Units of Analysis and Adopter Types (007)

By Bill Henderson on May 21, 2017

Post 007 is another building block in our understanding of diffusion theory. This sounds like the spinach of blog posts. And perhaps it is. To make high quality decisions in a complex, rapidly changing legal industry, we need a high quality theoretical lens. Others have done the hard part — building and validating a useful theory over a period of decades. The purpose of these foundational posts is to understand diffusion theory well enough to apply it to the legal context.

Part I of this post covers units of analysis. Part II presents composite sketches of the five adopter types. Before getting to these new topics, however, let’s briefly review the previous foundational post.

004: Law is a Social System

Post 004 introduced readers to the key insight that innovation diffuses through a social system. The social system has five segments: (1) innovators (~2.5%), (2) early adopters (~13.5%), (3) early majority (~34%), (4) late majority (~34%), and (5) laggards (~16%). With the exception of innovators, the decision to adopt an innovation is based upon the observed experiences of the adjacent reference group. Imitation and copying play a much bigger role than analytical or abstract reasoning.

This raises a foundational question — does diffusion theory apply to the legal profession? The short answer is yes. See Post 004. Lawyers very much value the security of the pack, albeit we may be reluctant to acknowledge its influence on our own judgments. Why? Because it cuts against our self-identity as a smart person. We want to believe we are smart enough to identify the right answer ahead of others; yet we don’t want the risk and exposure of being separate from the crowd. Hence, a heavy veneer of reason is layered onto non-adoption decisions that are primarily driven by social proof. All of this noise invariably slows the pace of innovation for the entire profession.

Yet, here is the crucial insight: In law as in other social systems, the protestations and resistance vary along a continuum. If you want your innovation to be adopted, don’t waste time trying to convert the early majority, late majority, or laggards. You have only one audience that matters — early adopters.

I. Units of Analysis

Part II of this post presents composite descriptions of adopter types. Each description is written as if the adopter were a person, which makes them relatively vivid and easy to understand. Yet, in the legal industry as in other complex parts of the economy, innovation often requires the engagement and support of an entire organization. Therefore, before getting into adopter types, we need to cover a technical concept called “unit of analysis” (or, for diffusion research, “unit of adoption”).

A. Organizations

People adopt innovations (e.g., telephones, personal computers, smartphones, etc.), but other valuable innovations often depend upon successful adoption by businesses (e.g., health benefits, enterprise software, flex-time) and/or governments (e.g., seat belt laws, environmental legislation, smoking bans, gay marriage).

When the unit of analysis is an organization rather than a person, the dynamics surrounding the innovation decision (to accept or reject) are much more complex.

To illustrate, imagine the AmLaw 200 grouped along the adopter continuum. A handful of firms would be innovators (~3 – 7) while others would be laggards (~30 – 36 firms, or 1/6 of market). Yet, the AmLaw 200 social system is dependent upon a separate social system of corporate clients who also fall into the five adopter types. For an innovator law firm to be successful, it has to find its counterparts among corporate legal departments — i.e., clients willing to pay for something promising even though its new, novel, and relatively untested.

If left to random chance, this complex dialogue will be a fairly rare event. The 2.5% innovator law firms need an audience with the 16% innovator-early adopter clients. Without awareness of diffusion theory, the mathematical odds are bleak (2.5% x 16% = .4% of buyer-supplier relationships). Once the right pairing occurs, the parties need a dialogue of sufficient depth to plan, build, and execute a successful innovation that benefits both buyer and supplier.

After that, and only after that, will the innovation be picked up and copied by the rest of the social system. This is why the blue part of the diffusion curve is so crucial toward making everything else go.

B. Organizational Innovation is Harder

It is extraordinarily difficult to be a true innovator organization, particularly within the legal industry. This is true for several reasons.

Wrong Analytical Frame. Legal organizations are social systems made up of people and subunits that track the five adopter types. Yet we lack this awareness. So when promoting an innovation, we place excessive faith in reason and data. After all, everyone is a highly educated professional. Our lack of progress is then blamed on the lawyer stereotype — risk averse, conservative, too focused on precedent, bad at math, etc. — rather than the possibility that we are talking to the wrong group of lawyers. If we are pitching reason and data to early adopter lawyers, things will go better.

Consensus Decision Making. Legal service organizations tend to make organizational change decisions through committees. That is challenging enough. But the composition of these groups are often designed to manage prideful and contentious lawyers. Optimizing innovation is not even on the table. Think I am just talking about law firms? Not true. David Cambria, Director of Global Legal Operations at ADM, and Jeff Carr, GC of Univar, often use the term “MPR” (massive passive resistance) to describe the most common reaction to in-house change efforts. This is fixable, but it takes time and planning, as the politics can’t be ignored.

True Innovators Often Lack a Brand. I have seen this fact pattern many times. Innovator sees a better way while working inside a large industry leader. The better way is presented to colleagues who cannot yet grasp the advantage. Innovator leaves to form a legal start-up. Yet, the innovator fails to fully appreciate the difficulty of making sales (or even getting a meeting) without the halo of an established legal brand. In turn, the sales cycle lasts forever plus three days. Some innovators have overcome this hurdle (e.g., United Lex, Pangea3, Axiom Law, Radiant Law), and more will in the future. But it’s a brutal road.

