Earlier this week came some unexpected good news for the legal ecosystem. Dan Linna of Michigan State Law unveiled the Legal Services Innovation Index, which provides some very interesting and compelling measures of innovation by: (1) country, (2) practice area, (3) type of innovation, (4) firm size / global segmentation, and (5) individual law firm.
The Legal Services Innovation Index is a project of MSU Law’s LegalRnD, which is a mission-based research center focused on innovation in legal services. The Director of LegalRnD is Dan Linna, a legal education doer with a multi-faceted background. Prior to joining MSU in 2014, Linna was an equity partner at Honigman (a Michigan-based AmLaw 200 firm); and before law school, he worked for several years as an IT manager and consultant. Over the last few years, Linna has been instrumental in organizing legaltech meet-ups in both Michigan and Chicago.
What I admire most about Linna, however, is his ability to mentor young people so they have the confidence and focus to build great legal careers. See, e.g., LegalRnD’s application of Lean principles to student employment outcomes. The Legal Services Innovation Index is justifiably going to get a lot of attention from the entire global legal services industry — and remarkably, it was substantially built by law students working under Dan’s direction.
Zero to One
In the project Overview, Linna goes to great pains to explain that the Legal Services Innovation Index is a “Phase I, Version 1.0” release that should be viewed as preliminary. Linna writes:
I’m releasing Phase 1, Version 1.0 of this index to add to and improve legal-industry discussions about legal innovation and technology. My inner perfectionist–a voice empowered during my journey to equity partner in an Am Law 200 law firm–would prefer that I conduct far more research and complete Phase 2 and Phase 3 before releasing anything. But this type of perfectionist thinking is itself a barrier to legal-services innovation. Instead, I will follow the Lean Startup innovation process [example online here] … striving to continuously improve our legal industry discussions about innovation and technology.
Linna notes that the project was inspired by LSC President Jim Sandman’s speech at the 2016 CodeX FutureLaw Conference. Sandman argued that if law firms were ranked and assessed by their use of technology rather than just revenues and profits, we’d find ourselves in a virtuous competition that could potentially redound to the benefit of those who lack access to legal services. (Even if the connection between BigLaw tech and PeopleLaw access is attenuated at best in the year 2017, it’s nonetheless a better vision than pure financial metrics.) When Sandman repeated this call at the 2017 CodeX conference — thus revealing that nothing happened over the past year — Linna committed himself and his Center to the Index project.
Tactically, it’s wise for Linna to be cautious about what the Index data mean — he describes Phase I, Version 1.0 as a “minimum viable product” that will improve with user feedback. Regardless, for the rest of us, it is hard to overstate the importance of this first iteration. Basically, Linna and his students have moved the state of the art from zero to one. On Monday, conversations about legal innovation took place in a data vacuum. On Tuesday, we had a system of measurement and classification and corresponding innovation data on 263 of the world’s biggest law firms (that is how many unique firms are in the Am Law 200, Canadian Top 30, and the Global 100).
To their credit, Linna and his crew are trying to frame the conversation as “How can we make this better?” Regardless, even in its current form, the Index is bound to be extremely influential. Seeing where your firm stands relative to other firms is going to change both conversation and behavior. This is the psychological phenomenon of reactivity, which can be profoundly powerful. See Espeland & Sauder, “Rankings and Reactivity: How Public Measures Recreate Social Worlds,” 113 Am J of Sociology 1 (2007) (discussing law school rankings as an example of reactivity with far-reaching social and institutional effects).
What is the Innovation Index?
(1) Innovation Catalog
The Innovation Catalog captures legal-service delivery innovations that are currently being implemented by law firms in the AmLaw 200 (US-headquartered firms based on gross revenues), the Canadian Top 30 (based on attorney headcount), and the Global 100 (122 firms on two lists ranked by revenues and headcount). Innovations are grouped into three categories — products, services, and consulting. The results are presented using Tableau, a popular data visualization tool.
Below is the graphic showing the number of innovation offerings based on the law firms’ home jurisdiction:
Why is the UK in the leader’s position? Some would argue it is because the UK’s domestic market became saturated 20 years ahead of the US market, forcing deeper strategic thinking on how to adapt and grow. Another factor might be the residue of lockstep compensation, which tends to create and incentivize a longer time horizon. Note that these figures have not been “normalized” — i.e., adjusted for the size of the home market. Because the UK market is much smaller, it makes the UK’s leader position all the more interesting. Although elite U.S. law firms appear to be running away with the most lucrative financial services work, see Simon & Bruch, “The Strange Tale of How Elite US Firms Surpassed Their UK Counterparts,” Law.com (Aug. 2017) (three-part series), the chart above likely reflects the larger and more contested market for operational legal work.
