Originally recorded by LawNext - October, 2021.

Digitory Legal is now BigHand Impact Analytics. Learn more here.

Digitory Founder Catherine Krow chats with Bob Ambrogi on LawNext. During the episode, Catherine discusses how on our combined commitment to driving DEI in the legal industry and mission to bring predictability and transparency to legal billing and pricing is driving mindful staffing with law firms and legal departments.

It's important to keep in mind that data is the start. There always has to be a why behind the numbers and when you have programs in place that are designed not to make anybody look bad, but to get to what the source of the issue is or whether there is an issue, that's a great approach. 

Podcast Transcript:

Catherine Krow
Once you have your diverse pool of talent, are you building the rainmakers of tomorrow? Are you setting up those attrition patterns that have haunted our industry to continue? I want to be part of building the rainmakers, the diverse rainmakers of tomorrow.

Bob Ambrogi
Today on LawNext, six years ago, Catherine Krow left a partnership at Orrick, Herrington & Sutcliffe, one of the world's largest law firms, to start Digitory Legal. A company devoted to bringing predictability and transparency to legal billing and pricing. Last year Digitory Legal was named Disruptor of the Year by Litera’s Changing Lawyer awards. And as we speak today, the company has just been named the recipient of the 2021 Innovation Award by the College of Law Practice Management. Catherine Krow joins me today to share the story of her and her company. We will also talk about a topic she's particularly passionate about, just how billing data can be used to enhance diversity, equity, and inclusion within law firms.

This is Bob Ambrogi and you are listening to LawNext, the podcast that features the innovators and entrepreneurs who are driving what's next in the law. Now on to today's interview.

Catherine, welcome to LawNext.

Catherine Krow
Thank you, Bob, so much for having me. It's a pleasure.

Bob Ambrogi
So honored to have you. You practiced law for 17 years, and you were a partner at one of the world's largest law firms, as I said in the introduction. What was your practice like and what was it that you saw in that practice that inspired you to found Digitory Legal?

Catherine Krow
So I did practice, as you noted, law for a long time. I did complex litigation work at top-tier firms for 17 years. First at Simpson Thatcher in New York, then I was a founding member of their Palo Alto office before I moved to Orick where I was a partner in San Francisco for a long time.

I did litigation and my background in litigation is pretty broad. Commercial litigation, employment cases, internal investigations, patent, trade secrets, and torts, but at heart, I was really a trial lawyer. So after I was seconded to the DA's office for a while, I served as trial counsel for the firm's largest product liability client and tried cases for that client up and down the West Coast before packing it all in to go into legal tech.

Bob Ambrogi
Well, what led you to do that? I mean, was there something that you saw as a result of your law practice that you realized was a problem that perhaps could be addressed through tech?

Catherine Krow
Well, really Digitory is of course about the business of law, but it grew out of my experience of becoming a partner prerecession and having to grow and manage my own book of business and realizing it probably as a result of the recession that the rules of engagement had changed. So, suddenly, great legal work wasn't enough. To be a true trusted advisor to a business means understanding and serving the business's needs and that means scoping and budgeting and data and project management and accruals. So, as a partner, I have to get really good at that stuff, really fast, and that meant writing task-level budgets and mapping bills to categories. It was all very, very manual and painful and hard. So, what Digitory was created to do was help others, law firms, and legal departments, answer that same call to action that was coming from business clients, using a combination of technology and expertise. So, make that all more seamless for them.

Bob Ambrogi 
So I have to ask, at the point that you decided to leave the firm and start a legal tech company. What was it like making that decision?

Catherine Krow 
It was, was I crazy?

Bob Ambrogi 
I didn't say that.

Catherine Krow 
That's a reasonable question. I took a long time to make the decision. I spent a lot of time thinking about what was important to me. What I valued and whether I wanted to continue to try bigger and more cases or start something new. Right around the time I was making that decision, legal operations were starting to come to the fore. It didn't even have a name at that point. If you remember CLOC was a book club for a while before it became the phenomenon it is now.

