Innovation hype is alienating too many practicing lawyers. This is because we forgot that lawyers innovate in the realm of substantive law. It’s time to fix that.
Last year I was at a conference on law firm innovation organized by the Ark Group. To close things out, the event’s chairperson, Patrick McKenna, walked attendees through an insightful 30-minute flipchart session that could have been the centerpiece of the entire conference.
Above is a depiction of what McKenna drew on the first page of the flipchart (I’ll call it the McKenna Lifecycle of a Practice Area). Patrick was making the point that legal work moves along a time continuum that starts with lawyers building relatively lucrative practices by becoming experts in difficult and emerging areas of law. Yet, at some point a substantial portion of that practice area becomes relatively mature. Notwithstanding one’s level of mastery, the market is filled with other lawyers with a similarly deep skill set. As demand flattens and starts to decline, what was once a cutting-edge area of practice becomes a commodity.
Patrick gave the example of synthetic biology as an emerging practice area. As Patrick pointed out, synthetic biology raises extremely complex and novel issues of intellectual property, regulatory law and consumer safety to name but a few. In the growth area, Patrick suggested googling “virtual reality law practice” to see that lawyers from Cooley, ComputerLaw Group, and Kelley Drye have planted their flag in this important new practice area. Securities law is a good example of a practice area that has reached relative maturity — complex but sufficiently settled that portions of it can be brought in-house. Finally, Patrick pointed to debt collection as an area that has become fully saturated and thus subject to pure commodity pricing.
I have been studying the legal market now for more than 15 years. For the last ten years or so, I’ve tried to refine the tool of just talking to lawyers about their practices. In each conversation, I’m listening for novel or recurring patterns. In my experience, very few lawyers or law firm leaders attribute their success to catching the right practice waves. Instead, conversations almost always focus on the abilities and intellect of individual lawyers. Perhaps this is because the waves of change in law move slowly and are hard to decipher without a lot of additional effort. As a result, we fixate on the surfer (and the surfer fixates on the surfer) and overlook the importance of the powerful waves that hurl them forward.
In this post, I’ll explain how McKenna’s Lifecycle of a Practice Area is a remarkably useful tool for delineating between two types of legal innovation: Type 0 innovation (substantive law), which is the engine that powered the rise of the world’s most successful law firms, and Type 1 innovation (service delivery), which is crucial for reigning in the problem of rising costs and complexity in a highly regulated, interconnected and globalized world. Type 0 remains as important as ever, but clients would also like help with Type 1.
For a recent and in-depth treatment of this topic, see McKenna, “The Advent of the Legal Practice’s Micro-Niche, Part 1“, Legal Executive Institute, Oct. 14, 2018; McKenna, “The Advent of the Legal Practice’s Micro-Niche, Part 2“, Legal Executive Institute, Oct. 18, 2018. It’s noteworthy that McKenna believes that the most important law firm strategy occurs at the practice group level.
Type 0 Innovation
As McKenna explained his diagram, I recalled numerous lunches and dinners with rainmakers who explained to me how they build their practices. Some fit the profile of the trusted advisor — they were great listeners, excellent at identifying core issues, very practical, and excellent at delegating technical tasks to other lawyers in the firm.
But another group, who were not particularly charming or charismatic, described how a series of assignments early in their careers took them deep into the business and technical aspects of their client’s industry. Eventually they came out the other side with a series of solutions that proved to be very valuable and useful. As a result, they got more work from their client and others with similar type problems. These folks caught a wave in the blue or early green portion of McKenna’s lifecycle.
This is Type 0 Innovation. It happens organically when a lawyer has the opportunity to immerse herself in the business and legal complexities of a new or changing industry. Although it often produces the same economic benefits as a major R&D initiative, lawyers and law firms seldom frame it that way. This is because clients are paying the bill, often by the hour. It’s just legal work. The lawyer who develops such an opportunity into a major practice is viewed as a rainmaker and is compensated accordingly.
I call this Type 0 innovation because it is common throughout the legal profession. Virtually any lawyer has the intellectual tools to do it. It requires zero additional training. Yet it’s undertheorized almost to the point of being invisible to practicing lawyers.
To illustrate this point, McKenna cites several years of data from law firm retreats where he has polled partners using anonymous clickers. In sessions related to the importance of business development, McKenna asks, “How many of you right now can think of something you’ve observed in your practice that could be turned into a compelling service offering for one or more of your existing clients?” McKenna says he consistently gets scores in the 65% to 85% range. Next question, “How many of you have shared your idea with firm management?” Remarkably, scores of 25% or lower are the norm.
When asked why, partners explain that they doubt the firm or practice group will support them. Specifically, to “innovate” is to put yourself at risk of being on the wrong side of numerical targets needed to maintain one’s status in the firm. Stated another way, the partners are not sharing risk. As a result, too many partners are stuck trying to sell services in the “mature” portion of the lifecycle, often at prices that cause clients to question the value they are receiving. This is a failure of both strategy and leadership.
