Photo by Carson Arias via Unsplash / When innovation dreams fade, heads often roll.

Great things don’t just happen.  People make them happen.  So who is actually working on legal innovation (and why haven’t they fixed everything already)?


Innovation is a strange word.  At least, it tends to affect people strangely, particularly in the legal industry.

Of late, eye-rolling 🙄 and face-palming 🤦🏻 are gaining traction as the response du jour.  Despite the growing levels of skepticism in and around the echo chambers and the pockets of battle-weary veterans, the word “innovation” still has some ✨ magic and mystique.  Clients declare publicly that they expect firms to do better, and firms give every assurance that they are trying.  We are inundated daily with press releases: new startups, new initiatives, new partnerships.  Eyes might roll, but the innovation award shows (there are so many 🏅🏆🥇 of them!) must go on.

All of that sound and fury doesn’t come for free.  It takes a great deal of work, by real people in real businesses.  This talent pool, which is limited, should not be taken for granted.

Part I (062) of this series delved into the price tag of legal innovation in the current state of play, borne by both investors and incumbents who fund innovation efforts.  Part II (063) took a role-based view of legal markets and the various inefficiencies innovation teams’ access to buyers and users.  Part III takes a closer look at the talent required to make innovation actually happen, as well as some of the structural barriers that legal innovation teams face in accessing that talent.

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Over the past year, Legal Evolution has devoted many posts to specific examples of change agents and their efforts in various segments of the market.  Today’s post takes a slightly different approach.  The intent is not to place the spotlight on the individual people doing the pick-and-shovel, block-and-tackle work of legal innovation.

Rather, the aim is to take a structural and functional view of human capital by analyzing its various component parts: (a) the skills, knowledge and experiences that people need to perform at a high level as well as (b) the organizational capabilities, processes and systems required to acquire, develop and retain the right talent as well as deploy them in correctly configured teams to work on the right problems.


This is What a First-Rate Innovation Team Does

Given the extremely fragmented and messy structure of the industry, see Post 051 (key graphic), a navigable discussion on talent will require some table-setting and some structure to guide our thinking.

A. Innovation Is a Team Sport that Requires Specialized Skills

A good starting point for this discussion is to ask, what is the universe of specialized knowledge and skills required to make innovation actually happen?  A quick detour to design thinking theory will be helpful here.  Popularized by both IDEO and the Stanford d.school, the below visual encapsulates the mental model at the heart of design thinking — the overlap between desirability, feasibility, and viability.

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When all cylinders are firing, innovation teams might hit the sweet spot for a game-changing idea, but such occurrences are rare.  The more consistent value of design thinking discipline is that testing for the above three elements helps to de-risk innovation investments.  For instance, ideas that fail to meet desirability standards can and should be eliminated immediately: if there is no clear pathway to enough customers paying customers who care, even the best idea will die on the vine.

Each element can be expressed as a set of questions to be researched, answered and validated.

1. Desirability — Customer Needs

Desirability is about ensuring that the innovation team is working on a solution with verifiable market demand.  In that sense, desirability is all about understanding the intended customer (both buyers and users).  A thorough effort to validate desirability helps innovation teams sidestep over-investment of finite resources into ideas that sound good but actually aren’t (e.g., a thousand hours spent on an app nobody wants).

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In IDEO’s parlance, desirability asks whether the contemplated idea “makes sense to people and makes sense for people.”  This framing is useful in a general sense, but for legal innovation team it is helpful add one more note: validation tests for desirability should always be pinned very tightly to a clearly defined market segment.  In that sense, the desirability axis in design thinking maps very neatly to the problem-solution fit (PSF) framework from Lean Startup.  See Post 063 (summarizing problem-solution and product-market fit tests requiring efficient access to users and buyers).

For startups burning down finite cash reserves, this focus is likely to be imposed on them.  But for incumbents such as law firms, maintaining focus and clarity on the intended target market is critical: when incumbents pivot away from their established customer base to an unplanned effort to acquire new clients or enter a new market, they simultaneously lose a significant comparative advantage (superior access to buyers/users) and may face drastically different economics for both R&D and GTM (go-to-market).

2. Feasibility — Tech Advances

Feasibility is about designing a realistic solution, one that the innovation team can reasonably expect to deliver that will work reliably in real-world conditions for actual users.  This also requires continuing focus on customer understanding, but strategic feasibility assessments will consider user needs in tandem with the innovation team’s core capabilities.

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Particularly within the high-tech sector, the feasibility axis tends to set ambitious and fast-moving targets for innovation teams.  In effect, this establishes a very large solution space in which innovation teams can explore: in IDEO’s iteration, feasibility asks “what is functionally feasible in the foreseeable future?”

Although this broad standard makes sense for technology companies with the core capabilities to push existing tech beyond current limits, legal innovation teams need to exercise more discipline. This is because most legal service providers like law firms and law departments lack the investment appetite required to build and maintain full-stack technology teams internally (although there are always a few exceptions to every rule).  Further, very few teams field the kind of best-in-class technical talent required to push the boundaries of existing technological feasibility. Instead, within the legal vertical, feasibility means stitching together existing technologies into fluid and cohesive solutions.

In addition to feasibility on the innovator’s side of the house, legal innovation teams should also take into consideration the total cost of consumption and execution risks for the customer, including the time, effort, and client-side resources required for implementation.  Feasibility concerns feed directly into design choices: the key is to build something that will work in the real world.  For that reason, ecosystem factors absolutely matter (like compatibility, interoperability, data/content availability).  For example, how will the proposed solution interact with legacy infrastructure and the enterprise environment?  Effective validation for feasibility helps innovation teams eliminate unrealistic pathways more quickly and to allocate finite resources to the most promising pathways to a workable solution.

Lastly, legal innovation teams — particularly those embedded within incumbent organizations — should assess feasibility within the context of the organization’s existing strengths, capabilities and assets.  Inevitably, innovation and improvement efforts will end up stretching an organization’s operational strengths.  However, if the contemplated solution offers very little opportunity to leverage the organization’s current assets and capabilities, it is usually a sign that the innovation team may have designed a very promising solution that would be better built and taken to market by someone else.

3. Viability — Business Value

Viability is about ensuring that the innovation effort fits comfortably with the company’s broader competitive strategy. This requires that the team establish and maintain a very clear understanding of broader market conditions and the company’s current competitive position. The crux of the viability asks whether the proposed solution aligns with and advances the company’s business goals.

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Validating for viability means testing for alignment: with concurrent strategic objectives, existing market-facing activities from branding to sales and service delivery, and forward-facing plans for how the company intends to compete and win in specific markets.  IDEO’s articulation of the viability axis asks whether the contemplated innovation is “likely to become part of a sustainable business model.” Testing for viability highlights the non-negotiable need for executive sponsorship of innovation initiatives.

Without strong executive sponsorship, innovation teams often lack (a) line of sight into the high-level strategic thinking that guides the company’s decision-making and (b) direct and unfettered access to customers (both buyers and users), where existing relationships and channels are usually managed by teams much closer to existing P&L.  Both factors appear to be more serious barriers for incumbent organizations, where innovation teams and Skunkworks initiatives must compete for resources with existing revenue streams (and much more influential political forces designed to protect the status quo).