So, I was seeing the rise of legal operations and really in my own personal life. Making the decision is what I wanted to do for the next 20 years, knowing that I had small kids and that trials meant to travel, but also, I really liked the challenge. I spent a lot of time with introspection before I made the decision. I was fortunate to be working at a firm that allowed me time off to think through it before I made the final call.

Bob Ambrogi
So when you did make the final call and you went off and started Digitory. How clear of a vision did you have of what it was that you wanted that company to be and how long did it take you to or have you yet achieved that vision?

Catherine Krow
Well, I know I wanted to change the conversation around cost. I wanted to take a lot of the unnecessary tension out of the equation, stop the guessing, and create cost transparency. Really the inspiration for where we started, believe it or not, came from a construction project.

A few years earlier we had essentially torn apart our house and started fresh. After going through an experience like that, I came out as one of the few people I knew who still liked my contractor. The reason I still liked my contractor wasn't just because my house turned out well, which it did, and thank you, contractor, you did a great job. But it was because everything was so scoped, that there were no surprises. So, when I would change my mind about the light fixtures, we knew that was on me. We had a price around it, and everybody moved on. And when my contractor made a mistake about how much the plumbing was going to cost, that was on him, and we all knew it.

And so, I really believed that complex legal work could and should be run with the same level of transparency, communications, scoping, and measuring. What I didn't realize, at the time, was that in order to do that, we had to tackle a data problem. A very complex data problem and to use historical data to understand what the price should be and to project manage effectively and highlight areas where talent could better match tasks. So, where I started in my head was really a budgeting solution, and where we got to fairly quickly was that this needed to be a data solution.

Bob Ambrogi
When you say tackling a data problem, I mean it wasn't part of the problem that the data just didn't exist.

Catherine Krow 
It existed. It was just a mess. So, there is data, historical billing data. Law firms were sitting on mountains of historical data. The problem was, the challenge was, the data hygiene. Data hygiene practices within the law and, particularly around billing data, historically have not been particularly rigorous. And that's led to what I used to call data debt. We have a lot of it but in its natural state, it doesn't really tell you anything.

So, I'm going to go back to construction analogies. It was like being able to see the cost of a house, but you couldn't see how many square feet there were, how many bedrooms, how many bathrooms, and somebody had coated all of your plumbing as drywall. If you tried to use that data, not only would it not really tell you what you needed to know, it would lie to you. What we had to do was find a way to mine the data for what we needed to know, even when it was poorly, poorly structured.

Bob Ambrogi
Was that problem in the, I know that there have been kind of universal billing codes in play for a number of years, was the problem partly with those kinds of billing codes that were being used, or was it? Or was the problem with the way the data was being entered and maintained?

Catherine Krow
Yes! So, the billing codes, there are historical billing codes that have been used for a number of years. The challenge with those codes is that they're very high-level. So, let's go back to the not knowing how many bedrooms or bathrooms. You don't know the why behind the numbers. You cannot tell what there are, how many depositions or what kind went into that number. Or how much does claim construction in a patent case cost? There's just no way to see beyond the high-level number. And that had something to do with the codes, something to do with them not being used consistently, and something to do with not enforcing rules around data hygiene, and not having data strategies. All of that is sort of evolving, but the codes haven't changed and so we use our own taxonomy to go beyond what the industry standard codes are, to create actionable insight that provides the pieces that are missing. So that you can really price accurately, one of which being scope.

Bob Ambrogi
So there are all these plumbing issues, I guess with the law firm data, how does Digitory Legal provide a solution to that problem?

Catherine Krow
We leverage the time narratives and transform those opaque legal bills into what we call actionable cost data. For Digitory, that's not a buzzword, it has a very defined meaning. It means data that is task level and well labeled, which gives you that scope piece and allows you to see who did what, insight into resourcing.

So, going back to the depositions. How many plaintiffs’ depositions were there? How many corporate representatives? Who took the lead on which? And there's a visualization to that as well. The second piece of actionable cost data is that it's accurately and consistently coded. It tells you the truth.