That said, some law firms, particularly those that are highly specialized by practice area and/or industry, understand the importance of underwriting the development of substantive law innovations. For example, one of the attendees of Patrick’s session was Tim Mohan, Chief Executive Partner of Chapman and Cutler LLP, an AmLaw 200 law firm that specializes in financial services. Tim later told me that Chapman had adopted a system of innovation hours whereby partners and associates could obtain credit on par with billable hours for innovation efforts likely to result in future revenues for the firm.
One area where this approach has paid large dividends is marketplace lending, which is the relatively recent development of non-bank financial institutions matching up borrowers with lenders, often by leveraging technology to evaluate and process loan requests. Obviously, this has been tremendously disruptive to traditional banks. Back in 2013, when this industry practice was at best an “emerging” [blue] practice area, two Chapman partners, Marc Franson and Peter Manbeck, wrote a whitepaper called “The Regulation of Marketplace Lending: A Summary of the Principal Issues.” The first draft (the authors now keep it updated) took several hundred hours to research and write. But once posted on the Chapman and Cutler website, it became a hotbed of download activity that has led to $10M+ in firm billings. This is pure Type 0 innovation. Far from going away, Type 0 opportunities are growing in number and importance.
Chapman and Cutler is also a shining example of Type 1 innovation. See Post 039 (discussing the career path of Eric Wood and the founding the Chapman Practice Innovations as a successful example of law firm intrapreneurship).
Once McKenna’s Lifecycle model got into my head, I began to see Type 0 innovation all around me. Consider the following examples:
Gary Marchant at ASU Law
Gary Marchant is a Regent’s Professor of Law and director of the Center for Law, Science and Innovation at ASU Law. He is also on the speaker’s circuit, wowing legal audiences with novel questions of law that judges, regulators, and practicing lawyers are grappling with as a result of massive advances in science and technology, from autonomous cars to drones to cloning to global warming to digital data that captures our every move and hence of great value in determining issues of guilt or civil liability. Several times over the last few years, I’ve had the privilege of being the same program with Gary, where he consistently knocks the ball out of the park.
Our most recent panel was earlier this month in San Francisco. Fortuitously, we shared a cab to the airport. Thus, I got to ask Gary, “How in the world do you come up with all these examples of new and emerging issues?” Gary replied that he teaches seven classes a year at ASU Law (e.g., Law, Science and Technology; Genetics and the Law; Biotechnology: Science, Law and Policy; Health Technologies and Innovation; Privacy, Big Data and Emerging Technologies; Environmental and Sustainability Law; and Artificial Intelligence: Law and Ethics). To scale his expertise, each is taught with a co-instructor. “But they’re all paper classes. I read and grade 400 papers a years. All my examples come from my students.”
Gary Marchant is astonishing example of how to get the three circles of teaching, service and scholarship to overlap in near perfect unity. Kudos to the enlightened deans at ASU Law who found a way to make this work!
Carolyn Elefant at MyShingle.com
Carolyn Elefant, the clarion voice of the solo and small firm bar at My Shingle, has recently written a book called “41 Practice Areas That Didn’t Exist 15 Years Ago.” The table of contents can be viewed online here. Elefant is renowned for being a solo practitioner who stays busy doing challenging work she loves. So, how in the world does she have the time to identify 41 new practice areas? Similar to Gary Marchant, Elefant skillfully leverages the time of student law clerks she regularly employs in her practice.
Carolyn compiled this list not necessarily for her own practice but to prove the point that new practice niches are growing at an accelerating rate. As a result, any lawyer can pick an emerging area of law that is causing heartburn for some distinct population of clients and, by dint of some research and writing in an ebook format, translate that know-how into seven figures of income. This is because the community of interest passes around the ebook, building goodwill and credibility with future clients. This isn’t theory — this is Carolyn’s own experience which she learned through trial and error as she created a landowner rights practice. See “Seven Figure Ebook,” My Shingle, Aug. 23, 2018. She’s turn this insight into an easy-to-follow methodology for creating a lucrative and rewarding Type 0 law practice.
I know all this because I signed up for one of Carolyn’s webinars this past August — for me, it’s field research. I greatly admire Elefant because she is passionate about helping other lawyers become successful. She reflects the legal profession at its best.
Kevin O’Keefe at LexBlog
Kevin O’Keefe is the Founder and CEO of LexBlog, which is an online publishing platform that currently hosts 1,400 law blogs, including Legal Evolution and the majority of blogs published by AmLaw 200 law firms. Arguably, LexBlog has become the epicenter of Type 0 innovation, as the vast majority LexBlog content is focused on substantive law. In most cases, the unit of production is either the boutique law firm or a practice group inside a major law firm.
Like Carolyn Elefant, O’Keefe spends a lot of time helping lawyers see the abundance of ripe fruit hanging less than a foot off the ground. The only catch is the modicum of effort necessary to reach down and pick it up. This is the world of content marketing, demonstrating through your writing your insights on a set of problems that afflicts some discrete universe of clients. When someone in that small universe goes online in search of relief, your content appears near the top of the Google search (the LexBlog platform aids SEO). That content builds trust and credibility. Although some readers will use it for pure self-help, the complex work flows disproportionately to the authors and the authors’ firm.