Below is another Index chart that breaks out innovations by tool or discipline. The range and diversity of innovations is striking — this is not a market where nothing is happening.
Where the rubber meets the road, however, is a table that breaks down all the data at the granular law firm and innovation level. See Catalog by Law Firm (last tab). To date, only three firms have one or more innovations in each of the products, services, and consulting categories: Allen & Overy (UK), DLA Piper (US), and DWF LLP (UK). US-based firms with several innovations include: Duane Morris (7), DLA Piper (7), Fenwick (6), Ogletree Deakins (6), Norton Rose (5), Littler Mendelson (5), Bryan Cave (4), Hogan Lovells (4), and Seyfarth Shaw (4).
One of the most interesting features of the firm-specific table is the inclusion of strategic partners. These companies are necessary to solve difficult technical problems or resource gaps:
- Intapp (with Ashhurst (UK))
- Deloitte (with Allen & Overy) [related to contract management and compliance]
- Elevate (with Corrs Chambers (AU))
- HighQ (Corrs Chambers (AU), Norton Rose)
- Kira (with Clifford Chance and DLA Piper)
- Neota Logic (with Clifford Chance, Foley & Lardner, Hall & Wilcox (AU), Hive Legal (AU), Husch Blackwell, Littler Mendelson)
- Thomson Reuters (with Ackerman, Clifford Chance, DWF LLP, Nixon Peabody) [mostly managed service research support]
(2) The Law Firm Index
The Law Firm Index is based on Google Advanced searches for indicators of innovation on law firm websites. The methodology section gives the precise search terms for each category. There’s likely a bias favoring large firms, as they have more lawyer biographies and practice group pages to tout the same innovations. That said, there are many relatively small firms posting relatively large innovation numbers; and many large firms that are posting relatively small numbers. And for those of us fairly close to this space, there are few if any surprises. To me, they appear face valid.
Here is the breakdown of the average hits per firm website by area of innovation:
This is a very interesting breakdown because the largest category, Blockchain, bears on changes affecting the core business of corporate clients. In some respects, this innovation borders on changes in substantive law and how contracts get formed and enforced. Because this is closer to lawyers’ natural wheelhouse, perhaps it’s unsurprising that lawyers are ready and willing to innovate. Yet, on service delivery innovations that are directed at reducing billable hours and overall cost, such as automation and process, we see a lot less activity.
The analysis based on country and firm grouping is also interesting and informative:
The big takeaway here is that size + geographic reach appears to be strongly correlated with at least the seedlings of innovation. Cf. Innovation in Organizations, Part III (017) (discussing complexity and size as correlates of organizational innovativeness and explaining why this is likely true in law). Although really large firms have significant challenges with management and communication overhead, there’s no substitute for a critical mass of resources to build new service offerings.
Finally, the Law Firm Index has two breakdowns by individual firm (the last two Tableau tabs) — one based on total Google Advanced website hits and a second based on percentiles.
The Index website repeatedly communicates that these firm-level charts are not a ranking. That said, the differentials among firms are massive, moving from less than 10 mentions of innovations to nearly 15,000. This raises a very real question for partners — “is it worth trying to get my firm to innovate, or should I take my clients to a market leader firm?” Cf. Henderson & Zorn, “The Most Prized Lateral of 2015 Wasn’t a Partner,” American Lawyer, Feb. 1, 2016 (discussing media attention given to movement of 4-person process improvement team from a UK Silver Circle firm to a Global 100 UK-Australian firm and predicting that this type of sophisticated capability will eventually attract lateral partners trying to hang onto clients). The failure to invest in innovation may prove to be extremely expensive for late majority and laggard law firms.
Kudos to Dan Linna and his team at MSU Law’s LegalRnD. For the foreseeable future, your Legal Services Innovation Index is going to be the measuring stick for law firm innovation. You have given lawyers, law students, and law faculty a useful, tractable, and relatively comprehensive window into the changing legal services market, at least in the large law firm segment. Going forward, we can be spared the blanket generalization that lawyers and law firms can’t innovate. That by itself is a tremendous public service. We all look forward to improvements in the months and years ahead.
What’s next? See Inside the Client’s Head: 2017 CLOC Institute Programming (022)