We work very hard so that costs land in the same place, every time so that you can rely on the data and the reporting. Then connect it to context, the why behind the numbers. We pull all of that out of the time narratives itself. So, we never rely on what a timekeeper in the field has tagged data as because let's be honest, that's not their core competency.

Bob Ambrogi
Who are your customers? Are they the corporate legal departments or the legal OPS people? Or are they the law firms? Or some combination of both?

Catherine Krow 
It's a combination of both, but we do sell to allied business professionals, in particular, so legal operations, pricing professionals, and project management professionals.

Bob Ambrogi
So, it is actually funny that we're recording this today because we were on a panel discussion earlier today with some legal OPS people talking about this. Particularly about the issue of pricing and pricing transparency. I'm curious how, when you started doing this, and you mentioned legal OPS, I imagine the legal OPS side of the equation got what you were doing pretty quickly. What about on the law firm side? What was the sales process like there?

Catherine Krow
Well, first I had to earn their respect. The respect of pricing professionals who have been dealing with this for some time and building credibility and I'd say that was actually one of my larger challenges. You know, practicing law is one perspective but you aren't selling to lawyers. I had to take the same kind of intense focus that I would devote to dismantling an expert at trial and I put it towards understanding practice management, in all of its nuances and in the perspectives and challenges of all stakeholders, including pricing professionals, relationship officers, folks who are managing talent. So that I could understand what their needs and challenges were and have credibility with them and solve their problems in ways that made sense for them. I’m actually very, very proud of being able to have that credibility when I walk into the room and converse with them with knowledge of some of the sophisticated work that they are doing to complex pricing, portfolio deals, and where data can play a role and how we can solve some of their biggest challenges.

Bob Ambrogi
How does data play a role? I mean, from the corporate legal side, we've heard so much for so long about pushing for alternative fees and yet there seems to be not a lot of progress being made on that front. You might disagree from your perspective, but what are the results for your customers in corporate legal? What does this enable them to achieve in terms of either savings or better budgeting or better pricing?

Catherine Krow
I think the power of data to increase realization and facilitate savings in a variety of ways never ceases to amaze me. From a law firm's perspective, your coding stuff to generic codes wrong is a really excellent way to not get paid and to have problems in your realization rates. But if you can code automatically, map to custom codes, to activity-based AFAS, and communicate earlier around cost changes and scope changes, because the data is there to support it, you're going to increase your realization.

One of the most important things for finance is that they know in advance because they have material change order processes. They understand that things change. What they can't deal with is finding out two months after the fact. So having good data changes the conversation and I've seen it increase realization rates and save millions for law firms. On the corporate side, it’s all about knowledge and knowing where having insight into what is actually being done. It allows corporate legal departments to, for example, say you know what we could put an ALSP in here and rejigger our work and our workflows, or let's rebuild a pricing model from the ground up so that when we're negotiating, we can save ourselves millions of dollars in a capped collard situation.

So, the ultimate ways in which it saves money really kind of boil down to knowledge and that's really what data is about. More informed decisions, more productive conversations, and more accurate pricing. Even in diversity and inclusion, what should the conversation be? Should you be talking about how you staffed trials? Is it a conversation about success planning and pipeline? Just better decision-making.

Bob Ambrogi
I want to get to that diversity issue in a moment, but I want to ask and we're talking about Digitory Legal as a legal tech company. We're talking about data analytics that you do, but you also are a services company, right? Can you explain what you do in that regard?

Catherine Krow
So, data is part of the equation, but it often needs context. We basically phrase it as we're a partnership, not just a platform. Oftentimes allied business professionals are looking at the data and they could use assistance in translating what it means and bridging that gap between the practice of law and the business of law. We help them with that, leveraging the data, but also building programs that have data folded in and this is some of the EID work we do is programmatic. We quickly found the ability to turn data into action. Sometimes you need a partner with you every step of the way to help, particularly for business professionals who have not practiced law, understand some of what the data means, and where the opportunities lie for improvement.

