Innovation in Law Firms Caroline Poynton

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Innovation in Law Firms

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Innovation in Law Firms Caroline Poynton

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Contents Executive summary.............................................................................................................VII Part One: Strategies and tactics for innovation Chapter 1: To innovate or not to innovate…........................................................................ 3 Is legal innovation really necessary?........................................................................................ 4 Round peg, square hole......................................................................................................... 6 The seven sources of innovation.............................................................................................. 6 Heedless chickens?................................................................................................................ 9 Chapter 2: The case for innovation................................................................................... 11 A tale of two law firms.......................................................................................................... 11 Trouble at the heart of the legal profession............................................................................ 12 1. The competitive environment............................................................................................ 14 2. Clients............................................................................................................................ 16 The challenges ahead.......................................................................................................... 17 Lunatics running the asylum.................................................................................................. 20 Chapter 3: Innovation in funding...................................................................................... 23 Funding option #1: The banks............................................................................................. 23 Funding option #2: The partners.......................................................................................... 26 Funding option #3: Innovate................................................................................................ 28 Chapter 4: Innovation in the face of competitive pressures................................................ 35 The changing in-house department....................................................................................... 35 The innovation opportunity................................................................................................... 37 The impact of outsourcing.................................................................................................... 38 Innovation in pricing............................................................................................................ 39 The problem of innovation in large firms............................................................................... 41 Chapter 5: Innovation and people..................................................................................... 45 A recruitment model in trouble.............................................................................................. 47 An alternative way: The contract model................................................................................. 48 On the brink of innovation................................................................................................... 49

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Chapter 6: The innovative leader...................................................................................... 53 Part Two: Case studies Case study 1: Addleshaw Goddard LLP – The pricing differential....................................... 59 Finding answers................................................................................................................... 60 Complementing change....................................................................................................... 60 Case study 2: Advent Lawyers – Innovation in new markets............................................... 63 The underlying model.......................................................................................................... 63 The rise of the fixed-fee business........................................................................................... 64 Case study 3: Baker & McKenzie – Innovation in people management............................... 67 Baker & McKenzie’s people agenda...................................................................................... 67 Employee engagement......................................................................................................... 68 Social mobility and diversity.................................................................................................. 69 The launch of BakerOpportunity........................................................................................... 70 Senior/board level commitment............................................................................................ 70 An honest approach............................................................................................................. 70 Case study 4: Berwin Leighton Paisner LLP – Enabling innovation...................................... 73 A leap of faith..................................................................................................................... 74 Taking charge of innovation.................................................................................................. 74 Case study 5: CMS Cameron McKenna LLP – Transforming the ‘back office’...................... 77 Case study 6: Eversheds LLP – Making a name for itself in innovation................................ 81 Striking out on the path to innovation.................................................................................... 81 The lessons of Tyco.............................................................................................................. 82 Into the future...................................................................................................................... 83 Case study 7: Marque Lawyers – Starting from scratch...................................................... 85 Deciding what we wanted to be............................................................................................ 85 An utterly different philosophical approach............................................................................ 87 Case study 8: Riverview Law – Shaking up the legal market.............................................. 89 The training ground............................................................................................................. 89 The right time to move......................................................................................................... 90 The fixed-fee proposition...................................................................................................... 91 Case study 9: Simmons & Simmons LLP – Delivering legal expertise the innovative way.................................................................................................................. 93

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Innovation in Law Firms

Expert analysis: Totum – Enabling innovation – the rise of the business services professional......................................................................................................... 95 The trend to outsource......................................................................................................... 95 Increased specialism enabling innovation.............................................................................. 96 Index................................................................................................................................ 99

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Executive summary Innovative law is an oxymoron. Innovation is the outcome of taking chances, being bold and standing apart from the pack. The great innovator must first be the bold risk-taker – for whom success is far from guaranteed. On the contrary, the whole legal system is predicated on certainty and risk-aversion. By their nature, lawyers look backwards, using precedent to advise clients on how to avoid risk, or get out of dangerous situations. And who wants a law firm to be innovative anyway? When a client chooses a law firm, it is not to enjoy the marvellous array of new service lines. It is to get the most solid track record of proven expertise delivered by lawyers with top-ranked credentials. Some compromise may be necessary to accommodate budgetary constraints, but ‘reassuringly expensive’ has long been the foundation stone for many a law firm’s client list. But, wait…take a look around and there is something strange happening with this most traditional of professions.

