Taking flight: Launching a technology-enabled client service

 

Key takeaway points

1. Recognise what you are good at – be honest with yourself

2. Ensure you obtain stakeholder buy-in for the new service offering

3. Keep your decision chain short – it can make a huge difference to the pace of the project

4. Give equal importance to the business and technical aspects of the operation

5. Keep the re-engineering of your technology platform in-house – it is more cost-effective

6. Never stop refining your service offering, business model and technology system – there are always marginal gains to be achieved

 

Bott & Co has specialised in personal injury (PI) since it was established in 2001. With revenues of £11.8m from PI and just 75 staff, our revenues per head equate to £157,000; this is sector leading. However, when the Jackson and legal aid reforms started to take shape, we – like the rest of the profession – foresaw the seismic changes in store for the sector.

With almost 85 per cent of our business coming from what would become banned referrals, we recognised that, in order to offset the financial impact of the reforms, we had to diversify into a new business area – one in which we could make good use of our core skills. We set about analysing our core competencies and kept them in mind when looking at new opportunities.

We then sought to match our core ?skills to potential new services we could provide. Some of the considerations in ?that evaluation were:

• to launch another niche and ?scalable business;

• preferably in an emerging market;

• enabling us to become ‘absolute’ specialists – i.e. allowing us to go deep into the offering rather than simply providing a broad service;

• preferably we would already have or be able to acquire the relevant expertise in that area of law;

• the ability to automate business processes through technology or workflows;

• quality of service was paramount; and

• a long term, profitable business model was essential.

In early 2008, we catastrophically attempted to move into the residential conveyancing space. The technology platform was built to handle 1,000 transactions per month. We were spectacularly unsuccessful because of the property market crash and estimate that we lost about £500,000 in total.

However, the evaluation of the decision making and execution processes of that project gave us a real insight on how to do things better next time – a very expensive lesson! We have applied that insight to our latest venture, Bott Aviation, a service that enables consumers to secure compensation from airlines for delayed and cancelled ?flights and for being denied boarding of ?their booked flights.

The new business

When considering a new business sector, it is vital to accurately assess the market in detail, based on strict predefined evaluation criteria. Our criteria included a potentially sizeable market that would justify an investment in technology that would allow us to automate our services and benefit from economies of scale.

Using our existing IT team and its technical, project management and delivery skills was critical. That capability, which ?has been built up over ten years, is as ?much a part of the fabric of our firm as ?any of our lawyers and has been ?integral to our success. It is a part of ?our core competency.

We considered four new service offerings, including legal and non-legal, with all ticking most of the above evaluation criteria. The most promising idea that emerged was an aspect of consumer law based on a European regulation. Coby Benson, one of our solicitors, experienced a flight delay coming back from Israel and was hugely inconvenienced. He researched his rights and discovered that the airline had an obligation to him under European Union Regulation 261/2004 (see box: Airline passenger rights).

 

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Airline passenger rights

EU Regulation 261/2004 was brought in to protect the rights of passengers across Europe and to set out common rules for assistance and compensation applicable to passengers. The view within the EU was that the passengers’ rights were not being properly upheld by airlines.

The key features of the regulation are that it applies to:

• cancelled or delayed flights or passengers denied boarding (such as in the case of overbooking);

• flight departures from an airport in an EU member state;

• flights into an EU member state airport, where the airline is based in an EU country;

• compensation of between €125 and €600 depending on flight distance and length of delay; and

• a statutory defence of ‘extraordinary circumstances’, (such as political ?instability and strikes).

While the regulation was introduced in 2004, it was written with reference to cancelled flights. Between 2005 and 2012, the European Court of Justice came to define a long delay as a cancellation. Significant cases like Christopher Sturgeon and Others v Condor Flugdienst GmbH, Friederike Wallentin-Hermann v Alitalia – Linee Aeree Italiane SpA (C-549/07) and Emeka Nelson and Others v Deutsche Lufthansa AG and TUI Travel plc and Others v Civil Aviation Authority (C?581/10 and C?629/10) helped to shape the law to the ultimate benefit of passengers.

The intention is to create a Europe-wide, unified charter of passenger rights for the benefit of air, rail, sea and coach passengers. Other opportunities may exist for us in future.

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From then on, it took us about a month to work up the business idea for Bott Aviation. We identified the requirement for detailed data around flights so that we could sift out those that might qualify for compensation. We located and exclusively secured a partner, EUclaim in The Netherlands, a European leader in Regulation 261 claims.

The business model is a very difficult one. Each successful claim has a value of between €125 and €600, which makes every claim a ‘small claims’ track case. Even when we bring together groups of passengers and the aggregate value of those claims goes above £5,000, it does not move those claims out of the small claims track. We therefore offer a true ‘no win, no fee’ service, where the client pays us a percentage of the damages we recover, and nothing if we don’t.

Clients paying for legal services in this way are far more aware of the level of service they are getting and expect the service to be of high quality. The business model stacks up if we use our expertise and select, through automation technology, only those cases that will win; if we don’t, then the losses will quickly sink the department. We are currently running at about 97 per cent accuracy.

We have also taken what might be seen as the unusual step of giving away a detailed claim letter to passengers so that they can present their claim to the airline themselves if so wish. If their claim is unsuccessful, they can utilise our services, for which we then charge a fee. It’s a novel approach, but it goes to the core of what we believe, which is to enable consumers to help themselves. They only need to use ?a lawyer as a last resort.

