ABA Journal

The New Normal

The Legal Innovation Ecosystem: 10 Actors & Their Roles - An Early Review

By Paul Lippe

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With Apple’s stock and overall performance continuing into the stratosphere, Steve Jobs has attained the status of a secular saint.

But it doesn’t take anything away from Jobs’ accomplishments to say that he wasn’t necessarily the lead musician of every part of the orchestra so much as the conductor.

As Walter Isaacson illustrates in his recent biography, literally since Jobs was in high school, he was immersed in the Silicon Valley (broadly understood) ecosystem, starting out with the Homebrew Computer Club, then working with HP, Atari, Xerox Parc and Sony.

To create the iPhone and iPad, Jobs had to orchestrate chip companies, glass manufacturers, music labels, telephone companies and software vendors along with countless others. This type of orchestration was rarely seamless or without pain and risk—perhaps a new chip vendor came up with a way to show faster graphics, but at the cost of generating too much heat for the phone and using too much wireless bandwidth. Yet regardless of the challenges, each of the companies Apple worked with were wired to know that in order to successfully innovate, collaboration was required.

Call it an “innovation ecosystem.”

For law, our innovation ecosystem is just starting to jell. As part of our New Normal series, I hope we can do three things:

a) Come up with a basic map of the innovation ecosystem.
b) Provide a platform for leaders in the innovation ecosystem to describe how they are (or aren’t) embracing the New Normal.
c) Offer a lightweight “Innovation Index” to suggest and track where different actors are on the innovation spectrum.

So here are my 10 actors in the legal innovation ecosystem, together with an impressionistic view of how innovative they are, on a scale of one through five. No. 1 is the status quo (“Dr. Pangloss—this is the best of all possible worlds, how could anything ever be different or better?” and No. 5 is Steve Jobs. My company does business with folks across these categories, so my impressions undoubtedly reflect all manner of bias on my part. All this should be read with the general “innovator’s dilemma” thesis in mind—individuals and institutions who are winning in one context are generally slow to embrace a new context; sometimes that works out fine, sometimes the slow movers turn out to be Kodak. A world like Apple’s with one super-orchestrator coordinating industrywide innovation may be an anomaly; the intermittent and sometimes confused nature of the change law is experiencing may be more the norm.

10 Actors with Preliminary Innovation Index

1) Law schools (3): Two years ago, one might have said law schools were seriously underperforming their role in helping to advance the state of the profession, but that is clearly changing. From curriculum reform to greater client engagement to affordability, law schools seem to be taking up the challenge of the New Normal. Law schools typically cite two constraints—faculty mobility and U.S. News ratings—that keep them from doing more. But the core problems of affordability and employability, together with the fundamental bent of schools to want to “do the right thing,” leaves me fairly optimistic.

2) Large firms (2): Richard Susskind says “it’s hard to tell a room full of millionaires that their business model is broken,” so it’s no surprise that large firms get a 2. What is a little surprising is that large firms are making lots of New Normal-ish investments, have lots of good potential structures (knowledge heads, practice group leaders, generally managing partners who “get it” and some like Ralph Baxter who get it a lot). Yet when push comes to shove, the bigger firms have three problems: a weak decision-making model that is dominated by the most influential partners who benefit most from the status quo, a lack of experience outside their monoculture, and a management horizon that is very short-term. Stay tuned, as I expect to see this rating go up, driven by Nos. 3 and 6 below.

3) Start-up firms (5): In contrast to the slow pace of change at large firms, there is now a very robust and potentially disruptive infrastructure of start-up firms (as well as the “long-standing start-up firms” like Wilson Sonsini, Susman Godfrey, Bartlit Beck and Boies Schiller.) The start-ups are generally populated by large-firm refugees, are built around ideas like better value, collaboration, transparency, lower leverage and use of technology. I think a hat tip goes to my confrere Pat Lamb for starting Valorem, but there are lots of other examples following Pat like MoloLamken, Confluence and Clearspire. At a time when the large firms are not generating organic growth, the start-ups are growing rapidly, attracting new clients and partners.

4) General counsel (3): Most observers would agree that GCs are only partially exercising their capacity for driving change. There are some (think Jeff Carr) who are highly innovative and have been for a while, but there are many others who see themselves largely in a law firm context (“we’re just like a law firm, only we have one client.”) Four keys things to watch are (a) the role of GC networks like the General Counsel Roundtable in fostering a more innovative view of best practices, (b) the emergence of new roles such as heads of legal operations whose job it is to drive change, (c) engagement from chief financial officers and (d) the new-found interest among large and historically less price-sensitive financial players in improving legal quality and efficiency.

5) Networks (3): Because lawyers operate according to a “Constitutional Convention” model of change there is a tendency to expect change to come from professional networks like the ABA, the Association of Corporate Counsel, the Canadian Corporate Counsel Association or the General Counsel Roundtable. But because networks are generally subject to ‘supra-majority” requirements, they are not often found at the forefront of change, even when many of their leaders are at the forefront.

6) Legal process outsourcers (5): Probably the most potent disruptive force in law are the legal process outsourcers (LPOs). Building on a business and service model that has been proven elsewhere, leveraging external capital and superior management, and with nothing but upside, the LPOs are poised to take between 10-20% of the legal service market over the next decade, seriously impacting traditional service providers.

7) New-technology vendors (5): New software vendors like LegalZoom (for the consumer market) and Lex Machina (for the law firm market) are showing the power of “Google-zation” of law, organizing information better to simplify legal work.

8) Consultants and analysts (4): These individuals are leading the way to highlight emerging best practice. Interestingly, two of the leading thinkers in this arena—Richard Susskind (United Kingdom) and Jordan Furlong (Canada)—are outside the U.S. Inside the United States, we have folks like Bruce MacEwen who have been leading the call for change and innovation for quite some time.

9) Less-sophisticated clients (3): In contrast to GCs, who are generally sophisticated clients, two-thirds of the legal market is made up of less-sophisticated clients like smaller business and individuals. They have been influencing the market indirectly, by avoiding buying legal services because they’re too expensive or starting to use self-help services like LegalZoom. Whether they will influence the market directly through concerted behavior is hard to predict.

10) Litigation finance companies (4): The dark horse of the legal innovation ecosystem will be the litigation finance companies like Parabellum, Burford and others who will drive greater transparency in commercial litigation. An awful lot of litigation is driven by fear or organizational inertia, not a rational calculus of what’s at stake. The litigation finance folks could catalyze major change in how companies think about litigation.

Jobs’ genius was to see how different pieces of his innovation ecosystem could fit together, keep them all moving in concert, and create a sense of inevitability that his solution would carry the day. No one person will provide that level of orchestration in law, but we can track the emergence and evolution of the legal innovation ecosystem.

Paul Lippe is the CEO of the Legal OnRamp, a Silicon Valley-based initiative founded in cooperation with Cisco Systems to improve legal quality and efficiency through collaboration, automation and process re-engineering.

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