Working notes from my new role at Microsoft
I might have the most fun job in the legal profession. I help Microsoft’s legal department build the future of our practice of law leading a program we call “Modern Legal.” Modern Legal is a spin-off of my prior operations role focused on innovation. This post offers a summary of Modern Legal and our observations about why legal industry innovation may be accelerating.
Our General Counsel, Dev Stahlkopf, chartered our small team with a delightfully elegant and audacious mandate: “Drive industry-leading innovation to digitally transform and modernize the department’s practices and ways of working.” Our department handles complex legal needs, for an accelerating and dynamic business, with global scope, at massive scale. Our Modern Legal team brings together a Storyteller (Senior Attorney), a Cultural Systems Engineer (Senior Program Manager), and me. We are built to explore and use what we learn to catalyze the evolution of our larger organization.
Modern Legal is an investment that will create new work experiences that serve Microsoft’s future needs. These experiences will be built on investments in culture and tools that serve our people.
Culture first, through stories
We hypothesize that transformation efforts must focus on culture first. If culture is not conditioned to receive and support the transformation, people will reject it.
People transmit and receive culture through stories. Effective stories are relatable, compelling narratives offered by a trusted source that bind facts and information to drama that evoke feelings. An effective story creates impact by activating the intrinsic motivations of those who receive it to embrace change and become part of the movement. We believe our transformation will be built on great stories that help our people find their place in our future.
Our culture investment strategy (see graphic) seeks to create a self-reinforcing cycle focused on:
Identify Needs by building closer partnerships with our people who do legal work ;- Build Solutions that meet them where they are;
- Tell Stories that reveal the growth and progress of people and teams;
- Make Heroes through recognition of colleagues who typify model engagement and skill development;
- Create Demand through consistent focus on need-solution-story-hero value system;
- Teach Skills that support our colleagues innovation potential;
- Repeat by identifying even better solution development opportunities because we have upskilled legal workers.
Our people have work that can be made better by improved processes. Those processes can be scaled and accelerated by improved tools. We should meet people where they are. That means understanding and respecting what is intuitive for our people.
Changing the “How?” through platforms
The cultural investment loop is the first half of our strategy. It is designed to change the “Why?” and “What?” of our legal work. But as we do this, we must be smart about platforming to make these experiences intelligently support data-driven work. This is because the platform is crucial to the the second half of our strategy, which is focused on “How?”
Microsoft’s heritage identity is as a platforms and tools company. We build pieces that complement each other and create more value by working together. Carrying this approach forward, our tools investment loop focuses on turning our several, discrete solution investments into assets that create platform value. The term “platform” is used a lot. In this context it means identifying the common data and functionalities that cut across the tools experiences we need to support our work and creating reusable building blocks that can talk to each other. Breaking that into pieces suggests our platform should:
Reflect a coherent set of commonly used technology-supported capabilities;- Apply consistent internal data and process shapes that enable horizontal interactions within the platform;
- Surface a rationally scoped (cover 80% scenarios) and designed (easy to find the front door) interface accessible to solutions built on the platform;
- Deliver a composable framework that accelerates solution development;
- Enable intelligent systems that create cross-domain linkage and enable data-driven work; and
- Align solution development investments towards an overarching value hypothesis.
Solutions that efficiently build on and contribute to a system of intelligence are an output. We must refactor our technology portfolio to identify a set of scenarios that reflect the future needs of our business based upon lived experiences of a diverse sample of our people (roles, responsibilities, and ranks). We then turn the scenarios with greatest impact potential into a prioritized investment backlog that will be built with a platform mentality (abstraction is good, re-use > reinvention, and dependencies are our strength). We build solutions with the goal of making them shareable because this makes us more disciplined in building on core Microsoft platform capabilities whenever possible.
This portfolio investment process will take on an even greater external lens as we share our work with our customers and partners to accelerate their evolution, learn from their experiences, and reintegrate our internal and external signals back into our platform strategy. See, e.g., Business of Law Podcast; Posts 068, 069, 104 (write-ups on Microsoft’s Trusted Advisor Forums). We will measure our investment choices and outcomes against an overarching value hypothesis.
Aligning investments with our opportunities
Our hypothesis is effectively a statement of intent that aligns us with the business we serve, specifically: “Deliver legal services that efficiently support Microsoft’s dynamic and growing business using data-driven approaches that empower our people and showcase our innovation.” We will operationalize this by breaking the monolithic goal into specific sub-elements that can be used to score investment prospects. We will likely launch prioritization efforts with subjective scoring (e.g., low, medium, high) and we will get the scores wrong. But this framework increases the likelihood we will learn from our mistakes and adjust our approach going forward.
