What should firms consider at the outset of creating an innovation team?
For those sold on the idea that their law firm needs innovation, they are confronted with decisions about how to get started, move forward and make an impact. This article sets out practical considerations to help those decisions, based on input from experienced law firm professionals from around the globe as well as inspiration from outside legal.
It’s important to remember that there’s no proven blueprint for success, and factors such as firm size, degree of commoditization, capabilities, market maturity, leadership, and culture will affect what’s best for each firm. Setting clear direction will also help manage expectations among stakeholders, appoint the right leader and provide the team with resources and focus to make winning choices along the way.
Visible progress as a priority
Not all leaders are in a position or want to start with the long-term. Rather they perceive it’s best to defer and instead check off some visible quick wins then figure the direction out later. In this case, law firms may move straight to appointing an innovation leader, announce the news, then work out the long-term plan once that person is settled in the role.
Pros are that firms check off two visible action items – person hired and social media blasts - and develop the long-term plan with the benefit of the innovation leader’s time and experience. This raises firm profile and awareness and sends a message to the market about the firm’s initial commitment, with the understanding that no innovations are yet underway.
Cons are that knowing the long-term plan and direction in advance would have been beneficial in the recruitment process, both to vet candidates by asking the right questions and attracting the right candidate by better demonstrating the firm’s commitment to driving true innovation. There is also the risk of receiving a few eye rolls as your audience perceives another firm focused more on the marketing.
The eye rolls can come internally too. Sana Halwani, Partner at Lenczner Slaght and Innovation lead, comments: “In a firm like ours, where the focus on innovation is new, an early step has to be building an innovation culture. Doing that requires showing internal stakeholders that innovation isn’t just talk, and early and real progress is critical to fostering that culture.”
Segments and priorities
Identifying and prioritizing which segments – whether by client, service or geography - the innovation team should focus on will help with alignment of the firm’s short- and long-term strategies. Such priorities steer the innovation team in the right direction both in terms of their proactive efforts to generate ideas and as they respond to ideas from any corner of the firm. This will be important as the innovation team makes progress and the floodgate of ideas pours in.
Conventional wisdom of catering to top clients’ pain points as a priority is not necessarily the best or only approach, as the principles in Clayton Christensen’s The Innovator’s Dilemma suggest. The premise is that traditional best-in-class organizations – bogged down with their cultural inertia and legacy systems - inevitably collapse because they follow the best practices: they cater innovations to high-value clients and move away from lower value clients. Incumbents’ demise comes about when new entrants with little to lose target the lower value clients, refine their offerings, and then move upmarket to eventually attract the incumbents’ high-value clients.
The legal sector may not be at risk of such dramatic disruption as seen in the tech sector and instead face a dialed back version, as discussed in the Harvard Law article Adaptive Innovation, by Ron Dolin and Thomas Buley. These principles do, however, raise this issue of whether there is an expectation to cater to the firm’s top clients or whether the firm is open to piloting and growing with the lower margin clients, services or geographies for longer-term strategic purposes, laying the seeds for moving upstream in future.
Low hanging fruit today v risky, unknown future v both
Going after low hanging fruit is an important priority among leaders, and for good reason: stakeholders need visible progress in a short timeframe to maintain and build confidence throughout the firm in both the innovation leader and team. But this should be balanced with the initiatives at the other end of the spectrum – the complex, long-term, risky, and unknown. Firms embarking on the long-term have more foresight to help prioritize quick wins with those that are laying the foundation for the future.
As Daryl Shetterly, Director of Orrick Analytics, a team using AI and other tools to disaggregate data-driven and scalable tasks commented:
“your strategic plan should include both quick wins and longer term firm-wide initiatives with broad impact. The quick wins are not merely symbolic but build momentum and set the stage for the more ambitious initiatives. And don’t ignore firm culture when building your strategic plan. Initiatives should be developed with an understanding that firm culture will affect your ability to execute, but also recognize that executing on firm-wide initiatives will drive firm culture.”
