for reviewing the contract, improve the process, standardize the process, and drive out waste. The client undoubtedly contributes to the waste in the process. Having it on the team will help reduce the waste it generates. The law firm starts with the product the client handed it. If the law firm spends time removing waste from the contract, the client should look for the causes of the waste. The client can eliminate waste so the law firm avoids having to remove it, reducing review time.

The client can work with the law firm to focus reviews. If the law firm does a great job reviewing the indemnification clause, but the client is okay with the clause, the law firm has inserted waste. The client can guide the law firm on the scope of the review. Working as a team, the client and law firm can integrate the process for contract review across the walls of the client and law firm. They can standardize the process and coordinate timekeeping entries to the process. The timekeeping entries will provide useful, behavioral data.

The Real Value of Predictive Analytics

I have focused on predictive analytics using timekeeping records. This is, of course, the sideshow. The main act is predictive analytics focused on behavioral data that we can use to reduce risk and avoid expensive mitigation strategies. In other words, find what behaviors to change to avoid the lawsuits rather than focusing on how to reduce spending per lawsuit.

Sixteen years ago, I became general counsel of a company of a spin off company. I started with a law department of one. I discovered that I had a docket of 100 lawsuits involving personal injuries alleged to have happened in or near our retail stores. That was the current docket, but plaintiffs kept re-filling the docket. I would settle one lawsuit and another lawsuit would come at us. Each lawsuit cost the company $50,000 to $75,000. We were on a treadmill.

I had been a retail lawyer for several years before I became general counsel and I had no ready explanation for the size of the docket, the staying power of the docket, and the total cost of the lawsuits. I smelled opportunity and charged. In under one year, we worked the docket and brought it to 10 cases. It stayed in that range. The cost per lawsuit dropped to $5,000 to $15,000. I wanted to keep improving, but it was a great start.

We changed the metrics by focusing on behaviors. What triggered the lawsuits? What drove the costs (legal fees and expenses plus settlement costs) higher? As we dug in and learned the facts, we saw the patterns that led us to change behaviors. Putting a wire stand with copies of the recent store flyer outside a store was a good one. The wind would blow, the flyers would scatter on the sidewalk, and slip-and-fall claims would increase. Solution: put the rack inside the store.

Small changes can have big impacts. Tracking and analyzing the right data shows the way. Crunching timekeeping data would have helped me reduce the cost of those 100 lawsuits, but eliminating 90 lawsuits and ensuring they stayed off the docket was the ultimate cost saving approach.

Lean relies on eliminating waste. Analyzing waste to manage waste strikes me as a diversion. Going to the root cause of the waste seems a better way to spend our time and money. Let’s take out the trash rather than focus on predicting how much it will cost.

EfficiencyYou decided to go to law school because you wanted to become a lawyer. You studied the law, passed the bar, and practice law. You have friends who provide legal services using their unique skills, which include project management, data analytics, and eDiscovery. But every day someone nags you to improve. “Improve” means something other than being a better legal services provider. But what exactly does it mean?

One way to find the true meaning of improve is to ask your clients. If your clients work for a corporation, you will hear “become more productive” or “increase your efficiency.” Both sound good. For decades we have heard how corporations are increasing productivity and efficiency. But, as a trained skeptic, you want greater clarity. What do you mean, you ask your clients, by “productivity” and “efficiency”?

They point to the dashboard glowing on their computer screen and say, “if this number goes up” I am more productive or “if that line goes down” my efficiency dropped. You smile and nod, still wondering what they mean. Let’s satisfy your curiosity.

New Ideas for a New Century

The turn of the 20th century brought with it the Efficiency Movement. The Industrialization Age had been going full tilt for decades. Starting in England, we moved from people to machine plus people. The next step was to increase the machine speed, and encourage people to keep pace. Experts such as William Shewhurt studied what people did in factories and developed ways to improve.

After WWII, Toyota Motor Company re-started its automobile production and developed the Toyota Production System (TPS). In the 1990s, TPS came to the US in the form of lean thinking. It was joined by Six Sigma, Business Process Management, and a list of other improvement methods with names just as catchy.

Corporations throughout the world grabbed the improvement concept and thrust it onto the shop floor and into the corporate offices. Law firms took the productivity path. They pushed for more output from the same team (choosing output per person versus output per hour as the measure). Corporations became more efficient and law firms became more productive, leading to the current clash. Clients want more efficient law firms and law firms see clients as threatening their productivity.

The Productivity and Efficiency Equation

Data alone lacks meaning. We must put it in some context to attach meaning to the data. If I tell you that during my career as a litigator, I won 10 cases that data tells you nothing. How many cases did I try? How long was I a litigator? Were the cases small? Big? What does “won” mean? Data without context takes us nowhere.

One way to give data context is to create a ratio. If I told you I won 10% of the cases I tried as a litigator, you have some context. You want more information, but you know that I lost nine cases for each case in which I was victorious.

Productivity and efficiency are names for a ratio. The ratio, the same in both cases, is outputs divided by inputs. We can write the equation this way:

Productivity or Efficiency = Outputs ÷ Inputs

When you look at the equation, you think that “productivity” and “efficiency” are synonyms. Many people use them as synonyms (my Roget’s Thesaurus does not treat them as synonyms). We hear them used casually. We think of ourselves being more productive or efficient after many years practicing law. But what do they really mean?

With a ratio, you have two levers you can pull to affect the result of the equation. First, you could hold inputs constant and increase outputs. For example, assume you work eight billable hours each day (yes, I hate billable hours, but I will start with something you know). On Monday, I do one hour work for each of eight clients. I have filled my eight billable hour objective.

On Tuesday, the firm’s Managing Partner walks into my office and plunks a tool on my desk. She tells me the tool can help me do my job. “Ms. Lexbot,” the cute name I give the tool, helps me do in 30 minutes what took me 60 minutes. On Wednesday, I do 30 minutes work for each of 16 clients. I billed my eight hours, but my output doubled with the help of Ms. Lexbot. I am more productive.

My friend sits in the office next to me. He also works eight billable hours each day. On Monday, he too did one hour work for each of eight clients, filling his eight billable hours. But on Tuesday, the Managing Partner asked Mr. Lexbot to work with him on the processes he uses to do work. Mr. Lexbot found waste and helped him redo processes. Now, he can do in 30 minutes what took him 60 minutes the day before. On Wednesday, he does 30 minutes of work for each of eight clients. He bills four hours. He has become more efficient.

Telling the story these two ways highlights the difference between productivity and efficiency. It lies in the objective, rather than the formula. Over decades as corporations have used improvement methodologies, they focused on efficiency. The goal was to drive waste out of the system. A more efficient company was a less wasteful company. Reducing waste was good, for society and for the bottom line. But that concept clouds some issues.

Reaching Limits

Removing waste is good, but waste reduction hits limits. Business people know this and have coined a phrase for it: “You can’t cost cut your way to success.”

Waste reduction confronts three constraints: (1) people, (2) technology, and (3) creativity. If a process depends on people, waste reduction reaches limits as it bumps against what people can do. I can handwrite documents legibly at a certain speed. Beyond that speed, my physical abilities create a limit. Process improvement aimed at my handwriting can do only so much.

Technology has limits. Though computers can do amazing things, they have limits. Ask Siri to compare equal protection to due process and you will see a limit. Process improvement will not take me past that limit.

Finally, creativity hits limits. These limits are practical, not physical, but real. People working alone or brainstorming reach limits. Time, education, training, and other enhancements may take them past the limits, but for some period creativity will slow or even stop.

Corporations today are starting to test the limits. They keep looking for and finding efficiency gains, but the rate has slowed. And, as they know, efficiency gains are not the path to success.

An alternative is to look at productivity gains. Take the resources you have today (the inputs) and grow the output using those resources. You can grow your way to success.

Client Efficiency and Firm Productivity

The legal industry is struggling with productivity and efficiency. Clients understand and legal services providers are starting to realize that the legal industry needs to improve efficiency. Clients resist paying for 60 minutes of time when the same output could be achieved in 30 minutes.

