Innovation is one of the critical buzz-words of legal services in 2019 and has become one of the most desirable labels that a law department or law firm can brand themselves with. But what does innovation in legal services even mean? And where does someone begin on an innovation journey? First of all, a definition…
What is innovation?
The Harvard Business School defines it thus: ‘Innovation is a change in the process by which an organisation transforms labour, capital, materials, or information into products or services of greater value.’ Therefore, innovation is about thinking about value, and how your organisation creates it.
What does this mean for legal services?
If you are an entrepreneur, you may want to consider developing a market-creating innovation. There are many underserved legal needs around the world, which represent massive market-creating opportunities. The history of disruption teaches us that the greatest disruptions often originate in broad-consumer based products, consider access to justice and other initiatives that are rethinking how to bring law to the average customer. Most corporate/commercial lawyers are not interested in creating new markets for their legal services, and most law firms and in-house departments are not structured to create new markets for legal services.
Sustaining innovation is what the market for corporate legal services is lacking. Most corporate legal services are being met and the market is competitive and crowded. However, client satisfaction remains generally low, and corporate legal services remain expensive, complex and confusing. In response, many clients have demanded more efficiency and value from their lawyers. In turn, there has been tremendous attention paid to efficiency in legal services.
Efficiency innovations are about streamlining processes to improve profitability, while sustaining innovations is about generating additional value within the same basic category of service. This is the first problem with innovation in the legal services sector. Lawyers are hearing their clients asking for efficiency, but they are not listening to the root cause of their problem. Clients are concerned about how long it takes for a lawyer to do their work, the complexity of the advice that is received which means more time and work for the client to use the work product, or clients are concerned about the lack of transparency in the cost of their legal matters. One common sustaining innovation that many law firms offer their clients are free secondment placements of associate legal talent in exchange for providing the law firm with a significant amount of billable hour work. While nice, secondment placements do nothing to make the other work they perform accessible, predictable or affordable. Although lawyers are hearing about the need for innovation and the need for efficiency, they are often missing the root cause of their clients’ concerns.
Efficiency innovation is relatively straightforward for in-house departments. Efficiency improves capacity and throughput of a legal department. Since an in-house department is a cost centre rather than a profit centre, any improvement in efficiency of the law department directly improves the profitability of the corporation. Law firms are different – if the firm is primarily structured on a billable hour, efficiency in the delivery of legal services only means that the firm will sell less of its time to its clients. Law firms are highly motivated and incentivised to be efficient in their back-office because efficiency innovation in the back-office directly improves the profitability of the law firm.
Where to start?
For those serious about innovation, the journey begins with the voice of their customer. If your customer wants an easier to use work-product, lawyers should utilise design-thinking principles to develop plain-language tools that empower non-lawyers to be a sophisticated consumer of legal advice. This may mean giving your client a flow-chart rather than a memo. If your customer wants cheaper legal services, the challenge for their lawyer is to abandon the billable hour and replace it with technology-enabled solutions that are still sold at a profitable price. In the end, innovation is about re-imagining processes to generate value and value is about listening to clients and focusing lawyers’ efforts on clients’ demands rather than the lawyers’ skills.
Getting started with innovation needs to be neither daunting nor expensive. It often starts with a simple conversation.
This post was originally published by Bill Novomisle on KorumLegal Forum.