A great perspective on long-term strategy is McKinsey’s Three Horizons framework, which suggests innovation takes place concurrently along three time horizons:
H1 – Maintain - Focus is based on the current year and short-term concerns related to maintaining the core business through process innovation, likely using more mature technologies. In this horizon it’s all about execution and surviving for today.
H2 – Build - Focus moves to a mid-term outlook as firms build the business with new revenue-driving opportunities with new clients and markets. It’s typically with emerging technologies not yet used, likely with product managers taking successful ideas that came from the third horizon to market.
H3 – Create - Focus moves to a longer-term outlook with activities mainly around research, experimentation, and pilots. Here the team incubates entirely new ideas that don’t exist today and are potentially unprofitable for a period of time. The team creates new capabilities and new business to leverage, react to or counter disruptive opportunities. In H3 it’s all about searching for new opportunities for the future business.
Disruptive start-ups operate in H3 while traditional firms, with their legacy systems and cultural inertia, largely operate in H1 as they focus on the short-term and drive incremental improvements to the existing business.
Once established, the framework operates like a funnel with proven and profitable innovations moving from H3 to H2 to H1.
Robert Garmaise, McKinsey alumnus and Chief Innovation Officer at Fasken Martineau commented that he uses “the Three Horizons to set expectations about capabilities the firm needs to build now and seeds it needs to lay to be a player in all three horizons and extend the firm and build new revenues.”
In the article ‘To Succeed in the Long Term, Focus on the Middle Term” Geoffrey A. Moore set out the perfect analogy: “Like good farmers, managers see that they must simultaneously harvest the current crop, till the ground for next season, and investigate new crops for the future.” This is exactly how law firm leadership should view the role and direction of innovation teams.
Another perspective on where firms can go with innovation is in the idea of productizing their services, which can take place in three stages:
Automate services – During this stage, firms start by identifying opportunities to systematize and automate aspects of their services – typically starting with the low hanging fruit of tasks performed frequently and requiring little sophistication. At this stage they continue to be paid for time and materials. This is often where firms can get quicker wins and work towards a platform.
Leverage data – In this stage, firms can use data to improve upon and develop their services then possibly introduce new pricing models, typically per unit since automation is in place.
Monetize innovation – At this stage, firms can begin to get paid on an outcome basis and the pricing model can change for the resulting improvements or value provided.
Simmons & Simmons, an international firm with offices in the UK, is among the few firms operating in horizons 2 and 3 and developing new revenue streams through the productization and monetization of solutions. Simmons has done a great deal to break free from the traditional legal business model starting with online subscription services like their Navigator product suite over a decade ago.
Whether modeled after the Three Horizons or not, the firm’s innovation team is structured in a way that mirrors the concept. April Brousseau, Head of Innovation and New Business at the firm, explains how they’ve structured their department to reflect their commitment to innovation:
“Our department is made up of two teams: one team is focused on optimizing the delivery of existing legal services through, among other things, project management and process improvement. The other, my team, is responsible for diversifying the types of services we provide – we do this through the successful development of new products that complement our legal services as well as the ongoing promotion of the creative culture at Simmons.”
The image below summarizes the different perspectives.
Connection to senior leadership
In speaking to various innovation leaders around the globe, all are of the view that a connection to the firm’s senior leadership is critical. At a minimum, a firm’s leadership needs to know what the team is doing, but it is also crucial to the innovation team’s success that leadership serves as a strong champion of the innovation efforts. With the culture change required, such a connection sends a helpful and strong message throughout the firm.
Another reason for the connection is that innovation can affect all aspects of the business including:
This broad impact makes innovation a bit like a firm’s strategy and operations engine and puts it at the epicentre of change, which leads to many short- and long-term decisions and issues that will need to be managed.
