Here’s why your firm can’t afford to not invest in new technology.
When it comes to digitizing your professional services firm, it’s easy to feel apprehensive. If you’ve been doing things the pen-and-paper way for most of your career, the prospect of switching to a cloud-based digital solution can be daunting. How do you know the software will do what you need it to do? How do you know it won’t cause more headaches than it’s worth?
But this fear of change can easily obscure something important: The many benefits of digitization. Emerging technologies can help your firm to save time, cut costs, increase productivity, and gain a better understanding of where there could be bottlenecks in your practice. Digitization can also drive top-line revenue by enabling your team to manage more client files in less time.
Plus, investing in digital technologies can make your firm more resilient to industry headwinds – and ultimately more valuable. (Case in point: When COVID-19 first hit, firms that had already adopted digital technologies were ready to switch to work-from-home policies immediately, while less tech-savvy competitors were caught flat-footed.)
If you’re delaying investing in new technology, your firm is missing out on the many ways that digital solutions can streamline your practice and help you boost your profits. Quite simply, it costs you something to maintain the status quo. And if you’re making decisions about digitization without considering the cost of doing nothing, then you’re not looking at the full picture. Here are just some of the ways that looking only at actual costs, and not opportunity costs, is holding you back.
Quite simply, opportunity cost refers to the potential monetary and non-monetary benefits you give up when you choose one option instead of another. It’s about what you lose – what it costs you – to pursue one opportunity instead of another. Opportunity cost comes about because you only have limited time, energy, and money to pursue new opportunities.
Every choice you make involves an opportunity cost. Hiring one candidate instead of another means you miss out on the other candidate’s unique skill-set. Offering one service package instead of another means you’re pursuing one type of client at the expense of another market for your work. In essence, every choice you make involves a trade-off of some kind.
For example, say you’re at a restaurant with a client and you’re having trouble deciding whether to order the chicken or the fish. If you order the fish, you can’t order the chicken, and vice versa. While the chicken may satisfy you, making the choice to order the chicken comes with the opportunity cost of not getting to taste the fish.
In a more professional context, opportunity cost could look like only being able to take on so many clients, and having to choose which clients you do and don’t work with.
If you land a $100,000/year contract with Company A, but it results in your team maxing out their capacity for work, then that means you can’t take on the $200,000/year contract with Company B, even if that contract would have involved the same amount of work as the other contract.
In this situation, your opportunity cost is $100,000/year – because your decision to work with Company A instead of Company B is costing you $100,000/year in lost potential revenue.
To identify your opportunity cost in any given situation, all you need to do is ask the question: “What are we giving up – what price are we paying – by choosing X instead of Y?”
In the case of adopting new technology, there are several opportunity costs involved if you choose to stay with your status quo. Here are just some of the ways that not making a choice to adopt new technology…is the same thing as choosing to shoot yourself in the foot.
Like it or not, clients generally expect their professional advisors to be tech-savvy. According to Themis Solutions’ 2020 Legal Trends Report, 69% of consumers want to share documents electronically instead of using print copies, while 56% of clients want to talk with their lawyers via videoconference instead of over the phone.
Clients have become more accustomed to a digital way of doing things since the start of the COVID-19 pandemic. They don’t want to drive to an office or sign hardcopy documents to put in the mail. They want to meet virtually, sign documents digitally, and handle matters online.
Like it or not, your current and potential new clients expect you to be on board with digital solutions. If your firm isn’t adopting new technology, you’re losing the opportunity to demonstrate to your clients that you’re a forward-thinking firm that can meet the challenges of operating in the real world. Instead, you run the risk of your clients seeing you as behind the times, as out-of-touch.
In this example, the opportunity cost of failing to adopt new technology is that you lose the opportunity to show clients that you’re on the ball. You’re also putting yourself at risk of losing clients to more digitally-savvy competitors.
One of the most significant opportunity costs in remaining with the status quo is the new business you lose to competing tech savvy firms. Emerging technology is making it easier for forward-thinking firms to boost productivity, cut costs, and do more with fewer resources.
Those are the kinds of results your competitors are seeing by adopting new technology. If your firm is still doing things the pen-and-paper way, you’re letting your competitors catch you flat-footed. Failing to adopt new technology means you’ll lose out on the opportunity to stay competitive in a changing market.
Put another way, the opportunity cost of maintaining the status quo is that your firm is less competitive.
Emerging technology has made it possible for you and your team to accomplish more work in less time. Case in point: RDM Lawyers, LLP. When RDM Lawyers started digitizing their practice, they suddenly found they could execute 2X more incorporations than before – and accomplish tasks in 75% less time.
Whether it’s AI-powered document creation, cloud-based records management, or something else entirely, emerging technology is enabling your team to offload the tedious and repetitive tasks that take up the bulk of their time to instead focus on the matter-specific (and high-value to the client) work they love.
Prime example: If you’re still updating your minute books by hand, you’re spending more time than is necessary manually checking for errors and cross-referencing items. Instead, if you were to adopt automated minute book software, your team could spend less time managing your records and more time on matter-specific or value-added work. By maintaining pen-and-paper minute books, you’re missing out on the opportunity to increase your revenue.
Regardless of how you may feel about new technology, the decision to not adopt new solutions is still a decision – and just like all decisions, it comes with an opportunity cost. While you’ll never escape all opportunity costs, you can choose which opportunity costs you pay – and what you get in return. The key to managing your opportunity costs is to always ask, “what are we giving up by choosing X instead of Y?”
Is your firm still managing records the pen-and-paper way? What opportunities are you giving up by not digitizing?
Use our comprehensive digital transformation checklist to see if it’s time for your firm to digitize.
Engaging insights and the latest news, designed for legal professionals.