In June of 2019, Burford Managing Director David Perla posed a series of questions about innovation in the business of law to a small but respected group of legal pioneers and business of law influencers. Their answers are gathered and excerpted below.
Bobbi Basile, Managing Director, HBR Consulting
Leslie Brown, Director of Legal Process Innovation, Greenberg Traurig LLP
Sanjay Kamlani, Co-Founder & Managing Director, 1991 Group
Sally F. King, Chief Operating Officer, Akin Gump Strauss Hauer Feld LLP
Susan Raridon Lambreth, Principal, LawVision
Mark Medice, Principal, LawVision
“Innovation” is almost a cliché in the business of law. Everyone agrees we need more of it and recognizes that lawyers aren’t good at it, but it’s often unclear what we mean when we talk about innovation, and what types of innovation really matter. How do you define innovation in the business of law?
Leslie Brown: Innovation in the business of law is no different than innovation in any industry. It is the execution of an idea that has value—to the client, the firm or both. There is no single definition. It can be an improved process, it can be a new way to deploy personnel, it can be the application of new technology, or a new and different way to use existing technology.
The best innovation in law comes from having a client-centric view when making business decisions. You must always ask, “How will this add value to the services we provide?” If you don’t listen to the voice of the client, you may introduce a new technology or find a novel way of delivering your services but it won’t necessarily add value.
A radical change in process or the introduction of new technology can be considered innovative but incremental changes can also have a dramatic impact. That said, we can’t ignore the legal technology boom.
Bobbi Basile: Innovation means changing something that has been established or introducing something new, be it large and organization-redefining or modest. The term encompasses far more than technology; operational changes and mindset shifts can be innovative as well. As new practices become the norm, they are no longer novel; therefore, the criteria for what’s innovative is, by definition, constantly evolving. What’s innovative in legal is likely not in other industries.
Sally King: Very few firms have managed to truly innovate. Innovation in the practice has actually come from alternative providers who are motivated to change processes to the benefit of clients. Law firms need to carefully consider how their clients can and should benefit from changing the way in which legal services are delivered.
Susan Lambreth and Mark Medice: What matters is connecting with clients and making a difference. Most clients could care less about what it is called, so long as firms adopt changes that make their worlds more cost-predictable and reduce process friction. That fundamentally is where the mindset should begin.
There are many different frameworks for innovation in the business world that are now being discussed in the legal profession. We have developed a matrix with two axes, “client centricity” and “differentiation”. We look at the innovations that firms are doing or considering in terms of whether they are low-to-high in terms of client centricity and low-to-high in terms of differentiation. For example, a firm might have developed an internal innovation around predictive profitability or talent attrition that is low on client centricity (does not directly affect clients and/or they don’t care about it) but it could be high on differentiation.
Some innovation heads in law firms have stated that they believe that only client centric innovation matters but we believe that there are some internal innovations that may be critical for law firm competitive advantage, particularly as the market gets tighter or if we have a recession.
Sanjay Kamlani: Think of innovation in law in two separate buckets—first, the practice of law and second, the business of law. With respect to the practice of law, innovation involves the implementation of technology and process tools and methodologies to change the way lawyers create and deliver work product such that what they deliver is more consistent, of higher quality, and/or requires fewer lawyer hours. This would include, for example, contract automation and artificial intelligence enhanced research tools. With respect to the business of law, innovation involves the implementation of technology and process tools and methodologies that result in more effective and/or less expensive ways to operate a law firm (or an in-house legal department), such as talent management, business development and client intake tools.
What kind of innovation do you think matters most in the business of law, and why?
Sally King: Law firms need to consider what clients really need. The change has been incredibly slow, and the billable hour model does not incentivize innovation or efficiency. We need more project management professionals who truly understand the workflow of any matter, to ensure that the work is completed at the most appropriate level and using the most appropriate technologies—inside or outside the firm. Clients should be willing to pay for this resource as it will clearly benefit them over time, not least through the increased transparency and communication it would enable.
Susan Lambreth and Mark Medice: The most important innovations for law firms are client focused. As management consultant Peter Drucker famously said, “The purpose of a business is to create a customer.” Innovation typically involves identifying client needs (especially changing ones) and proactively listening to clients. Our industry historically has been terrible at this. We find this ironic because in most industries, the “front line” knows what the customers want but management is so far from it that they often miss it. In law firms, the partners are the ones that are most regularly in touch with clients. Unfortunately, in their interactions with clients they are often focused on being a great lawyer/advisor rather than seeing the bigger picture problem that needs to be solved or don’t see themselves as client service representatives.