Legal services providers, and here I will focus on law firms, worry. Efficiency sounds like reducing eight hours of work to four hours, which cuts revenue in half under the billable hour model. Efficiency to a law firm means something different than efficiency means to the client. But if we talk about productivity to the law firm, we see eyes brighten. Managing Partners would love to get higher outputs from the same inputs. To the client, that sounds like billing for waste.

The common ground is the area where both parties understand we are looking at one equation, but have two strategic objectives. The client wants increased efficiency and the law firm wants increased productivity. The client will trade something to get something. If the law firm increases efficiency, the client will accept a lower invoice but share some of the cost savings with the law firm.

The law firm wants increased productivity, and will trade something to get something. It will reduce the price it charges for the service as it increases efficiency, but retain some of the cost savings for itself. It will use the saved time to increase the output per input without increasing the total hours worked.

This solution will not work under every market condition. If the total market for corporate legal services was shrinking, increasing productivity would not help firms. But we know otherwise. The demand for legal services increases each day. Corporations struggle with the overload. Pricing, productivity, and efficiency stand between corporations and getting the work done.

Finding the Win-Win

The legal industry lags decades behind corporate clients in efficiency. We must keep pushing forward with our operations improvement efforts. But, clients need law firms. Despite the rush to hire in-house, clients understand that law firms bring them many benefits. Clients want the benefits without paying for the waste that comes with them.

Corporations are starting to turn their attention to productivity as they see diminishing gains from efficiency. The limits make it harder for corporations to get the same return on investment in improvement that they got 10 or 20 years past. As corporations look for productivity, they will encounter increased regulatory and compliance challenges. That, in fact, is what we hear from CEOs and general counsels. Legal services providers should listen to the call for help. Becoming more efficient will help the services providers and they can grow productivity by helping their clients. Productivity and efficiency may not be synonymous, but in this case they could spell win-win.

SiloI spent my formative years in Illinois and part of my college years and working years in Iowa. I have seen my share of silos. But the silos lawyers construct top anything scattered among the cornfields. If we had a silo competition, lawyers would take the top prizes every year. The closest I found was a silo competition focusing on how to re-purpose old silos. Since lawyers keep using their silos, it won’t help us.

Finding ways lawyers enforce the silo mentality is easy. We can start with the basics: lawyers and non-lawyers. You are either in the silo or outside the silo, no middle ground. We cling to the belief that law is a monopoly, with rights to practice law granted by each of the states. That makes a lot of silos. You can join several silos, but it is a complicated process involving years of training on the secret handshakes.

We have some silos that touch our lives for a brief period—three years, to be exact—the law schools. Apart from the residual ego-boosting, social status pumping, or job-getting benefit of a law school’s name, three years pass and we fugetaboutem.

The silo list goes on. Law firms build walls between themselves and clients (strange, but true). Clients stay separate from law firms, consulting firms, law schools, and everyone else. Technology vendors are each to their own. You feel me?

In my talks, presentations, and interviews I suggest we breach the silos. Forget that other professions have done so. Forget the it would benefit all of us. Forget that it makes sense, could reduce costs, would increase efficiency and would improve quality. Let’s get to the heart of the matter: it would result in a lot of rip roarin’ parties! But I digress.

Removing the silos is a logical step in moving from our pre-20th century agrarian view of the world to a post-Industrial Age profession. Understanding how silly the silo structure is depends at times on the little things. For that idea, we can look to digital object identifiers.

Building Networks

Publishers throughout the academic world and many other deep scholarly environments, such as movie studios, use digital object identifiers (DOI). How many you ask? Over 5,000 entities have assigned over 133 million DOIs, which connect to media viewed over 5 billion times each year. So, a lot.

What is a DOI? It is an “actionable, interoperable, persistent link” to media. In other words, it is a unique identifier that a digital item calls its own. Wondering whether you should read Nudge by Richard H. Thaler and Cass R. Sunstein (you should)? Perhaps you would want to read a book review by Thomas C. Leonard. He says, “Though costumed in the guise of pop economics, complete with a cute logo—Nudge is, in fact, a manifesto for the new paternalism.” The DOI for Leonard’s book review is: 10.1007/s10602-008-9056-2. That DOI uniquely dentifies Leonard’s book review.

We have had DOIs since 2000. The DOI system is a standardized system—Digital Object Identifier System (2012), ISO 26324. It is international. The DOI Handbook and other information necessary to participate in the DOI system is online and open access.

You can use DOIs in many ways. In citations, a DOI points to a unique item—no confusion. If you posted the item on a publishing site that uses DOIs, you have a persistent link to the item. Since computers can capture DOIs, they can show the relationships among published items. Think of the many ways a legal citation can appear and consider the difficulty in training a computer to know all of those formats. DOIs have one format. Computers can scan all published materials and show the inter-relationships.

DOIs are “extensible by design to any sector.” If we assigned a DOI to each reported decision from the courts, we could show linkages among cases without trouble. Yeah, but look at that thing—the DOI is long. No problem! Use the shortDOI and that unique identifier for Leonard’s book review becomes 10/cp6mx8 (or, http://doi.org/cprmx8 if you prefer the link). What would happen if case citations changed to DOIs? We could make citations easy and accurate: Smith v. Jones, shortDOI (date).

We could go further. Each brief, motion, order, and other paper filed as part of a lawsuit could have a DOI. Instead of developing complex algorithms to link documents in PACER or try to discern from titles or other materials what relates to what, include the DOIs.

The Legal DOI Blockade

I have encountered DOIs as I increase my publishing. That led me to the legal world’s ignorance of DOIs. In 2010, Benjamin J. Keele published, “What If Law Journal Citations Included Digital Object Identifiers? A Snapshot of Major Law Journals.” If you want to read the article, use the DOI: http://dx.doi.org/10.2139/ssrn.1577074. As Keele notes, “DOI has become the standard digital identifier for scholarly publishing, with most hard science and many social science and humanities publishers using DOIs for their articles.” Keele did a study. He checked 1,041 articles and found that 37.8% had DOIs. Articles published in law journals: “most major law journal articles did not have DOIs assigned to them.”

Becoming part of the DOI community is easy. Despite the ease, lawyers and legal publications persist in the silo mentality on knowledge. If we dropped that mentality for publishing, these are a few ways we could benefit:

  • Access to Justice. If we published legal materials including cases, statutes, articles, etc. using DOIs, those who need the materials would have easier access to them. We want people to access the law, explanatory materials, forms they need to file, and anything else that eases the path to interacting with the legal system.
  • Since each DOI points to a unique thing, we avoid confusion. The citation system lawyers use attempts to get us to the correct, unique thing by throwing information at the reader in the hope that enough information will lead us to the correct material. A short DOI string does the same thing.
  • Lawyers and all others who work with legal materials can avoid learning, spending time deciphering, and navigating complex citation systems. One DOI finishes the task. Imagine the reduction in time spent learning and using the Bluebook.
  • Want to go to the third concurring opinion in that recent Supreme Court case? No problem. We can assign a DOI to the entire case and a separate DOI to each opinion. In fact, we can go further. We can assign a DOI to each paragraph, quote, or other segment. The Dodd-Frank Wall Street Reform and Consumer Protection Act covered 2,300 pages. Citing to specific sections means tracking through the byzantine sections, subsections, sub subsections, etc. Instead, we could assign granular DOIs. A DOI becomes an active URL by appending it to “http://dx.doi.org” and pasting it into a web browser. No confusion. The DOI takes you to the most current, official version of the statute.
  • Lawyers want to sit at the table and talk strategy. We want to share our thoughts and show leadership through them. But if we build silo walls , we become irrelevant. Make it easy to find, share, and discuss what we think and we become part of the community.

The Ideas Marketplace

Gillian Hadfield, in her book Rules for a Flat World explains the absence of markets in the legal infrastructure. The legal infrastructure, a term she coined, is everything “law,” including the institutions. The market absence, she argues, holds back law from effectively handling society’s increasing demands for guidance and regulation. With a few exceptions, I agree with what Professor Hadfield says.

