(A version of this material originally appeared in the July 2017 issue of ALM’s “Marketing the Law Firm.”)
In this five-part series I will:
- explain and distinguish “Business Intelligence” (BI) and “Competitive Intelligence” (CI), and show how both should be employed in optimal:
- brand development,
- pricing of services,
- client feedback programs, and
- strategic planning.
This installment will set the stage with some background and definitions.
Law firm leaders are faced with myriad decisions every day, from the mundane to the strategic. Each is an exercise in risk management. Not too many years ago, good decisions made by smart lawyers were sufficient. Law firms were raising their fees substantially every year and attorney incomes were soaring.
Those good old days ended for most firms shortly after 2008 when the market for corporate legal services shifted from being supply-driven to demand-driven. Now corporate buyers are largely calling the shots, and excellent decision-making by law firm leaders is required as firms work to maintain their profitability.
At the same time, a host of Alternative Legal Service Providers (ALSPs) have arisen, giving corporate legal departments three alternatives for most work: keep using law firms (perhaps their incumbents), bring it in-house, or use one of the ALSPs. In many cases, the buyers are “disaggregating” large disputes and deals, allocating some of the work to law firms (e.g., IP prosecution), sending some to the ALSPs (e.g., eDiscovery) and keeping some in-house (e.g., overarching legal strategy).
This means that where law firm leaders’ “gut judgement” once was sufficient, today, effectively running the business (yes, Big Law is a business) requires solid intelligence. Decisions must balance the demands of clients with those of the partnership. Law firms are awash in data, but harnessing it to support sound decision-making is a major challenge. Most law schools fail to even mention “business intelligence,” “competitive intelligence,” “artificial intelligence” and the host of other tools now available to law firm leaders. Those terms certainly were not taught back in the 70s and 80s when today’s leaders were studying for the bar.
So, let’s sort out these terms and discuss how they can help law firm leaders reduce the risk in some of their most important decisions (for instance, keep the business coming in and make sure it’s profitable).
|Data||Raw numbers or other facts.|
|Information||Data that have been summarized and organized such that they have meaning beyond the raw numbers.|
|Intelligence||Information that has been analyzed in context to the point that it can support decision-making.|
|Artificial Intelligence||Computers performing analytic tasks heretofore believed to be the sole province of the human brain. (The object of the analysis can be BI or CI.)|
|Business Intelligence||BI is an umbrella term that refers to a variety of software applications used to analyze an organization’s raw data. BI as a discipline is made up of several related activities, including data mining, online analytical processing, querying and reporting. (Ryan Mulcahy 2007)|
The collection and analysis of information to anticipate competitive activity, see past market disruptions and dispassionately interpret events … provides insight into marketplace dynamics and challenges in a structured, disciplined, and ethical manner using published and non-published sources. (Leonard Fuld 2017).
The bottom line, is that business intelligence is based on data internal to the institution, organized and reported to drive decision-making. Sources might include your billing system, CRM database, HR files, and individual attorneys’ Outlook contacts.
Competitive intelligence is primarily based on external data, again, used to drive decision-making. CI certainly can employ internal data as well. External sources of CI might include reports of macroeconomic trends, client satisfaction surveys, law firm directories, advertising by competitors and client companies’ websites.
The real benefit of both BI and CI is in risk management. Decisions must be made every day, and both BI and CI are intended to inform the decision-making process to maximize the chances of making best possible choices. But both BI and CI are absolutely dependent on the availability of the right data.
Another loose distinction is that Business Intelligence almost always employs quantitative data (numeric) whereas Competitive Intelligence very often includes qualitative (non-numeric) data such as the results of in-depth interviews and the scanning of news stories.
Competitive intelligence includes “competitor intelligence” — information about specific rivals.
|Desired characteristics of CI and BI data
In today’s environment of information glut, certain elements of both BI and CI should be considered table stakes; that is, the competition has access to much of the same CI as does your firm, and they have the same BI regarding their own organization. But with competitive intelligence, there is opportunity to gain significant competitive advantage through original data; that is, data gained through proprietary research not available to the competition. Competitive advantage can also be gained through superior analysis of BI and CI data.
In law firms, BI is often housed and managed by the finance team, but includes data from HR and other systems as well. CI is often housed and managed by the marketing team. Significant IT support is required to manage both, and especially to integrate both.
CRM systems present something of an overlap between BI and CI. Originally little more than computerized Rolodexes, nowadays CRM systems routinely connect to external data sources (CI), and they certainly (at least should) connect to various internal databases (BI).
Law firms have a history of being managed by gut instinct. In today’s market environment, that won’t do. BI and CI, especially when used in concert, can substantially help manage the risk inherent in important decision making.
The next installment in this series will focus on firm Branding, a prime example of the application of BI and CI to improve decisions that were once mainly determined by “judgement” and “instinct,” to the great detriment of the firms involved.