Leslie Brown: Although technology will always have a tremendous impact on the business of law, we can’t overlook the role that people play in innovation and new business models. The business of law is and has been undergoing massive changes. Although the market has recovered from the economic downturn and is quite robust, new external forces are impacting the demand for legal services. Law firms are competing with all forms of non-traditional providers of legal services. Many of these competitors not only rely on finding skilled lawyers, they also appreciate the need to have professional staff in non-legal roles. These resources bring their experience and best practices to operational areas such as human resources, finance and accounting, process improvement and management.
Just as our clients’ companies are diverse collections of individuals with a variety of skills, law firms need to embrace and appreciate how non-lawyers contribute to the firm. Innovation is not one person’s responsibility. Nor can it be by committee. You must have people in place who recognize opportunities for innovation and who possess the aptitude to know when a new process or technology is appropriate to the opportunity. Everyone at the firm has a role to play in creating a culture of innovation.
Bobbi Basile: From a business perspective, creating new ways of delivering advice and services in real time, with greater efficiency and at a lower cost—because improving transparency and delivering timely legal guidance is critical in an environment where the speed and scope of business continues to accelerate with no slowing in sight. From a people perspective, employing innovative approaches to achieve diversity and inclusion objectives and improving access to justice—because it’s the right thing to do.
Sanjay Kamlani: Data analytics and artificial intelligence (AI), and more specifically, machine learning and robotic process automation (RPA) are the two most important technology innovations that are impacting both the business of law and the practice of law. Artificial intelligence tools enable lawyers to analyze enormous volumes of work product related data in a fraction of the time required for a manual review. In addition to reducing cost, this also enables lawyers to identify more quickly the most relevant precedent or negotiation position, which can result in strategic advantages for the client. For example, one of my clients has implemented a data analytics platform to track the results litigation attorneys have achieved broken down by motion, judge and settlement amounts. They have used the same tool to track how different law firms have negotiated terms in private equity deals in various circumstances. On the automation front, contract authoring tools are reducing by as much as 90% the time a lawyer spends drafting a set of transaction documents, and more law firms are automating repetitive, process level tasks performed today by more expensive associates.
How would you rank the following vectors of innovation from most important to least important: pricing, technology, process/structure?
Sally King: Reverse order: Process/structure, technology, pricing.
Leslie Brown: Process/structure; technology; pricing. Although all are equally important for different reasons and are related, if I have to choose and order, I’d say process/structure, followed by technology, and then pricing. In order to truly improve upon an existing approach, you need to understand the current process and identify ways to improve it. This might be via new technology or alternative pricing but you always have to begin with process and structure.
Bobbi Basile: Process/structure, pricing, technology. Not all innovation is enabled by technology; therefore, I’ve ranked it last (but not least important). Understanding the level of effort and cost of delivering a service requires an understanding of the process and resources supporting that process. In a normal business, pricing is an artifact of that analysis, and the legal industry is beginning to resemble a normal business (in some respects).
Sanjay Kamlani: This is a trick question because none of these vectors achieve results in isolation from the other two. Automating the creation of a set of transaction documents enabling them to be prepared in one hour versus six hours will create significant near term pressure for a lawyer if the lawyer doesn’t develop a new process for working with that automation tool and coming up with a new pricing mechanism (e.g., fixed price) that enables the lawyer to get paid for the expertise and time that is invested in the automated solution. But if I have to rank them, I would say technology, first; process/structure, second; and pricing, third. Let’s say you still try to charge for your automated contract on an hourly basis and now charge only for the one hour. In theory, you would become wildly competitive and win a lot more work from more clients. Without the technology, though, you would not have achieved anything. Of course, even the most powerful technology must be deployed properly to generate a positive return on investment. A successful deployment is largely dependent on how well a firm has modified its processes around a task. So, it’s rare that you can evaluate processes or technology, without the other being a part of the calculus.
Susan Lambreth and Mark Medice: These vectors are all primarily internally focused. As we mentioned, we see the vectors for evaluating any opportunity to innovate or any problem to solve by looking at how client-centric it is versus how much it will differentiate us.
comparisons were drawn with other (typically US) securities fraud settlements and the amounts achieved in those cases.
Read more of "Roundtable: Legal innovation":
Part I • Part II
To read the article in full, download the Summer 2019 Burford Quarterly.