Probably not, but we’ll see.  A surprising conversation with digital transformation expert Isabel Parker

It’s already been quite a year for law firm innovation.  Just last month, Norton Rose Fulbright launched LX Studio, a new “innovation-focused” subsidiary, and Wilson Sonsini unveiled Neuron, a proprietary SaaS platform for start-ups.  Exciting propositions, but the development that had the NewLaw cognoscenti scratching their heads was ‘white shoe’ firm Cleary Gottlieb launching of ClearyX, which the firm describes as a “platform for highly efficient, AI and data-driven legal services.”

What’s driving these unveilings? And, are these new platforms worthwhile?

For a fresh take this month, I’ve invited guest columnist Isabel Parker, author of Successful Digital Transformation in Law firms: A Question of Culture (2021) and Executive Director at The Digital Legal Exchange. For more detail on the concepts she discusses below, I’d point you to “Chapter 4: Products” and “Chapter 7: Sustaining change – partnership” in her comprehensive and well-reviewed book.

BTW, don’t let Isabel’s rosy tone at the outset fool you. This conversation contains several surprises.

Anusia:  Why should we be so interested in what Cleary is doing?  They are not the first, surely?

Isabel:  Of course, Cleary is not the first law firm to launch an innovation platform.  Most ‘Magic Circle’ firms have a NewLaw capability or business model.  For many clients, Allen & Overy’s platform represents the innovation high-water mark, with an impressive menu that includes:

  • Peerpoint, its flexible resourcing capability,
  • Fuse, its legal technology incubator,
  • Aosphere, its online legal subscription service, and
  • An unbranded corporate legal consulting capability and a legal function transformation team.

Other firms have followed suit – e.g. Freshfields Bruckhaus Deringer, Linklaters, Clifford Chance – making an innovation platform the must-have accessory for any UK HQ law firm.

Wendy Butler Curtis

Where are the US firms?  Well, a handful are active in the space: Wilson Sonsini with SixFifty (as the leading Silicon Valley firm, one would expect nothing less); Orrick with Wendy Butler Curtis at the innovation helm (one of the first firms to create a legal services center in a low-cost region) and Reed Smith (with their own product development house, Gravity Stack) amongst them.

The elite ‘white shoe’ firms, however, have so far been reluctant to shed their spats and dip their toes into the water, until now.

Anusia: What’s changed? Why now?

Isabel:  The short-term catalyst, if there is one, is unclear. At the top of the league tables, revenues remain buoyant and PEP is soaring. We can only assume that Cleary, recognizing the very real competitive pressures from other providers, is taking a refreshingly long-term view.

Carla Swansburg

Those on the inside tell us that ClearyX is a genuine effort on the part of the firm to delight its clients with a truly exceptional experience and to demonstrate greater pricing flexibility.  And with experienced leadership from Carla Swansburg (formerly of Epiq and Blakes, a leading Canadian law firm), and sponsorship from the managing partner, even the most cynical observer would put money on ClearyX being a sound investment for the firm.

(Anusia thought bubble: I would not put money on this. In my view, law firms should focus on achieving service excellence through the infusion of NewLaw in core competencies instead of funding peripheral platforms.)

Anusia:  It all sounds good, but do these law firm platforms drive any real change?

Isabel:  Organizationally, these platforms tend to be wholly-owned subsidiaries of the law firm, with separate branding and management.  The theory behind this is as follows: law firm partnerships are slow, consensus-driven oil tankers that are not agile enough to make quick decisions and are too psychologically fragile to contemplate failing fast.  A wholly-owned subsidiary can experiment safely without damaging the traditional law firm partnership brand.

Another justification is that delegating innovation to a subsidiary takes the pressure off the ‘line lawyers’, who, we are told, are quite overstretched enough without having to grapple with a new delivery model.

In summary, the structure works for the law firm, which gets to demonstrate its innovation credentials to its clients without meddling too much with the fabric of the partnership.

Anusia:  Are you suggesting that law firms are delegating innovation so that the lawyers don’t have to bother with it? 

Isabel:  Yes. To illustrate my point, take a look at the Thomson Reuters Institute 2022 Report of the State of the Legal Market, p.19., Figure 17.  It’s a rather depressing infographic showing the non-billable activities that lawyers consider to be “under-popular”.

[Click on to enlarge]
According to the report, lawyers expect responsibility for these under-popular activities to be delegated “to support professionals and to those partners who might specifically wish to be involved”.  Shockingly, this includes diversity, equity & inclusion.