DOIs facilitate participation in the marketplace of ideas. By making our ideas easy to find and easy to incorporate with ideas from other disciplines, we join and participate in that marketplace. Economists should have easy access to what lawyers publish, but so should technologists, sociologists, biologists, and ethicists. Are we all cool with technologists creating the algorithms for AI independent of (and perhaps lacking knowledge of) existing law? When the autonomous vehicle has to choose who to kill, is it a technical and ethical question devoid of legal implications?

Many thought we crossed this bridge in the 1920s. Columbia’s and Yale’s law schools looked beyond law to the social sciences. At first, the current and prospective faculty (including future Supreme Court Justice William O. Douglas) engaged in bitter battles. But, the schools found a happy medium. They refrained from becoming the social science research focused institutions some favored, but social science became part of legal study and education.

Since that time, the trend to crossover from law to social science or the reverse accelerated (with peaks and valleys). Today, seeing law professors with PhDs has become common. Some law schools, including my alma mater Northwestern’s Pritzker School of Law, have developed new reputations as hubs for this silo-breaking, multi-disciplinary approach. But, apart from these tidbits, lawyers and law resemble those siloed cornfields I got to know in Illinois and Iowa. Want to know what lawyers think? Join us or stay out of our silo.

Building Bridges

We can rail against the institutions or start fixing the problem. We can start with those pesky DOIs. Each time you write an article, ask the publisher if it assigns DOIs to the articles it publishes, assuming the article will appear online. If the publisher says no, push the publisher to start using them. The process to participate in assigning DOIs is beyond simple, so any excuses ring hollow. If you get a DOI for an article, use it whenever you cite the article and encourage others to do the same.

Add your article to the body of knowledge. If you publish your article in a traditional journal and it uses DOIs, indexing services can capture the DOI. You can use other vehicles to get your ideas out in addition to that lawyer trade journal. Authorea, ResearchGate, SSRN, SocArXiv, and Academia are publication outlets (and for most purposes, they are free). Try to retain pre-print or post-print rights to your article, even if you must assign the copyright. Ask whether the publication permits you to self-archive. Use your rights and publish through one of these vehicles. All of them give you ways to get your knowledge and research in the public domain, even if access to the final version or typist version remains behind a paywall. Don’t let legal publishers benefit from your work and exclude you from benefitting and helping the community.

Of course, being part of a knowledge community means you should access knowledge beyond articles outside the law silo. It seems that every day, I hear a lawyer speculate on how to address an issue outside the law. Checking, I find articles and books addressing the topic. But, the lawyer—staying within his or her silo—fails to look for the knowledge that exists. Clients pay for those knowledge deficits. By exploring the larger knowledge community, lawyers benefit from the work of others who have tackled many of the tough problems.

Red HerringWe should start with the phrase “red herring.” We know that it means a decoy intended to lead us in the wrong direction. But do you know the origin of the phrase? No one knows. As with many phrases, we can find an origination. The oft-cited story explaining the modern use of  this phrase is that someone used a red herring (a type of salted herring) to obliterate his smell so that hounds or wolves lost his scent.

Today’s red herring is the argument that we must have de-regulation, or changes in regulation known as re-regulation, in the legal industry. Through these changes, we can overcome the appalling and declining lack of access to justice. Let’s tear this decoy apart.

De-regulation or Re-regulation

I think most individuals looking for change in the legal industry stay away from de-regulation. Eliminating regulation of legal services delivery would let the charlatans who prey on the unsuspecting ply their trade. We can put de-regulation to the side. I have heard and read arguments for the alternative—re-regulation or changing legal services regulation. In this version of the future, lawyers lose their monopoly, but those who provide legal services must follow “legal consumer” protection laws.

Those who favor re-regulation believe authorities should remove the monopoly chokehold lawyers have on the practice of law. The UK’s Legal Services Act of 2007 gets dragged into the fray as one example. Australia’s and New Zealand’s changes are others.

Removing the monopoly should encourage new parties to provide legal services. Those new parties would bring cost competition, creativity, and access to legal services for people without access. The corporate end of legal services should benefit too. The influx of new providers will drive innovation. The theory is we will move from our dismal world ranking on access to justice (out of 100, the US falls between 65 and 94 depending on whose ranking you look at). The hope is that our ranking will improve because clients will get what they need in legal services.

Fair enough. Changing the regulations, depending on how they change, may deliver those benefits. In the UK, citizens have gotten benefits, though fewer than they or the government expected. The UK has established a group to examine the 2007 Act’s with the hope of determining what has limited the effects of the law. Let’s all agree—changing the regulations could help.

So…

We Can Do Better Without Waiting

The red herring is the re-regulation argument. We have what we need to fix the lack of access to civil justice problem. Changing the regulations may make a few things easier and transaction costs could drop. But, the problems we need to solve are independent of the regulatory structure. The barrier to solving the problems is lawyer resistance to change. Fix that problem and changing the regulations will become a side show at best.

Consider this one example. Solo practitioners argue they have a technological disadvantage. The cost of emerging software is beyond their grasp, either in time to implement or money. The professional responsibility rules prohibit law firms from having owners without law licenses. If we re-regulate, the argument goes, these firms can get access to money and resources through new owners. They can use those investments to bridge the technology gap. We already have a solution. Create a technology business (incorporation costs are trivial). Get investments in the second business which acts as a services business to the law firm. Spread the technology firm’s costs across several small firms. This model, or variations of it, exists.

We could change the current business model for legal aid. Necessity being the mother of invention, we will need creativity if the federal budget drops the Legal Services Corporation (which the proposed budget does). Middle class Americans lack or shun access to legal services. But, we have tools and can put in the field a different legal services model, compliant with the current rules, that gives this group access to legal services. The small firm lawyers providing the services would make a nice living.

Ignore the re-regulation decoy, we could improve today. But, lawyers resist change. Go back to that false premise: many lawyers believe that they have a monopoly to practice law. Wrong! Lawyers, at best, have a monopoly to represent other parties in certain situations (e.g., court hearings). Want a will? Go ahead, draft one. Or, go on LegalZoom or Rocket Lawyer and use a form. Or, go on the Internet and download a form. Confused? The online services have help sections, you can read many articles, you can buy DIY books that may answer your questions.

You can be your own lawyer whenever you want. Bye bye monopoly. “But wait,” you say, “that isn’t what I meant. I meant you can’t hire someone to do certain things for you unless that person is a lawyer.” If you need that someone to go into court, the lawyer monopoly applies (unless you count self-representation). Clients go without lawyers because lawyer put barriers between themselves and clients. Other niches exist. Everything else requiring hiring someone to do work for you falls into that ambiguous bucket the “unauthorized practice of law.” And watch out for smart contracts. Computers practicing law without lawyers.

Could a consultant draft a contract? They do. Could a financial planner write a will? They could point you to LegalZoom. Most lawyers would say “no” to both questions. But Legal Zoom, Rocket Lawyer, and the Internet have blurred the line. It is difficult to define the unauthorized practice of law because we can’t define  the practice of law. We like to think we know it when we see it.

If we go big, to corporate legal work, the unauthorized practice of law gets fuzzier. Most bar authorities believe that corporations can take care of themselves (they can) so they don’t waste time protecting them. That has left the field wide open for entrepreneurs to move in. It is hard to say today that lawyers have a monopoly. Lawyers have a pre-existing claim to certain legal services that shrinks by the day. This is one of the reasons small firm lawyers have stagnant income.

Strange, since lawyers resist change to protect incomes. They want to defend what they have left of the monopoly. They want to retain some level of prestige. They want to retain power. The list of actual and possible reasons seems unlimited. Whatever the reasons, lawyers resisting change is the principle barrier to fixing our access to justice problem.

Making Progress

My concern with the re-regulate movement is that it has become a distraction. Rather than acting to fix problems, we justify lack of action on failure to re-regulate. Regulation may affect how we structure changes and it may make some structures higher cost than others. Those are details. Let’s dig in and fix the problems. As the problems get fixed, regulation will become a minor issue and regulatory change will happen. As the regulators ponder, we will solve problems.