Yet, these interdependencies raise an important issue: If Modern Legal depends upon the larger legal ecosystem to move with us to modernize, are we doomed because change is always glacial, or are we experiencing Friedmann’s Law? See Ron Friedmann, “Our Perception of Change,” Prism Legal, Dec. 2019 (perception of change is relative to observer’s career starting point). My personal story walks this path.
Perspectives of “evolution” are built upon lived experience
I started my practice as a startup lawyer at a law firm. See Post 080 (discussing early career). The work moved quickly because our clients and colleagues moved quickly. I carried several dozen clients at any given time helping them with formations, financings, securities issuances, governance, M&A, general contracting, and anything else they needed. I learned so much and was probably bordering on malpractice every day. It was serious fun.
Startup work benefits from efficiency. Your clients have limited resources (time and money). We spent surprising human effort on forming companies. This was mostly humans executing find and replace on Microsoft Word templates (see Ctrl+H and more). It was a poor use of human attention.
I proposed to a partner that I automate this tedious and error-prone process. I could develop a client facing survey portal that would do some light advising, capture their specifications, route to us for review, and automatically build the formation package to create the company and standard suite of employee forms. I would do the development work for “free,” but I would need time away from billable work because it would require me to build the whole stack.
The partner told me building this system to serve our clients was not worth it. This person is very smart. If this kind of investment did not make sense, then I saw little point in continuing to build equity where my strengths were an encumbered asset. As discussed in Bricklayer and Architects (080), this experience (and others) highlighted my value proposition mismatch. Thus, following this conversation I aggressively pursued skills necessary to become a minimum viable lawyer (MVL) and enable my departure. Cf. Post 126 (discussing importance of MVL to legal innovation). At the the time, I did not have the courage to fully interrogate the partner’s decision at the time. I have tried to construct the partner’s likely investment calculus.
My primary contribution to the business of the firm was billing my time to clients. The partner’s economic benefit was a portion of the profit realized from my client billables. I was proposing an infrastructure project that had limited direct benefit to the partner. The investment might benefit the practice group and the firm. It was unlikely that this partner would materially benefit from my investment and be made whole from the lost personal profit of my time that could have been billed. It was probably politically expensive to try to recapture an equitable or beneficial portion of the value created for the organization because the contribution did not fit into the systems. The rewards structure of the firm systematically dissuaded the collective action that is necessary for transformation investment.
If this was true and is still accurate, why should we expect change?
Demand characteristics are accelerating legal innovation
The legal business landscape has changed in the decade since I left private practice in ways that suggest we are approaching an evolutionary inflection point. As shown in the below graphic, I observe clustered patterns in three areas that suggest systemic changes are happening that might catalyze our innovation:
Buyers
Buyers seem to be increasingly willing to express their preferences in response to their internal business requirements. And on this score, Microsoft intends to be a leader.
Our Modern Legal investments reflect our General Counsel’s observations that we need to get in front of the wave of work that is to come (a business-driven requirement). The need to partner more effectively with the organizations we will work with to deliver legal services manifests as preferences we express to the market. See Post 069 (Jae Um discussing enormous market implications when clients lead change).
That’s the theory, but the practice necessarily takes out out of our comfort zone. Foremost, we are culturally averse to telling our partners how to run their business. Rather, as buyers, we express preferences as subtle hints followed by disruptive purchasing pattern shifts. A better alternative might be to just ask for what we want or need. See Casey Flaherty, Unless You Ask: A Guide for Law Departments to Get More from External Relationship (ACC 2016). The culture mimics the diffuse decision-making processes on both sides of the market. See Post 051 (Jae Um noting chaos of so many niche specialty markets where buyers are seeking value). But decision and communication clarity are improving as business discipline is added to legal services partnership engagements. See “Rebecca Benavides talks about the business of law,” Business of Law Podcast, Sept. 12, 2018 (discussing inroads made by Benavides at Microsoft).