Simon Wormwell, Chief Knowledge & Innovation Officer at Osler, adds “It’s about change and change needs champions. Unfortunately, in any law firm the partnership structure gets in the way even though we’re talking about the business operations. The role should be adjunct to the COO or Managing Partner – so if picking a team, it needs to be separated and at the right hand of leadership.”
Separate & defined structure
Firms serious about innovation are best to set up a separate and defined team with people and financial resources committed. Going back to the Three Horizons, if a new team is not carved out, true H3 and H2 innovation will constantly move to the bottom of the list and never get off the ground because the team will always focus on what is urgent today first, which will usually be H1 or not even on the innovation map.
This concept, best depicted in The Eisenhower Matrix (pictured below), is one we encounter every day as forces push us towards the not important/not urgent quadrant. Structure and discipline are required in order to dedicate any time to the important/not urgent quadrant, which is where innovation sits, particularly as we move up the horizons.
Kate Orr, Senior Innovation Counsel at Orrick, adds that a separate innovation team will also broaden the team’s perspective. “It is helpful for the innovation team to exist as a defined group, whether it’s called an innovation team or not. Sometimes innovation teams pop up in law firms within traditional business functions such as IT, but it can be challenging to fully support the client innovation priorities of a firm when you are committed to other functions as well. Having a defined team avoids a narrow view. It is also, of course, important to have a leader on the team who participates with the leadership of the firm.”
Dedicated resources with clear targets
It probably sounds elementary and obvious that dedicated resources with clear targets – at the individual and team levels - need to be set, but this does not always happen.
It’s all too common for the responsibility of innovation to be added to an existing full-time person’s role, whether the innovation leader or a team member. That can still be done, but for it to work there should be clear targets in place and the right proportion of existing responsibilities removed to ensure capacity to achieve targets. These targets should be tied to annual performance reviews, career planning and compensation. Without this connection, innovation will always come after what is rewarded, and the firm’s leadership risks being surprised about what is or is not accomplished.
Small and mid-size firms are less likely to be in a position to hire new resources to establish the team and will rely more heavily on existing people to pitch in. There are many benefits to this including a connection to the delivery of legal services and business functions, if done properly. It is not only the small to mid-size firms that may rely on existing resources. At Allens, one of the biggest and most innovative law firms in Australia, Anna Collyer is Partner and Head of Innovation where she dedicates 50% of her time leading innovation and 50% to the practice of law. Anna commented on these benefits and how this structure works at Allens: “I'm lucky that I have excellent teams in both my legal practice area and our emerging innovation program who can get on with the work with appropriate touch points where I can provide direction, guidance and sign off. While my days are often hectic, I find the combination means I can really keep in touch with what's important to clients, and bring this focus to all of our work in innovation.”
Whether establishing a team for the first time or revisiting what is already underway, law firm leaders will benefit from going back to basics and solidifying the long-term direction then putting in place a structure that sets the innovation team up for success in getting there. This includes defining what is expected of the innovation team. Is a focus on incremental innovation and the core business a success and all that’s needed? Or is there an expectation that a roadmap is developed, innovative ideas are generated and business is built over time? It also includes prioritizing segments leadership wants the innovation team to focus on to ensure alignment to the firm’s strategy.
The structure is best to include a strong connection to the firm’s leadership, a team separate from the other business functions and dedicated resources with clear targets embedded in plans, annual evaluations and compensation.
At Lenczner Slaght, a mid-size, corporate litigation powerhouse, we continue to consider these factors as we mature and expand from a focus on incremental improvements to the core business over the last few years to laying the foundation for the roadmap ahead, with the engine of our Innovation Hive™.
About the Author
Jessica collaborates with the firm’s Management Committee and business function leads to build out and execute the firm’s strategic plan. Originally focused on marketing and business development, Jessica now leads the firm’s client listening, innovation, process improvement, project management and pricing functions.
Before joining Lenczner Slaght, Jessica worked for nearly a decade at national law and accounting firms, progressing through a series of roles focused on providing value to clients and showcasing specific capabilities and services.