However, even product teams in small and relatively young startups can suffer from lack of direct and clear leadership.  Whenever the founder and/or chief executive steps away from direct oversight of product decisions, R&D teams can miss the mark in several ways.  Ideas for new features and isolated product/service improvements don’t always generate sufficient business value for the company.  Potential solutions that were viable for innovation team to prototype may carry hidden costs when inconsistent user skills are introduced, and attractive unit economics may not always scale due to customer-side variations.

B. Innovation in Action: Fact-finding, Decision-making and Execution

Design thinking provides a tractable and accessible framework for the substantive thinking that should inform innovation investments, but we need to think more practically and tangibly about how these questions translate into concrete activities that drive results.  There are many existing frameworks that preach one approach or another, but today’s discussion opts for an inventory of required activities and skills (what’s needed to get the job done) rather than a prescriptive methodology (how to get it done):

Fact-finding.  Much of the design thinking framework above directly pushes for rigorous and wide-ranging efforts to validate desirability/feasibility hypotheses through fact-finding work.  The primary purpose of market and user research in innovation activities is to facilitate insight generation; in turn, this enables evidence-based choices in very early decisions like market selection, opportunity spotting and assessments, and ideation/prototyping toward problem-solution fit.

Decision-making.  In many cases, the core innovation team may not own decision rights over strategic factors like innovation investments, market selection, or product positioning and pricing.  Even so, effective innovation efforts require that the best-informed individuals participate meaningfully in the decision-making process.  For that reason, high-performing innovation teams will be proactive in articulating decision points and shaping clear options for executive decision-makers.  This is critical to facilitate validation of the viability axis, and enabling competencies in specialized communication (e.g., documentation of findings and executive briefing) are nice-to-haves.

Execution.  The concrete skills required for execution vary greatly across specific types of innovation plays.  See Post 063 (categorizing 5 broad types of innovation plays in current legal market).  For startups and new entrants, execution encompasses the build-out and deployment of entire business functions (e.g. marketing, sales, accounting) in the correct sequence to support rapid growth.  Achieving product-market fit for a new offering usually demands experimentation with product/service definition as well as revenue model & pricing design; these jobs demand skills in strategic marketing and sales as well as some level of financial and business analysis.  For incumbents seeking incremental gains in existing business lines or developing new services, general management and operational skills will be important as well as exceptional communication skills to (i) manage stakeholder engagement, (ii) drive cross-functional collaboration, (iii) navigate interdependencies that tend to crop up in highly matrixed organizations.


The Current State of Play: A Talent Diagnostic

Regarding the current state of play, we can ask two broad questions that reveal a lot:

  1. Do (most) legal innovation teams have access to individuals with the necessary skills, knowledge and experience?
  2. Do (most) legal organizations have the necessary capabilities, processes and systems in place to attract, retain, develop and deploy innovation talent?

The answer to both questions circa 2018 is no.  That is your competition: under-resourced and under-skilled.  To rise above the competition, the following is a pretty solid talent checklist for your own innovation team:

  • Who are the individuals that comprise these teams now?  Are they the right people?
  • What are the “necessary” skills, knowledge and experience for our specific innovation agenda?  Do we have (enough of) the right skills, knowledge and experience?
  • How are these teams organized and deployed?  Are they working on the right problems?
  • Are these teams sufficiently supported, funded and guided?
  • To the extent there are gaps in the current state, why do they exist?

A. We Need Candor to Counterbalance the Hype (#RealTalk!)

Each of the above questions merit thoughtful consideration, but they usually get short shrift in most organizations (both in and outside of the legal industry).

Why?  These are difficult questions that make most people feel…. 😟 uncomfortable.  The primary source of discomfort, of course, is the sneaking suspicion 😒 that the answers will be bad.  Completely rational fears 😨 follow: admitting that the current state and our rate of progress are both sub-optimal might make us look bad (e.g. ineffectual, unqualified, inadequate).  The discomfort alone feels bad and demoralizing.  All of this is a reasonable emotional response to a challenging situation.

What is more important is how we decide to act in response to that discomfort.  Too often, organizations practice diligent avoidance of these fundamental questions.  But confronting these anxieties is part and parcel of the organizational resilience required to push meaningful progress forward.  The process of doing so demands tolerance of friction and a willingness to criticize each other, even at the expense of (temporarily) hurt feelings.  This type of culture is difficult to build and maintain anywhere, but it is especially rare in the legal industry.

Within incumbent organizations, cultural norms as well as internal politics and individual incentives push change agents to choose an easier way out.  That easier way, however, demands that we contribute to the hype machine, and in lieu of the emotional discomfort of candor, we take on the emotional labor of managing organizational fragility.

Often, we find valid reasons to put a positive spin on both the pace of change and the magnitude of impact wrought by incremental changes to the status quo.  Positive reinforcement and collective affirmation have their place in leading organizational change, but consistent preference for good feelings over real results comes at the expense of honest assessments about where we stand and how far we have to go.  The byproducts are law firm marketing overreach, underpinned by the lawyer theory of value and reinforced by the law department goat rodeo.  (H/T to the great Casey Flaherty for his entire body of work dissecting the negative impacts and root causes of the current reality distortion field in legal innovation; these links represent only a tiny selection, but they are all highly relevant, endlessly educational and reliably amusing.)

B. The Market-wide Challenge: Serious & Widespread Skill Gap

Obviously, the high-level diagnostic is bad.  Most legal innovation teams suffer from inefficient access to talent with the necessary skills, knowledge and experience, and most legal organizations struggle to attract, retain, develop and deploy innovation talent effectively.  Structurally, there are at least three critical market-wide challenges that conspire to create significant inefficiencies in the talent market: (1) overall market scarcity; (2) rapid shift toward ineffective specialization; (3) insufficient focus on core industry-wide problems.

Simply put, legal innovation is suffering from a serious skill gap.  As harsh as it sounds, high-caliber professionals with the necessary specialized business and technical skills are in short supply.  The recent explosion in demand for innovation talent (e.g., the number of law firms and law departments jumping on the innovation bandwagon) exacerbates the scarcity problem.  The resulting supply-demand imbalance is made even worse by the rapid proliferation of new and highly specialized roles in the legal vertical.

Generally speaking, specialization should be a positive development.  Specialization is a common labor market response to rising complexity, and it often signals increasing sophistication.  In some cases, these newly created roles represent broader participation of allied professionals and the introduction of more and different competencies into the legal vertical.  But many signals suggest that the current trend toward specialization is not all to the good.

In an illustrative example, I share below a sample inventory of required skills to provide data-driven decision support for an Am Law 100 firm.

