Law firm innovation: From idea to implementation

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I was honoured to deliver a 20-minute TED-style presentation last week at the 2013 Futures Conference, produced by the College of Law Practice Management and hosted by the University of Chicago-Kent Law School. I was hardly the main attraction — Ann Lee Gibson and Bill Henderson gave tremendous presentations, and people are still talking about Stephen Mayson‘s extraordinary keynote address. If you want to view any or all of these sessions, they’re available online (Stephen’s is especially recommended, despite its length). if you’d like to hear my thoughts and you’re short on time, please feel free to view the video.

But if you’re interested, I also prepared a companion article for the presentation, which I’ve reproduced below. As the title of this post suggests, the object of both my presentation and paper was to get us talking about actual, practical ways to make innovation happen inside a law firm. Please share your thoughts and your own recommendations for achieving this daunting task in the comments below.

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The great actor lay on his deathbed, and his friends gathered close to him. His best friend, holding his hand, leaned in and murmured, “You poor man. Dying is so hard.”

The actor’s eyes shot open and he glared at his friend. “Dying is easy,” he snorted. “Comedy is hard.”

In much the same vein, we can freely admit that the idea of innovation is easy — it’s the work of a moment to imagine any number of ways in which law firm operations could be improved. Implementation — the successful, sustainable execution of the innovation — that’s what’s hard. And the law firm landscape is littered with the remains of many failed innovations that couldn’t cross the bridge from idea to implementation. So how can it be managed?

To my mind, there are five steps in this process — and I’m sorry to report that each step is more difficult and challenging than the previous one. But it seems to me that the successful implementation of a legal innovation requires most if not all of these elements, in roughly this order. This is no small challenge — in fact, as we’ll see at the conclusion of this article, it’s literally an existential challenge for law firms today. But it can be done. And right now, in this environment, it has to get done.

1. Facts. Start with data. Evidence. Verifiable information. Business intelligence. We have a truckload of myths about lawyers and the legal profession, and we have no shortage of opinions and assertions masquerading as law firm strategies. What we need are facts. Specifically, you need facts about your law firm, data about your business. Most law firms know astonishingly little about themselves beyond what they spent, what they billed, and what they made last year. We need to know our firms inside out financially and structurally, both retrospectively and prospectively.Law Firm Publishing

Here’s an easy example: “What’s your cost of doing business?” What do you spend, what resources do you consume, to run your business and deliver your services? What did it cost you to serve this particular client or provide this particular service last year? What will it cost next year? We are barreling towards a legal services market where fixed prices for products and services will dominate. But without precise knowledge of your costs, and without a workflow process that ensures those costs are sustainable and predictable, you cannot name a fixed price that will generate a profit.

Here’s a harder one: “What do you actually sell?” I don’t mean that in the abstract sense of “value to clients” and so forth, although that’s obviously important. I mean: what, precisely, is your inventory? What do your clients actually give you money to accomplish? What are your deliverables? Not just: “Conducted a merger: $500,000.” What were the specific elements? Who or what did them? How long did they take? How much did they cost? Break down everything you do. No other business with the annual turnover of a law firm is so ignorant of its own inventory.

You need facts in order to properly diagnose your firm, to choose the right activities and make the right decisions for its future. But more importantly, you need them to get the attention of your partners. Show them that you have evidence for what you’re saying and doing. We’ve had more than enough faith-based decision-making in law firms. It’s past time to start making reality-based decisions instead.

2. A Catalyst. You need some sort of outside intervention, something to introduce a sense of urgent change. Law firms are not, shall we say, naturally given to proactive self-improvement. Most are what you might call “steady state”: self-contained environments, sealed off from outside influences. It takes a lot of pressure to break that steady state. Fortunately (for our present purpose only), you can have your pick of high-pressure catalysts right now. Falling revenue. Declining profits. Loss of a key client, partner, or practice group — choose one or more.

If you can’t find a catalyst, consider making one: Invite senior representatives of your five biggest clients, and the relationship partner in charge of each one, to a discussion panel in your office. Ask the clients to talk about the pressures they’re under, or the three things your firm could do that would make them break off the relationship, or three things they would handsomely reward your firm for doing. Bring the crisis home to the partners with the most to lose.

3. A Process: If you hope to actually accomplish something big and disruptive in a law firm, you need to have a clear, detailed process in place. How to do this? I say, start with a basic legal project management (LPM) template. Fire up those Gantt charts and lay out the following: “This is the goal. These are the steps. These are the milestones. This is the timeframe. This is the budget. These are the people. These are the performance expectations. These are when the expectations will be tested. This is the nature of the commitment we’re all making to this project.”

And then follow up, all the way through to the end. You don’t launch an innovative change process in a law firm the same way you launch a ship. You don’t smash the champagne bottle on the hull, call out “Bon Voyage,” and look forward to its arrival on the other side of the ocean. You walk it through, every step of the way, and see it safely through the storms. And that brings us to the next tough step:

4. Leadership. I don’t necessarily mean leadership from the top, the managing partner or CEO, although you certainly do need that. In my experience, though, these are usually the most forward-thinking, change-amenable people in the firm.

I’m talking more about the formal or titular leaders, the practice area heads and industry group chairs, as well as the informal ones, the heavyweights with the biggest books of business. In many firms, those people are not actual managers with leadership skills, and they have the most vested interests in the status quo. When they see change buzzing in from any direction, their first instinct is to grab a very big flyswatter.