If we can fix problems, what holds us back? Go back to lawyers resisting change. We are 10 or 15 years into real change efforts in the legal industry. I have been at it for 38 years. Others have decades of change-resistance fighting on their resumes. In the boom times of the 1980s, lawyers gave no thought to change despite what I and others said. As lack of access to civil justice came to the forefront, as the recession hit, and as lack of access to civil justice is tied to larger societal problems, change is in the air. But, lawyers hold us back.

We can measure change in the legal industry by the movement of glaciers. Lawyers agreeing to change is the start. Change is big—it requires lawyers learning new ways to deliver legal services. Lawyers have to work as part of teams. Lawyers will cede some authority to gain influence. How a lawyer earns money needs to change. The changes needed to fix the problems like access to civil justice aren’t small and they aren’t without controversy.

For those who want to direct their limited time and resources at the American Bar Association or state bar associations and argue for re-regulation, go for it. The ABA is a byzantine group with as many political agendas as members. I think focusing on fixing the problems is a better use of time.

That statement presumes we can fix the problems, and I think we can. One problem that gets in the way of most others is the economic model for legal services. The current model uses high-cost labor. It is a model that worked in the 1800s, but is ill-suited to the 21st century. We know how to change the model. The tools to change have existed for decades. Some tools have existed for 100 years. Newer tools emerge each day, such as computer technology. But a world with tools ignored or left idle is as good as a world without tools.

Fix the Problems

Should we abandon the re-regulation fight? We should continue the fight, but put it in perspective. Ask yourself a question—What do I want to do to fix the access to justice problem that I am prohibited from doing by regulation? Ask if you could find a different way to do what you want to do. I ask those questions of people who tell me re-regulation is the barrier. I believe we can do what we need to do despite the lack of re-regulation. Re-regulation may help, but I am willing to solve the problems without it.

PapillonIn 1974, Allied Artists Pictures, Corona-General, and Solar Productions released Papillion, a movie based on Henri Charrière’s book by the same name (his nickname, which is the French word for butterfly). The book covers the time he spent in the brutal French Guyana penal system. Charrière became famous for his many attempts to escape from prison. The movie has a great cast, including Steve McQueen and Dustin Hoffman. The screenplay was by Dalton Trumbo. Trumbo was an excellent screenwriter. But his greater fame came in the 1940s as one of the “Hollywood Ten” who refused to testify before the House Un-American Activities Committee (HUAC). Hollywood blacklisted him. He continued to write, however, using front men. Two of the front men movies—Roman Holiday (1953) and The Brave One (1956)—received Academy Awards for screenwriting. It is hard to keep a good author down.

One scene from Papillon has stuck with me. For bad behavior, such as attempts to escape, the guards put prisoners in solitary confinement cells. The prison’s conditions were poor and, of course, cells lacked mirrors. A prisoner could guess if his physical condition was deteriorating. But he had another way to tell. To get his hair cut or to get deloused, a prisoner stuck his head through a small hole in the door of his cell. He would turn his head and look at the prisoner in the adjacent cell, who had his head stuck through the door of his cell. the first prisoner would ask, “how do I look?”

For some reason, this scene reminds me of lawyers working in their offices. Even in large firms, they work alone, oblivious to the world. For comfort, they meet at the coffee station and ask each other, metaphorically of course, “how do I look?” They don’t ask clients or others outside the industry, typically afraid of the answer or wanting to avoid it. They trust the word of the lawyer in another cell.

The light for these lawyers would come by inviting other disciplines into their thinking. I wrote an essay explaining the need for multidisciplinary thinking. If lawyers considered what others have studied, they would find answers—or at least potential answers—to many of the questions they struggle with each day.

Holmström’s Career-Concerns Model

The recent Nobel Prize in Economics brings this point home. Oliver Hart and Bengt Holmström won the award for their work on the economics of contract theory. Contracts are dear to most lawyers’ hearts and one might think that lawyers would stay current on research into contract theory. One would be wrong. To most lawyers, Hart and Holmström are strangers. Lawyers remain ignorant of their work.

This gap in lawyers’ knowledge is disappointing. Economic theory and contract studies could help lawyers understand their own practices. But that disappointment deepens, because the knowledge could help lawyers help clients.

(I’ll come back and address the complaint you raise. First, you say, he wants me to learn project management, process improvement, metrics, and AFAs. To that he adds economics. Doesn’t this guy get that I practice law. A day gives me 24 hours and I squeeze in eating, sleeping, and relaxing.)

Corporate clients complain that legal services come with unpredictable costs, inefficiency, mediocre quality, and arrive late. They direct their ire at large law firms, though the problems seem agnostic—every legal services supplier is at fault.

For years we have enjoyed guessing “why.” Why are law firms unresponsive? Some lawyers are responsive and deliver, as best they can, what their clients want. It seems, though, that the challenge for clients to get what they want grows each day. Clients have responded by taking steps, such as bringing legal services in-house. Increase lawyer hiring, say the general counsels. The problems stay, but reducing use of legal services providers reduces the volume of problems.

Of course, the “why” question remains. If we look to Holmström’s research, we can find a potential answer.

Holmström and Milton Harris studied what happens between employer and employee as the employee ages. For employee, substitute lawyer. Remember, Baby Boomer retirement is underway. By 2030, all Baby Boomers will have reached age 65. We should ask, “what happens to the lawyer-client relationship as the lawyer ages?” As a related question, we should ask whether the general counsel push to move work from first and second-year associates to senior associates and income partners makes sense.

The Harris-Holmström study, titled A Theory of Wage Dynamics, questions some of our basic ideas. Let’s start with this one. The longer an employee works the greater the employer’s knowledge of the employee’s skills (or client’s knowledge of a lawyer’s skills). “This learning allows more senior workers to be matched better to tasks than less senior workers. The result is that more senior workers exhibit higher productivity on average, and this accounts for their higher average earnings.” The higher you rank in the law firm, the higher your income.

But what if that relationship isn’t correct. “Some … empirical evidence suggests, however, that there may be factors other than acquisition of productivity enhancing human capital which produce upward sloping experience-earning profiles. …Medoff and Abraham … find that more experienced managerial employees earn more on average even though their performance is not as highly rated as less experienced workers in the same job category.” Harris and Holmström go on to show that senior workers may get paid more for reasons other than productivity. For general counsel, this could mean you pay higher rates for senior attorneys even though you don’t get higher productivity from them.

Perhaps the Harris-Holmström view holds true for lawyers in firms. We do not know. But, this is a nice example of lawyers acting based on guesses even though economic studies would give them data-based knowledge. Harris and Holmström published their paper in 1982. I’m sure an economist would point to all of the studies following the paper. Perhaps their idea did not survive. The point is that lawyers tread ground others have covered, for no good reason. By working alone, lawyers deprive clients of what we (the broader “we”—society) already know. Doing so wastes time and money. As I have said, law and the delivery of legal services is too complex to leave to lawyers.

Join a Team

I promised I would come back to your complaint. You say lawyers lack the time to become project managers, process improvement experts, pricing experts, and economists. I’ll go back to my usual response. I argue that lawyers must become part of expert teams. I get it — I was a partner in a law firm and spent 20 years in-house, most of them as a general counsel. As a general counsel, I worked on teams composed of experts. In-house lawyers get used to this approach. Law firm lawyers avoid it.

I argue that practicing law takes a wide range of skills and those skills should come from blended teams. Lawyers should avoid the lone wolf syndrome. Law firms and law departments will be better off with teams that include project managers, process improvement gurus, data analysts, economists, and other professionals.

The mix of those professionals for each project and matter will vary. But, the modern legal team needs skills and knowledge lawyers lack. The leader of the team, which may be a lawyer or could be someone else from the team, should be familiar with these other disciplines. She should know how to leverage these individuals and how to compose teams suited to answering client problems. I do not argue the lone lawyer should become an expert in all areas.

Lawyers are stubborn. They refuse or ignore this advice. What happens? Precisely what we see happening today. Lawyers get displaced. Consultants, accounting firms, entrepreneurs, and others embrace teams. They leverage teams, which may include lawyers, to the benefit of the client. Lawyers become tacticians, others become strategists.