Perhaps even more interesting is the section labeled “Leverage,” which depicts the activities that are straight-up unpopular.

What are these unpopular activities?  They include tech implementation, innovation, pricing models, wellbeing, and alternative delivery models. The common thread is that these activities contribute, in one way or another, to changing the way things are done.

Conversely, ‘strategy and planning’ (whatever that means) is a highly popular activity, as is ‘client relationships’.  Everything else, say the lawyers, should be someone else’s job or have the least amount of attorney involvement possible.  [Editor’s note: Perhaps this has something to do with an entrenched eat-what-kill compensation mindset among partners? wdh]

Anusia: Hold on, though – doesn’t this mean that despite the innovation activity, the status quo is being preserved?

Isabel:  Well, yes — and it is at this point that it all starts to feel a bit uncomfortable.  Shouldn’t client-centered innovation be a mindset, rather than simply a new offering?  Doesn’t genuine innovation require at least some hard work and disruption?  Can lasting change really be achieved from the sidelines? Shouldn’t the lawyers be compelled – even ethically – to get involved in delivering better services and products for their clients?

Anusia:  Hmmm.  What do the [change management] experts say?

Isabel:  On questions of change and disruption, there is only one guru worth consulting — Harvard Business School Professor John Kotter, who is the godfather of organizational change and the author of several leading books on the subject, including his most recent, Change: How Organizations Achieve Hard-to-Imagine Results in Uncertain and Volatile Times (2021)

The book is the product of years of research. Kotter’s thesis, if it can be reduced to a soundbite, is that this new world demands that organizations change rapidly and that adaptation cannot be driven through an organization by a select few.  Instead, it requires the efforts of the ‘diverse many’.

Kotter argues that separating out change efforts and delegating them to a subsidiary or a committee significantly slows the pace of change.  This creates risk because, in today’s competitive market, most organizations do not have the luxury of time. Kotter cautions, “by not integrating your digital ambitions with your core business, you might create some innovative new offerings, but it will not transform your core business, which is fast becoming a necessity for nearly everyone.”

Anusia: It’s easy to criticize from the sidelines.  Is there a better way?

Isabel:  Law firms aren’t the only organizations grappling with change in a resource-constrained environment — their clients are, too.  Cf Post 289 (New Law Fundamentals column discussing corporate digital transformation based on a recent law review article by DeStephano, Tellman, and Wu); Post 277 (Jason Barnwell of Microsoft assessing the daunting nature of the task, wondering if legal will be able to keep up).

Corporate legal teams are driving significant levels of change through their teams to support businesses that are digitally transforming at pace and pivoting to new business and delivery models.  Interestingly, the in-house teams leading innovation do not designate change efforts as unpopular activities and delegate them to a committee.  They engage the entire legal department in the effort.  For example, we see:

  • Deutsche Telekom (known as T-Mobile in the US) embracing a wholesale restructuring of the legal team to an Agile model, complete with scrums, tribes, and clusters, in order to support an Agile business.
  • We see the newly spun-off Haleon (formerly GSK Consumer Healthcare) uniting the entire legal department around a shared purpose to deliver an ambitious digital transformation.
  • Thomas Barothy

    We see the corporate legal team at UBS white labeling their legal know-how and commercializing it for other Swiss financial services entities to use – a ground-breaking, whole team effort. The former COO of Legal, Thomas Barothy, described this initiative as being more about mindset change than revenue generation: for the legal department, so often cast as the business blocker, there was great cultural value in uniting the lawyers around a shared digital objective.

Law firms could learn a great deal from the ways in which their clients are approaching – and embracing – innovation and transformation.

Anusia: What does a reading of the tea leaves suggest that law firms should do?

Isabel:  Law firms should follow the example set by their most progressive clients and bring innovation back into the heart of the firm.

It is not easy to do, as lawyers are busy, and clients are demanding.  But if law firms are to change at pace, in a way that is sustainable, they need to find a way to harness the “diverse many” and atomize the change effort through every level of the firm.

There is no need to unwind innovation subsidiaries, but law firms should consider how to bring them closer to the lawyers, to allow for osmosis of learnings between the two sides.  Law firms have an obligation to their clients to convert innovation from an unpopular activity to a career-enhancing opportunity. This will pay long-term dividends for the culture and prosperity of the firm and, ultimately, for its clients.