Innovation calls New firms are appearing, boasting slogans on their websites like ‘re-engineering the practice of law’, ‘law redefined’, and ‘taking a different view on legal services’. And it’s not just new legal businesses that are getting in on the innovation act. Since the Financial Times (FT) launched its ‘Innovative Lawyers’ awards in 2006, there have been a whole host of established firms clamouring for recognition. That magic

circle firm Allen & Overy won the FT’s top spot in the rankings for 2011 may be in no small part down to the fact that it funds a permanent innovation panel to support its more creative business initiatives. But where has this come from? Well, there’s no doubt that industry commentators have long been calling for a shake-up of the legal profession. In May 2010, for example, Professor Stephen Mayson, director of the Legal Service Institute, wrote: “Why are lawyers so slow to change, so slow to take up best business practice, and so slow to adopt innovation; and what is it we can do to forestall them from using the professional principles they hold dear (quite rightly) as a justification for resistance?1” In response, an increasing number of law firms seem keen to prove they are anything but slow. Indeed, Riverview Law, one of the latest new entrants to the UK legal market, uses Mayson’s questioning as the basis for its more innovative proposition – which is to provide an entirely new kind of legal service delivery business model. The firm combines solicitors and barristers who together provide legal services at a fixed fee. With the financial backing of global law firm DLA Piper, it has also made considerable waves in the press as a potential big player of the future.

All change This report examines the case for innovation in law. Using practical examples of latest law

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firm management strategies and client service delivery models, the report aims to characterise what is exactly meant by ‘innovation’ in the context of the legal profession. Innovation in Law Firms first goes behind the scenes to examine the internal and external pressures pushing law firms to change. Some argue that firms face nothing less than a perfect storm – as the impact of the economy, globalisation, changing client requirements and the lawyers themselves all demand a radical shake up of the way legal services are delivered. Beyond the theory, the report then looks at the practice. It examines the firms that have launched in recent years, as well as the alternative business structures (ABSs) that are now coming into play off the back of the Legal Services Act. These new kinds of legal business model provide clients with an all-important choice – and one that will undoubtedly impact even the largest of firms as they are forced to increasingly justify the expense of their elite offering. From internal restructuring – including outsourcing – to new client service packages and innovation in international expansion, Innovation in Law Firms will assess how the traditional legal business is using innovative strategies to win new clients, markets and talent. The report also looks at the obstacles that are currently preventing innovation, and examines how these might be overcome. In the larger business, this can be particularly challenging. The partnership structure does not necessarily lend to creative thinking and, even where it does, a truly innovative idea can quickly get lost in the sheer size and bureaucracy of a global business. Innovation in Law Firms uses best practice examples to suggest ways in which law firms are becoming more innovative – and asks how they are doing so while retaining and growing profitability.

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The report asks pertinent questions such as: 1. Do clients really want innovation, or do they just want cheaper legal services? 2. True innovation means taking risks. Can a business as risk-adverse as a law firm ever really be innovative? And how do law firms handle the inevitable uncertainties that innovation creates, especially where partners may resist change? 3. In recent years, certain firms have been labelled as ‘innovative’. But what does that actually mean in terms of their service offerings? 4. How can lawyers and partners themselves play a part in supporting their firm’s innovation? And why would they want to? 5. In the long term, how far will the innovation we are seeing today change the legal profession for good? For years, the need for innovation in the legal profession has been discussed. But that was theory. Now we face the reality of what innovation in law really means. With case studies from across the globe, Innovation in Law Firms presents the new paradigm of 21st century law. Reference 1. Mayson, S., ‘If ABSs are the Answer, What is the Question?’ at http://www.legalservicesinstitute. org.uk/LSI/LSI_Papers/Speeches/If_ABSs_are_ the_Answer,_What%E2%80%99s_the_Question_/