The retirement of Baby Boomers means the legal industry will watch some knowledge walk out the door. We will lose some experience. But if we don’t change our behavior, we will lose an important opportunity. We lose the opportunity to become team builders and team players. We lose the chance to integrate what we do with what others do to enhance our problem solving abilities. We lose our chance to solve problems. We become the technocrats that computers can replace.

References

Harris, Milton, and Bengt Holmström. “A theory of wage dynamics.” The Review of Economic Studies 49.3 (1982): 315-333.

TippingAs my kids used to say, “made you look”! Remember, we rarely know a tipping point until we have passed it. We see them while looking back. We realize the world changed as we watched another cute cat video. For the record, I prefer the video of Professors Collins and Stone talking with Judge Posner. The Judge shares some provocative thoughts about the Supreme Court.

A recent survey from Corporate Counsel magazine suggests we did pass a tipping point. Steve Kovalan reports in “Your Clients Just Aren’t That Into You,” that 74% of general counsel project increased budgets in 2017. Then we get the belly drop: 43% expect to reduce use of outside counsel. About 92% of that work will go in-house. The trend of clients bringing work in-house continues. Eighty-five percent of general counsel cite cost as the reason for bringing work in-house. Seventy-four percent expect the same or higher budgets in 2017. But, we have a more interesting story than cost savings.

As Kovalan says, law firm leaders have blamed “more for less” and decreasing budgets for pressure on firm revenues. Data suggests, however, law departments have different motivations. They pull work in-house because they can. Recently, general counsel added another reason. They said they will trim law firms that seem to be on shaky ground. This move was inevitable. It could hasten the demise of some firms without resources to survive the departure of major clients.

We may have serenely watched general counsel realizing they can live without outside counsel. Are they changing their Facebook statuses from “in a relationship” to “alone and loving it”?

Why Do Law Firms Exist

As clients reduce the number of law firms they use, we should revisit a basic question: why do law firms exist? In 2011, Jordan Furlong published a nice essay taking a look at this question. He came up with one clear reason. Law firms exist to reduce transaction costs. Lawyers would face higher costs if they practiced separately. Re-reading his essay, it is hard to fault his logic. And, Furlong’s conclusion is consistent with the development of law firms over the past 150 years.

After the Civil War, solo practitioners started joining together into firms of two or three lawyers. The main motivation as best we can tell was to save transaction costs. A few firms, such as New York City firms representing corporations, needed more attorneys. They handled complex legal work. The rest saved money by partnering.

In the 1900s, the volume of regulatory work grew. Legal work also became more complex and it took more lawyers to do the manual labor of law. All of this led to some law firm growth. But,  saving on transaction costs was the main driver.

Furlong argues that technology replacing labor drives transaction costs lower. It decreases the justification for large law firms. Transaction costs fall below what firms can get by banding lawyers together.

I think he has a good argument, with one exception. A segment of the large law firm cohort—the superrich law firms—thrive. Twenty large law firms increase revenue and profits each year despite all the challenges facing law firms. Experts claim these firms provide legal services that weather cost cutting efforts. They provide specialized services in high-risk areas and command premium prices for their work. The lawyers in these firms band together because doing so supports lucrative businesses.

These firms don’t feel the challenges other firms do. Competition and technology do not have the same effect on them. Clients with high-risk work are not cost sensitive. Clients demanding specialized and sophisticated work will pay for the “best” to avoid failure.

If we slice off the top 20 firms, we have 180 firms left in The American Lawyer 200. They need to show why they exist. Lowering transaction costs is not sufficient. I am not arguing all but the top 20 law firms will disappear in a decade. But, I believe we will see continued firm consolidation. The gap between the top 20 and the remaining firms will grow. Today, we see a law firm size distribution resembling a two-humped camel. It has a bulge at the right end, one at the left end, and a trough in between. I think we will see a similar distribution in the right end bulge. That is, two humps with a trough in the middle. A camel on a camel?

Large law firms carved up the middle market firms years ago. Today, the 180 law firms in The American Lawyer 200 have become the new middle market firms. They face just as much risk as their predecessors. The live in a trough. That trough holds the firms that have trouble answering “why do you exist?”

A Late Bloomer

In many respects, this firm size evolution reflects broader trends. When I was young, mid-size department stores populated retail malls. Today, those stores have gone away. We have a few large stores, but the others merged or folded. We can go through industry after industry and see the same trend. Why should law firms be different?

We also see competitors entering many of these industries. Amazon? The legal industry is remarkable for having held on so long before living these changes. The tipping point has come (if it has come) late to law.

What Now

Assume we did see a tipping point in 2016 and in 2017 the remodeling pace in the legal industry will accelerate. What does that mean? I think it means a lot for clients. As I’ve said before, I’ll leave the firms to fend for themselves.

Clients need to get serious about understanding their supply chain and how to structure it. We hear that clients use alternative legal services providers more frequently and pull more work in-house. Those changes don’t show supply chain understanding and remodeling. They show clients swapping higher cost for lower cost in an existing supply chain.

The suppliers in the legal industry may change, but the supply change structure remains the same. A client hires a law firm. Everything is transactional, with little or no integration. Even when that client goes back to the law firm for help, each matter is transactional without integration. This is an old supply chain model. To the client’s detriment, it favors the supplier, not the buyer.

In 1980, Harvard Business School professor Michael E. Porter published the Five Factors Model. We use it to analyze an industry’s structure. We consider: 1) bargaining power of suppliers, 2) bargaining power of buyers, 3) threat of new entrants, 4) threat of substitutes, and 5) industry rivalry. Based on the analysis, we can measure the intensity of competition in an industry. Intense competition means suppliers earn lower profits.

When we look at the legal industry, the model shows low competition. Suppliers can earn outsized rewards at the expense of buyers. As competitors have entered the legal industry, the results shift a bit. But, the structure favors suppliers earning outsized rewards. This is one reason law firms can raise rates each year.

The structural shift that makes sense for the legal industry goes counter to the direction clients have taken. Jeffrey Dyer and Harbir Singh call it the “relational view”and described it in a 1998 article.

Under the relational view, suppliers and buyers integrate processes. This creates seamless, cost effective, higher quality workflows. The automotive industry is a visible example of this approach. An assembler integrates with Tier 1 suppliers, who integrate with Tier 2 suppliers, and so on. Before you say “lawyers don’t assemble cars,” I’ll point out that some clients and law firms use this same approach. The supplier and buyer work for mutual advantage rather than winner takes all.

How does this work? The supplier and buyer think long term. Working together, they set a goal. Then, they examine and integrate their existing processes. They design a value stream that flows through the entities. Value streams in the old model start and stop at each entity’s door. They build and invest in a relationship and in each other. They develop trust and expect the relationship to continue.

That relationship means the supplier will invest in innovation that benefits both it and the buyer. It means it won’t try to maximize the return on each matter. Instead, it will maximize the return on the relationship. It means the buyer will return to the supplier rather than shop every matter. The buyer invests in the supplier. Studies show that using the relational view, suppliers and buyers both do well. The supplier has a continued relationship at lower profit per transaction. But, that is better than higher profit per transaction and constant churn.

Finally, external competition keeps the parties on their toes. If a buyer stops investing, innovation will drop off. That in-house law department will be less competitive than departments in other companies. The corporation has a competitive disadvantage. If a supplier stops investing, the buyer will leave for a stronger relationship. We see that today. Buyers report they already have dropped many firms and plan to continue the trend.

Today, corporate law departments still use the transaction view for supply chain structure. They do not build competitive advantages, just temporary cost benefits. Law firms do not invest, because they have no incentives to do so. The transaction view drives low innovation, higher cost for the buyer, and higher revenue for the supplier.

Conclusion

Buyers have more alternatives today to get their legal needs serviced. They understand this and have decreased their reliance on law firms. Law firms struggle to respond and keep the benefits of the current supply chain structure. That is, law firms still want outsized profits. Buyers perpetuate the transaction structure that helps law firms. Swapping one supplier for another does not change the structure.

