How do law firms become more innovative?

It seems that law firms have been grappling with the question, “how can we be more innovative” for nearly a decade now. But a quick search on Google search trends for “legal innovation” shows that interest in innovation in the legal sector is, at least from a Google search trend perspective, only increasing.

What’s the point in becoming innovative?

When people think of innovation, they often think of two things: (1) technology, and (2) change. Because of this, discussions around “innovation” can be fantastic bridge-builders in law firms. They build bridges between different skillsets — most notably those with technology skills, and those with legal practice experience. They also build bridges between levels of the hierarchy — with more seasoned veterans often deferring to the younger generations who grew up in an age of technology and change.

Despite the cultural advantage of having these discussions, it is actually quite rare in practice that initiatives around “delivering innovation” are successful. Regardless of efforts and expenditure put into these projects, and how “hi-tech” they are seen to be, innovation efforts can often run into the same obstacle, which appears when the rubber hits the road.

That obstacle is people asking, “what’s the point”.

Non-purposeful v. purposeful innovation

Most firms have some kind of innovation agenda, but the underlying reason for wanting to be innovative varies. There are a few variations here, and I’m going to group them into two categories: (1) non-purposeful innovation, and (2) purposeful innovation.

The rationales that fit into the non-purposeful category are not directly related to business goals. For example:

1. “Innovation for the sake of it”. Many will pursue innovation efforts because they are asked about it in client pitches (although, more than often, this is not a decisive factor in pitches) or because they have heard about other firms’ innovation initiatives.
2. “Innovation as an efficiency play”. It is probably a little harsh to call this example “non-purposeful”. However, it is worth calling out that, at least in a law firm where revenue is predominantly driven by the billable hour, “efficiency” is a concept that needs more exploration because it does not always directly relate to profitability or client satisfaction.

The first step on any innovation journey is to try and move out of the non-purposeful innovation bracket, and towards purposeful innovation. Here are some examples:

1. “Innovation as a business play”. For example, other similar firms are winning more work as a direct result of innovation initiatives. Or a firm might be looking to increase its profitability by improving margin on fixed-fee deals or remaining in-budget in traditional time and materials projects. Efficiency is highly relevant here, but not as a goal in itself — it has to drive something else.
2. “Innovation as an employee satisfaction play”. Lawyers might complain at the quality of work they are receiving, or the stressful situations they are put in by manual processes. Again, process improvement and efficiency can help solve these issues.
3. “Innovation as a marketing play”. It is not often admitted, but sometimes a law firm cares more about being seen to be innovative than anything else. In these scenarios, a firm might play up its capabilities in emerging technologies and cut data to reveal high adoption rates of new tools. A note of caution: lawyers quickly lose faith in your internal innovation efforts around purpose (1) or (2) if they see external marketing that they know is not an accurate representation of reality.

Some people will change for the sake of it. But just because some people are willing to change, it does not follow that everybody else will. This is especially the case with lawyers — who often exhibit aversity to risk, a preference for “their way of doing things” and perfectionist personalities. Combine these things with the traditional billable hour business model, and getting anybody to change can be a nightmare.

But moving into the purposeful innovation bracket helps you answer the question, “what’s the point”. If your business goal relies on people adopting your innovative solution, you can use this rationale to persuade people to use it. If you don’t have that rationale in place, you might struggle.

Example: transaction management

For example, take transaction management solutions. These tools seem no-brainers for lawyers (especially junior ones) to adopt. Rather than spending time in Word checklists, PDF editors, countless emails and clumsy steps between different systems, these solutions combine workflows in one place. They dramatically decrease manual processes in transactions, reducing errors and stress for individuals who do them.

Yet these solutions, despite (almost unquestionably) optimising processes, are not universally adopted. A main reason for that is that they are often bought without enough detailed analysis of how they help the business. Sometimes, they are bought under a general need to “be efficient”. But without a tangible link to profit or client satisfaction, lawyers will not always adopt them if they do not think there is a particular push from above. Is it a problem for a law firm that transactions are inefficient? If so, how much of a problem is this? Does it affect the firm’s bottom line or prevent them winning new work? How much do inefficient transaction processes contribute to these issues? Will clients choose firm’s because they are using these technologies? Do clients even care? Are employees leaving the firm because of this kind of work?

