Where is the client-facing innovation in law practice?
Not long ago, I attended one of the typical “future of the legal industry” conferences in Denmark.
All the usual speakers were there: A chief information officer from a large law firm talked about experiences with implementing a solution about two years ago; a consultant talked about breaking down silos and showed graph after graph in an effort to convince law firm leaders that they are doomed unless they go digital tomorrow; and of course, a partner from a small law firm that is regarded as “innovative” or “disruptive” talked about how they do things differently because they have an open office space and use cloud-based solutions.
It was all good, and I think everybody learned something new that day. However, the thing about this conference, as with so many other conferences on legal innovation, is that the talks and presented solutions are all focused on how things are working great internally, how innovation is happening internally and how the adoption of emerging technology is progressing internally.
The question that should be on everyone’s lips is: How is that going to benefit the client?
The concept of client-centrism is becoming increasingly important as globalization and new digital technologies have improved customers’ access to information as well as their ability to find competitive alternatives more easily—often, regardless of location. Knowing that customers have gained a tremendous amount of power, and that increased client demand is the primary driving force for innovation, the question remains: Where is all the client-facing innovation?
For decades, innovation has mostly been a branding exercise or a way to nurture one’s own conscience. It is a bit like that gym membership you subscribe to but never actually use. Most larger law firms have created internal R&D departments in order to try and discover the next great thing.
Those departments have received somewhat sufficient funds but have no real power; so as with that gym membership, actual implementation has lagged. This trend has most likely been a result of the incentive structures of senior management in most law firms as it arose from the innovation-hostile workings of the partnership structure. It made total sense.
After all, this approach to innovation allowed partners to sleep sound at night knowing that they allocated a budget to innovation. As long as the R&D department evaluated a few new suggestions each year and ended up implementing a new system for billable-hours tracking, everyone was happy. A check box could be ticked.
In the past years, the process has accelerated as some law firms have also implemented contract drafters, simple AI-review tools and case management systems that improve the efficiency of the internal workflows. However, none of this really benefits the legal consumer. And what is even worse, it is grounded in a belief that law firms are able to hire people who are smart enough to determine and exploit the correct opportunities without help from the surrounding business ecosystem that constitutes their clients.
But the time has come for change. No longer will clients accept that law firms serve them the same dish they have been eating for years, even when it comes at a discounted price. Clients want more for less, not the same for less. To be frank, clients do not care about the internal productivity improvement of law firms if it does not influence the legal products they consume. They want external, client-facing innovation they can take part in and shape according to their specific needs. They want to be heard.
The question is, why are lawyers so reluctant to implement client-facing innovation? Some interesting research done by psychologist and former lawyer Larry Richard found that lawyers are not just change-averse but notoriously known for being low in resilience. Translated into innovation language, it means that lawyers are afraid of losing face. On top of this, receiving criticism is often a hard blow for lawyers compared to other professionals.
This is clearly a problem, as client-facing innovation is associated with going places that you are not familiar with, testing out new stuff and eventually failing along the way. It is a trial-and-error procedure, so it is not hard to see why internal solutions often become the preferred mode of innovation in a law firm, where failure is happening colleague-to-colleague rather than in symbiosis with your most valuable client.
The issue with internal versus external innovation is not only whether the end solution is client- or lawyer-facing. The process of getting there is probably the most important aspect of ensuring that the end solution becomes a success. The traditional internal R&D setup is based on the belief that the law firm knows what the clients want. Innovation is developed and tested internally and then pushed to the market in the hopes of adoption.
Many law firm leaders believe that this is the only way because they think law as a profession is too complicated for the common man to understand, and external collaboration is therefore not an option. A famous go-to quote attributed to Henry Ford underlines this belief: “If I had asked people what they wanted, they would have said faster horses.”
Naturally, this theory was proven untrue decades ago by multiple studies. For example, a 2002 paper by management science professor Gary L. Lilien found that solutions developed in collaboration with users had a higher probability of success, more market share after five years, higher strategic importance and were significantly more original than those developed by in-house teams.
Not only do you reap the aforementioned benefits when applying open innovation principles, but you are also able to dramatically cut down the costs of doing so. Furthermore, the clients will be more invested in solutions for which they can take ownership. While some law firms still believe that their knowledge should be protected in order to secure competitive advantages, the most successful companies know that open innovation and sharing of knowledge is what attracts modern clients.
As one would imagine, open innovation is gaining increased traction, not least in large tech companies, but even law firms are starting to eye the opportunities and develop innovation labs and incubators as part of their business, like Allen & Overy’s Fuse, Dentons’ Nextlaw Labs or Baker McKenzie’s Whitespace Legal Collab.
Law firms must open up and replace their solidified boundaries with more flexible membranes. They should value inclusion over segregation, invest in external innovation strategies and engage in collaborative ecosystems in order to meet client demands. Law firms must change their face to be prepared for the future they are faced with.
Anders Spile is a legal tech and innovation consultant who helps law firms develop and implement strategies based on open innovation principles. Spile has previously worked in large international foundations and law firms and has several years of experience in Chinese and Asian markets. Based in Copenhagen and working in Contractbook, a leading Scandinavian legal tech provider, Spile has hands-on experience as to what it takes to test, select and implement legal tech solutions in larger law firms. To have a talk about legal tech and innovation, Spile can be contacted at [email protected] or through LinkedIn.
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