Both buyers and suppliers will do better over the long run by changing the supply chain structure. Moving from a transactional view to a relational view balances benefits to both parties. We have seen instances in the legal industry of this move. The client and the firm prosper with stronger relationships. Innovation increases. Buyers should consider a new supply chain structure. Otherwise, they will replicate the current system with different players, which is not real change.

References

Jeffrey H Dyer & Harbir Singh, The relational view: Cooperative strategy and sources of interorganizational competitive advantage, 23 ACADEMY OF MANAGEMENT REVIEW (1998).

LAWRENCE M. FRIEDMAN, A HISTORY OF AMERICAN LAW   (Simon and Schuster. 1973).

Steve Kvalan, Your Clients Just Aren’t That Into You, Law.com(2016), available at http://www.law.com/sites/ali/2016/11/13/your-clients-just-arent-that-into-you/.

Tony Mauro, Judge Posner Slams “Stupid” Decisions by Chief Justice Roberts, “Silly” Stances by Scalia, Law.com(2016), available at http://www.law.com/sites/almstaff/2016/11/30/judge-posner-slams-stupid-decisions-by-chief-justice-roberts-silly-stances-by-scalia/.

MICHAEL E. PORTER, COMPETITIVE STRATEGY : TECHNIQUES FOR ANALYZING INDUSTRIES AND COMPETITORS   (Free Press. 1980).

White DwarfNow that 2016 is more than a month behind us, law firms have moved through reporting the year’s financial results to partners and into compensation discussions. This is the time of year when equity partners puff up their chests and emphasize their importance to the firms and compensation committee members attempt to placate thousands of outsized egos. From the early reports, 2016 was another decent year for many large (e.g., AmLaw 200) law firms. The top 100 were up, collectively, about 4% in revenue and the next 100 up about 1% in revenue. Not the salad days prior to 2008, but certainly not the armageddon many feared.

When I said “decent year,” I really meant a disastrous year for clients, junior partners, associates, law firm staffs, and the legal profession generally. But, a decent year for equity partners in many firms (a 1% average revenue increase strongly suggests some firms had a down year). Before I go further, you may want me to clarify the first sentence of this paragraph. Why disastrous? Well, because anything that masks what is really happening in the industry—in this case large law firm rate increases that offset declining productivity, decreased demand, and increased costs—helps most lawyers deny that a different future already has arrived. And, that brings us to white dwarfs.

A Bit of Astronomy

Look up into the night sky and you will see a lot of stars. When you look at the Milky Way, about 97% of the stars you see in it are neutron stars (our Sun is a yellow dwarf). But, sprinkled among the neutron stars are white dwarfs. Not to be insulting, but a white dwarf is a star that didn’t make it.

We don’t want to get too far afield in this post, so let’s go with the following summary genealogy. A star begins growing. Some will grow into red giants. Some of the red giants will get rid of their outer layers, forming planetary nebulas (not really planets, think instead “gas cloud”). What remains of the red giant after getting rid of the outer layers is the white dwarf.

The white dwarf is dying. It does not have a source of energy so it cannot sustain itself. It is slowly degenerating. Now by slowly, I mean billions and billions of years to degenerate, but it is degenerating. Eventually, it will reach a point where it will become known as a black dwarf, or it may combine with a nearby star, or it may explode. Given the long time horizon for white dwarfs, we really don’t know what will happen at the final stage, we just have guesses.

Back to Law Firms

While the AmLaw 100 saw revenues grow almost 4%, the AmLaw 50 saw revenues grow an average of 5% and the top 20 firms saw even better performance. For many years, the top 20 firms have been pulling away from the rest of the AmLaw 100 and early results tell us that trend continued in 2016.

We can think of the top 20 firms as the yellow dwarfs of the legal industry. They made it. They have not become immortal, just as our Sun will eventually reach its endpoint, but they have reached a point where success seems to be with them for the foreseeable future.

That leaves us 180 firms that have not achieved yellow dwarf status. Of the 180 firms, some number will make it to yellow dwarf status. We don’t know which ones or when. “Legalology”  is less advanced than cosmology.

Since not all of the 180 will make it to yellow dwarf status, what will happen to the rest? Well, we are seeing that question answered each year. Some will merge with nearby stars (other firms). Some will quickly degenerate and die. Others, will take a long time to fade away and it is fair to say we don’t know what will happen to them.

Beware the White Dwarfs

We can rant and rave, bay at the moon like wolves in the night, or hide our heads under blankets, but nothing we do will change what is happening in the night sky. White dwarfs will fade away. They won’t get a new source of energy. Combining with another star is an exit strategy, but the white dwarf goes away.

Most equity partners at large firms (other than the top 20) will look at the results for 2016, shake their head sadly that the go-go days of law firm growth are gone, and go back to work. They aren’t starving, their firm hasn’t collapsed, and all the naysayers were proved wrong. In 2017, they will need to scramble a bit more, fight a bit harder, and tweak what they do, but thank goodness they only have a few years until retirement. They can weather the storm.

That, of course, is why 2016 was a disaster. The platform is not visibly burning. For many, it is hard to see any smoke. Partners overwhelmingly oppose change (almost 70% on the last survey I saw). To them, even if the naysayers are correct and even if the end is coming, they can make it. All they need to do is get to retirement. The fire may be there, but since they can’t see it or smell it, they chose to ignore it. As a white dwarf firm, it probably has a long time before the end finally comes.

Combatting Complacency

In the past, I have suggested that we let the white dwarfs be white dwarfs , that is, let large firms be what they want to be. If the large law firm equity partners are content to let their firms disappear (after they retire, of course) and they own the firms, who are we to tell them to run their businesses otherwise? New legal services organizations are rising and some of them will take the place of law firms. Some of the firms will survive, and we can presume there will be enough lawyers to staff those firms and meet the demand for legal services pulled from large law firms and not handled in-house. So, while entertaining to watch, what is the big deal?

The big deal is not the large law firms. The big deal is lawyers. For society to function, we need governance systems. Our governance system is the rule of law and the institutions that create and implement it. If those institutions change, but we still have individuals skilled in creating and implementing law, then we will adapt. But, if the demise of the institutions brings down those who create and implement law, the future will dim.

Richard and Daniel Susskind have taken their best shot at demonstrating that whatever lawyers may have added to society in the past, that “thing” is being replaced by computers. To paraphrase the old song, “whatever humans can do, computers can do better.” The slow death of white dwarf law firms won’t matter because computers will step in to handle some, many, most of the “things” those lawyers did. Perhaps a few things will remain in the fragile hands of humans, but our time (like that of other professionals, the Susskinds are agnostic on the demise of professions) has passed.

This is the trick. Some of what lawyers do can be automated. Over time, that will increase. If we take a very long view—50 years or more—we can imagine everything lawyers do being taken over by computers. If that happens this discussion is moot (or as many clients would say, it is “mute”). But, some of what lawyers do involves normative decision making. A lawyer may tell a client he can do something, but that he shouldn’t do it. A judge may decide he could rule for the plaintiff, but it would be better if he ruled for the defendant. A jury can decide the defendant is innocent even though there is strong evidence of guilt, because they are swayed by the circumstances of the crime. Much of what lawyers do does not get written into caselaw, into contracts, into policies, or into legislation. Through persuasion, custom, appeal to the higher virtues in all of us, or simply through arguing the pragmatics of a situation, lawyers shape what happens each day.

The question for those who look forward to our computer overlords is not whether we are willing to have computers do the simple, routine, or automated stuff, it is whether we are willing to turn over our humaneness—our destiny—to computers. It is easy to argue that using computers to cure or prevent cancer is for the better good. Is it as easy to say a computer should decide whether to send the abused spouse to jail for a murder? What about deciding whether to prosecute? What about deciding whether to bring it to the prosecutor?

Those who pay the invoices of white dwarf law firms should care about the white dwarfs. For the rest of us, worrying about the white dwarfs diverts our attention from the real issues facing lawyers. The annual debate about which firms are neutron stars and which ones are white dwarfs, and then how fast each white dwarf is degenerating, is better left to the law firm leaders and those clients who prefer to look to the past rather than embrace the future. For the rest of us, it is (well past) time to focus on why lawyers are important to society and how we can evolve so that lawyers do not turn into white dwarfs or quickly degenerate into black dwarfs.

