In-House Counsel

If A Tree Falls in Biglaw, And No One Hears It, Does It Make A Sound? Meet Firoz Dattu!

According to Dattu, by sharing performance information with general counsel, firms are more likely to be paid for their innovations.

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Firoz Dattu

Consider a legal equivalent of the classic Zen koan, “If a tree falls in a forest and no one is around to hear it, does it make a sound?”

Imagine, if you will, the “Super-Firm” . . . confidently leveraging all the advantages of this alt.legal age of wonder for their star litigation client.

This firm has done their alt.legal homework (on their own dime) and is doing everything right by their client: they use predictive coding to reduce data; they train lawyers to be better business advisers (not just legal); they offshore document review; they found a better way to capture and incorporate client feedback; and they use historical data to price flat fees.

Each implemented innovation dramatically improves work quality, client service, and responsiveness, while simultaneously reducing the hours billed to the client and the total cost of representation.  But then what . . . ?

Because we are still dreaming, wouldn’t it be amazing if that lucky client commissioned a Times Square billboard proclaiming: “MY LAW FIRM IS FAR BETTER AT CLIENT SERVICE THAN YOURS,” or if an authoritative source like Consumer Reports wrote an article proclaiming the Super-Firm the “best and most efficient at litigation.” Then, like magic, the Super-Firm would see new clients pouring in the doors, revenues and profits up, and their mere-mortal competitors rushing to mimic their efficient ways.

Unfortunately, it’s time to awake from our collective dream, and come back to our bleak reality. While this Super-Firm did all it could to make the client experience exceptional, the total benefit is, most likely, a fleeting dopamine rush experienced as client’s general counsel says “nice work!”

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Now maybe, just maybe, that client will offer to serve as a reference for one prospective client — marginally increasing the odds of picking up a single new engagement. DEFINITELY worth the reduction in revenue, to our Super-firm friends, . . . right?!

So what does all of this mean? It means the transmission mechanism of market information in legal — which should send clients in droves to the best (most innovative) law firms — is fundamentally broken. Tree falls, no one hears. Innovation moves at the speed of the information flow (slowly). So is anyone working to change that?

Meet, Firoz Dattu, who works hard every day to fix the legal industry’s transmission problem — to make sure the most innovative law firms get the respect (and business) they deserve for their efforts.

Like many of our subjects in alt.legal (yes, I refer to them as subjects), Firoz is a Harvard Law grad.  He’s also a Paul, Weiss alum and the founder of AdvanceLaw.

Firoz is a true alt.legal maven, who entered the alternative business of law as a young lawyer, and before it was cool.  Now he can boast true expertise in all things alt.legal, having clocked more than double Gladwell’s 10,000 hours of deliberate practice (though hopefully not at Biglaw’s classic 2,400 hours a year).

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We’ve all been following AdvanceLaw’s GC Experiment and Open Letter From 25 GCs, and we look forward to the exciting results to be revealed in 2018, but that is a side project for them.  I wanted to learn what they actually do, and I was impressed.

Through AdvanceLaw, Firoz has advanced the one innovation that will strengthen innovation in the whole legal system: clear, unbiased, non-anecdotal information flow. And he’s done that through attracting a panel of some of the most high-powered general counsel in the world (a feat in and of itself).

Enjoy the great interview below! 

Joe Borstein: Firoz, despite your Harvard law and Paul, Weiss pedigree, you were an early mover in what we call alt.legal business.  Tell our audience why you decided to leave the traditional legal track and focus on the business of law.

Firoz Dattu: I suppose there were early signs I would try to tinker with the legal market rather than practice law.  While in law school, I was a teaching fellow in the economics department, and spent quite a lot of time thinking about what makes markets work, including the legal services market.  More time than I spent studying law, though perhaps that wasn’t a really high bar.

After a couple years at Paul, Weiss, I left to help launch an organization called the General Counsel Roundtable.  That was 1998; it was cutting edge at the time.  We were learning from and advising hundreds of general counsel on how to manage their departments and to work more productively with their law firms.  The whole point was to challenge conventional wisdom — to show people a better way.  We talked a lot about the legal market.

Malcom Gladwell writes about a 10,000-hour rule to become an expert.  Most of my peers spent their 10,000 hours practicing law, but I spent my 10,000 hours — I guess closer to 25,000 — talking and working with GCs and their teams to figure out how to improve inside-outside counsel relationships.   And that was the springboard for AdvanceLaw.