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This skills inventory above features three distinct but closely related points of interest.  The first is that this particular combination of skills are purpose-built for a very specific objective: the provision of strategic decision support and execution enablement to drive profitable growth in an Am Law 100 firm.  The second is the sheer number and variety of skills required to accomplish that objective.  The third is that not all of the listed skills are new, even to the legal vertical.  (All three features are signals, albeit subtle ones, that most of us in legal are doing it wrong.)

C. Strategy First, Innovation Second (Otherwise, Shiny Things ⇒ Emotional Labor ⇒ Arrested Development)

I am often asked by law firm and law department leaders on how they should get started with data analytics, and I know that most of them are expecting a much simpler and shorter answer than I can give.  My usual response is to respond with a question of my own: what are the three most important strategic objectives they seek to accomplish in the next two to four years?  In most cases, this brings the conversation to a screeching halt.  Sometimes it’s because the organization’s mid-term strategy hasn’t been clearly articulated, but almost everyone is surprised that this is relevant in any way to the original question about how to implement data analytics.

Without a clear strategy that is being followed with discipline, we are perennially distracted by shiny things. We gravitate toward whatever skill, role or technology is being touted as the new hotness and then search out use cases that are only vaguely relevant.  This is almost always a recipe for disaster and a certain pathway toward ineffective specialization.  Why?  Because high-caliber talent in newly emerging domains like data analytics is expensive (as well they should be).  The investment in that type of talent can only pay off when applied with laser sharp focus on a clearly articulated problem that matters.

In most cases, effective responses to complex problems require creative thinking about how to combine old and new competencies to improve holistic system performance of the organization.  And yet most incumbent players add more complexity when establishing new roles.  Excessive variation in titles and unnecessary separation of new teams from core business functions only serve to exacerbate diseconomies of scale by escalating coordination costs and imposing untenable communication overhead.

Environments that already tend toward the highly bureaucratic and matrixed only become worse.  A second-order effect of this inefficient specialization is the hidden explosion in a different type of emotional labor required to navigate bad systems.

Consider a (very) partial list of recent developments in Big Law: pricing functions residing separately from service delivery teams or existing at odds with the core finance function; the ongoing fuzziness across marketing, communications/PR, business development and account management teams; knowledge management teams that reside in some no man’s land between the library, practice support teams, and the core IT function; “data science” teams straddling a gray area between practice-specific analytics and enhanced BI for the business side. It’s almost unsurprising that equity partners are known to sigh at the mounting overhead and ask in a bewildered tone what all of these people do all day.  In turn, “all of these people” remain at risk for growing disillusionment and accumulating lawyer aversion.

The pull toward ineffective specialization applies fractally to the market as it does to individual organizations.  Our industry is full of duplicated efforts by countless innovation teams in separate organizations that are too leanly staffed and under-resourced to accomplish their stated objectives on their own, leaving the industry stuck in a perpetual state of arrested development.  In many cases, these teams fail to validate the desirability of their solutions and end up expending significant time and effort on the fringes: minor problems in non-core areas of the industry.  This is a shame, because the industry suffers from a handful of fundamental problems that demand a coordinated and inter-organizational response.


Access to Talent: Likely a Slow Burn to Improve, But a Few Potential Pathways

The below graphic identifies three distinct dimensions (law, tech and business) from which legal innovation teams must draw talent, along with a conceptual and relative rating of current-state access for incumbents and new entrants.  Whatever the situational context, innovation teams in the legal vertical are likely to require some mix of skills, knowledge and experience across these three dimensions.  This construct helps break down some of the existing inefficiencies in the talent market and to envision some possible responses.

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A careful examination reveals several clear takeaways:

1. Recovering Lawyers Play Prominent Roles

Not every innovation effort or project will require best-in-class legal talent, but many will require some contribution from lawyers.  Particularly in more ambitious innovation plays to shift traditional one-to-one service delivery models to a one-to-many solution approach, heavier touches from high-caliber practitioners will be critical.  See Susskind, The End of Lawyers? (2010) (introducing one-to-one and one-to-many terminology).  In any whole-product substitution or significant time/labor displacement plays, innovation teams will need to secure subject-matter expertise from experienced practitioners to fully understand customer needs and solution requirements.  In effect, products and solutions for lawyers benefit from lawyer input, particularly in validation and design phases.  That said, the build and go-to-market work will most likely require partnership with co-founders, advisors or strategic partners who bring necessary business and technical competencies to de-risk investment.

  • The upmarket trajectory of ALSPs is a representative example of the opportunity for high-caliber lawyers to lead legal innovation.  The most prominent ALSPs are led by highly pedigreed lawyers with experience in the upper echelons of the Am Law 100: Axiom Executive Chairman Mark Harris hails from Davis Polk; in his previous life, Alex Hamilton of Radiant Law co-Chaired the global Technology Transactions Group at Latham.  The unbundling, disaggregation and reassembly of  increasingly sophisticated tranches of work is a challenge tailor-made for ex-practitioners with depth of experience in both legal buy and service delivery in relevant practice areas.
  • Shift of legal tech toward practice-specific solutions is another opportunity for ex-practitioners to lead the market in spotting innovation opportunities and designing products or platforms that are superior to current market alternatives.  Transaction management platform Doxly is led by Hayley Altman, formerly a corporate and securities lawyer and partner at Ice Miller.  Former Gibson Dunn litigator Alma Asay founded litigation management platform Allegory and served as its CEO until its acquisition by Integreon.

2. Increased Mobility Across Segments and Functional Roles

The uptick in talent mobility is likely to manifest as a continuation of the Big Law diaspora, but recent years have seen more diverse cross-pollination across market segments and individual roles.

  • Law firms and law departments swap business talent.  The recent move by David Cambria from ADM to Baker McKenzie is a headliner example, but there are several prominent example of switch-hitters in the opposite direction.  Before he joined Shell to manage global sourcing and legal operations, Vince Cordo served as the head of pricing at Reed Smith.  Rebecca Benavides, the Director of Legal Business at Microsoft, was previously the Director of Legal Project Management at Norton Rose Fulbright.  Before she was Google’s Director of Legal Operations, Mary O’Carroll reported to the COO of Orrick, where she managed large-scale projects to improve profitability.
  • Lawyers as product evangelists.  Lucy Bassli is another example of a recent high-profile move out of the in-house function.  Formerly an associate general counsel overseeing contracts for Microsoft, Bassli now serves as the Chief Legal Strategist for LawGeex.

3. Agency Model for Specialized Talent

The shortage of high-caliber business and technology talent is not likely to find a quick fix.  The most critical drag here is the non-negotiable need for a threshold level of content understanding and domain knowledge: to drive meaningful advances in the way legal work is done, innovation teams must establish a baseline comprehension of the business context around that legal need.

  • Build versus Buy.  As Josh Kubicki taught me when he was my boss at Seyfarth, new competencies might be expensive to buy but they are incredibly time-consuming to build.  Upskilling existing talent is an imperative, but one that can be accelerated only so far. The current supply-demand mismatch demands a market-level solution, and recent developments suggest that an agency model might fit the bill.  (He’s doing this now, at Bold Duck Studio, which offers a range of packaged services to facilitate innovation activities.)
  • Innovation as a service.  Jason Moyse at LawMade and Ryan McClead of Sente Advisors are two more examples of business and technology professionals who are looking to leverage their respective market-scarce competencies to facilitate innovation processes for a broader swath of the legal market.  Nicole Bradick‘s Theory and Principle is another example of specialized technical skill set on offer: an outsourced legal tech product development capability.

