The stability that was once a hallmark of our profession has gone for good. Law firms must innovate if they are to thrive.
It seems that ‘innovation’ has become another buzzword that is in danger of being over-used and under-applied. Over the last decade, the legal profession has jumped on the bandwagon, and references to being innovative are casually bandied about in marketing materials and on websites. But despite the word’s ubiquity, there is often no understanding within law firms about what it means to be innovative.
This lack of clarity results in many firms simply paying lip service to an interesting-sounding – but somewhat ‘fuzzy’ – idea.
But innovation cannot be ignored in today’s market. Almost everyone accepts that we will never see the return of the stability that was once a hallmark of our profession. In addition to a continually changing market, the sheer speed with which ideas are shared means that any competitive advantage a firm has will almost certainly be short-lived. This brings about a constant pressure to improve, adapt and grow, making the ability to innovate continuously, and at scale, of increasing importance.
What is innovation?
Innovation is a difficult concept to pin down. It means different things to different people. In addition, there is a perception that innovation is mostly about new, game-changing products. It is difficult for most of us to imagine a law firm being innovative in the same way as iconic businesses such as Apple and Amazon.
A good definition of innovation in the context of a law firm is provided by Scott Anthony of Innosight Consulting who, together with his colleague, Professor Clayton Christensen of Harvard, has researched innovation for decades. He defines innovation as ‘doing something different with impact’.
‘Something different’ could be creating a new service line designed to appeal to a specific type of client, or an improvement to an internal process which helps lawyers serve clients better. The words ‘with impact’ emphasise that whatever the firm does differently must make a difference. It must add value, whether by increasing profit, making an internal process more efficient, or some other means. And it goes without saying that if something makes a difference, then this should be measurable in some way.
Ultimately, though, each firm should craft a definition of ‘innovation’ for themselves, so that it has meaning for that firm. Without everyone in the firm having a clear understanding on this front, ambiguity prevails and it is difficult to drive things forward.
Innovation is often viewed as something practised by a small group of gifted and creative individuals, outside the remit or ability of most lawyers. The key to innovation is considered to be the generation of as many ideas as possible. But, although ideas are important, it is the implementation of an idea in a way that adds value that results in innovation. The reality is that innovation is a discipline in its own right, and firms can learn how to innovate successfully by using the correct approach and practices.
Innovation in law firms is multi-faceted. It can span areas such as legal work, operations, HR and business development. For a firm to innovate effectively, it needs to innovate at scale, and be open to looking at all of these areas (and more) at some point. Innovation in silos will have little effect on a firm’s long-term performance.
Formulating a process for innovation is the best way to ensure that a firm maximises its chances of innovating consistently and successfully. A suggested four-stage process is set out below.
1 Generate and evaluate ideas
All too often, no guidance is given about the areas around which ideas for innovation are required. The search for ideas should always be linked to the strategic objectives of the firm, and directing people to focus on a specific area helps rather than hinders the creative process. For example, a firm could seek ideas to attract talent, and that brief could be narrowed even further with other criteria or constraints being added. To help generate ideas, consider the following suggestions:
Train for innovation
Research shows that coming up with good ideas is not the domain of a few gifted individuals. However, without effective training on how to employ the thinking processes and techniques of good innovators, the quality of the ideas coming through may be poor, ranging from obvious incremental improvements to suggestions which are completely ‘off the wall’.
Some businesses have really invested in training. The home appliances provider Whirlpool, for example, has trained more than 30,000 employees to be business innovators, and certified more than 1,000 of them as innovation ‘black belts’.
Make it as easy as possible for people to put forward ideas. For example, allow individuals to bypass line managers so that they can avoid internal politics or personality clashes. Lou Gerstner (pictured), the ex-CEO of IBM, is widely acclaimed for turning around IBM’s fortunes. One of his first actions as CEO was to allow anyone in the company to email him directly with ideas and suggestions.
Good ideas can come from many places, so seek opinions from as wide a variety of places as possible – clients, crowd-sourcing, collaborations with external companies, consultants and so on.
Ideas will rarely be entirely new. Some of the most successful innovations occur when ideas are borrowed from other industries (or even from other law firms) and adapted.
Observe the target of the innovation – whether a client or internal team member – for clues on where their ‘pain points’ are. For example, if the potential innovation is intended to benefit a specific group of clients, spend time with them and observe how they transact with the firm. Simply asking clients what they want may not yield the quality answers you seek. As Steve Jobs said: ‘It’s not the customer’s job to know what he wants.’
Keep meetings small
Six to 10 people is best, but individual meetings should be as diverse as possible in terms of gender, age, length of service with the firm, and so on. You could also bring in an unrelated expert; they can often spark new ideas. For example, if you are trying to generate ideas around client service, a manager of a hotel could provide a different point of view.
