In the face of flat demand for legal services, law firms are searching for ways to differentiate themselves in the market. One obvious route to differentiation is innovation. Consequently, we have seen many law firms announcing innovation initiatives in recent months. Skeptics among us may wonder, exactly how substantive are these announcements? Are they truly viable? Are they mere publicity stunts? But these questions actually miss the point. It does not matter if several firms are unable to realize their innovation ambitions as long as your firm's main competitors are innovating successfully. As the old joke goes, you do not have to outrun an angry bear—you just have to outrun the other people between you and that angry bear.
This article gathers advice designed to maximize your chances of outrunning your competitors through intelligent innovation: innovation that is ambitious, disciplined, and grounded in firm culture. I spoke to knowledge management (KM) leaders of several innovative firms to learn how their departments approach innovation. In each case, they generously shared lessons that will help your firm start or accelerate its intelligent innovation efforts.
To begin with, it is useful to confront what may be the most worrying innovation scenario for law firms: that other firms are making external investments in new technology that will give those firms an enormous competitive advantage. This prospect can be daunting because not all firms are in the position to make significant financial investments in legal technology startups. If your firm prefers not to participate through investment, is all lost? That is a question I asked Lucy Dillon, Chief Knowledge Officer at Reed Smith LLP. She noted that while financial investment is one possible route, her firm prefers to "be more hands-on in helping [startups] develop, helping them shape their product." Legal tech startups sometimes come to market with a "bespoke solution that solves a very specific practice-related problem." However, that one solution may be insufficient to allow that startup to scale its business. This is where close collaboration with a law firm can be mutually beneficial: the startup finds more use cases for its technology and the law firm has an early chance to vet the technology and keep its finger "on the pulse" of technology changes.
In the event your firm is willing to make an investment in a tech startup, Meredith Williams, Chief Knowledge Management Officer at Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, recommends you right-size that investment to the practice or client you are seeking to serve: "If you are looking to jump on the tech bandwagon, but haven't done a pragmatic analysis of the impact of that investment on firm revenue or profit, then you will be in trouble." This financial analysis led Baker Donelson to turn down investment in artificial intelligence (AI) technology for one of their smaller practices in favor of AI for their much bigger healthcare practice. This allowed them to make an appropriately sized investment and gives them the potential of an even bigger return.
If making investments in tech startups is the outside-in approach to innovation, the alternative is the inside-out innovation effort that begins with people inside the firm and then reaches clients. Dillon and her colleagues have recently launched a new innovation initiative at Reed Smith that starts inside. They have two foci for their efforts:
1. What they do internally—how they make sure they are creative and inventive in the ways they deliver services to clients
2. What they do externally—how they work differently with clients
They have bolstered these efforts with robust communication internally and externally. The internal communication involves transparent reporting of progress. It builds support for, and confidence in innovation efforts, thereby increasing the number of people willing to participate. The external communication fundamentally changes the dynamic with clients. For Dillon, the key was "getting the message out to clients that we were open to working differently with clients."
These are great outcomes but they do not happen overnight. So where do you begin? Every KM leader I interviewed concurred with Dillon: "Focus first on problem-solving, then show how what you are doing is innovative." This approach is in stark contrast to the way some are tempted to tackle innovation: find an interesting technology and then see if there is some way you can use it in your firm. That interesting technology is the proverbial "shiny object," highly distracting but not always appropriate for the culture and context of your firm. Scott Rechtschaffen, Shareholder & Chief Knowledge Officer at Littler Mendelson PC, provides very clear advice in this regard: "Before you jump for the shiny object, do you have a credible use case for that innovation? Focus first on the problems worth solving rather than the technology."
But where do you find the problems worth solving? Andrea Alliston, Partner, Knowledge Management at Stikeman Elliott LLP, says it is critical to keep your ear to the ground to be aware of what is going on and what is bubbling just under the surface. Rechtschaffen advises would-be innovators to "find the need." Sometimes this means looking for patterns. For example, when they saw a pattern of repeated requests for assistance, Littler launched a Knowledge Desk staffed by library assistants in the firm's service center. They can be called for anything: pulling a case, locating a 50-state survey, learning how to order new business cards, etc. KM attorneys provide additional support by contacting subject matter experts as necessary. The Knowledge Desk handled 18,000 requests last year. In another instance, Rechtschaffen surveyed clients to identify areas of improvement and later followed up with selected individual interviews. This led to some radical changes in the content, format, and functionality of their well-known employment law resource, The Employer. These clearly are cases of finding and meeting specific firm and client needs.
Once you have identified a problem worth solving, how do you identify the right solution? According to Williams, "Some of the best innovative ideas come from people in the firm." This is especially true for lawyers and staff who interact with clients and really understand what clients want. At Baker Donelson, the firm involves associates in innovation challenges. This allows them to contribute their ideas in a manner that gives those ideas as much weight as those from any other person in the firm—including shareholders.
Sometimes the solution to a problem seems obvious. However, Dillon echoed the old advice: Make haste slowly. In her experience, the first solution you identify may not be the best one. Therefore, she recommends that the innovation team write down each proposed solution and then "unpick it." In knitting parlance, unpicking means taking something apart or undoing the knitting, so you can reuse the yarn in better ways. This forces the team to push harder and go deeper. Only after this further ideation and analysis is the best solution likely to emerge.