4. Still, We Need Systemic Investment in Human Capital

The above-cited examples suggest emerging trends with the potential to improve matching efficiency between innovation talent and innovation needs.  That said, the extent of the supply-demand gap demands an industry-wide response.  There is a clear need to step up systemic investment in professional development for business and technology staff and to explore cross-organizational forums that can accelerate the pace of knowledge sharing and collaborative innovation.

Casey Flaherty often says good lawyers aren’t scarce, good systems are.  Similarly, I don’t think that innovation talent is intrinsically scarce, but we definitely lack systems in the industry to identify and develop high-potential talent.  And we certainly need better systems to match the talent that does exist with the right opportunities.

What’s next? See Our journey to Big (067)

Photo by Geoff Greenwood via Unsplash.  Rot Fai Train Night Market, Thailand / The legal market is just as fragmented and complicated, and more painful to navigate.

Legal markets are chaotic.  For innovators, that chaos can be a pit or a ladder – depending on how quickly they can find a market to serve.


We get it.  Legal innovation feels slow.  Very, very slow.

Continue Reading Legal Innovation Woes, Part II: TBD Markets + MIA Customers (063)


Legal innovators yearn for a big payday. The obstacle course in their way? A messy, fragmented, and chaotic legal market.


Why is the legal industry so slow to change? This question gets asked all the time – particularly during conference season – but it gets more than its fair share of airtime year-round. It is ever-present in the blogosphere and hotly debated on Law Twitter at least once a week.

However, the most frequently given answers are largely unsatisfying and the ensuing discussion often recursive. If the legal industry is on tape delay, the change conversation may be stuck in a Delos-worthy loop.

Legal innovation stands at a critical juncture. With mounting momentum comes heightened scrutiny, and though we may be on the cusp of significant breakthroughs, we also stand on the precipice of an industry-wide chasm.  It’s time to acknowledge that we are working within an environment of extraordinary complexity and inefficiency, where innovation offerings are at clear and overwhelming risk of faring poorly.

(Market) Context Matters More Than (Lawyer) Character

One popular fallback is a narrative that I’ll call “because lawyers.”  Because lawyers are skeptical, because lawyers are conservative, and the list goes on (and on and on). The “because lawyers” train of thought goes something like this: because lawyers are different, the legal industry must also be different, and what has worked to advance positive change in other industries will not apply here. I disagree.

How “Because Lawyers” Fails the Industry

The “because lawyers” narrative can offer insights of value to would-be change agents, but I tend to think it suffers from two limitations that are closely related:

  • Firstly, it is better at explaining failures than explaining successes (and there have been some successes). This suggests that the “because lawyers” narrative lacks explanatory power: designing around lawyerly tendencies is likely a necessary but insufficient condition to driving systemic change.
  • Secondly, “because lawyers” is an intrinsically blame-based narrative, built on hypotheses about highly stable aspects of lawyer disposition and personality. This is especially problematic where it invites proactive defensiveness from lawyers and engenders cumulative resentment in change agents. These two consequences conspire to erode rather than promote collective psychological safety. Cf. Laura Delizonna, “High-Performing Teams Need Psychological Safety. Here is How to Create It,” Harv Bus Rev (Aug. 24, 2017).

Instead, I think we (legal innovators and change agents) would reap greater benefit from thinking and talking more specifically about target markets. For example, which buyers have underserved needs that they are willing to pay to address now? And what, precisely, are those needs?

Buyers Rarely Beat the Proverbial Path to Your Door

Developing new products and services is hard – in any industry.  Even when there is a proven customer base with clearly articulated and well-understood needs, incremental improvements do not readily and reliably translate into profit.  Disruptive products and services are another order of magnitude difficult: they occur because of discovery of a whole new set of needs not yet known or understood by anyone (we want 1000+ songs on demand at all times); or because of a wholly new configuration of value creation and delivery that substantially displaces the current solution (we want to order every book and eventually every product under the sun and have it delivered tomorrow).

In either context – incremental improvement or true disruption – would-be innovators must proactively define a reachable target market. Because new things take time to refine and scale, the survival of new ideas often depends on identifying and addressing the correct market first.

This implies a deep understanding of buyers and markets:

  • how buyers currently organize and identify themselves into groups;
  • how each group might differently perceive their needs and potential options to fulfill those needs; and
  • how they prefer to buy and consume products and services that present a solution.

This is especially tricky because markets for new things are fluid and sometimes cut across existing or obvious demographic segments.  Indeed, as this publication has well established, receptiveness to new things – in any context – are more dependent on psychographic attributes than demographic ones. See Post 007 (covering the basics of adopter types).

Ideas Need Market Feedback to Become Real

In the legal industry or anywhere else, ideas are rarely in short supply. Ideas are necessary but insufficient for meaningful progress – what we need are effective and reliable means to validate and refine ideas into tangible products and services that will survive contact with reality.  This almost always requires the participation of potential buyers.

Unfortunately, optimal buyers in early markets do not always self-identify or congregate conveniently in a physical marketplace that innovators can visit to announce or demonstrate their idea.  Instead, as the graphic above suggests [click to enlarge] the innovation team has to think creatively and undertake all manner of legwork outside the lab, to discover or pull together niche markets or sub-segments who will provide feedback and stress-test hypotheses about how the new process, product or service should work.

The onus to find the right prospects and convince them to try new things rests with the innovator, entrepreneur or intrapreneur. Yet, how often do we revert to the “because lawyers” narrative to explain away the many promising ideas that have stalled without achieving significant adoption?  If a product or service is actually effective in addressing a problem that matters to the customer, the change management burden can be reduced (although perhaps never fully eliminated). Cf. Post 008 (49 to 87% of the rate of adoption typically turns on just five product attributes–relative advantage, simplicity, cultural compatibility, trialability, observability).

Unfortunately, “going to market” has become shorthand for any number of sticky problems and nebulous questions to work through. When we use that phrase, we need to acknowledge the enormous time, effort and difficulty that lies ahead.

As an industry, we are not yet mature in our collective ability to define and size new markets for innovative offerings. In simpler terms, our most critical gap isn’t ideation and it probably isn’t change management either.  We have a commercialization problem, and to improve our industry-wide win rate we need to address the actual choke point.

Legal Innovators Face Extreme Conditions

In a recent discussion, Bill offered this insight: the legal industry isn’t different; rather, it’s extreme.  I think this is a superior framing device to drive constructive dialogue and to advance our thinking about legal innovation.

Two distinguishing features of the legal industry’s structure contribute to make it an unusually unfavorable ecosystem for innovation: (1) extraordinarily balkanized and (2) fractally opaque.  That sounds highly academic and esoteric, so I explain in plainer English below, with some supporting figures and visuals.

