Innovation is a term that has been heavily used by lawyers and law firms. It is pervasive in pitches and proposals, hailed as a differentiator when speaking to clients, and used as a hook to attract and retain talent. It is even in the titles of many leaders in the industry, including a couple of the authors of this piece. Isn’t it time we banned this word from our industry?

Why?

The legal industry seems to have fallen into the trap of focusing on innovation for the sake of innovation. Instead, we should be focused on creative ways to drive value for our clients.

What the term ‘innovation’ is not (although what it seems to mean to some in our industry):

  • Issuing press releases on technology tools that don’t necessarily drive real value for clients;
  • Adopting table-stakes tools that other industries have been using for years; or
  • Being more organized around outdated ways of doing business.

What should we do instead?

First, let’s get back to what innovation really meant before the concept became a catch phrase. Innovation means applying new ideas, solutions and technology to add value to clients. The objective is to create value by meeting the needs of our clients—both those needs they are able to articulate and those they haven’t even thought of yet.

How is this value created?

There are three key ways to do this:

  1. By offering new products, services and approaches to clients in previously unforeseen ways, service providers can open up new frontiers of client demand (known as ‘market disruption innovation’).
    • When it first came out, the Apple iPhone was an example of this type of value creation. No one knew how much they needed a mobile phone with a touch screen, multiple apps and a camera until they had one in their hands!
    • The law firm analogue includes things like e-discovery, data management, high-calibre contract lawyer services and high-end problem-solving on emerging issues like Environmental, Social Governance (‘ESG’) and COVID response.
  2. By providing continuous incremental improvements to existing products or services to ensure they provide value to clients, service providers ensure that they retain existing clients and attract new ones (known as ‘sustaining innovation’).
    • Mobile phones as they exist today are a good example of adding value through incremental improvements, such as adding better quality cameras.
    • The law firm analogue is optimizing processes like litigation management or automating commoditized work.
  3. By getting back to the basics of what over-serviced clients really need, service providers are able to displace competitors who are offering more than what clients want to pay for (formerly known as ‘disruptive innovation’).
    • Mini steel mills are a classic example of disruptive innovation. Before mini-mills, most of the world’s steel was made by massive integrated steel companies. By melting scrap metal in electric furnaces, mini mills were able to make steel for twenty percent less than integrated mills, causing many of the integrated steel companies to go bankrupt.
    • The law firm analogue is firms that are over-lawyering being displaced by introducing clients to better scoping and budgeting approaches, informed by an understanding of the clients’ risk appetite and business objectives.

So what should law firms do differently now?

Let’s follow the lead of the great innovators who came before us:

  1. Understand market segmentation. In the legal industry, because services are diverse, there are a number of ways to segment the market—for example, by industry, type of enterprise, region, client need and client demographics, to name a few. Let’s use ESG as an example: publicly traded companies have unique ESG considerations; ESG expectations and commitments look different for Oil & Gas companies versus the food service industry; and ESG considerations vary by province.

To achieve high-end problem-solving for clients, law firms need to marry their understanding of the market and clients with the following:

  • Equip market-minded lawyers with data and data-driven research and intelligence, tools, training and support;
  • Develop a collaborative network of complementary providers (such as consulting firms) who encourage lawyers to think outside of the box; and
  • Build lawyer confidence in their ability to guide organizations and make judgement calls through mentoring and different talent development models.
  1. Understand the People, Process, Technology (PPT) Framework. This framework has traditionally been used by companies to improve their own operational efficiency. In the law firm context, it can be even more powerful. Not only can it be used for continuous incremental improvements to the basics of law practice, particularly commoditized areas of law, but it can also be applied to solve client problems and drive optimal value. Below are a few examples in the context of litigation matter management:
    • Firms that provide high-end and complex litigation advice are often reluctant to assist clients with their portfolios of high volume and low value litigation matters, but by leveraging alternative staffing models, where contract lawyers are overseen by experienced litigators, law firms can offer a low-cost solution to clients and help address a major pain point;
    • Firms can also develop detailed process maps with accompanying checklists for routine litigation to ensure that their service team is not missing important steps, the services being delivered are predictable and consistent, and that “waste” (in the form of time and money) is reduced or eliminated;
    • When asked to predict the outcomes of litigation matters, law firms typically provide predictions based on one or two lawyers’ best guesses. This advice can be valuable but is far more useful when augmented with the massive data sets that law firms have available in relation to the historical outcomes and cost of litigation steps for similar matters. Leveraging that data can allow firms to give clients better tools when making decisions about how to proceed once litigation has arisen or is imminent.
  1. Evolve the innovation mind-set. Focus instead on providing the best possible value. To do so, it is important to truly understand your clients’ needs and how they define value.
    • You can do this through open dialogue – check-points throughout a file, end-of-matter debriefs, client satisfaction conversations, etc. Listen to both their spoken and unspoken needs, anticipate their pain points, and come up with solutions. Amidst the technological advancements, this is still a relationship business. But clients expect more from their relationships than ever before.
    • Law firms can expand their thinking in terms of how they respond to client needs by offering legal “products” as a complement to the legal services they deliver. For example, legal providers can look to build products, such as litigation risk mitigation tools or checklists, that help clients in reducing the number of litigation matters that arise in the first place. Such products may not be seen as urgent – in the same way that dealing with an existing litigation matter would be – but can be equally or even more important as a means of adding value for the organizations.

Every few years, there’s a new movement in the legal industry. AFAs, outsourcing, Legal Project Management, innovation… What’s interesting is these movements often morph into meaningless buzzwords when we shift our attention to the latest trend in legal service delivery. What has remained constant however is the term “value”. Clients have asked for more value for decades. They continue to expect more, and the firms who thrive are the ones who focus less on sounding good and more on taking action to rise to the challenge.