JB: In a nutshell, what is AdvanceLaw, and why did you decide to build it?

FD: In all those hours talking to GCs about law firm relationships it became clear that the problem wasn’t the firms, and it wasn’t the clients.  The problem is that we have an awful market because performance information doesn’t flow.  I was struck one day at a meeting we were holding with about 30 large company GCs.  During breaks, the GCs would be huddled over the cheese and crackers asking each other, “Hey, do you know a good ERISA lawyer?  Do you know a great consumer class action lawyer in Michigan?”  And I’m listening to this, still pondering how markets work — and thinking, this is so broken.  Can you imagine a bunch of CIOs huddling over the Swiss cheese saying, “Hey, do you know anyone who does a good job of cloud-based hosting?  Do you know someone who can do an IT security audit?”  No way — they have better market information.

AdvanceLaw is a group of nearly 200 GCs who have said this market doesn’t really work — might we have a different one please?  Working with the GCs, we find innovative firms that can deliver on quality and efficiency, and then use controls to ensure top performance.  The most important control is that the law firms know performance assessments are being collected, and the firms and lawyers who earn strong feedback get more work.  Do well for McDonald’s and Honeywell, and you’re positioned to get more work not just from them, but also from Panasonic, Nike, Mastercard, and others.  This market incentive to over-perform gives GCs assurance when retaining counsel through AdvanceLaw.  Without that assurance, GCs are sometimes forced to stick with incumbents even when they make a mistake or aren’t efficient — the devil you know versus the devil you don’t.  We need a much better market.

JB: That seems like part of something we have discussed this with many alt.legal CEOs and leaders — we call it the “Legal Innovation Paradox.”  Efficiency gains at law firms net lower profit.  We at alt.legal believe strongly that the holy grail of legal tech and innovation is a solution to this paradox.  What are your thoughts on this problem?

FD: It’s a huge problem.  Imagine if Volvo made 100 of the world’s best new electric vehicles.  Beautiful, 1,000-mile range, affordable.  But the only people who ever knew about them were the first 100 buyers.  For everyone else it’s just a rumor that maybe Volvo made some sort of new thing.  That sounds crazy — but that’s the legal market.  Performance information doesn’t circulate, and it hurts the most deserving firms.  Think about the disincentive to innovation: if a law firm does something new and great, they really kill it for the client — who knows about it?  That one client.  Usually that’s it.  There’s no good mechanism for clients to share this kind of information.  So a loss leader for a client becomes just a loss.

This is a key reason for what we’re doing.  By sharing performance information, firms are more likely to be paid for their innovations.  If a law firm or another provider creates an innovation that works, it shows up in the form of consistently strong feedback and translates into new business from hundreds of clients.  Conversely, innovations that sound good on paper but don’t deliver, aren’t rewarded.  So you won’t be surprised to hear me say that you can’t fix the Legal Innovation Paradox without fixing the legal market.

I think it’s important for all of us to stop, and think about what truly holds back innovation.  I suspect it’s not a lack of good ideas or enterprising people, it’s a market that won’t support innovation.  By way of analogy, think for a moment about all the product improvements that it’s probably not worth making but for a market channel like Amazon.  By creating a well-functioning market — one that provides extra revenue to superior products — Bezos created something where innovation pays.  We’re helping the legal market get there.

JB: You wrote that law firm pedigree may be a thing of the past, can you explain that to our audience?

FD: Even sophisticated consumers rely on proxies for quality.  It’s unavoidable.  The most obvious in the legal industry is law firm reputation.  This has clear limitations.  For instance law firms have inconsistent quality — some lawyers are better than others.  Also, legal advice is now more bite sized, real-time, less academic, more grounded in business.  In other words, pedigree was earned under a different system, engineered to deliver a different type of service to what’s expected now.  Clients know that firm pedigree is a poor proxy for service quality, but they often lack a better indicator.  But what if clients have actual performance information about a lawyer or service provider — that’s much more valuable than reputation, which is basically hearsay on glossy paper.  Reputation won’t be pre-eminent for much longer, in part because we rate everything now.  Hotels, schools, doctors.  It makes sense.  This is what Sue Miller, the GC of a $6 billion multinational was getting at in the quote on our website: “The standard should change from you don’t get fired for hiring a white shoe firm, to you don’t get fired for using AdvanceLaw.”  It’s a way of saying, we as GCs shouldn’t rely on pedigree, we should rely on something more powerful, which is actual performance.

