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Relationships, while important in all industries, truly form the core of the legal industry. Think of relationships in the broadest sense possible: obviously between individuals, but also between service providers and firms, counsel and local counsel, firms and legal departments, legal departments and their internal clients, and companies and government agencies. The list is virtually endless, and technology can be used to facilitate, structure, and even automate any number of these relationships. But using technology successfully requires an understanding of the structure of those relationships and how they can operate most efficiently. To do that, it helps to take a cue from the manufacturing industry, which historically has had dramatic success in identifying and automating relationships between various industry players, and where competitive forces have blurred the boundaries between corporations, suppliers, customers and other business partners. The supply-chain framework is central to manufacturing, where corporations engineer a network of upstream and downstream partners, and then seek to collaborate as seamlessly as possible with each of them. Suppliers of legal services can realize similar benefits by applying a framework to the delivery of their services, a framework we will call “the law value chain.” EXTERNAL SUPPLY AND DEMAND From the perspective of any given company, there are six primary external drivers of demand for legal services: • Peer organizations (competitors, vendors, alliance partners, prospective acquirers and acquisition targets, etc.) form a network of exchanges and relationships that create ongoing demand for legal services. • Financial institutions and investors create an entire spectrum of transactions usually facilitated by legal services. • Government bodies create and enforce the framework of law and regulations that governs all companies, translating into demand for legal services for purposes of compliance, influencing the law, and other means. • Employees and their relationship with the company also cause the company to require legal services. • A company’s customers — individuals and business customers — and their relationship to the company generate a broad spectrum of demand for legal services. • Outside parties generate demand for legal services with frequency. Often, the relationship between these outside parties and a company arises solely from a claim or threatened claim brought by or against the outside party. At the opposite end, the supply network in the legal industry begins with law schools, whose graduates constitute the raw materials of the law value chain. Experienced lawyers from other third-party law firms, local-counsel, and even support services (legal research services, litigation support, electronic discovery, legal marketing organizations, etc.) also constitute key supply sources. Finally, law firms as well as legal departments can explore their relationships with the foundation elements of the law value chain: courts, governments and the law itself. Can the exchange of documents with courts and government agencies be automated? Can electronic access to online legal codes and regulatory guidelines be incorporated into a firm’s knowledge base? LAW FIRM PERSPECTIVE With increasing competition and the emerging buyer’s market for legal services, firms are examining the content, quality and format of the way they produce and deliver legal services, as well as supporting administrative functions (business development and marketing, for example). By using the law value chain to evaluate major processes, firms can gain and strengthen their competitive advantage. For example, one of our clients was able to apply a technology solution to dramatically decrease the time and documentation previously required to execute a complex financial transaction. This put the firm in a position where it could agree to a client request to charge fixed fees for the transaction. In this example, a corporation approached its investment bank to create a specialized security to help the corporation manage financial risk. The securities trading group in the investment bank then designed a structured note to fulfill the corporation’s needs. This resulted in a manual exchange of documents among several disparate parties by overnight mail and e-mail — an obvious time bottleneck with no corresponding increase in quality. An application of technology to this exchange of “legal value” dramatically transformed the process and increased its efficiency. • The manual system was transitioned to a secure Web-based extranet that presented complex, transactional information and automated workflow of the documents among the various parties and advisors for each transaction. • Rather than exchange documents, the bank sent the proposal to its law firm using a pre-formatted online checklist. • The law firm then completed another online checklist to approve the creation of the security, which in turn was routed via extranet to the investment bank’s legal department for review. • Upon review and approval, the bank’s legal department completed another online form, including a secure online signature, requesting final execution and creation of the security. • The firm’s securities lawyers then processed a final checklist, notifying the appropriate agencies, the investment bank and the corporation. Hence, a single application connected the customer, corporate legal department and outside counsel in the processes of requesting, producing, delivering, receiving and storing legal value. LEGAL DEPARTMENT PERSPECTIVE Driven by increasing pressure to minimize costs and streamline internal processes, legal departments can use the law value chain to closely examine operations and relationships with internal and external stakeholders and guide their technology choices by determining which of these many processes can be automated through technology, and where that automation will have the most positive impact. A helpful example is the development of a proactive legal communication program related to hiring practices that ties together “supply” (hiring laws and relevant regulatory and government agencies) and “demand” (hiring managers, the human resources department and potential employees). By ensuring proactive monitoring of online government agency bulletins and databases, and integrating this information with its own hiring and interview policies, legal departments can push information out to the human resources department along with everyone in the corporation identified as a hiring manager. Depending on the value assigned to hiring practices, various technologies can be deployed to support this effort. • A simple intranet or electronic bulletin to provide basic communication on the issue to managers; • A fully-integrated knowledge management/e-learning system to push training to managers and monitor understanding and compliance; • A secure communication channel to communicate urgent policy changes to hiring managers. REDEFINING ‘BUSINESS AS USUAL’ How can an organization begin to realize the benefits of a value chain approach? It begins by understanding how the law value chain applies to the organization. • Identify the value processes within the organization, and the upstream and downstream organizations and entities — “suppliers” and “demanders” — with which it interacts. • Chart these processes and entities. • Determine the highest value processes and areas for improvement. • Create a vision for how these will work for the organization in the future. • Contemplate how technology can streamline or automate these processes. Examine ways in which a single technology — secure extranet, for example — can impact several links in the value chain. • Finally, invest resources in solutions that enable this vision. The obvious goal is improved profits and direct return on this investment. John Fish is president and CEO of Chicago-based Hubbard One, a technology solutions company that exclusively services the legal industry.

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