The ability to identify the best ideas is critical for a successful innovation program. Scott Reid, Director of Knowledge Management and Practice Innovation at Bryan Cave LLP, has had "innovation" in his title at two different firms and has had the benefit of working in three highly innovative organizations. On the strength of this experience Reid says, "As an innovation director, I don't feel like I need to have the new ideas. I need to be able to recognize a good idea when I see it. I need to see its value and be able to explain its value to the firm." So how do you train yourself to recognize good ideas? Reid believes that you need to do your "10,000 hours" of deliberate practice, as described by Malcolm Gladwell. This practice might involve trying new innovation methodology, staying abreast of cutting-edge technology, tracking changes in the legal industry, and learning more about your firm. All these inputs, he said, "help you get on the path so you are ready to do what needs to be done when the opportunity arises."
Alliston concurs with this. When it comes to innovation, she believes you have to "seize the day" and act on it quickly because "these good ideas don't come around very often." But Alliston warns that you must balance that orientation towards action with a very clear-eyed understanding of whether the idea is likely to work "in your firm's context and culture."
Testing an innovation idea against firm context and culture is best done in a systematic way. Both Alliston and Rechtschaffen recommend that a firm have an agreed framework to help assess potential projects on critical factors that matter most to the firm such as:
- The extent to which the proposed innovation project supports the strategy of the firm
- The project's ROI
- The project's impact on clients and law-firm personnel
For Williams, a key part of vetting a proposed innovation project involves having the "right conversation" with firm management regarding the numbers: to what extent does this innovation project improve revenue or profit margin? She believes that if you cannot demonstrate a credible positive impact on revenue or profit margin, the firm should not proceed with the project.
Once you have won the necessary management support to begin your innovation project, what happens next? As Williams observes, "You can have the best idea in the world, but that is insufficient if you don't have the processes to bring those ideas to fruition." And then you need follow-through. In Williams' experience, "not having the right resources to make it happen can kill you." She suggests considering outsourcing some of the work if you do not have the necessary internal resources. This can be a particularly useful tactic when you need resources (such as additional software development support) that are not dependent on firm-specific expertise.
If the support you need requires legal subject matter experts, you can run into resistance from lawyers who would prefer to allocate their time to billable projects. Baker Donelson addresses this challenge by using their internal Venture Fund to pay firm personnel who invest their time in R&D. Williams reports that this Venture Fund supports 90 to 100 projects each year. Some of these projects are large-scale while others are small. In 2016, they had 116 subject matter experts contributing their innovative ideas with the support of the Venture Fund. This helped ensure they always had the right people around the table, thereby allowing for more complete problem analysis and solution spotting. It also helps isolate the instances where new technology really is necessary to ensure successful innovation.
Once you get to the technology phase, Reid advises that you understand the proposed tool well enough to know what problem it solves, what value it provides, and what resources it will require. When thinking about resources consider both the internal and external needs. Rechtschaffen recounts the story of an innovative online training company his firm created in the 1990s. One of this company's key assets was the ability to provide training via streaming video. However, there was a technological barrier: most potential customers lacked the ability to handle streaming video at that time. Eventually, technology caught up with the firm's ambitions and now that training company is extremely successful.
Having the right team, funding, and technology in place is critical, but do not overlook the vital importance of communication support for your innovation efforts. As an innovation project progresses, be careful to communicate that progress widely. Reid recommends giving firm leadership "summarized in-progress reports that end with an offer to provide a more detailed briefing." in his view, this "executive-level communication is an opportunity to develop powerful project teammates who can offer advice and carry our messages to wider audiences. So ask them to do it."
Similarly, communicate regularly with the lawyers affected by innovation project. In Reid's experience, "lawyers hate surprises but they love being in the know. And, they love the opportunity to give advice (it's their job), so ask for it." Further, don't stop communicating after rollout. Be sure to "report successes (naming the heroes involved) and report updates and new versions." Finally, Reid advises: "Never miss an opportunity to thank someone. Few things are so powerful. We are intrinsically motivated." In short, "communicate with your larger audience from start to finish, and then communicate some more."
With some innovation successes under your belt, consider consolidating your innovation learning and support by building an innovation coalition within your firm. Obvious participants are both innovators and beneficiaries of your firm's innovation efforts. Even if they do not have the bandwidth to get involved in specific innovation projects, rainmakers can be vital members of this innovation coalition. Rechtschaffen has found that some of the biggest supporters of his firm's innovation efforts are its rainmakers "because innovation can help them connect with and keep new clients." This is a critical way in which intelligent innovation can improve the top line.
Along with this innovation coalition will come opportunities to build and expand an innovation culture within your firm. Reid has observed some common features of the three innovative organizations in which he has worked:
- Their leadership's vision includes the need for innovation
- They provide strategic guidance and resources
- They give latitude so you can be creative in your problem solving
- Their attorneys embrace the potential of innovation and are willing to try new things
- The organizational culture genuinely promotes and rewards teamwork
Finally, as you pursue intelligent innovation, look for ways to keep innovation front and center at your firm. This does not mean scaremongering. In Alliston's experience, you cannot "scare people into innovation." For Alliston, the better approach is a positive one: "I think you will be more successful with your initiatives if you make innovation about excelling rather than survival."
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