Legal

Three ways to organize for innovation in a law firm

More and more law firms are jumping on the innovation bandwagon. Meantime, many law firms are still on the fence.  In this blog we compare three ways to organize for innovation in a law firm. Depending on the size and ambitions of your firm, you may prefer one approach over another.

Organizing for innovation

Before diving into three ways to organize for innovation, let’s quickly define what we mean by innovation. Law firms are service firms. Innovating services entails a variety of things. It can be new:

  • Service concepts (for example the offering of automated compliance audits)
  • User interfaces (for example the offering of an online kiosk to download standard contracts)
  • Service delivery systems (for example the implementation of a document management system)
  • Technologies (for example use block chain to connect a wide partner network or quickly establish trust relationships in a distribution chain)

Organizing for innovation means that you develop and implement the new service concepts, user interfaces, service delivery systems or technologies – or combinations thereof – in your practice.

Generate new or boost existing revenue streams

Organizing for innovation is not giving someone a pat on the back for out of the box thinking or writing blogs about what is possible. While laudable activities, innovating is about actually changing how you practice law; about developing and implementing new services that benefit your clients and the law firm. That is, bringing ideas to practice and generating new or boosting existing revenue streams. Just talking about ideas for new services is not enough.

There are three options to organize for innovation:

  1. In an innovation lab
  2. In a new firm or a new entity that is part of an existing firm
  3. With an innovation support function

The innovation lab

Innovation labs are how most of us think about innovation. From the Bell Labs to the Skunk Works of Lockheed Martin, innovation labs have a reputation to produce innovative solutions to pressing problems.

In the legal industry, Baker & McKenzie recently announced the opening of their innovation lab, the Whitespace Legal Collab. It is headquartered in Canada, as the Prime Minister of Canada, Justin Trudeau, proudly announced.

The goal of this lab is to allow for face-to-face collaboration between Baker McKenzie attorneys and leaders in business, government, academia and not-for-profits to address complex global challenges at the intersection of business, law and technology.Many of the collaborations will center on innovations related to data privacy, smart cities, and other data-related challenges in a conducive workspace.

It certainly is very prestigious to have an innovation lab. It is also clear that such a lab creates innovative solutions.

However, we know from our research that it is difficult for innovation labs in service firms to generate sufficient revenue  to sustain themselves over time. One challenge is the high costs of maintaining an innovation lab. Another challenge is transferring the state-of-the-art knowledge from the work floor to the lab and then back. Together, these issues make that innovation labs are rarely effective in service firms. In other words, don’t expect an innovation lab to be a revenue generator for the firm. It will be a cost center.

The innovation lab summarized

Pros:

  • Prestigious
  • Work with innovation champions in and outside the firm to develop novel approaches
  • Build on the existing reputation and capabilities of the firm

Cons:

  • Costly to maintain
  • Difficult to make revenue generating and sustainable

Most suitable for:

  • Large law firms who can bear the costs of such a lab

The new firm or entity

Instead of trying to work with and build on what the firm already has – as is the case with Baker & McKenzie Collab – legal technology start-up Atrium decided to start anew. Incorporated as a law firm, Atrium presents itself as the law firm of the future. Their goals is to create a law firm full of technology-turbocharged lawyers who can offer clients more efficient services for a single, transparent bill.

Instead of a new firm, you can also set up a new entity that is part of an existing firm. The requirement is that you start anew, with no prior expectations or because-we-have-always-done-it-that-way dogmas.

Using a new entity to innovate has several advantages. First, there is plenty of room to experiment. The  clients expect innovative solutions, otherwise they would not have knocked on the door of the new entity. Collaborate with these clients. Together, design, develop, and implement new service concepts, new user interfaces, new service delivery systems, and technologies. Second, you don’t have to break something down before creating something new. Third, the firm or entity will attract and maintain talented lawyers that embrace innovation.

Downside, is that you will have to start from scratch. Starting from a blank page without existing clients, services, processes, and revenues  is challenging. It will take time to establish the reputation of the entity as an innovative and trustworthy law firm.

The new firm or entity summarized

Pros:

  • Start with a blank slate
  • Ability to hire the talent that is hungry to create, develop, implement, and use novel legal approaches to serve clients better
  • Attract clients who expect innovative solutions and novel services
  • Opportunity to innovate with the whole firm, not just in pockets of the organization

Cons:

  • Risky
  • It takes significant time and resources to become an established firm

Most suitable for:

  • Young law firms
  • Mid-size law firms in decline – who want to break away from the current mold

The innovation support function

Instead of an innovation lab or a dedicated entity, the innovation support function offers the opportunity to innovate within the walls of the firm.

The concept behind the support function is simple. In law firms, the state-of-the-art knowledge resides at the work floor, among the most busy and talented lawyers. These ambitious lawyers have ideas on how to innovate. However, they often lack the time and knowledge to transform their ideas into new service concepts.

The innovation support function offers new service development training and support to these lawyers. That is, the innovation support unit enables innovation champions to bring their ideas to practice in less time, with less risk, and a larger return on investment for the firm. The function does not engage in the execution of these projects, like an innovation lab would do. Initiating, developing, implementing, and diffusing ideas is left to the innovation champions. The support function provides the processes, training, coaching, resources, etc to make them successful. The innovation support function is also responsible for optimizing the innovation process.

While the innovation support function may sound like the ideal solution to engage your talent and explore their ideas at minimum costs, beware. Setting up such a support function requires effort and dedication, just like the to other two options. Teams need support to develop their new service concepts and bring them to practice. Without the deliberate intent to fund and support these efforts, the innovation support function will be one frustrating exercise for all those engaged.

In other words, starting an innovation support functions creates expectations. The firm needs to be willing to invest in and pursue the innovation efforts that are put forth by the innovation champions with help of the innovation support function.

Another downside of the innovation support function is that it makes it more challenging to develop truly disruptive solutions. Solutions that negatively impact the current capabilities and thus value of the firm. For product firms the support function model is therefore not very attractive. However, for law firms, new services rarely will be very disruptive in nature. After all, even next generation and breakthrough novel service concepts deal with existing legal concepts.

The innovation support function summarized

Pros:

  • Easy to make a start
  • Great way to engage existing talent and build on their passions, capabilities and expertise
  • No major upfront investments needed
  • Possible to create new revenue streams and generate sufficient return on investment to make the innovation support function sustainable in 1 to 2 years

Cons:

  • Not suitable for disruptive new service concepts
  • Without the full support of senior management, innovation champions get frustrated in their innovation efforts and these talented individuals will exit the organization

Most suitable for:

  • Mid-size to large law firms that currently experience limited to moderate growth

Organizing for Innovation

At Organizing for Innovation we gladly assist you with any of the three ways to organize for innovation in your law firm.

We specialize in building innovation support functions. Build on our expertise, experience, training courses, and tools to successfully set up your innovation support function. Get started with our 1-day workshop.

Interested in learning more, visit our website Organizing4Innovation.com or contact us directly.