Cultivating Innovation in a Risk-Averse Legal Industry

Innovation has always been synonymous with risk. In the past, pure technical ability — not innovation — was the key differentiator between firms in a traditionally risk-averse and inherently conservative industry.

Lawyers were trained to apply statute and the doctrine of precedent, and firms were valued for their ability to identify and minimise risk. Historically, law firms have been driven by efficiency and financial reward and, until recent times, featured a rigid management structure resistant to change.

The current competitive climate in the legal industry however, is the direct result of much disruption, including the introduction of advanced technologies, a shift of legal work from external advisers to in-house teams, and the rise of multidisciplinary practices.

To survive this change, it has become crucial for firms to innovate through the introduction of new products, services, processes or strategies that add value while reducing costs and inefficiencies, both for the practice and its customers.

We look at three key ways to drive a culture of innovation in today’s modern practice, and observe how some of Australia’s most progressive law firms promote innovation in a conventionally risk-averse industry.

1. Through greater collaboration within the firm

The traditional pyramidal law firm structure – where a large number of associates are hired and incentivised towards partnership through more billable hours (i.e. on the basis of time spent rather than outcomes) – requires an urgent rethink. A static, largely homogeneous management hierarchy actively discourages creativity and the generation of fresh ideas from ‘below’.

An organisation’s culture and its ability to evolve in the face of new challenges will, to a large extent, determine how innovative it can be. To encourage collaboration, firms should aim to hire more diversely and manage more inclusively in the sense that employees – whether they are fee-earners, business development, operations or admin – should be provided with an environment where they can approach management with new ideas without risk of retribution.

Management should also foster open communication channels and encourage staff to think proactively and flexibly rather than purely reactively.

2. Through greater collaboration with external service providers

While in the past a firm might have sought to guard its clientele from other legal and professional service providers, a growing trend has seen firms traditionally characterised as BigLaw actively collaborate with NewLaw firms to boost their menu of service or product offerings, or achieve a better outcome for their clients.

Technology is changing the practice of law, and by embracing digital technologies, firms can enhance cost-effective service delivery through increased automation of routine or low-level legal work to maintain a competitive edge.

3. Through greater collaboration with clients

In an era where clients are more discerning in their choice of legal service providers, agile firms are responding by coming up with fresh ways to enhance the client experience and add value. Co-creation — where clients and firms work together to create better products, services and ideas — is an increasing trend in the industry.

The rise in NewLaw’s popularity is, in one sense, a direct outcome of more innovative legal professionals reverse-engineering a new law firm structure on the basis of client frustrations with BigLaw – firms that are either unable, or unwilling, to abandon their traditional ‘full service’ offerings and billable-hour fee structures.

Lessons from Australia’s best legal innovators

So what has been done to drive a culture of innovation in a traditionally risk-averse industry? A look at some of Australia’s most prominent legal innovators – all winners of the 2016 Legal Innovation Index – supports the notion that collaboration and client focus are key to the organisational innovation that delivers value to clients.

Corrs Chambers Westgarth

Corrs Chambers Westgarth was named for Corrs Collaborate, a software-as-a-service (SaaS) platform that provides clients with intelligent, automated workflow capabilities, calendaring features and services to help clients better manage their own business processes and any legal services that might be part of it.

Allens

Allens developed Allens Arrow, an integrated and bespoke service that helps clients undertake major document production more efficiently and cost-effectively through a team of various specialists with backgrounds in computer science, consulting, project management and law. The service aims to drive significant efficiencies and cost savings for clients across a range of matters, from front-end transactional work and due diligence through to litigation and regulatory investigations.

Through a combination of low-cost document review, the application of artifical intelligence (AI) and other advanced legal technologies, as well as close integration with its lawyers, Allens seeks to provide its clients with greater cost reduction, certainty and timeliness.

Gilbert + Tobin

Gilbert + Tobin was named for developing a program to teach its lawyers and clients to code. The program included workshops held in collaboration with Coder Factory Academy and US smart contract expert Taylor Gerring, and involved 60 of Gilbert + Tobin’s lawyers and around 120 of its clients.

Simon Gilchrist, the firm’s innovation officer, said the coding lessons helped the firm’s lawyers understand the potential of new applications, such as blockchain and smart contracts. By involving both lawyers and clients in the learning mix, both sides get to examine how “decentralisation can improve legal processes”.

Herbert Smith Freehills (HSF)

HSF created Re-Imagine Legal – a collaborative framework developed with clients – which reviews how legal services can be provided in more cost-efficient ways that are aligned to clients’ business strategies and goals.

The framework recognises the need and opportunity to innovate HSF in the face of change. According to the firm’s chief marketing officer, Paul Bonomy: “There is much talk about the changing legal industry, and at its core this is driven by the constantly changing market conditions our clients operate in. It is their business needs that provoke us to embrace highly creative and innovative solutions to meet their legal challenges.”

While many in the legal industry claim to be innovators, true innovation means taking the core strengths the industry is historically known for – such as the ability to map out and mitigate risk and ‘outthink’ the opposition – and applying them to the organisational good, as well as the good of the client.

Groundbreaking firms – like the ones mentioned above – prepared to go against the grain and constantly innovate in terms of internal strategy, structure and process, and apply that same level of energy to finding cost-effective, efficient and fresh solutions for its clients, are emerging as the front runners in a disrupted legal industry that’s facing chaotic conditions.

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