Balkanized and Isolated

Many industries are fragmented (i.e. crowded without a clear or dominant market leader), but legal is something more: extremely fragmented into many smaller units that are mutually hostile or uncooperative.  This is true at the establishment level (individual firms) and at the segment level (the categories and subgroups into which firms roughly organize themselves).

The above diagram [click to enlarge] conceptualizes the evolving landscape of legal service providers, along the two-hemisphere model advanced by Heinz and Laumann and Susskind’s bespoke-to-commoditized continuum. See Henderson, What is more important for lawyers: where you go to law school or what you learned? (Part II), Legal Whiteboard (July 19, 2015). The left side of the chart captures the broad categories of incumbents (“the artisan guild”). The middle and right regions capture the broad categories of emergent competitors who seek to leverage new technology or process innovations to offer a different value proposition. This graphic is effective in communicating the increasing complexity of the legal marketplace.

However, it’s important to note that the above depiction of market composition is conceptual and categorical – it is not a scale representation of current market share along any quantitative measure. To add a more quantitative dimension, the below chart [click to enlarge] relies on U.S. Census data to show the composition of the legal services market by establishment size:

While this is an incomplete view of the market and a fairly imprecise mapping of segment to firm size, it still offers added quantitative support to the idea posited first in Post 005 “Six Types of Law Firm Clients” and clarified recently in Post 048 “Confusing Conversations with Clients”: namely, that we talk past each other because we each bring varying perspectives from different work contexts.

Most market composition analyses are based in revenue share. On infrequent occasions, the point is made that the vast majority of firms are solos or small firms (over 90% in the Census data above). But it is an analysis of job share that gives a more accurate sense of our industry as well as the best real-world explanation of why we often talk past each other.

Roughly 1,200 of the largest companies in the legal market account for about a third of all jobs, with small firms and solos splitting the remainder fairly evenly. If a Martian visiting Earth to learn about our legal ecosystem were to randomly select 3 people who work in legal services, the most likely scenario is that he will end up with 3 people who come from dramatically different work contexts and have almost no consistent information to offer.  Even if our Martian were to beat the odds and pull together a focus group of 3 individuals who at least work in similarly sized organizations (he has about a 3.7% chance of getting that lucky), it’s also likely they come from firms with different specializations serving different client segments, who are accustomed to completely different workflows, technology environments, and compensation and incentive schemes.

Like any balkanized region comprised of hostile states, the legal market is difficult for outsiders to navigate or understand. For those of us on the inside, we should remember that each of us brings to the table a labyrinthine set of customs and experiences that create significant divisions and critical barriers to cooperation.

Fractally Opaque → Perpetually Lost in Translation

By and large, we remain in our silos and fail to cooperate. The “lone wolf” proclivities of lawyers (so autonomous and so competitive!) have been cited frequently as a primary barrier to open communication and collaboration. However, I think the phenomena is subject to more contextual explanation. Some legal work is intrinsically adverse and nearly all of it is highly confidential in nature. These factors serve to anchor a high baseline of opacity and create communication infrastructures that are designed to impede, rather than promote, the efficient sharing of information.

Despite the efforts of some forward-thinking corporate law departments to drive deeper collaboration across their supply chains, firms within each category tend to engage in vigorous competition, which in turn drives even greater opacity. The intensity of that competition has only increased in recent years as corporate budget pressures and insourcing strategies have depressed demand growth for the “artisan guild.”  Subsequently, an open exchange of new ideas or practices within categories is more the exception than the rule, and usually only happens under diligent and hands-on management by a shared client.

In the current state, we also see very little systemic cooperation across segments (e.g. sustained strategic alliances or partnerships across service provider types). The artisan guild tends to regard newcomers with suspicion, and many forward-thinking incumbents are embarking on long-range initiatives to future-proof their businesses against down-market threats. In this, the incumbents engage in completely rational competitive behavior: many new entrants seeking entry points into the corporate buyer ecosystem are essentially positioned to displace corporate legal spend that has historically been held captive by the artisan guild.

In the legal industry, very real differences are present at many different resolutions: across segments, firms, practices, case teams, and individual roles. The resulting translation barriers add opacity to an already complex ecosystem, and that opacity is fractal in nature. In other words, you can take any subpart of the legal industry and it will display structural features that make each part just as opaque as the whole.

Even when we want to, many of us working in legal businesses find it challenging to relate meaningfully to each other. The emergence of new types of businesses and the continuing proliferation of new roles for allied professionals add more dimensions of complexity and friction in communication:

If innovation is a process by which new ideas spread across a social system, see Post 004, then legal innovators and change agents would be well served to recognize that the legal industry is not one single monolithic social system.  Rather, it is a complex and complicated network of distinct and disparate subsystems, with almost every organizing principle conspiring to create friction in the diffusion process.

In an illustrative comparison, our close cousins in accounting have a slightly easier time. About 50% of accounting jobs are concentrated in firms of 500 employees or more. The perennial focus in legal press on the fates and fortunes of the richest firms, see, e.g., “The Super Rich Are Getting Richer” in American Lawyer (April 2018), also conspire to give a broad sense that the legal market is exceeding top-heavy.  In short, the legal market appears to be a textbook example of the top 1% claiming the lion’s share of clients, revenue and profits, but this turns out to be a distortion of reality. The legal market most likely suffers from a slower pace of innovation because it is not top-heavy enough.

Though an apples to oranges comparison, the Big 4 enjoy much greater advantages of scale and scope relative to even the largest global law firms because they’ve consolidated a much larger portion of market share. Collectively, the Big 4 clocked about $130bn in global revenues in 2017 – more than revenues of the Am Law 200 combined.

Historically, the Big 4 draws roughly 40% of its revenues from the Americas and about 30% from audit.  To match the Big 4’s Americas topline, the largest 32 Am Law firms would need to pool their collections. Because each of those 32 firms is organized into its own unique matrixed structure of regions and practice areas, the adoption decision must be made many times over, whether on a collective or authority basis, see Post 008 (type of decision affects rate of adoption). Either way, overall cost and effort required to spread new ideas through law firms are exponentially greater.

Market Inefficiencies → Innovation Inefficiencies

These structural barriers to the spread of new ideas are very real, even for the vast majority of the market conducting business as usual and merely looking for ways to drive incremental improvements to how they work. However, their adverse effects are perhaps felt most keenly by those trying to drive significant change in the industry.

In the aggregate, these structural barriers are experienced as friction in the procurement process and as inefficiencies in the marketplace. What do I mean by inefficiencies?  In classic economic theory, an efficient market is one in which asset prices accurately reflect true value. Clearly, the ongoing dialogue around the need for pricing innovation – as well as the anecdotal evidence of high price dispersion for similar services – suggests the legal services market is highly inefficient.

But I also think the current makeup of the legal services market makes it highly inefficient in the literal and colloquial sense of the word: it takes too much time and effort for buyers and sellers of specific services to find each other, and once they meet up it also takes a great deal of time and effort to agree upon a fair rate to exchange money for services.  More often than not, buyer and seller arrive at some accord using highly technical methods best described as “eh ¯\_(ツ)_/¯ looks about right.”

