Innovation Has Failed Big Law, Legal Ops Can Help

Aug. 18, 2015, 4:05 PM

Editor’s Note: This post is written by the director of a global legal services firm who works with in-house legal teams to adjust process and reduce costs in litigation, investigations and other document-intensive matters.

By Dan Currell, Director, Client Solutions at Novus Law LLC

“New Law,” “Paradigm Shift” and the “New Normal.” All describe the morphing landscape of the legal profession as law firms and professions adapt, for the first time in more than 100 years, to unprecedented market change.

Legal service providers and their clients are experimenting with new agreements, pricing schemes and staffing measures as they strive to innovate the modern practice of law.

But history has proven that it’s possible for a major industry to engage in long periods of shallow innovations that don’t help very much, even when deeper, more powerful innovations are possible.

It’s helpful to consider the evolution of car manufacturing. In the 1950s, a time when highway death rates were at an historic high, product innovations among Detroit automakers focused largely on appearance. For example, flashy tail fins were all the rage — inspired by the look of World War II fighter aircraft — and sold many automobiles on “cool” looks alone.

[caption id="attachment_3966" align="alignleft” width="299"][Image “Photo by David Paul Morris/Bloomberg” (src=https://bol.bna.com/wp-content/uploads/2015/08/233061864-e1439910764535.jpg)]Photo by David Paul Morris/Bloomberg[/caption]

At the same time, lifesaving seat belts and headrests were generally unavailable. Seat belts weren’t present until the 1960s and 1970s, even though a group of physicians began to install their own lap belts 30 years prior. Meanwhile, 30,000 Americans died every year in car accidents. There were plenty of other so-called “innovative technologies” being applied to cars, but few actually made the product better.

Why did Detroit take decades to make a genuinely safer and better performing car? Because — “Nothing fails like success,” to borrow the words of the influential American author Steven Covey. The Big Three were on top of the world, leader of “the industry of industries,” a phrase coined in specific reference to GM and U.S. car manufacturing. Why try to improve?

Big Law can be a lot like the U.S. Big Three automakers. In Big Law’s heyday, particularly the 2000s, firms grew on nearly every measure. Just like the Big Three, much of Big Law made little effort to improve the product while the good times rolled. Law firms offer a service that looks much the same today as it has looked for decades — though the cost has gone up.

Legal media and professionals are quick to tout sincere, meaningful innovation in law today. But lawyers, clients and the legal ops executives leading the charge for true change should ask: Is it predominantly deep or shallow innovation?

Answer: Unfortunately for the legal profession, we still see a lot of shallow innovation.

Here are some of the most typical examples of innovation occurring in the profession today:

Alternative Fee Arrangements. AFAs are very popular, but shallow, because clients are accepting discounted and blended hourly rates as AFAs, rather than moving to value-based (non-hourly) fees that align incentives. If there’s relatively little difference in the underlying delivery of services and value, economic or otherwise, for the client, then it may be that the only thing different is how the same fees are packaged.

For AFAs to become a deep innovation, the actual legal work would need to be and feel different. There would be significant and noticeable changes in the processes used to deliver them. When a law firm uses alternative fees, do the process and final work product feel different from the client’s perspective? Is the client achieving lower costs, more predictable spending and better outcomes? If not, deep innovation has yet to occur.

Staffing Models. When firms push work down to less expensive lawyers, whether staff counsel, contract lawyers or a legal processing outsourcing company, the innovation is often shallow because they rely almost exclusively on labor arbitrage to deliver value.

For a staffing model to reflect deep innovation, we would expect very different kinds of people, with a wide variety of expertise and unique skill sets, not just similar people in a different zip code. For example, a new staffing model could include law enforcement experts, investigators, librarians, technologists, data analysts and project managers, many of whom may be more qualified to do certain types of work on a matter.

Project Management. Whether promoted through technology, a legal consultancy or in-firm, PM is often a shallow innovation because professional project managers are rarely fully in charge of a matter. Too often, project management systems and software go unused.

If there were deep innovation, another sign would be project managers leading engagements, and lawyers, including partners, contributing their expertise, similar to the commercial construction and aerospace industries.

Good questions to ask law firms or other legal service providers with proposed project management programs are: Who runs the projects? Is the scope defined at the outset? Are the specific metrics for the schedule, budget and status of matters defined and shared weekly? If not, deep PM innovation has not evolved.

In short, innovation is almost always shallow when a law firm, in-house department or other legal service provider hasn’t precisely defined its processes.

Toyota Motor Corporation revolutionized the motor vehicle industry with the Toyota Production System — the leading example of lean production in the world. This system shifted the focus from individual machines and their utilization to the flow of product through the total process. The result was a better car — not on the shallow measure of appearance, but on the deep measures of reliability, safety and total performance.

[caption id="attachment_3969" align="alignleft” width="323"][Image “Photo by Akio Kon/Bloomberg” (src=https://bol.bna.com/wp-content/uploads/2015/08/217966210-e1439912437181.jpg)]Photo by Akio Kon/Bloomberg[/caption]

Toyota did not simply promote technology, different parts, nor smarter people. It had better process: a vastly, constantly and relentlessly better process. With it, Toyota kicked off a spasm of industry-wide competition on deep innovations that changed the world.

In 1950, the American automobile death rate was 8 deaths per 100 million miles. Now, it hovers just above 1 death per 100 million miles. That is the result of deep innovation – an undeniable improvement in core product performance. The legal profession has not experienced improvements of this kind in the past 100 years, if ever. That’s because law has never truly taken process (the intersection of science and art) seriously — until now.

Law can experience deep innovation because legal processes are now being defined so that they can be transformed. As a result, legal services are being designed to better identify and meet customer needs.

With this development, law’s “tail fin” period is nearing its end and process innovation has begun, with legal ops executives and new types of legal service providers on the vanguard. For those who know how, and whose business models will permit it, let the deep innovation begin.

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