“Innovation is in our DNA.”
In the face of unprecedented disruption and heightened competition, traditional law firms are desperate to be, or at least be perceived to be, innovative.
And so they should.
Innovation can be a point of difference, justify higher fees, increase profitability, create barriers to switching, and aid entry into new markets.
Right now, fear of the so-called ‘Great Resignation’ is prompting many law firms to hand out above-market and out-of-cycle pay increases and bonuses in the misguided belief that they can buy the loyalty of their employees. But ‘pay-to-stay’ is a band aid, not a panacea.
Innovation, more so than money, is what will retain and attract top talent.
Legal services innovation
In the legal sector, innovation is either internally- or externally focused.
- Internal innovation benefits the firm by improving the way it does business
- External innovation benefits the firm’s clients.
There are seven dimensions of innovation, four of which are internal and three, external.
To illustrate, here are examples of legal services innovation across each dimension.
Internal Dimensions of Innovation
Strategic Innovation
Strategic innovation is all about finding different ways to compete and to leverage your internal resources so as to exploit external opportunities. Heightened competition, new market entrants, and changing workforce expectations are among the drivers for this dimension.
Example:
In March 2022, Allens Linklaters launched a legal transformation graduate program (to commence in 2023) which will rotate graduates through the firm’s legal technology, legal project management, product lab, and innovation centre teams. Graduates will gain experience through formal and on-the-job training in data analytics, automation, contract analysis, design thinking, project management, and change management.
Behavioural Innovation
Some firms make the mistake of thinking innovation has to be disruptive. It doesn’t. In fact, most isn’t. Behavioural innovation is the key to incremental and continuous improvement. Behavioural innovation is achieved when a firm fosters an open-minded, innovative culture, one which embraces new ideas and encourages employees to seek out new and improved ways of performing even the most menial of tasks.
Many law firms struggle to foster an innovative culture. Because lawyers don’t like to lose, they tend to discourage experimentation. Achievement: good. Failure: bad. Yet, innovation is borne out of trial and error.
Example:
Baker McKenzie has built a culture of innovation by building a global network of 1200-plus innovation ambassadors representing all functions and professions in the firm. This community purportedly serves as much more than an internal communications channel. What Baker McKenzie has done is identify and inspire a cohort of people who are interested in innovation, and provide them with opportunities to communicate, share, learn and interact. It’s obviously working as the firm is regularly shortlisted for, or the recipient of, prestigious innovation awards.
Market Innovation
Market innovation references how a legal services provider enters and exploits new markets – how it goes to market and promotes its brand and business. According to the CommBank Legal Market Pulse 2021, the majority (65%) of law firms are prioritising marketing and business development investment, up from 26% in 2018.
Example:
The way clients go about procuring commercial legal services is also changing. Priori is a global legal marketplace where in-house teams can quickly and cost-effectively source vetted outside counsel from law firms of all sizes for projects, transactions, specialist expertise, or overflow, as well legal technology companies and alternative legal services providers. Legal departments simply articulate their requirements (jurisdiction, skills, years’ experience) and determine their preferred pricing model or budget, before being presented with a shortlist of matches.
Platforms such as Priori represent both an opportunity and a threat for traditional law firms.
Process Innovation
Process innovation enables firms to be more efficient and their people to be more productive by identifying and adopting new management practices, procedures and processes. These can be manual, or tech enabled.
Example:
In most law firms, work is distributed informally within a team, resulting in some junior lawyers being overworked while others feel overlooked. The inherent bias, conscious or not, in work distribution methods drives job dissatisfaction among junior lawyers. In response, a former Dentons associate has developed Capacity, a work distribution platform which spreads work evenly across legal teams based on each lawyer’s availability, career ambitions, experience, and eligibility to perform the required tasks.
External innovation dimensions
Service Innovation
To achieve service innovation, introduce new services – ideally, services which are new to the market, not just your firm. New services opportunities can be identified a multitude of ways including by monitoring societal, regulatory and legislative changes. For example, the international spotlight on modern slavery has spurred the global law firms to market their ability to assist clients with supply chain compliance and reporting.
However, innovation is not the exclusive domain of the big law firms.
Example:
The team at Melbourne-based Umbrella Family Law recently became the first lawyers in Australia to have completed the pet custody course offered by animal behaviourist, Karis Nafte. Recognising that Australia has one of the world’s highest rates of pet ownership, Umbrella Family Law now offers pet custody as a distinct service.
Client-Centric Innovation
Because client-focused innovation is collaborative, firms can become almost indispensable through customised client solutions.
The keyword is ‘collaborative’. On this dimension, it’s important not to make assumptions. Engage your clients in the process. Where do they see the best opportunities? What are their pain points? How might you make their lives easier? What services do they wish you could provide? What services do they need you to provide?
Example:
Through their legal arms, the ‘Big 4’ accounting firms are integrating legal advice (and in some cases litigation) with legal operations consulting to help corporate legal departments save money, deliver enhanced value, and optimise their functions by way of people, process and technology improvements.
Simultaneously, traditional law firms such as Ashurst are entering the legal ops space such as by applying agile frameworks to the delivery of large, complex legal projects.
Agile methodology is not tech dependent. It involves breaking projects down into components, prioritising the elements, and measuring progress against small deliverable goals, rather than one final outcome.
According to Ashurst’s head of digital products, Tae Royle, who will be speaking at the Legal Innovation and Tech Fest in Sydney this week (3-4 May), so much of innovation in legal is about finding things that work well in other sectors and transplanting them to the legal sector, with the necessary adaptations, in order to fit the way lawyers think and the sort of problems they’re trying to solve.
Ashurst first introduced agile thinking when it was introducing automated workflow services for legal – a project which involved business analysts, project analysts, network engineers, and application specialists. The firm is now looking to apply agile to lawyer-heavy projects such as the delivery of finance documents to a banking institution.
Technological Innovation
Not long ago, technology innovation was thought of as a way to improve service delivery – for example, a firm’s use of technology to service regional, remote or overseas clients.
Then COVID hit and all of a sudden technological innovation became critical to service delivery.
But law firms are not alone in embracing legal technology. In-house legal departments are under pressure to do more with less. According to Gartner, in-house legal tech budgets will increase threefold through 2025 in large part to reduce the dependency on outside counsel.
Amid these conditions and spurred by an influx of private equity and venture capital investors, the legal technology market is booming.
Booming as in USD24.5 billion per annum worldwide booming.
For law firms, the biggest challenge is how to prioritise and select legal technology in a saturated market. After all, the legal tech sector includes everything from contracts management and matter management through to legal research, litigation prediction, document automation, and risk and compliance technologies.
Where is the most pressing need? Where are the biggest threats? Where are the best opportunities?
A good starting point would be to consult the most robust and reliable legal tech directories (examples below) as they provide a wealth of information about the available legal software products
LawNext Directory of Legal Technology Products and Buyer Resources
Legal It Professionals’ Legal Technology Directory
Above the Law’s Legal Tech Directory
