Client are looking for better value, not for the lowest price.
After more than two years of writing, my new book was finally published on 1 April 2019. Data & Dialogue, a relationship redefined is now worldwide available on amazon.com and all local amazon sites. In the first 30 minutes over 100 copies were sold. This is going to be big!
The book explores the relationship between companies and the law firms they use. It explains in great depth the inner working on each side, in order to help clients better understand what drives lawyers and lawyers what drives the client. As you may know, I have written the book together with Vincent Cordo, who is a highly experienced Legal Operations Executive and is widely considered one of the thought leaders in his field. One could say that no-one knows better what clients are looking for than he does.
During the process of writing the book, I have had conversations with many of the world’s leading GC’s and with some of the CEO’s that employ them. I have spoken with the managing partners of the elite law firms, the Big-4, litigation funders, legal tech providers, leading academics and more. Writing this book, we have had input from all those who are at the very frontier of development of the legal industry. Thanks to all these insights, the book contains an unparalleled amount of knowledge to share.
Towards a data supported relationship
Data & Dialogue, a relationship redefined, shares in detail what is going on right now at a leading group of multinational companies that have bundled forces to develop and share best practices and time-keeper-data in order to better manage their relationships with external law firms. Those of you that are not familiar with these developments will be blown away by what has already been achieved. Have you ever heard of SALI (page 113 – 115 of the book), the inter-company working group to define uniform matter coding/classification for the legal industry? Once the uniform classification standard has been agreed, there will virtually be no limit to the amount of data that can be used for analysis as companies can easily share the scrubbed data. More data means higher reliability. The industry is moving towards data supported relationships at a pace faster than most law firms are expecting.
Data analysis will not only provide valuable insights to companies on where and how they are spending money on legal issues (Quarterly Business Reports, page 102 and onward), it will also enable companies to define benchmarks and identify inefficiencies in the value chain. As I have explained in earlier articles, clients are not per se looking to pay less. They are looking to receive better value. Better value does not automatically mean a lower price. Both high and low price can equally represent good and bad value. The relationship is explained by means of the TGO Value Matrix© (chapter 4 of the book). Supported by data analytics clients will demand lower prices for those parts of the value chain that deliver low added value (production) and will be prepared to pay more for those parts of the process that have clear added value (creation). Time-based-billing will prove to be unsuitable for this situation as there is no objective relation between value and time. More time does not mean more value, as is also true the other way around.
Clients demand better value, not a lower rate
Discussing this with law firm leaders I am often met by a lot of frustration. Many lawyers are convinced that clients are only looking for the lowest price. Lawyers are often frustrated that besides price nothing seems to matter. Mention ‘procurement’ and some start foaming from the mouth. A great number of lawyers is convinced that quality and service do not matter anymore to their clients.
The surprising reality however is that a significant majority of clients is not looking for the lowest price. The graph shows a ‘balanced scorecard’ as it is used today by many clients. As you can see in this example there are 15 criteria that taken into consideration in deciding which law firm will be awarded the matter. You will notice that only 2 out of the 15 criteria are price-related. Each of the criteria gets a weighting factor. As the example shows both ‘overall pricing value’ and ‘strategic approach’ get the highest factor. Price obviously is important, but overall value is what counts. As explained: price and value are not the same thing.
When I show this graph to lawyers, they agree that it makes total sense. It would be reckless for a client to just go for the lowest price. Actually, this is what we all do in our daily life. Which person would always buy the cheapest product, take the cheapest airline, wear the cheapest clothes and so on? From a rational functional point of view a low-cost airline will get you from A to B just like a premium airline will. Both are equally safe. But still the majority of travelers would prefer to pay more for the extra service, the more generous luggage allowance and the more convenient time slots of a premium airline. For them the higher price represents a better value. Also in our personal life value and price are not the same.
The book Data & Dialogue, a relationship redefined is available on amazon.com – amazon.de – amazon.fr – amazon.es – amazon.it and on amazon.co.jp. The book has 300 pages. Prices vary per market form GBP 25 to USD 29 and JPY 3,472. Buy your copy and let me know what you think. There is an inspiring future with great opportunities ahead of us!