Weitere ähnliche Inhalte
Ähnlich wie Legal ROI: Quality & Innovation, Incorporating Efficiency (20)
Kürzlich hochgeladen (20)
Legal ROI: Quality & Innovation, Incorporating Efficiency
- 1. Legal ROI:
Quality and Innovation,
Incorporating Efficiency
Copyright © 2014, Ron Dolin
1
Ron Dolin, J.D., Ph.D.
Research Fellow
Center on the Legal Profession
Stanford Law School
Financial Metrics Conference
New York, Oct. 22, 2014
- 2. Part 1
Copyright © 2014, Ron Dolin
2
What we can't do:
Measure Client's ROI on Legal Spend
- 3. Client (Fortune 100)
Me: Do you measure ROI on legal spend?
GC: No.
Me: Why not?
GC: We can't measure quality.
Copyright © 2014, Ron Dolin 3
- 4. Startup Competitor (e-discovery)
Me: Do you measure quality?
CEO: Yes – top quality and inexpensive.
Me: Is that successful?
CEO: It can be challenging when the law
firm has a board member that
questions our quality without data.
Copyright © 2014, Ron Dolin 4
- 5. ABS Law Firm (England)
Me: Do you measure quality?
CEO: Constantly.
Me: What is your fee structure?
CEO: 95% is multi-year flat fee, and the client
contracts with the company, not with the
lawyer. They stay with us even with lawyer
turnover.
Copyright © 2014, Ron Dolin 5
- 6. Measuring Value and ROI
Value is Quality/Benefit over Cost
ROI requires a value assessment on R
Quality metrics are financial metrics
Legal service quality is measurable
Clients need to estimate ROI on legal spend
Law firms need to estimate ROI on innovation projects
Copyright © 2014, Ron Dolin 6
- 9. In General (e.g. Legal)*
Copyright © 2014, Ron Dolin
*interactioneurope.com
9
- 10. Row 1 Row 2 Row 3 Row 4
12
10
8
6
4
2
0
Column 1
Column 2
Column 3
0 10 20 30 40 50 60 70 80 90 100
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
E-discovery Quality
(hypothetical)
Relative Cost
Precision * Recall
Copyright © 2014, Ron Dolin 10
- 11. Part 2
What we'd like to do:
Measure Law Firm Innovation ROI
Copyright © 2014, Ron Dolin 11
- 12. Law Firm Innovation
Compare marketing (2-3%) with
innovation budget.
Measuring ROI on marketing (which
focuses on current offerings)?
Propose: 1% on innovation.
Focus: pilots and business models, not
large-scale software development.
Copyright © 2014, Ron Dolin 12
- 13. Innovator's Dilemma/Solution*
Threats and opportunities
Non-consumption
Unknown and unknowable markets
*Christensen/Raynor
Copyright © 2014, Ron Dolin 13
- 14. Innovation ROI and Finance Metrics
(Innovation Killers*)
Discounted Cash Flow, Net Present Value
*Christensen/Kaufman, HBR
Copyright © 2014, Ron Dolin 14
- 15. Fixed and Sunk Costs
“When new technologies or capabilities are
required for future competitiveness,
margining on the past will send you down
the wrong path.”
Finance and strategy “need to be studied
and practiced in an integrated way.”
Copyright © 2014, Ron Dolin 15
- 16. Consider
“...the importance of other indicators such as
market position, brands, intellectual capital, and
long-term competitiveness.”
“One study even showed that senior executives
were routinely willing to sacrifice long-term
shareholder value to meet earnings expectations
or to smooth reported earnings.”
What does a compensation model incentivize?
Copyright © 2014, Ron Dolin 16
- 17. Innovation Process
Independent team, dedicated budget
Discovery-based planning, not stage-gates
Identify assumptions, test early, repeat
Budget must include learning through trial-and-error
Copyright © 2014, Ron Dolin 17
- 18. Conclusion
Copyright © 2014, Ron Dolin
18
“Some of the tools typically used for
financial analysis, and decision making
about investments, distort the value,
importance, and likelihood of success
of investments in innovation. There's a
better way for management teams to
grow their companies. But they will
need the courage to challenge some of
the paradigms of financial analysis and
the willingness to develop alternative
methodologies.”