A good, but far from unique, example is Ballard Spahr, which puts out five publications on LexBlog:
- Housing Plus. Guidance and legal insight for all aspects of housing and community development
- Money Laundering Watch. Insights and news on the world of financial corruption
- Consumer Finance Monitor. CFPB, Federal Agencies, State Agencies, and Attorneys General
- CyberAdvisor. Insights from the frontlines of privacy and data security law
- Health Care Reform Dashboard. Charting Developments with the Affordable Care Act and Beyond
In the year 2018, lawyers can skip the rubber chicken dinners and make rain by developing and sharing their expertise online.
Kevin O’Keefe has an infectious laugh and a life story so inspiring that every year I invite him to Indiana Law to talk with my students. Without fail, Kevin marshals example after example of young lawyers who create life-altering career opportunities for themselves by researching the legal issues around what interests them. Step 1 is to find the online legal experts. Step 2 is to read their content and the materials they point to. Step 3 is to contribute to the conversation via social media. That’s right, to get off the ground, cutting-edge Type 0 innovation often leverages a twitter account.
Type 1 Innovation
I hope it’s obvious to readers that the vast majority of Legal Evolution content is focused on Type 1 innovation — i.e., service delivery improvements (data, process, technology, etc.) that chips away at the problem of lagging legal productivity. For example:
- Post 001 (lagging legal productivity negatively impacting entire profession)
- Post 006 (discussing impact on legal education and courts)
- Post 009 (importance of ODR to solve bottleneck in courts)
- Post 019 (legal productivity is a “last mile” problem that requires new business models)
- Post 022 (CLOC is response to lagging legal productivity problem affecting large corporations)
- Post 036 (discussing dire statistics because of productivity problem in PeopleLaw sector)
- Post 042 (consumers are coping with higher costs by foregoing legal services)
- Post 048 (framework to see differential impact on people versus organizations)
- Post 058 (Landscape report for Cal Bar that emphasized the problem of lagging legal productivity)
Yet, as important as this topic is to the future of the legal profession, it is near impossible to get lawyers to go on this journey when innovation hype ignores or denigrates the innovations routinely occuring at the practice group level. I hope the Type 0 / Type 1 framework can start to mend this riff.
Lawyers value definitions. I would proposed the following as a starting point:
- Type 0 innovation. Adapting law to fit changing social, political, economic and technological conditions.
- Type 1 innovation. Improving the quality, cost and delivery of existing legal solutions.
We can plot these innovation types on McKenna’s Lifecycle of a Practice Area, with Type 0 (emerging, growth) being in the wheelhouse of skilled artisan lawyers and Type 1 (growth, mature, saturated) being the foundation of one-to-many legal solutions and thus requiring the collaboration of lawyers and multidisciplinary professionals.
Isn’t it obvious that Type 0 and Type 1 innovation are both distinct and interdependent? Further, isn’t it obvious that the legal profession’s tool box needs to include both types of innovation, albeit with lawyers and legal professionals tending to specialize in one or the other but retaining the ability to effectively collaborative across the two types?
As I’ve reflected on Type 0 / Type 1 innovations, I’ve snapped them on to other frameworks. Below are two examples based on other Legal Evolution posts:
The T-Shaped Legal Professionals graphic (above left) has been discussed in Posts 043 and 048. Type 0 innovation is enabled by the traditional law school curriculum. If you’re reading the news in the year 2018, it’s obvious that Type 0 innovation is crucial to the functioning of an open society based on the rule of law. Yet, to address the problem of lagging legal productivity, legal professionals needs a bigger toolbox that includes the ability to collaborate effectively across multiple disciplines. Type 1 innovation is enabled by the disciplines at the top of the “T”. Solutions to crucial PeopleLaw/Access to Justice issues require quantum leaps in Type 1 innovation. There’s literally no time to waste. This is why so many of us are working tirelessly to stand up the Institute for the Future of Law Practice (IFLP, or “I-flip”).
Likewise, variations of the Traverse the Pyramid Strategy (above right) have been discussed in Post 010 (the rise of managed services) and Post 055 (law firm strategy that combines substantive lawyering with data, process, and technology). It’s foolish for legal services to migrate away from the pyramid model, as Type 0 innovation is built on the foundation of “mature” law in the operational and commoditized space. It’s also the type of work that law firms have historically used to train junior lawyers. Less than 15 years ago, the process usually began with banker boxes filled with documents as part of the discovery or due diligence process. Likewise, legal operations and the P3 disciplines (pricing, project management, process improvement) all exist within the Type 1 innovation vertical — though more prices sensitive, it reflects the bulk paid legal work. Thus, we need to retool the traditional law firm talent model so that it can flex in the direction of both Type 0 and Type 1 innovation. This is yet another challenge that is being taken up by IFLP.
Neither Type 0 nor Type 1 innovation are easy or costless. Both require continuous learning and an investment of time and resources without a guaranteed financial return. Yet both add immense value to clients and form the basis for challenging and rewarding careers. Thus, for both lawyers and legal professionals, the future is bright.