We have many friends that have founded or work in legal technology companies, and we’ve invested in some as well. We were recently on the phone with one of our legal tech founder/CEO friends, and the challenges his company is facing in trying to bring its product to market seem to us to be endemic to much of the industry. In short, we see too many great people focusing on how their products work, rather than on what problems those products solve.
Coincidentally, our friend Rishi Varma, now the General Counsel at Hewlett Packard Enterprise, recently invited David to speak to the go-to-market legal team from HPE’s legal department, during their go-to-market summit. Rishi, in a prior role, was our client at Pangea3. And he and David trained together as young corporate lawyers at Rosenman & Colin (now Katten Muchin Rosenman). It was an opportunity for David to share our views on legal technology with HPE’s lawyers, and to try to cut through some of the legal tech fog that has descended over legal departments and law firms alike, as they try to understand all the legal tech being offered in the marketplace, and as they try to determine if and how technology helps solves the myriad issues facing law departments today. To our delight, we learned as much as we shared.
For starters, we are amazed and impressed that HPE has organized its lawyers based on their relationship with HPE’s clients, and actually thinks of its client-facing lawyers as its legal go-to-market team. That in itself says a great deal about how HPE puts clients first, and about how it views its own products — namely, through the lens of what HPE’s clients are trying to accomplish by using HPE’s products and services.
This also means that HPE, like so many other legal departments today, is keenly aware of — and scrutinizes — the ways in which vendors interact with it as a buyer. And in that regard, vendors can learn a lot by understanding how legal departments view vendor go-to-market strategies.
First, we all had a good laugh at the idea that machines and robots were going to replace lawyers anytime soon — despite all the market hype around AI, robot lawyers, natural language processing, and the like. As far as that hype goes, to paraphrase Shakespeare, the sellers of legal tech doth protest too much.
Second, and more important, there was considerable confusion around how to even evaluate many of the technology offerings being pitched to legal departments, with a particular concern that developers of those tools spend all their time pitching “solutions,” but not thinking very much about problems — namely, the problems faced by legal departments, and how those tools might solve those problems.
Think What; Not How.
As we talked, we encouraged the HPE lawyers to think What, not How — and only later to think how. To explain, most of the conversation around technology, innovation, transformation — and other words that have all but lost their meaning — is about how: How a particular tool accomplishes a narrow task; how its algorithms work, how it extracts data, how it analyses litigation; how users interface with products, etc. But the critical discussion, and a precondition to even considering how a tool works, is about what: What problem within the legal department is a given tool solving, what value is that tool providing to in-house lawyers, and what highly desirable outcome results from use of the tool?
In short, by focusing extensively, and often exclusively, on how their products work, legal technology providers are missing the first step of understanding prospective buyers’ challenges. This is perhaps the single most important challenge facing legal tech providers as they try to bring their products to market in an increasingly crowded market, to increasingly skeptical prospective clients.
The research bears this out. Baretz+Brunelle, a marketing and communications firm with strong ties to the legal community, recently released a research report about go-to-market activity in the legal tech world. In the most jarring of the survey’s finding, 97% of respondents said that legal tech players don’t have a firm grasp of go-to-market strategy. In the words of the report itself: “97 percent of respondents felt that the legal tech industry has no firm grasp of go-to-market strategy, or, at best, has a scattered one. The survey’s additional results underscore this point: They demonstrate great confusion within legal tech firms on three central components of any go-to-market strategy — what to sell, how to sell it and whom to sell it to.”
Baretz+Brunelle asked for our views on the report, and David’s response was that legal tech providers need to understand their value proposition (that is, what problem are they solving) and focus on those prospects whose problems are best solved using those products.
The full report, with David’s comments, can be found here.
Our discussion with HPE made clear that there are a discrete number of high-level challenges facing most legal departments. And third-party research confirms this. According to a recent survey by HBR Consulting, the top challenges facing legal departments are:
- Cost Control/Management
- Regulatory Environment
- Legal Risk Management
- Demonstrating Legal Department Value
Interestingly, according to the HBR Survey, top methods for handling increased legal demand are:
- Increasing Use of Current Technology (emphasis ours)
- Redistributing Work to Appropriate Resources
- Automating Routine Tasks
- Reengineering Work Processes
Put simply, legal departments need to control costs, understand and manage risk, and continually demonstrate their own value, and need to do so in an environment that is growing in complexity (both business and legal complexity). Each of these challenges is the WHAT in “what problem are you trying to solve?”
Most relevant for our friends developing and providing of new technologies for legal departments, the methods of handling the increased demands are a roadmap for how legal departments are today trying to do to address those challenges. Those vendors that can help legal departments better solve those problems in the future will ultimately win their business, replacing one or more of the current top methods.
For example, many law firms and GCs both struggle with a tension around alternative fee arrangements (AFAs). Law firms can’t get their heads around the risk associated with a fixed fee that could be substantially lower than what they believe they should be paid if they incur more hours, and GCs can’t get comfortable that the fixed fee arrangement is not creating a windfall for the law firm with a fixed fee that may be higher than what they would have seen with traditional hourly billing. A product that could analyze data associated with historic matters, break the matters down into objective components, and correlate those components with fees and outcomes could be a valuable solution to a real problem.
Finally, we encouraged HPE’s lawyers to require an explanation of the results of using a given new technology, measured against department goals and demands, and to not accept descriptions of how a new technology works as a substitute for the results of using that technology. As entrepreneurs who’ve been through the sales and hype cycle ourselves (in our case, with LPO), we encourage the providers to do the same: instead of saying how, say what!
David is on HBR Consulting’s Advisory Board.
David Perla and Sanjay Kamlani are co-founders and managing directors of 1991 Group.