JB: AdvanceLaw is “led by 180 general counsel,” including GCs from monster companies like Google, Sony, and Unilever.  How did you pull off getting these industry giants involved (our aspiring alt.legal entrepreneurs should be taking notes!)?

FD: I was lucky.  From my prior role at the General Counsel Roundtable, I developed great relationships with hundreds of GCs, spending all day, every day, talking about their management challenges.  So I had a rolodex of thought partner GCs.  Twenty of them were early advisors and launched AdvanceLaw with me.  I think that’s the main lesson — we didn’t launch AdvanceLaw by ourselves and then sell it to GCs.  We launched it with the GCs.  Related, we didn’t simply create AdvanceLaw to give clients better or more efficient service.  That’s an ingredient, but the GCs who join AdvanceLaw also have a passion to influence the market and make it more fair — where law firms and lawyers who “get it” gain traction and market share.  So adding GCs has been comparatively easy because we’re doing something that feels good to them.

There are other drivers too.  GCs are leaders in the profession, and want to support it.  They care about diversity, pro bono, better development of associates, and other things.  I still remember a conversation I had with Laura Stein, Clorox’s GC, when we launched AdvanceLaw.  She talked about encouraging and rewarding firms with profession-friendly practices — firms with good cultures, where collaboration and inclusion were supported.  And this was nine years back, in the heart of the recession, when companies were laser-focused on efficiency.  Even then, she and so many of the GCs who launched AdvanceLaw were focused on the big picture.  To this day, when we bring a GC into the group, we have to see that there’s a philosophical fit.  GCs who want to make the market better, and make the profession more exciting and rewarding for lawyers and firms that get it.

My view, for what it’s worth, is that a lot of innovators and entrepreneurs focus on creating a better mouse trap, but they may not focus enough on enfranchising and motivating early adopters and clients. I think the innovations that thrive tend to focus on passion and loyalty.  Something folks can rally around.

JB: In an article you wrote for Harvard Business Review, you noted that one general counsel violated the legal version of the maxim “you never get fired for hiring IBM.”  He said, “I would absolutely fire anyone on my team who hired Cravath.”  Explain to our audience the significance of that bold statement for the future of legal. 

FD: It’s a sentiment many GCs feel.  I don’t want to dismiss Cravath and the like — they are where they are for a reason, and they should be proud about what they’ve achieved.  But overall, things change, and when you look at what clients want from a law firm over the past 20 or 30 years, it’s changed dramatically.  How well are the big incumbents in any industry doing 50 years after they made it big?  Usually their brands are gone even if their legacy lives on somehow.  Law has been so different — our brands are strong because they’re 50 years old.

That’s changing as we speak, and that change is going to be really hard on the industry.  To think law is immune is shortsighted.  In fact, a firm like Skadden is viewed as an incumbent, but as Malcom Gladwell also notes, they were once the challenger.  Change happens, and the theme is that it happens when something looks stronger than it is.  We think incumbent firms will be very strong until they aren’t — the end will come slowly, and then all at once.

By way of example, one of our GCs just sent a very large M&A transaction — of the size a firm like Cravath or Skadden would be really happy with — through AdvanceLaw, ultimately going with a strong but less well known firm.  He said, “I’m done with how we’ve always played this game.  We don’t have to anymore.”  This is the new normal.  Those are the kinds of people who have built AdvanceLaw, and we know there are more out there.

JB: Thanks so much Firoz, really interesting stuff!

Joe Borstein Joseph BorsteinJoe Borstein is a Global Director withThomson Reuters Legal Managed Services, delivering Pangea3 award-winning legal outsourcing services and employing over 1800 full-time legal, compliance, and technology professionals across the globe. He and his co-author Ed Sohn each spent over half a decade as associates in BigLaw and were classmates at Penn Law. (The views expressed in their columns are their own.)

Joe manages a global team dedicated to counseling law firm and corporate clients on how to best leverage Thomson Reuters legal professionals to improve legal results, cut costs, raise profits, and have a social life. He is a frequent speaker on global trends in the legal industry and, specifically, how law firms are leveraging those trends to become more profitable. If you are interested in entrepreneurship and the delivery of legal services, please reach out to Joe directly atjoe.borstein@tr.com.

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