Competition
The competitive landscape has diversified. Buyers are moving work that has consistent type and volume demand characteristics in-house (in-sourcing) reflected in the growth of in-house legal departments. See Post 003 (trendlines). We are seeing more work unbundled. It is being decomposed and deployed to resources that can service those needs cost effectively, see, e.g., “Integreon and Microsoft Legal Operations discuss long-term partnership,” Business of Law Podcast, May 12, 2019. which we see this reflected in the growth of managed services. See Post 109 (Jae Um collecting market data on ALSPs and noting structural shifts). These motions apply:
- Most-cost-effective/least-necessary-skilled human resources (labor arbitrage);
- Differently skilled human resources to create leverage from combinatorial skill complements (allied professionals); and
- Machine resources consumed through finished experiences (e.g., your productivity platform) and as discrete inputs (e.g., standalone user experience services and API accessible services).
Regulatory changes
The uncertainty around using unconventional partners for legal services and the cost of technological change that supports innovation seems to be decreasing. Many US legal regulatory bodies are exploring alternative regulations for entities that can deliver legal services in response to perceived market failure. See, e.g., Post 112 (discussing growing movement). This systemic change increases the likelihood of new entrants that are not captive to existing business models.
This liberalization of who might serve legal needs is compounded by emerging technology that brings powerful capabilities with drastically lower customer adoption costs. Buyers can adopt a specific service by integrating it into their existing IT stack more quickly through open application programming interfaces. See, e.g.,”Tom Orrison talks about the future state of legal operations process and tools partnerships,” Business of Law Podcast, Sept. 11, 2018 (discussing this approach at Microsoft). And they can create custom applications to bridge “last mile” gaps in their experiences with citizen developer experiences that reduce dependencies on scarce technical talent.
A new openness
I believe it would be easier to sell a firm partner on a solution-oriented approach now because it is easier to sell a solution-oriented approach into a corporate client. Our legal department is experiencing some of these changes. A solution potentially helps sell more firm engagement through each of the following issues.
- Clients are expressing preferences for demonstrable innovation that creates value by being better/faster/cheaper and delivering insights that create more business value.
- Clients are reflecting the constraints generated by their business requirements into the relationships, often manifesting as rate pressure.
- Clients are building their own talent and solution capabilities that create implicit buyer generated competition for the buyer’s wallet.
- Unconventional sellers are hastening the unbundling of services by stripping off work that used to fill the buy basket, introducing competition lower in the complexity stack, and creating disruptive potential. See Clayton M. Christiansen, Michael E. Raynor, Rory McDonald, “What is Disruptive Innovation,” Harv. Bus. Rev. (Dec. 2015).
- Regulatory barriers are melting and supporting conventional relationship strength with technical dependencies that increases client adhesion.
- Technology change and development costs are dropping and solutions are now deployable into clients on their existing platforms to meet them where they are.
The business case for solution investment is materially different and is not necessarily hindered by time or resources. The solution I proposed to the firm would have taken me a couple months to build. A small group of my colleagues recently put a solution into production that does much of what I proposed to the firm. See “Getting the most from your scarcest resource: human attention,” internal presentation (Dec. 16, 2019) (proposing a “no-code” solution). They built it in their professional free time. They now have building blocks that let them stand up similar solutions over a weekend. Another team proved this by applying that know-how for an internal hackathon to produce a demonstrable prototype in a couple days.
These tools will bring more scenarios into the reach of technology enthusiasts and the digitally dexterous, and the game will change. Our Modern Legal team wants to show people how – and we anticipate many wanting to listen and learn.
And there are more signs.
Systemic changes are coming
The law firm I left now has a free, online service that lets anyone create an incorporation package. I do not know what the decision process was for that investment, but they figured out how to make it happen. Law firms like to fast follow. Every step forward by a law firm changes the market’s expectations for that law firm’s peer group.
The emerging changes in buyers, competition, and change barriers are going to require all parts of the commercial legal ecosystem to change in the coming decade. Anecdata suggests concurrent generational shifts in leadership on buy and sell side may further enable that evolution. See Jiwook Jung & Taekjin Shin, “Research: Business School Really Does Influence How Students Make Decisions Later On,” Harv. Bus. Rev. (Aug. 8, 2018) (discussing evidence that new theories taught in business school affect practice decades later). In dynamic, competitive environments, it is often not the fittest who thrive; it is those who adapt and adjust. Cf. Quote Investigator (discussing why this reasoning in quote form is often attributed to Charles Darwin).
Modern Legal is one of many investments our legal department makes to prepare for Microsoft’s future. We will take advantage of the positive movements, the systemic changes and the willingness of our people and partners to pursue transformation with us. We look forward to learning as we continue our shared journey of building the future of our practice of law.