Bob Ambrogi
Just a couple of other things I wanted to ask related to building the company over the years. One is I know that you participated in the MDR lab in 2018, and I think it was. Can you just talk a little bit about what that experience was like and how it helped you, if at all, in building up this company?

Catherine Krow 
I think MDR is probably the best in class, and I don't mean to offend anyone there but it's an incredible program, as a product accelerator for legal tech that is in a very early stage and makes sense for the UK market. And so it is important to think about in any kind of legal tech accelerator program, where you're sitting in the market and in where you're stage is, and whether that market is going to make sense for you. The amount of resources they put into helping you build a product that works for that market is incredible. So, I have incredible things to say about it, but we have decided ultimately not to focus ourselves on the UK market. Largely because it was so that I wouldn't have known that without the incredible support of MDR. You can see some of the amazing companies that have come out of it and that has a lot to do with their commitment and the excellence of their program.

Bob Ambrogi
Yeah, you actually picked up and moved to London for a while, right?

Catherine Krow 
I did, I did. That was a lot.

Bob Ambrogi
Yea. I just wanted to ask about financing the company. How have you financed the company from start-up to here?

Catherine Krow
So we're a little bit different. We started with some self-investment and then moved on to an angel round. We have not gone out for institutional investment, that's been intentional. That may change, but we have a lot of autonomy now and our team is made up of people who could be doing all sorts of other things but do what we do because they love it. So right now, we're angel funded and that's where we're staying for a little bit.

Bob Ambrogi
As I recorded this interview with Catherine Krow, the College of Law Practice Management had just announced the selection of her company Digitory Legal, for its 2021 InnovAction Award, for its partnership with Kaiser Permanente to design a data-driven diversity, equity, and inclusion program among its outside counsel. This is just one example of how Catherine and her company are using billing and spending data to advance DE&I in the legal industry.

Digitory Legal’s primary focus is on bringing predictability and transparency to legal billing and pricing. But the company also has a strong commitment to driving diversity and inclusion in the legal industry. It's been using its analytics to drive DE&I and law firms by helping firms gain insights into whether diverse lawyers are getting the same career-advancing opportunities as non-diverse lawyers. Then, if necessary, to enhance opportunities for diverse lawyers through what my guest Catherine Krow calls mindful staffing. As we return to our conversation, I begin by asking Krow about the relationship between billing data and DE&I.

Well, let's turn to this DE&I issue because it's really interesting and it parted, it's well, I think in totality it's the reason for this innovation award that you've just been awarded through the College of Law Practice Management, part of their InnovAction Award. I know that you're a fellow of the college. Is that what they call them fellows? I guess and I'm one too, I think I don't even know.

Catherine Krow 
Yea, shouldn’t you know that?

Bob Ambrogi 
You know, these titles elude me sometimes. But, and I know you come at this from different directions, but I wonder if you could maybe start by just kind of talking about how there's a relationship at all between data and diversity.

Catherine Krow 
Well, that's a good question because if it wasn't obvious to me when I started Digitory, that this was a place we were going to go. Really what happened is as we started transforming data from a big pile into the buckets it belonged to and seeing who was doing what. In certain instances, patterns would begin to emerge that were troubling and that wasn't visible until we had done our data work. So over time, I started thinking about how data could be used to build programs and data-driven programs, that focused on parity in the allocation of work and bringing to light patterns that may be the result of implicit bias or may not, but certainly questions could be asked. What data can help you do is go beyond the surface into who is doing what and whether there is fairness in the allegation of the resume-building work to diverse associates.

Bob Ambrogi 
And I think there's certainly research out there that suggests that women and people of color, even when they get into the law firm track, and getting into large law firms is perhaps a diversity issue in and of itself. But when they get into the firms they end to leave in higher numbers before they maybe get to the partnership level than white males, I guess in the track. So really what you're talking about here is that retention issue, right? You're not talking about recruitment; you're talking about retention.