CellThe word “cell” has picked up an unfortunate connotation in recent years as terrorist cells have taken over the news. Lawyers probably want to avoid any suggestion that they work as part of a cell. But the truth is, cells can be a good thing.

Today, when many of us hear the word “cell” we think of a terrorist group operating distributed cells throughout our city or country. That use has given a good word a bad name. In the original lean thinking parlance, a cell was a small area devoted to a certain group of tasks or activities. For example, on a production line you could have a cell that assembles the right-hand mirror for a car.

The cell concept is popular in lean thinking for many reasons. But, outside of manufacturing, the cell idea has not caught on. To avoid the negative connotation now associated with the word, and to move into a way of looking at things more familiar to legal services providers, I’m going to switch to the term “team station.” Cell and team station are not substitutes, but team station will help us get to where we need to go. More importantly, thinking about teams will help us work through how to generate predictable, productive, quality, and low cost legal services.

The Team Station Concept

It is tempting to bring in a sports metaphor here, but while I am replacing cell with team station, I don’t think the metaphor would work. Instead, I’m going to use … the eye doctor’s office.

A few years ago, I suffered the fate of age and nearsightedness—I had a retinal tear. To show you how devoted I am to helping lawyers, the tear happened sometime during the night so I first realized I had a problem when I woke up in the morning. I had a full day ahead of me doing presentations and facilitating as part of the Association of Corporate Counsel’s Legal Services Management training. I did not know why I had trouble seeing out of one eye, but I knew I was flying home later that day. I called my wife who got me an appointment at 8:00 am the next morning with the eye doctor, and spent the rest of the day doing my thing while seeing out of one eye. In retrospect, I should have gotten on the first flight home because I risked going from a tear to a detached retina, but as I said, I am devoted to helping lawyers.

The eye doctor quickly diagnosed the problem and sent me a few blocks away (my wife driving both times) to a retinal specialist. This is where the team metaphor comes into play. To make the story more interesting, my new retinal specialist doctor was working with a lean thinking consultant on how to make his office run more efficiently.

I started by checking in at the front desk. This was the first team station (or cell, using the old terminology). At the check-in team station, the “operators” had a set of simple machines designed to help with the processes performed at that station. The team members had to perform insurance tasks, phone tasks, medical records updating and retrieval tasks, and other administrative tasks. Immediately behind the front desk was the storage area for patient records. The team members had phones, staplers, scanners, computers, and other tools arranged neatly around them.

After check in, I was sent to the first examination room, or the preliminary examination team station. This room was devoted to processing the patient through a variety of tests and information gathering processes necessary to give the doctor general information about my physical condition and information specifically related to my eye problem. The room had a variety of devices devoted to specific aspects of the relevant processes.

I then moved to the examination room. Again, the room had tools devoted to the specific processes handled in that room. By the way, the hallway had a large kanban board that the medical assistants used to keep track of each patient’s progress through examination and treatment. Each room also had an andon outside the door to signal everyone about the status of the room. All very cool.

The final two rooms were the laser treatment room, where the doctor and his assistant repaired the retinal tear, and the recovery room, where I waited for a short period after the laser surgery. As with the prior rooms, each of these rooms had equipment designed for the specific tasks performed in the room.

You can see how the office operated. The workflow involved moving patients from room to room (team station to team station or cell to cell) for processes to be performed in the proper sequence. The kanban board was used to control flow, the andons were used to avoid bringing a patient to a room in use, and the team members moved among the rooms as needed to perform processes.

The workflow was not perfect (of course, no workflow ever is perfect). There were unnecessary wait times, lots of traveling (from team station to team station), challenges sequencing processes, and other inefficiencies. All of these were part of the improvement efforts the doctor and his colleagues were working on with the consultant. But the backbone was there and the doctor explained to me the significant improvements they already had achieved in workflow.

Now let’s move to law.

Legal Services Team Stations

You may have trouble seeing (pun intended) how the doctor’s suite of team stations relate to delivering legal services. Let’s start by freeing ourselves from the physical constraint of the office. Legal services provider teams work virtually, with the “thing” they are working on floating through the electronic universe. That is okay—a team station does not have to be a tangible location like a check in desk or a room, it can be a virtual grouping of individuals.

Think about how we break down legal services matters. Litigation has depositions, documents discovery and review, brief writing, witness book presentation, and many other processes that come together under the umbrella heading “litigation.” Transactions have due diligence, agreement drafting, ancillary document preparation, and many other processes we pull together under the umbrella heading “transaction.” In fact, any legal project is made up of many groups of processes pulled together under some heading.

Each of those groups of processes can have a team assigned to it. That team may have legal services providers from one organization (the client, the law firm, the ediscovery vendor), or it may have providers from several or all of those organizations. The team will perform the processes related to achieving their goal. The team station is their virtual universe for the inputs needed to perform the processes or the outputs from the processes.

When you break legal processes down this way, you can think about who needs to be on a team and what tools that team needs. Typically, the team does not need fancy, complicated, do everything tools. Instead, the team needs simple tools designed to help it efficiently perform the tasks needed to complete the processes.

Teams and Team Stations Facilitate Simplicity

I just pointed you to a very powerful concept—one that is hard for most people to grasp. Simple tools often beat complex tools when it comes to many things: cost, efficiency, quality, maintainability, training, and re-configuration, to name a few. We get hung up on the idea of big tools, because of two things: interoperability and compatibility.

Interoperability means that the tools work together. You can connect tool A to tool B. In the case of legal services providers, we want our software packages to work together so that we don’t have conflicts. Our document management system should work with our word processing software, and our contact management system should work with our email system.

Compatibility means that the output of one system can be used by another system. For those with good memories, this was the problem that Windows users and Mac users fought for a long time (and still do, a little bit). If we prepared a document in Word at work we wanted to take it home and revise it on our MacBook and then take it back to work and finish it on Word.

Obviously, if you license one big package, everything will be compatible and interoperable with everything in the package. But, if you decide to use many simpler, smaller, packages you may run into interoperability or compatibility problems.

Those problems are on the decline. No entrepreneur in his or her right mind would design a contract editing program that worked with Google Docs but not Microsoft Word. Going the other way, yes to Word and no to Docs, would not constrain the market as much, but ultimately vendors want everyone to use their products. So, the interoperability and compatibility problems can be minimized or avoided when selecting software.

Another way to reduce the problem mimics what companies outside the legal industry have done. Take the base program (e.g., Word) and customize it to the smallest amount necessary. Build macros or use other software to build small tools that manipulate the Word document (yes, that isn’t the easiest thing to do). Large law firms have attempted to do this, although in a ham-handed way. Done with some understanding of workflow and processes, it works very well.

Our due diligence team needs certain tools for its processes. Those tools could be dedicated tools, or customizations of basic tools set up specifically for the due diligence teams’ needs.The brief writing teams needs different tools or different customizations. When a person works on both teams, they will need to learn both sets of tools or customizations, but otherwise they only need to know the tools for their team. Look across all the teams and you will find that seldom does anyone need the big tool that does everything.

Multidisciplinary Teams

If one lawyer does everything, as a solo practitioner might, then you could argue for one tool. I think law is moving towards multidisciplinary teams, even at the solo practitioner level. Multidisciplinary teams can reduce costs, increase efficiency, and help bring law to the masses. To get there, we need to break down what we do into processes, assemble the right tools for those processes, and not overload the team with big tools.

I see many students come through law school who do not like to write legal briefs. I do not mean they dislike the style, I mean they dislike writing. But, they may have great negotiation skills or oral argument skills. This isn’t something new. Those who like to write gravitate towards practices where they can write. Those who like to negotiate go a different path. The solo tries to do it all. But, we can use processes and technology to create virtual practices (and many already exist), where a team comes together each member contributing his or her skills. Done correctly (that is, done in the way many other businesses have), the overall cost comes down, quality goes up, work satisfaction increases, and the products or services become available to more at lower cost.