Assessment and evaluation of new substitutes implies an even greater burden of time and effort, along with the added element of risk in what is defensibly an environment of exceptionally low tolerance for failure. Moving fast and breaking things is great for startups… until Cambridge Analytica happens.  Generally speaking, breaking things is less great for lawyers who are often hired to prevent bad things from happening or to argue over liability for bad things that have happened.

To succeed in this unforgiving ecosystem, innovations must offer an undeniable value proposition that functions as a complete solution to a material customer problem.  In the next post, we will revisit the five adopter types with the goal of understanding the specific and unique contributions each type can offer to the would-be change agent seeking to cross the chasm.

What’s next?  See A playbook for innovation magic (052)


The legal industry wants more innovation. The missing ingredient is strong leadership.


Several years ago, a good friend threw me to the lions, though that was not his intent.

My friend, who works in legaltech, asked me to show up at the headquarters of a Fortune 100 company to present some prototypes I had developed on giving feedback to law firms.  Cost pressures were rolling downhill to the legal department.  Thus, in an effort to better manage costs, the senior leadership winnowed their outside law firms to a panel of preferred providers.  In theory, the firms were supposed to work cooperatively with each other to deliver world-class quality within a large predefined budget.

From a distance, this all sounded innovative. But up close, implementation was a challenge. The only management tool was an annual rating system that measured law firms on a 1 to 5 scale (1 = poor, 5 = excellent). Because performance was aggregated across dozens of lawyers and dozens of matters, the narrative comments were too general and lacking in context to be helpful. Further, all the quantitative scores were clustered in the 4.8 to 4.9 range, making them useless for making merit-based adjustments.  Indeed, if in-house lawyers gave scores any lower, they’d be tacitly admitting a problem with their own oversight.

I had approximately 90 minutes to present my prototype to a room full of BigLaw relationship partners.  Basically, my proposal was to have in-house counsel complete a monthly survey tool for each significant matter they were managing (a 10 to 30-minute commitment per lawyer who managed outside counsel). In turn, the results would roll up to a centralized knowledge management system that would generate practice group, firm, and legal department-level reports.

Although the proposed prototype required the in-house lawyers to do all the work to generate the feedback, the law firm partners disliked everything they heard, arguing that the work to review the feedback would be burdensome and counterproductive. One especially vociferous partner remarked, “If there’s a problem, I’d rather have a phone call.” He would not concede that there was any value to timely bucketing specific examples of good and bad behaviors, nor that the resulting data could provide a roadmap to help the client and create a factual basis for higher fees.

As I was getting pummeled by the BigLaw partners, the in-house lawyers looked on in silence.  And in hindsight, I really don’t blame them.  They, like me, were learning the depth of the opposition to systematic measurement of performance.  It would have been a different dynamic if the general counsel, who operated at a level above these lawyers and was not supervising this initiative, had communicated that the company was going to use a feedback system to better manage millions in legal spend and that the purpose of this meeting was not to question the premise, but collaborate on implementation.

At this juncture in my career, I had not witnessed many examples of strong and decisive leadership among lawyers and thus did not appreciate how essential it was to organizational progress.  Over the next several years, however, I began to see the pattern.

Who should run the feedback process?

A few years later, in December of 2014, I spent the afternoon with two law firm insiders who were in charge of strategic initiatives at their respective firms.  Both believed in the importance of client feedback to not only enhance the quality of service but also deepen relationships with clients and build a path to more meaningful and sustainable growth.  Yet, they expressed frustration at its limited value to drive firm-wide or industry-level change.

Here’s why.  Imagine a large corporate client that uses 20 outside law firms.  In most cases, that means that there are nearly 20 different ways that the client provides feedback. One firm sends the managing partner for an annual dinner with the general counsel. Another sends the relationship partner. A third sends the Chief Value Officer. A fourth has an annual client survey system, albeit only 30% of the in-house lawyers reply. Several other firms use a third-party service, such as Acritas, Wicker Park Group, BTI, or PP&C Consulting.  And a surprising number of firms are content with feedback in the form of paid bills and continued work.

Virtually all of these feedback mechanisms are fragmented and lacking in context, making it easy for lawyers to rationalize away negative information. Under the best case scenario, only 20-30% of the total feedback time will result in significantly better performance.  That means that 70-80% of feedback has zero ROI. That’s an enormous amount of waste.

Yet, what if clients took control of the feedback process? As my colleagues pointed out, if clients rigorously evaluated their outside counsel, the information would be too direct and specific to be ignored. Then we laughed at our Panglossian idea, “This is never going to happen.”

Sometimes it’s good to be wrong

One of my law firm friends in the December 2014 meeting was John Fernandez, who was at the time was the US Chief Innovation Officer at Dentons (now Global Chief Innovation Officer).  One of John’s projects was the launching of NextLaw Ventures and NextLaw Labs, which identified promising new legal technologies for investment and piloting within the firm.

In June of 2015, John fielded an inquiry from a corporate GC who had, over the course of eight years and two different companies, developed a feedback system for managing his outside law firms.  The general counsel, Mark Smolik of DHL Supply Chain Americas, was looking for guidance on whether this idea had commercial application. John asked if I wanted to join a meeting with Mark to help vet the opportunity for NextLaw.  I said “sure.”

That meeting was very fateful because (a) John and I had already identified that this was a problem worth solving, and (b) Mark Smolik had years worth of data showing that his system worked.   Miscommunication and derailments were going down, value per dollar spent was going up, and Mark had more bandwidth to focus on other company priorities.

Borrowing from HR

I think readers will benefit from understanding the origins of Smolik’s system, as it reveals the power of simple ideas and insights.

The first insight occurred to Mark over a decade ago when he was general counsel of Safelite Auto Glass, a national company doing on-site windshield repair.  In addition to running the legal function, Mark was also in charge of HR. One day, Mark became a Safelite customer when the windshield on his wife’s car got damaged.  While at work, Mark took a call from his wife, who told him that a somewhat frightening looking guy claiming to be with Safelite showed up at the house to repair the damage  “I have no idea who this person is. Why should I open the door?” Wanting to reassure his wife, Mark contacted the Columbus service center and asked them to send their best technician to perform the work. “Please tell me his name and at least what he looks like.”

That incident gave Mark an opportunity to experience Safelite through the eyes of the customer.  Shortly thereafter, Safelite developed a standard practice of sending a technician profile email to all its mobile customers that included name, photo and credentials of the auto glass technician.  Safelite also implemented a client feedback tool to track the quality of each service call.  By the time Smolik left Safelite in 2009 (two years after its successful sale to Belron), Safelite was planning a national ad campaign that would make the quality and friendliness of their glass technicians the centerpiece of the company’s branding.

The systematic tracking of the customer-facing personnel at Safelite created a desire in Mark to apply the same logic to the many law firms that he was managing.  “If the company is going to spend a few hours each year reviewing the performance of each of its employees, then why aren’t we devoting at least that much attention to the large sums we spend on law firms?”