Catherine Krow 
That's yes, that's true. Once you have your diverse pool of talent, are you building the rainmakers of tomorrow? Are you setting up those attrition patterns that have haunted our industry to continue and I want to be part of building the rainmakers, the diverse rainmakers of tomorrow.

Bob Ambrogi 
Yeah, and what's interesting is what you're, correct me if I'm wrong but as I understand it, what you're encouraging here is to look not just at what work, not just who's getting work within law firms, but the quality of the work that's being allocated in law firms.

Catherine Krow 
That's exactly right. There are levels of data work, you know, there's looking at the quantity of work. But when you go beyond that because not all work is created equal. There are things that build a resume and that are important to have on your resume in order to be able to develop business and making sure that those opportunities are being fairly allocated, is really important. Because again, not all work is as visible or has as much cachet or builds your skills as a lawyer. And there's good stuff and bad stuff in every or good stuff and less good stuff in every engagement.

Bob Ambrogi 
Yeah, I know I saw, I don't know whether this is been published yet, but it's something you wrote for, I think, for law.com on a step-by-step guide to data-driven DE&I. One of the things you talked about in that article is this concept of mindful staffing. What do you mean by that?

Catherine Krow 
It's really about intentionality. A lot of staffing in law firms, and I want to be clear not all and that this is improving, but there hasn't been a lot of consistency in how work is allocated. Not always is there intentionality around, before I pick up the phone and just call the person I know, have I made a list of what needs to be done? What the career advancing work is? Who I'm going to give those opportunities to? Where the matter management work, for example, is and who is going to fill that role? Taking that breath, and making that list is a huge move forward, to thinking through, have I considered other associates who may not be on my radar? Am I being intentional and mindful about who gets these opportunities and that’s true on the client side too before they pick up the phone? Are there other folks that may not be top of mind, who are equally qualified and deserve an opportunity here as well?

Bob Ambrogi 
As I mentioned, this InnovAction Award is based on a partnership or relationship you had with Kaiser Permanente, in working with their legal department towards pushing diversity goals among their outside counsel. So can you talk a little bit about what that was? And how that worked?

Catherine Krow 
Yeah, I'd be happy to and privileged too, frankly. Building a successful data-driven equity diversity inclusion program, it starts with leadership. We've been really fortunate to work alongside a corporate legal department client in Kaiser, that has a long-term commitment to diversity and equity and a vision to advance it through data optimization. Through this program, we've worked with Kaiser to combine processes and data to provide a deeper understanding of the type and quality of work that diverse lawyers are doing. The program has enabled the client to see where there may be gaps in representation, but also, and I think this is important, to shine a light on firms that are putting their diversity commitments into action. Those firms can be recognized by the client for the good work that they are doing. It's very much a collaborative program, with an approach that starts with partnership and communication between law firms and the client.

Bob Ambrogi 
And does it involve specifically helping them structure their outside counsel guidelines in a way that will ensure that the data reporting, that's coming from outside counsel, provides the information that they need around DE&I?

Catherine Krow 
Well, one of the things that we did with Kaiser, and was published in an article written by Greg Capel and myself, in the ACC Legal OPS newsletter. It was around guidelines and one of the core foundational elements of Kaiser's guidelines was to preview for firms their expectations around diversity and inclusion. I think it's important for companies to set clear expectations if they're going to be considering diversity and inclusion. If they're going to be asking hard questions, they need to let their law firm partners know that in advance. And outside counsel guidelines are a good place to do that because that's your terms and conditions.

Bob Ambrogi 
I think this is just so fascinating because I people, I think the idea of applying data analytics to legal billing and spend management is no longer unique. But this extension of it to DE&I is something I really hadn't heard people talking about before. Before I heard you talking about it. I'm wondering how this concept has been received by law firms or legal departments, as you discuss it with them.

Catherine Krow 
I think it's been received very well. I think there are a lot of, this industry is trying particularly right now, to do the right thing. Having more information and better conversations, particularly in programs that are collaborative in nature is appreciated. It's important to keep in mind that data is the start. There always has to be a why behind the numbers and when you have programs in place that are designed not to make anybody look bad, but to get to what the source of the issue is or whether there is an issue, that's a great approach. I think that our industry and our profession, to their credit, is really ready to take the step forward and the steps forward that they need to look at evidence-based programs.