Once ideas have been collected, they should be evaluated against specific pre-agreed criteria to decide which ones to proceed with. The criteria will be different depending on the type of innovation being considered. For example, ideas for new products should be evaluated against factors such as technical feasibility, client acceptance and profitability. The evaluation phase should be quick and the best ideas chosen for further consideration.
When deciding which ideas to take forward, remember that not all innovation has the same effect; there needs to be a sensible balance between disruptive (game-changing) innovation and incremental (improving products, processes and services) innovation.
2 Formulate a detailed plan for the idea
An initial idea, even once evaluated, will rarely be perfect. It will need to be worked on by a group of people to adapt it and formulate a viable plan. Each plan will be unique but, depending on the innovation, some of the points that may need to be covered are:
- Identifying the target ‘client’ – this could be an external client or internal team members.
- Specifying the issue the client is having difficulty with (and providing supporting evidence of the difficulty), as well as confirming that implementation of the idea will have sufficient impact if effective.
- Identifying other key stakeholders, in addition to the client, who will be involved in the decision to adopt the idea, and ensuring that they support the client’s decision to engage.
- Considering other options for tackling the issue and articulating how the idea adopted will address the issue more effectively.
- Specifying the financial impact on the bottom line and evaluating the capital expenditure that will be required.
- Identifying the members of the innovation team, its key activities and an action plan.
- Articulating how success will be measured and how long it will take to see results.
3 Test the idea
Columbia University’s Rita McGrath states that the first cut of a plan is always wrong. To identify and overcome the flaws, she advocates testing the various critical assumptions that form the foundation of the plan.
Start by articulating what a successful result will look like and then work backwards to map out the assumptions that would need to be true for that result to be plausible.
Then, test each of the critical assumptions to make sure they are robust, looking for flaws. This can often be done quickly and cheaply through activities such as online research, speaking to clients, running a small pilot and seeking answers from other industries. Adjustments need to be made according to what is learnt. Simply knowing upfront that an initial plan will have flaws goes a long way to ensuring that firms do not give up on a promising idea too soon.
4 Implement the idea
Innovation is complicated, not least because it intersects with other fields such as strategy, change management and finance. The implementation stage tends to be where these elements meet.
Implementing innovation successfully means putting a plan into action as quickly as possible, as windows of opportunity do not stay open long. Analysis beyond a certain point does not reduce risk. No matter how long a firm spends analysing and researching, there will probably still be some flaws that need to be ironed out during the implementation phase.
- Here are some basic guidelines for effective implementation:
- Decision-making responsibility should ultimately lie with one person to avoid delays and confusion.
- Tight timescales should be set so that the project does not ‘float’ indefinitely.
- Regular reviews should be undertaken by the leadership team.
- An adequate (but not excessive) budget should be provided.
The role of the leadership team
Leadership teams need to engage with the innovative process at a number of different levels.
It is vital that the leadership team shows through its actions that it takes innovation seriously. Spearheading a training programme to ensure that those in key management and leadership positions, as well as a diverse range of individuals throughout the firm, have the capabilities required to think creatively and innovate, is a good start.
Another important element is to make it clear that failures are not only acceptable, but expected. As long as actions have been undertaken competently, and not carelessly, failure should be viewed as a valuable learning experience. Innovators should be praised according to their behaviours, rather than the outcomes of their efforts. It should be made clear that practising innovative behaviour is vital to ensuring that the firm learns to innovate at the scale needed to make a difference.
The leadership team also needs to set the innovation strategy for the firm. It must be able to integrate different types of innovation into the firm’s overarching strategy, ensuring that a balance is achieved between disruptive and incremental innovation. In addition, many academics and commentators claim that business model innovation is one of the best ways to ensure that a business is able to survive. Given the changes taking place in the legal market, it is vital that the leadership team does not shy away from this issue.
Managing the risks involved with major innovation projects will be key. Governance structures should be established to balance risk against potential benefits, always bearing in mind the high organisational risk of not undertaking innovation. Leaders should also set high-level reporting requirements so that they form part of the implementation process, and facilitate smooth and effective implementation.
Why it matters
Too many firms treat innovation as a sideshow. At best, these firms consider it a ‘nice to have’; at worst, it is thought of as yet another
management fad that will pass in time. In reality, being able to innovate effectively is the ultimate survival skill for any business or individual. Those savvy firms and new entrants to the market that have stepped up to the challenge will essentially be able to write their own future. And who can ask for any more than that?
Ava Madon is a partner at Penningtons Manches LLP
- This article was first published in the May 2014 edition of Managing for Success, the magazine of the Law Society’s Law Management Section. The Sections are subscription-based communities, designed to help you to easily implement best practice. Membership includes a tailored package of practical updates on legal and market developments, expert analysis and comment, networking, and CPD-accredited live and online events. The Section provides access to the best practice support you need, when, where and how you want it, on the issues that matter to you across all practice management disciplines.