What do you do in that situation? If and as possible, get those people out of formal leadership positions any way you can, and replace them with people who possess actual leadership skills and/or are on board with the change process. Buy the incumbents off with a bonus for retiring the leadership position, or give them a fancy title, “Strategic Counsel” or “Chair Emeritus” or some such. Lawyers love titles. I’d like to also suggest inspiring them to join the cause and help lead the change process, but I’m afraid my view of the average law firm partner is too jaded to allow for that.

There’s a larger issue here, however. Projects that ask lawyers to do something new, that require non-billable effort, and that will change the way they do their jobs, have a very high mortality rate in law firms. The reason is simple: non-performance by lawyers of requested or assigned duties is common, and few if any consequences flow from that non-performance. True law firm leadership is evidenced by both a willingness to place oneself at the collision point between what the firm needs and what its individual partners want, and an ability to survive that collision. And that brings us to our final ingredient: Evolutionary Road

5. Courage. Here’s the crucible. If you seriously want to get an innovation from idea to implementation in your law firm — no matter the size of the innovation, no matter the size of the firm — you must have courage. You must be ready and willing to absorb criticism, complaints, threats, and tantrums, and you need to be equipped to deal with them swiftly.

If you want to lead a law firm innovation, I recommend this thought experiment: fast-forward to the day, several months down the road, when the process is starting to really dig in and true change looks like it might actually happen. One of your key rainmakers walks into your office, closes the door, and says, “Let me make something clear. You can have all the fun and games you want. You can introduce as many little innovations as you like. But not in my department. Not in my practice. Try to push me on this, and tomorrow I’ll walk right across the street to our biggest rival, and I’ll take my top five clients with me, and the first you’ll hear about it is when you get their press release announcing the move.”

What do you do? Well, if you’re like most people in that situation, then it’s quite likely that — let’s put this delicately — you’ll cave. “I understand,” you’ll say placatingly. “I know how disruptive this is. We’ll exempt you and your department from this process.”  But I’ll tell you: if that’s going to be your response, you might as well have never even begun the process. You’ll have flushed away huge amounts of time, energy, resources and goodwill, while simultaneously poisoning the well for future innovation efforts, because you’ll have acknowledged openly that around here, innovations apply only to those without the power to evade them.

If you’re serious about innovation, and if you have the leadership and the courage on hand, here’s how I think you should — how you must — reply: “Thank you for coming to me with this. And thank you for all your valued contributions to this firm and its clients. But this is a law firm, and we’re a team. We want you on that team, but if this is how you feel, then you don’t need to wait until tomorrow. You can leave right now.”

I know that this is “unrealistic” and “impossible” and other terms people use to describe something they don’t want to do. The other partners will come screaming in, of course. “You can’t let him go. He’ll take X clients, deprive us of Y money. You’ve got to keep him here.” And you need to respond, “He’s never really been here. If he’s ready to walk out over this today, then he’ll walk out next week over something else, or next month when he gets a better offer, or when he retires next year, having mentored no one and developed no one to take over his practice. He’s going to leave someday; it might as well be on our terms.”

That’s a highly dramatic example, obviously. But implicitly or explicitly, that’s the threat (and the fear) that poses the biggest obstacle to change in many law firms. And it at least serves this purpose: if you have an idea for an innovation in your firm and you really want to see it happen, fast-forward several months after the launch, to the moment when that partner is in your office, issuing his ultimatum. If you don’t think you can stand up to that lawyer — if you or your partners lack the courage and leadership to draw that line — then I would recommend postponing any innovative efforts until you can.

But this is exactly why you need to start with facts, to make clear just what’s at stake; why you need a catalyst to demonstrate that the time is now; why you need a process to get the wheels moving and generate just this sort of crisis point. This is how you gain the commitment of leadership to put the interests of the firm ahead of the interests of its individual partners.

Because really, at this stage of the game, this isn’t just about innovation anymore. This is really about explicitly deciding a long-simmering, implicit debate over whether you’re running a farmer’s market of sole practices under one roof, or whether you’re running an actual law firm. Firms have put off dealing with this painful question for as long as they could, but the pain has only gotten worse the longer they’ve waited. The time has now come to finally deal with it.

Marshal your facts; identify your catalyst; lay out your process; call on your leadership; and summon your courage. That’s how innovations get done. It’s also how law firms survive, or don’t, in this environment.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.  

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4 Responses to “Law firm innovation: From idea to implementation”

  1. Dustin Cole

    Jordan, I am in the midst of wrestling two firms through exactly this type of change. You lay out the challenge – and obstacles to every firm brilliantly. I have already forwarded it to every key person in both firms.
    Thank you for boiling it all down so powerfully and effectively.

  2. Todd Richheimer

    Hi Jordan – I love this post. I recently left big law, practicing as a litigator, to innovate within the law. With a partner I founded http://www.lawfty.com. Our first product is a paralegal sharing program. Simply put, we provide high quality paralegals on demand (if you’re familiar, think Zipcar for paralegals). The part of your post that really resonates with me is the importance of data. It amazes me how many small and mid-sized firms fail to track the very metrics that could help them innovate and improve. I have found this especially egregious within the world of digital advertising. People throw money at internet advertising vendors (e.g., SEO/SEM) without any regard for click through rates, cost per click, cost for acquisition, etc. This is the first time I’ve read your blog, and I appreciate what you’re doing. I’ll be sure to check back frequently.

  3. Andy Clark

    Jordan,

    I saw your presentation at the COLPM conference and it was excellent – particularly the part about having the courage to see innovation through despite the inevitable opposition that will surface. I expect law firms will want to hire you to deliver the “our way or the highway” message to the “me first” partners who are all for innovation–but not if it means they have to be a part of it!

    -Andy

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