Thus, Mark applied basic HR principles to his outside counsel, developing performance criteria, applying it to firms, sharing results, and collaborating on a plan for improvement.  Mark used this methodology to winnow and consolidate the number of firms he worked with. This reduced his overall communication overhead while increasing the value of each dollar Safelite spent on legal.

Building a company around scorecards

By the spring of 2016, Mark Smolik’s outside counsel scorecarding system became the basis for Qualmet, one of the first companies in NextLaw Ventures investment portfolio.

Along with John Fernandez, the other law firm insider at my December 2014 meeting was Jim Beckett, who at the time was Chief Business Development Officer at Frost Brown Todd.

Beckett started his legal career as a Frost Brown Todd associate before going in-house at RJ Reynolds. A few years later, he moved to the business side, running an RJ Reynolds operating unit in Puerto Rico.  Jim came back to the firm partially because it enabled him to raise his family in his hometown of Louisville.  But having spent eight years inside a large company, he felt he had a roadmap in his head for how a law firm could grow market share. Jim and the firm’s chairman, John Crockett, had worked together when Jim was an associate and John was a young partner.  John wanted to give Jim’s ideas a try.

Jim’s business development strategy was very simple.  Spend time with your clients and listen to what’s on their mind.  Then make their problems your problems, using all your creative energies to identify, anticipate, and solve what’s happening in their world. This may sound obvious, but many lawyers struggle to get out of their comfort zone and then blame the lack of immediate returns on client resistance.

At his core, Jim is an impatient person who wants to change the industry.  Thus, in December of 2014, when we discussed the possibility of the client owning the feedback process, Jim couldn’t get it out of his head.  By the time Fernandez and I met with Smolik, Jim was sketching out a business plan.  Thus, during the June 2015 meeting, I told Mark, “There is a guy, Jim Beckett, who you’ll want to talk to. He has been on both the buy and sell side and is already fixated on this idea.”  John nodded in agreement, “I can’t think of a better guy to run with this.”  After several months of additional vetting, Qualmet was formed and Jim was named CEO.

CEO in legaltech may sound glamorous, but in reality it’s just more stress, a pay cut,  a chaotic mix of product, marketing, and sales, 6 am flights, bad airport food, and guilt over how your career decision is affecting your family. But if you think this is your big opportunity to make a difference, you’re willing to pay that price.


Disclosure: Through NextLaw Lab, I gave input to Qualmet during its formation, including sitting on its Board. Qualmet also became a client of Lawyer Metrics, where I served as Chief Strategy Officer.   When I left Lawyer Metrics in late 2016, and before I started Legal Evolution, I resigned from Qualmet’s Board, as I viewed fiduciary obligations to any legal industry business as incompatible with my role as editor. In addition, I have no financial or investment interest in Qualmet or any legal industry company.


We’re entering the management age for lawyers

Leadership and management are not part of the legal education canon.  Yet, that is bound to change as more lawyers stumble forward into these disciplines to cope with the relentless growth in complexity we face on a daily basis. In the meantime, however, we are at risk for misinterpreting the tides of change.

For example, many lawyers and law firms (and initially this professor) are quick to conclude that the goal of scorecards is to save money.  Yet, in most cases, the motivation is scarcity of internal bandwidth. An important task done well and efficiently frees up time and mental energy to tackle other strategic priorities. Saving money, or getting more value per dollar spent, is a by-product of a more disciplined approach to one’s job as lawyer-manager.

The first step in this more disciplined approach is formulating the evaluation criteria.  Initially at Safelite and DHL, Mark Smolik focused on seven criteria:  (1) understands our objectives / expectations, (2) expertise, (3) responsiveness / communications, (4) efficiency / process management, (5) cost / budgeting skill, (6) results delivered / execution, and (7) compatibility with company values.  Each criteria, in turn, is defined by a set of specific behaviors.

What managing law firms looks like

For ideas like scorecards, lawyers need examples rather than abstract descriptions. In 2016, I ran some focus groups for what would later become Qualmet. Below are some of the graphics from those sessions (credit: Evan Parker from LawyerMetrix).

These data reflect the performance of actual law firms, including the AmLaw 200 firm of Conroy & Alexander (a pseudonym). The scores for each criterion are averages of in-house lawyers who used the firm. Obviously, between 2011 and 2015, things moved in the right direction. Conroy & Alexander now exceeds expectations on six of seven criteria and has a clear priority on where it needs to improve.

Below is the trendline of Conroy & Alexander’s average annual performance. This is the ROI that flows back to the in-house lawyers who are providing the feedback — they’re expending less time and attention to get better results.

Below is a picture of how the top seven firms are doing. Conroy & Alexander is firm E.

One takeaway is that expertise — which lawyers routinely fall back on to sell themselves, are table stakes.  Another takeaway is that no firm really stands out on efficiency / process management. Thus, perhaps this is an area where a firm could seek to differentiate itself over the next one to two years. A third takeaway is that firm F is in trouble.  During our focus groups, several leaders of AmLaw 200 firms said they would like this data as a management tool for partners who are all-too-ready to blame the client.

These scorecard graphics above are basic management tools applied to the work of lawyers.

Progress will require leadership

As a profession, have we accepted the premise that working within a well-designed management system would make our work more valuable to clients?

Few of us would debate the general premise, particularly in front of our clients. Yet, we struggle to accept it because, in our own little zones, we fear losing control.  As a profession, we need a handful of lawyers in positions of authority who will make the decision for us.  They will be subject to a lot of blowback and pleas for special treatments.  However, in the long-run they will win our trust and respect.  We will view them as leaders.

I came to this conclusion in December of 2017 during a design workshop in Chicago.  After more than a year in business, the Qualmet team is coming to grips with a common innovator mistake: they had confused why they loved their product with why a client might buy it.  Cf. Post 008 (“[The innovator is] often deeply immersed in the technical workings of the project … [and thus] at grave risk of falling in love with features that are of little practical value to the target end user.”). Fortunately, the Qualmet team includes professionals with expertise in marketing and design thinking. I secured them meeting space at Northwestern Law.  In exchange, I got to observe the workshop.

The key goal of the daylong session was to work backwards from the daily lives of legal department professionals.  A wide variety of legal professionals–not just general counsel–were invited in for 60- to 90-minute conversations.  The Qualmet team wanted to know how they spent their time, their biggest frustrations, what they wanted most out of their jobs, etc.  Yet, very rarely were these questions asked directly. Instead, they were asked for their reactions to a series of crude prototypes (the vast majority that had nothing to do with outside counsel scorecards).

For me, the most surprising revelation was that in legal departments with several lawyers, the general counsel spends less than half of his or her time managing the department.  Instead, they are focused on being a fully contributing member of a C-suite management team.  One GC of a publicly traded company put the percentage at 70%, with less than 15% that touched on anything related to outside counsel.  Among the department professionals, the common theme was lack of time and budget to operate at a strategic level.