There are several more challenges, but that is enough for now. Suffice it to say, it takes tremendous knowledge, skill, persistence, and leadership to create an innovative legal organization. What we are trying to do here is create a reliable roadmap — that is the purpose of all this empirically grounded theory.

C. The Consumer Market is Different

The market for legal services has two major segments: individual clients (people) and organizational clients (mostly corporations). See, e.g., Deborah Merritt, Two Hemispheres; Bill Henderson, Lawyers for People Versus Lawyers for Business. In the smaller PeopleLaw segment (roughly 1/4 of the US legal market), the unit of adoption is a person with a legal problem. If the person can understand the innovation and the relative benefits are fairly large, the innovation will take hold. Advertising and marketing can often speed this up. This is the market space occupied by LegalZoom, Avvo, and Wevorce. The diffusion analysis is relatively straightforward and conventional.

However, organizational clients account for 3/4 of the legal services market. Further, the organizational market is not merely buyers and sellers — a complex supply chain is coming into being with managed service providers, legal tech companies with workflow and automation offerings, and various sourcing consultants. For now, however, it is enough to say that innovation roadblocks are more formidable when all the buyers and sellers are groups of lawyers accustomed to consensus decision making.

II. Adopter Types

The descriptions below draw extensively from Everett Rogers, Diffusion of Innovations (5th edition 2003), particularly pages 280-290. I hope you ask yourself the question, “Within the legal social system, which adopter type am I?”

Innovators place a high value on venturesomeness. Their interest in new ideas leads them out of conventional peer networks into more far-flung social and professional circles. “Communication patterns and friendships among a clique of innovators are common, even though the geographical distance between the innovators may be considerable.” This is certainly true in law. The early days of Legal OnRamp revealed the broad geographic dispersion of legal innovators and their desire to communicate with each other. The LOR chat boards circa 2007-2009 were routinely populated with lawyers from three or more continents.

One of the reasons for the far-flung connections is to better accumulate and understand complex technical information that can be applied to difficult problems. Rogers notes that the “innovator must be able to cope with the high degree of uncertainty about an innovation at the time that the innovator adopts” and also be comfortable with occasional failures and setbacks. Although innovators are generally viewed with skepticism by mainstream peers, they play “a gatekeeping role in the flow of new ideas into a system.” (pp. 282-83).

Early adopters are much more integrated into the social system than innovators. They are often the opinion leaders and thus are influential in getting others to act. As compared to the early and late majorities and the laggards, early adopters tend to be more intellectually curious, favorably disposed to science and data, comfortable with abstraction and uncertainty, and more socially and professionally ambitious.

The early adopter is also aware of his or her favored standing among peers. Per Rogers, the early adopter “knows that to continue to earn this esteem of colleagues and to maintain a central position in the communication structure of the system, he or she must make judicious innovation-decisions. The early adopter decreases uncertainty about a new idea by adopting it, and then conveying a subjective evaluation of the innovation to near peers through interpersonal networks. In one sense, early adopters put their stamp of approval on a new idea by adopting it” (p. 283).

In the logo of Legal Evolution, innovators and early adopters are both represented by the same light blue color. This is because their relationship is fundamentally different than the relationships between other adopters. See Post 004.

The early majority adopts innovations faster than the average member of the social system. Although they interact frequently with their peers, the early majority “seldom hold positions of opinion leadership in a system.” Yet, because of their position in the adoption process, they are the group that sets off the tipping point for eventual mass adoption. Rogers quotes Alexander Pope to describe this group: “Be not the first by which the new is tried, nor the last to lay the old aside” (p. 284, quoting An Essay on Criticism (1711)).

The journalist Geoffrey Moore has characterized the transition between early adopters and early majority as “crossing the chasm.” Moore’s context is primarily Silicon Valley high-tech companies selling enterprise software and similar complex products to corporations.
See Geoffrey Moore, Crossing the Chasm pp. 20-23 (1^st ed. 1991). Moore’s analysis is quite relevant to law. More on that later.

The late majority is skeptical and cautious. They generally will not adopt an innovation until “most others in the system have done so” (p. 284). By this time, the decision is likely to be either a matter of economic necessity or to avoid the discomfort of being outside the norms of the social system.

Rogers notes that socio-economic status tends to be correlated with adopter type. Thus, the late majority may have fewer resources to take risks and thus may prefer to wait and learn from the experience of others. Yet, the late majority’s risk averse mindset by be less an effect of fewer financial resources than its cause. Rogers characterizes this group as followers because the “pressure of peers’ is usually a necessary ingredient to get them to adopt (p. 284).

Laggards are traditionalists who tend to make sense of the world by reference to the past. Among the five adopter types, they have the fewest connections to others. Many laggards are “near isolates in the social networks of their system” and “interact primarily with others who also have relatively traditional values.” Yet, their slow adoption is not merely a function of limited connectivity. Laggards “tend to be suspicious of innovations and change agents.” Thus, once made aware of a new idea or methodology, their time period for adoption is significantly longer than others (pp. 284-85).

Rogers acknowledges that late adoption may be rational for those in a social system who can least afford to bear the cost of failure. Likewise, laggard “might sound like a bad name” though no disrespect is intended by diffusion researchers (p. 285). Rogers observes that a negative connotation would attach to any label associated with the last group to adopt. This is because the rest of the social system tends to view innovation more favorably.

The next Diffusion Theory post will discuss the levers that influence the rate of innovation adoption.