Innovation Isn’t Just for Startups – How Traditional Law Firms Can Embrace Change

Nick Quil | April 13, 2016

There is no denying the fundamental shift that is (and has been) underway in the legal industry. As a result, we are witnessing cutting-edge law firms striving to adopt more sustainable business models to meet evolving client needs. While it’s important to discuss theories behind why the legal market historically resists adapting to change, we believe a greater opportunity exists in focusing on how industry leaders can respond to and achieve success in today’s environment.

First and foremost, change management efforts should stem from an immediate or future client need. As corporate counsel continues to put pressure on law firms to increase predictability and value, a unique opportunity exists for firms to implement new capabilities and demonstrate innovation. In an effort to accelerate the pace of change across the legal industry, we’ve outlined the following best practices.

Implement and foster new capabilities

Build out capabilities in a ‘safe’ environment – For law firms to spark innovation across the board, forward-thinking leaders should cultivate an environment that supports creativity, proactive thinking and continuous growth – and reward employees for taking initiative to evolve and expand capabilities to meet client needs. Any new offerings that arise out of these incubation periods should be communicated throughout the firm to ensure employees are motivated to foster innovation and adopt change.

Create incentives and reward contributors – The key to any type of organizational change is ensuring there are incentives for people to change their mindset and actions. With respect to innovation, individuals should be rewarded for contributions across the three stages of a new idea: generation, implementation, and successful/outcome of the idea. Rewarding employees who embrace innovative practices can propel the firm’s capabilities forward while maintaining a highly productive environment.

Hone project management and analytics capabilities – Whether it’s implementing business intelligence platforms or revamping client service models, top administrative leaders should develop a vision and corresponding team to bring practice group leaders up to speed. Today’s most innovative firms are those that are capitalizing on project management as both a skill and tool.

Monitor Investments

Ask fundamental questions – Every law firm should ask themselves some key questions before proceeding to implementation.

  • How do we incubate ideas and prioritize initiatives?
  • How do we define “success” and “failure?”
  • How do we gauge and monitor investments?
  • When should we accelerate or increase an investment? What are the criteria for sun-setting?

Set aside profits each year – Profits can be invested in internal projects as the organization continues to evolve. With the understanding that not every investment will result in a transformative win, law firm leaders should calculate what level of risk they are willing to assign to each project and adjust the level of investment accordingly. Similar to corporations that are setting aside a specific percentage of profits each year for R&D, law firms should be including funds for innovation in their annual budget process.

Develop an investments roadmap – Create an ROI timeline. This allows the project manager to track progress while determining how the firm can learn from “failures” and make adjustments to major investments if needed.

Encourage a culture that embraces change

To ensure the new capabilities are successful, C-suite executives must foster a culture that supports integrating transformative innovations within the firm. While leadership may not be heavily involved in executing every innovation initiative, it’s essential that they remain committed to and supportive of any changes their firm undergoes. Whether it’s a one-off project or a strategic move, change management will only occur if top executives support the initiatives and effectively communicate them to the firm.

Rethink your client service model

Since client needs are rapidly evolving, fee structures and offerings should be reassessed before moving forward with any other strategic initiatives. Keeping client demands top of mind, law firms are driven to be more creative, innovative and profitable in how they price and deliver their services. Some examples of this innovation that we’re seeing in the legal market today include adjacent business offerings, alternative fee arrangements, in-house incubators and venture capital arms. Each of these models are supported and handled collaboratively by teams of attorneys who work together to deliver the best possible service.

There are many different shades of innovation, and unfortunately they aren’t all achieved with a clear cut, one-size-fits-all approach. But we do know that the legal industry needs more innovators – meaning it’s essential to understand how innovation and creativity can be applied to legal practices and client services. So how can we move the needle on actually putting innovation into practice? HBR Consulting continues to explore this theme through our industry surveys, consulting services and speaking sessions, most notably at our annual Legal Lab event.