Most lawyers resist the teams and teams stations ideas, in law firms (large and small) and law departments, because it goes against how they were trained. The “one lawyer does it all” concept still prevails in law schools and law practices. But, we have all the tools to change that concept and deliver some great benefits to our clients. It will take the brave few to step out and implement these ideas, not just in large corporate law, but in solo practices, legal aid, and government legal services, if we want to get past our current logjam where only the elite can afford lawyers. The nice thing is, there is a way.

AirplaneStop me if you have heard this one. A law department says that it wants to “increase efficiency.” Not really sure what that means, the department leaders decide that it must include moving some things they do manually—or things they don’t do at all—onto a computer system. All agree that computers make things efficient and by using technology, the law department will be perceived by those outside the department as “with it.”

The department proceeds to spend a lot of time developing “specs,” researching possible solutions, vetting vendors, and bringing home the idea. The planning process stretches over months, the paperwork is drawn up, the GC makes her pitch, and the department gets authorization to move forward.

Now the fun begins! The vendor comes in and helps the department plot how to bring the software online. The software is introduced (no need to get IT involved, this is software as a service (Saas))so all you need to do is reach out over the Internet, configure the system, integrate it with your existing processes, train everyone, and make sure all happens as it is supposed to happen. Naysayers are shot down as Luddites committed to a way of life no longer acceptable in an enlightened law department. Within the time budgeted the project goes from idea among law department leaders to implemented software doing its thing.

And then the other shoe drops. All agree the software helped. But it hasn’t helped as much as everyone thought it would help. There also is the time. The software wants information to do its job, so people in the law department get caught up feeding the software. Also, the business changed while the software was being implemented. North is now South, East is now West, and Southeast is now part of the corporate family. All those changes meant the software had to be re-jiggered.

Some questions have come up. Since the software is a data hog and everyone now feels like a data entry specialist, people want to know what is being done with the data. In many cases, the answer is: not much. It is being collected for the very good reason that it can be collected. And by the way, when they said the software “works” with the twelve software packages already used by the law department, they meant “does not aggressively destroy.” It seems “works” is a squishy concept.

All-in-all, people now use the software, the software has changed how people do things, people don’t waste time on things they did before, but they do seem to spend a lot of time on new things, and no one can definitively say whether the new things are better than the old things, but they sure are different. The key is that the GC can proudly report the law department is tech savvy.

Follow the Data, Not the Pack

The story may sound familiar because it is one repeated often by law departments. Many departments other than law fall into the same trap, but I’ll keep my focus on law departments. This also isn’t a “who is to blame” essay. Software vendors are in the business of creating and licensing software, so we really can’t blame them for doing what they do. It is tempting to blame the law department, but that wouldn’t help, and they really aren’t to blame anyway. They followed a traditional path trod by many for bringing software into a department. So what went wrong?

In lean thinking, we prefer to focus on the process not the people. When things go sideways, we look to the process and how it could be changed. The people were just implementing the process and we should not blame them because they did so. We should change the process so the next time the people implement it things do not go sideways.

We can identify some process problems in the law department story. First, it seems they jumped the gun in going to software. Rather than learning and improving existing processes, reducing waste along the way, they went to software as the silver bullet. Put in process improvement terms, they went to software before they had reached the limit of process improvement. Second, in going to software, they went big. The decided to go for the platinum, all bells and whistles, cooks your breakfast while making coffee and feeding the dog, version of software. Third, they did not test the software hypothesis before jumping to implementation. The hypothesis was that software would improve efficiency. But, instead of running some experiments they acted on the assumption.

Since these are process failures, we can improve the process to reduce waste and improve the likelihood of a better outcome next time. In the next three sections, I’ll briefly look at how the processes could be improved.

Jumping the Gun

Every law department delivers legal services using a bundle of inter-related processes. Those processes vary by department (often by lawyer) and so there is no one-size-fits-all. The processes vary by corporate culture, historical precedent, who is performing the processes, and constraints imposed by the organization (e.g., processes other departments use). The first step should have been to identify and document existing processes. Then, the department could have used process improvement techniques to eliminate waste. If nothing else comes out of the exercise, it means the law department will not “institutionalize waste” by building it into an expensive software program.

Of course, documenting and improving processes can do much more. Often, you eliminate many steps, so neither people nor computers need to do them. Simplifying steps may mean that existing software can handle the job. Documenting processes means that everyone can follow the processes, which eliminates problems caused by conflicting ways of doing things. Finally, process improvement is quick, low cost, and flexible. When the business changes, it is much easier to change processes than to change software.

Going Big

For law department leaders, there seem to be two goals to software: zero or big. They justify big on the grounds that everyone in the department must use the software. Most lawyers may work on contracts, but those contracts vary across the board. Despite the variance, everyone must use the contract management software which has a workflow designed for the lowest common denominator. That may make sense, but seldom do I find a law department that learned their processes well enough to make that decision before plunging into expensive software. Conversely, I often find law departments who learned that the one-size fits all assumption did not work well.

This is where the lean concept of “cells” comes into play. A cell can be a group or team that does a contract type. A lawyer may belong to many cells, but a cell is devoted to one thing. The team that does distribution contracts should work out their processes and, if software fits into those processes, look for simple software that fits the purpose for their cell. Perhaps some Word macros, or simple implementations of workflow logic or document automation would work best. The software tools will be easier to program (and re-program) and will handle the tasks needed, without interfering with other areas of the processes. The cost is much lower, quality is easier to control, and the department leaders will not be forcing everyone to do data entry or learn tools that don’t help them. Training someone new to the cell is easier, because the software is simpler to learn. Even if you do need to go big (e.g., everyone uses the same package to store and retrieve documents) you can focus on a tool that does that one thing well, instead of the multi-purpose tool that does many things not very well.

Test Your Hypotheses

As I said, law department leaders view the world in binary fashion when it comes to software: zero or big. There is an alternative. Instead of jumping to the big software, law department leaders can look at the adventure as a startup. Again, always start by learning and documenting existing processes. Yogi Berra’s admonition, “If you don’t know where you are going, you’ll end up someplace else,” is a good one. Then, instead of going big, start small by testing hypotheses.

One online grocer started this way. Instead of building out the software so people could go online, fill their cart with food choices, pay, and then sit and wait for the groceries to be delivered, the grocer went small. It put up a simple web page describing the service and a phone number. When a customer called, a real person took the order. Another person went shopping, delivered the food to the customer’s home, and took payment. Hardly a scalable model, but a great way to gather data and test hypotheses. The startup founders knew they could build the software. But they didn’t know if the idea would work.

The manual system allowed them to test their ideas at very little cost. Would people call (they could always move to online orders)? What would people order (keep track on a spreadsheet)? How frequently would they order (another spreadsheet)? What features would they want from the service (keep a list of desired features)? These and many other questions were easier to test in “small mode.” As they understood more about what the customer wanted, they could (and did) start building the online business. Eventually, they transitioned out of the manual approach and into the online approach, but by then they had answered many critical questions.

Law department leaders can follow the same approach with software ideas before going to software. Instead of boiling the ocean, pick a small group and have them “manually” do what the software would do. Keep testing, asking what features you need, learning where there are rough spots in processes, and gathering data. At some point, you may be ready to look at software. Now your focus will be on what you need not on what vendor’s sell. You may find that a much simpler package, or perhaps two or more very simple packages, will do what you need for less money, with better quality, and give you more flexibility, than the one big package.

Why Go the Lean Path

It is easy to spend money. It has gotten easier to spend money and successfully install software. It still is difficult to hold off, assess what you really need, clean up processes, re-think how you do things, and then spend only what you need to spend, not what you are authorized to spend. Going the lean path yields greater and more sustainable results, often getting results well before the traditional path of plan then spend big. It also fits much better with the modern, flexible business.

Running a law department efficiently, one of the keys to getting greater responsibility within the modern corporation, is much more than trimming costs. It involves knowing how to do things differently, innovate, and create new models to replace old methods. Having seen the fallout from those who simply pursue the traditional path, I have found that many programs intended to create efficiency end up creating more waste (especially when you add in the costs of having to redo the efficiency effort). For your next adventure, think lean startup and follow a new path to a better outcome.