Bob Ambrogi 
On a different topic related to diversity, I wonder if I can ask you. You are a woman founder in legal tech, an industry which does not have a great reputation for diversity among founders, either diversity either gender diversity or racial diversity. I just wonder, as a woman legal tech founder who has achieved success. Do you have any thoughts or advice for other women who are looking to get into legal tech?

Catherine Krow 
That is a very good question. I don't know if I have particular pearls of wisdom, except to say that the community of female legal tech founders is incredibly supportive. You will find folks tagging you and nominating you and cheering for you. So, know that that is there because it's a tight-knit community and the women in this are a force to be reckoned with and are there, including myself. So really, I've seen women supporting women in ways that just make me very proud to be part of this community.

Bob Ambrogi 
Well, I think that's an important nugget of wisdom. It’s actually one that I've heard not put quite that the same way from other women in legal tech as well. That there is this community that's supportive and valuable to tap into for women starting or working in legal tech.

Catherine Krow 
I believe that is absolutely, absolutely true. A powerful, powerful network.

Bob Ambrogi 
So I wondered since you started this company, this has become another one of those areas of legal tech where the competition is growing and expanding. There are other companies out there in the market that are focused on using, particularly using artificial intelligence, to evaluate billing data to help set pricing, to help monitor billing. So, I wonder given where the market is today, how do you see Digitory fitting into that market?

Catherine Krow 
Well, I do think that there are a number of pricing tools, in particular with reporting, but the value of that reporting depends on the quality of the data and more and more companies and firms are looking to us to improve that data quality and the accuracy and that granularity, that scope piece that's very, very hard to get. To make sure that what they are seeing in reports is valuable and accurate. And that they can answer as many questions as possible. That's where that detail piece comes in. So, we have a strong place in this market and particularly for very, very sophisticated, and I sometimes call them snowflake pricing models, that really take a level of detail and that is very hard to find, in my opinion elsewhere. So, I'm very pleased with where we are and I'm also pleased with where the market is going and that my vision of having better conversations is happening.

Bob Ambrogi 
Yeah, that's a good thing. What about the company itself? What kinds of plans do you have for further developing it, if at all, or for further growth? What's the future look like for Digitory?

Catherine Krow 
Well, we are a little bit in dev mode, so I'm going to be a tiny bit cagier than I usually would with you Bob, because.

Bob Ambrogi 
Well, that's good, that tells me something's coming.

Catherine Krow 
So there's a bit of ‘stay tuned’. We are combining other elements of legal operations into the platform and expanding into more and more practice areas. But my main response is to stay tuned from us, there will be more to say later.

Bob Ambrogi 
This is going to be like waiting for the next Ted Lasso episode to come out.

Catherine Krow 
Oh, no, that's so painful and an excellent analogy. I hope everyone's waiting for that data, the same way I am for Fridays.

Bob Ambrogi 
Well, that's all the questions I have. Anything else that you'd like to say before we wrap up here today?

Catherine Krow 
Just that it is always a pleasure speaking with you, Bob. I've been a fan and a follower of yours for some time. So, it's truly, it really is a privilege and a thrill to be on your podcast.

Bob Ambrogi 
Well, the fanhood is mutual and it's been a privilege and a thrill to have you on my podcast. I really appreciate it. Thanks so much for doing it and hope you stay well, and I will stay tuned for your next episode.

Catherine Krow 
Best to you. Thanks so much, Bob.

Bob Ambrogi 
I've been speaking with Catherine Krow, the founder and CEO of Digitory Legal. Thanks to Catherine for taking the time to be on LawNext. What are your thoughts on today's show? Share them by tweeting us at LawNextPodcast. LawNext is produced, engineered, and edited by Populist Radio. I'm your host, Bob Ambrogi, and I hope you'll join us again next time for another episode of LawNext.