Technology platforms

We are a technology-heavy firm – our PI business is underpinned by technology, which allows us to handle more than 650 cases a month. We have been using the LexisNexis Visualfiles technology, a case and matter management system, for over 12 years and it continues to serve the business well.

With Bott Aviation, we wanted to make sure that the technology we adopted would allow us to offer a modern legal service to discerning consumers, as well as scale to a level that would enable us to maximise business efficiency and profitability.

We had a checklist of things we were looking for in the platform. It had to be a stable and trusted product. We weren’t willing to be an early adopter of a new technology. This is not to say that it is not a route that businesses should take, but we were acutely mindful that the implementation of the Jackson reforms was imminent and we needed to proactively plug a potential financial hole in our business. We ideally needed a system that would minimise the time to deliver on the project and therefore our time to market.

Often, software vendors offer off-the-shelf products which they can tailor to meet individual customer requirements. However, we did not feel it was not possible for a software vendor to develop very detailed workflows and documents to meet our precise requirements.

We stepped back and critically evaluated all of the relevant technology platforms on the market and concluded that our current software remained the best option for us because it allowed us to develop the system ourselves. From experience, we find that keeping skills in-house is the most cost-effective way to customise a solution.

It is easy to forget that a product may be excellent, but it is what you do with it that counts. We developed a detailed project plan that exactly outlined how we would implement and use the technology.

The flight team

The success of the project rollout is, to a large extent, dependent on the buy-in and involvement of all of the stakeholders.

Our core team was led by our IT manager, supported by a senior developer, a legal manager, technical aviation manager, software representatives and a specialist software developer for add-on solutions. All of these positions reported directly to me. We have a short decision chain, which allowed us to quickly act on decisions and change course where necessary.

We have a strong partner in EUclaim, without which taking the business to market would have taken a lot longer and perhaps been a lot harder. It collects millions of pieces of data on flights from around the world and we use that data to assess the viability of each flight. It has been offering air passengers advice and assistance on claiming their rights under Regulation 261/2004 for over six years and has recovered over €10m during this time.

EUclaim was also looking to partner with a UK organisation. The business requirements and commercial approach of our two organisations matched perfectly, with a similar culture and openness to development ideas. Together, we have formed what we believe is the foremost team in this space.

Impact assessment

We started evaluating the business idea for Bott Aviation in November 2012 and, by 25 February 2013, we had launched our service offering. We can’t throw bodies at the business, given the wafer-thin margins in a volume business, and so we resorted to technology to deliver the productivity and efficiency we needed. ?The results speak for themselves.

Within the first 100 days, we recovered over £350,000 in compensation for over 500 air passengers and sent over 4,000 letters of claims to airlines. The Bott Aviation team comprises just five people (two lawyers and three assistants) and currently services about 1,000 new claimants per month. Today, our firm has more aviation clients than PI clients – such is the magic of technology!

We have used our software to embed legal process management into the operation of Bott Aviation – that is the only way to profitability in this business. We invested over £100,000 in setting up this department and are now starting to see the rewards.

We found that airlines fight claims in a similar way to how insurance companies fight PI claims. Making the case for the passenger to the airlines is a hugely complicated process – we have to deal with both the legal and technical aspects of the aviation industry. Consider that a Boeing 747 has millions of parts and, potentially, a flight can be delayed due to a malfunction of many of these parts. Simply triaging and issuing proceedings requires complex documentation which, without technology, would be a manpower-intensive, time consuming, expensive and, most certainly, unprofitable operation.
Our triaging of flight data and legal process management has enabled us to say with almost 95 per cent accuracy whether or not a claim will be successful.

All of this is possible because we have fashioned our software using sophisticated workflows in a way that has automated document production. It enables us to produce court proceedings in a standardised format, while incorporating the claim-specific data required for the case in question within minutes.

 

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Lessons learnt

• There is no place for complacency in today’s market – keep looking for new opportunities

• An in-depth and accurate market assessment is imperative

• Try to develop your own novel routes to clients

• Partnering with the right specialists reduces the time to market

• The steepest learning curve is on the first project

• Iterative and agile evolution is key in the fast-changing legal marketplace

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Benefit of hindsight

Today, our service appeals to consumers with UK jurisdiction claims across Europe. In 2014, we expect to be dealing with more than 50,000 claims; our technology system can scale well beyond this level.

We are constantly re-evaluating, refining and improving our systems and processes to ensure that we continue to derive marginal gains from it. We operate in a dynamic marketplace, so it is crucial that we constantly improve what we do to stay ahead of the competition.

Looking back, our biggest challenge was the tight timescales that we set ourselves to launch the business – literally three months from designing it to finding the best partner to going live.

I can now honestly say that, while our conveyancing business failed because of shocking market conditions, what we learned from that project has helped us with the inception and delivery of this project. In hindsight, it wasn’t a totally futile exercise – the steepest learning curve is on the first project, regardless of whether it succeeds or fails. As Bill Gates said: “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”

Bott Aviation is not our last venture – we are already evaluating other business opportunities using the same methodology to identify and deliver on other ideas.

Paul Hinchliffe is managing partner at UK law firm Bott & Co (www.bottonline.co.uk)