In the case of transaction management, many firms have been hugely successful at getting high levels of adoption of these tools. But they have only got there through grappling with these tough questions, and convincing people to change.

The first question really should not be “how can we be more innovative”, but “why should we be more innovative”. In other words, “what is our ultimate goal?”. This might involve some difficult questions relating to business model and individual incentives — but these are discussions well worth having.

Fork in the road: delivering on your ultimate goal

Once you’ve grappled with why you want to be innovative, you get into the fun part — actually being innovative. Strangely though, delivering on the purpose you just defined might not require you to be innovative.

Organisations go on one of two paths here: (1) they look for ways that they think are innovative to meet their ultimate goal, or (2) they look for any way to meet their ultimate goal, whether innovative or not.

A more extreme version of (1) might be to look for ways to meet that ultimate goal using a particular piece of technology. This variation rears its head whenever something new and exciting comes on the scene. These new capabilities undoubtedly unlock new ways of delivering on your purpose. But it is easy to be biased. Just because a new piece of technology is on the scene, it does not necessarily follow that using that technology is either essential or the best way of delivering on your purpose.

Unless you are adopting the “innovation as a marketing play” purpose, the second permutation makes the most logical sense because it prioritises achieving value over the means pursued to achieve it. Then, the question becomes: “how do we find ways to meet this ultimate goal?”.

What are the ways to deliver your ultimate goal?

The first step to deliver your ultimate goal is to scope your area of inquiry. For example, in a law firm, trying to generally stay within budget to improve fee recovery is a huge goal. Pursue this, and you risk boiling the ocean. Instead, discover the pockets where you want to achieve this goal. A common way of doing this is to focus on a particular practice group and a particular type of work.

The second step is to understand how people currently work, and identify the areas where people are doing things that cause the issue you are trying to resolve. For example, if you are trying to improve employee wellbeing, where are the areas people feel the most stressed? If you are trying to improve margin on fixed fee work, which processes and tasks take the longest? This step helps you focus on a specific problem to solve, that directly relates to the goal you are trying to achieve. It involves speaking to a wide variety of people, such as paralegals, assistants and lawyers of every seniority. It must not be done “from on high”, or you risk skewing the reality of what actually happens.

To take an example in litigation, preparing documents for court filings can be a long and arduous process. It is often seen by clients and lawyers as low value work — “a glorified printing press”. If you are trying to stay within fee forecasts, it would be advisable to look at technologies that automate this kind of process, which typically takes a long time.

In many examples like this, the question might also arise as to why you are doing the task, step or job at all — and whether it can be eliminated completely. In other situations such as contract drafting, technology might not be the answer at all — instead, defining best practices and consistent approaches that combine people’s experiences can be equally valuable (then, of course, getting people to follow those processes).

How can law firms become more innovative?

When I started my career in legal technology, I was obsessed with a particular solution I was working on. It was an in-house-built product, so I was also emotionally invested in it. I advertised its benefits as “improving client collaboration”, “improving efficiency” and “capturing better data”.

Most nodded their heads when I said these things, but a select few probed more. “How does improving efficiency make us more money?”. “What is in it for clients to collaborate with us better?”. I dismissed these concerns as things that “naysayers” and “laggards” were saying. But as a forward-thinking ex-lawyer, I was too invested in my personal project to see them as perfectly valid questions. Ultimately, when we struggled to get immediate adoption of the solution, these questions came back to bite us. We couldn’t articulate an answer to the question “what’s the point”. We eventually grappled with these questions and the project was successful — but I wish we had dealt with them at the start.

In my view, being innovative is not always the thing law firms should be striving for. Unless the primary goal is portray themselves externally as being innovative, the thing that matters is the ultimate goal at the end of the road. Being innovative is not always a precondition to achieving those things.

Instead, law firms would be wise to identify what they are trying to achieve, and look for ways to optimise, improve or reinvent existing processes. Do this a few times, and you might even become innovative without realising it.