Indeed, I did not realize it until later, but Qualmet was running the design work shop to test their thesis that scorecards were a tool to put the general counsel into alignment with the CEO, as the performance data could be used to show how decisions regarding outside counsel were being made. The use of quantified performance puts the GC in more of a business place than a “legal place.”

One question to a general counsel that I especially enjoyed was, “Do you want to be a CEO some day?” Reply, “yes.”

Follow-up, “What about your general counsel friends — do they want to be get promoted?” Reply, “Probably. Otherwise, why do this job? Once you become a general counsel, you are more a manager and leader than a practicing lawyer. Thus, you have to develop those skills to excel at your job. Why not embrace the career path?”

We need to talk more about leadership

Leadership in legal departments is different than leadership in law firms.  Unlike a law firm leader, a general counsel can make an unpopular but necessary decision and not worry about losing revenue and triggering a proverbial run on the bank.  This reality is what is driving the consolidation of law firms into global giants. The hope is that global reach and the support services that a large firm can afford — technology, project management, process improvement, data analytics, etc — will wed the client to the firm.

I would like to see more general counsel collaborate with law firm leaders. Scorecards are just the start.  The goal should be to bring out the best in the lawyers and legal professionals they lead and manage.

What’s next?  See Confusing conversations about clients (048)

I am pleased to introduce readers to the Institute for the Future of Law Practice (IFLP), a new nonprofit collaboration between law schools, law firms, corporate legal departments, NewLaw service providers, and legal technology companies.  Details of this new venture can be found online at www.futurelawpractice.org.

Per the picture above, IFLP (“i-flip”) will be hosting training bootcamps in May 2018 in Chicago (at Northwestern Law) and Boulder (at Colorado Law). The bootcamps are designed to prep law students for sophisticated legal and business work settings. Each student admitted to the program is paired with a legal employer for either a 10-week summer internship or a 7-month field placement. All internships and field placements are paid. The IFLP program currently includes four law schools — Northwestern, Colorado, Indiana, and Osgoode Hall (Toronto) — though the plan is to build an infrastructure that will support and serve a significantly larger number of law students, law schools, and legal employers.

Rather than summarize the contents of the IFLP website, I am going to use this post to answer four questions:

  1. What problem is IFLP trying to solve?
  2. How will IFLP be successful?
  3. Where did IFLP come from?
  4. How can industry stakeholders become involved?

1. What problem is IFLP trying to solve?

Legal education and the legal profession are at an inflection point where traditional models of education and practice no longer fit the shifting needs of the market. The biggest driver of change is increased complexity. Historically, the legal profession has dealt with complexity through specialization and division of labor.  However, the legal profession is now at a point where its members need to learn new tools and methodologies that were not, and are not, part of traditional legal education.

Unfortunately, law schools are unable to make this transition on their own. This is because (a) the shift in practice requires an integration of law with problem-solving methods that are not legal in nature (e.g., data, process, project management, technology, and team-based collaboration); and (b) the state of the art for these new approaches to practice are currently being developed in the field by practitioners and other allied professionals.

IFLP can help fill this void by identifying industry-leading practitioners and distilling their know-how and experience into an organized body of knowledge that can be taught to law students and mid-career legal professionals.

2. How will IFLP be successful?

IFLP will be successful if it can create training and internship programs that serve law students (through high-quality employment) and legal employers (through a rich pool of applicants with an expanded set of skills and knowledge). In its simplest form, our goal is to use education to build demand for new and better pathways to sophisticated modern practice.  The larger the demand, the clearer the signal to legal education on how to retool to meet the needs of a changing market.

IFLP is fortunate to have an anchor set of legal employers who want to create a talent pipeline that combines traditional training in substantive law with foundational training in data, process, technology, and business  (T-shaped lawyers). Further, as we develop IFLP curricula and training modules, these resources can be used to cost-effectively upgrade the skills of mid-career professionals.

IFLP is designed to be an intermediary organization that coordinates the interests of law schools and legal employers. We want to improve the content and quality of legal training in ways that widen the pathway to practice.  Under the best case scenario, students, law schools, and legal employers will converge on an industry standard that better serves the interests of all stakeholders. A half century ago, organizations like NALP, LSAC, and NCBE sprang up to fill an important industry gap. Similarly, in 2018, IFLP fills a pressing industry void.

3. Where did IFLP come from?

The founders of IFLP were inspired by their experience with the Tech Lawyer Accelerator (TLA) program at Colorado Law.  Since 2014, approximately 80 students (most from Colorado Law, some from Indiana Law) have participated in a 3½ week bootcamp at the end of their 1L or 2L year. The TLA focused on technology, process, and business skills, with students spending the balance of their summers in 10-week paid internships. In some cases, the internships were extended to seven months (the summer and fall of students’ 3L year). Colorado Law’s TLA is the foundation for the first iteration of IFLP. For additional background on the TLA, see Post 018 (summarizing topics covered in the 2017 TLA).

During four years of operation, TLA has garnered very favorable feedback from students and employers. But more significantly, we received “pull” from several employers to expand the program’s breadth and capacity.  In response to this pull, a small group of us conducted a needs analysis during the fall of 2017. This involved the formation of several exploratory committees drawn from our professional networks. One committee focused on law schools; a second on legal employers; and a third on the viability of an ongoing nonprofit business model.

Based on the feedback we received, in late 2017, we made the decision to go forward with the creation of IFLP.  As we embark upon this journey, we are very grateful for the support of our volunteer board.

4. How can industry stakeholders become involved?

IFLP is not an exclusive club.  However, to be successful, we have to meet a market test. This means offering an educational product that is valuable to students and employers while also generating revenues in excess of operating costs.  In our first iteration, we are limiting participation to a small number of schools. We need to work through the myriad of issues associated with cross-school collaboration. This is complex and requires us to go slow.  The goal, however, is to create a foundation that can support future growth.

At present, we are most in need of legal employers. If your organization wants to co-create a world-class educational program that can fill your need for world-class talent, please contact us.  We are also in need of industry sponsors who are willing to subsidize IFLP in its early days.  We are fortunate to have a handful of benefactors who are getting us off the ground.  The payoff is affiliation with a promising nonprofit working to align the interests of industry stakeholders. Announcement of our full roster of participating organizations and sponsors will occur later this spring.

For law schools and law faculty, we encourage you to visit the programs in Boulder and Chicago.  We value your input and are willing to share what we are learning.  With success, we will be able to expand to include more member schools.  If you are interested in getting involved, please contact us at this link.

What’s next? Lucy Bassli shares her thought process behind her major career move (044)

In a recent post at 3 Geeks and a Law Blog, Casey Flaherty puts his finger on a big problem.  The opening paragraphs are too funny not to quote in their entirety:

My friend John Grant [of Start Here HQ] made a mistake.

Many moons ago he was consulting on process improvement for a large law department. He surveyed in-house counsel on their biggest complaints about outside counsel. The response was that outside counsel:

  • Don’t understand my business
  • Can’t tell me how long anything will take
  • Overwork a problem/introduce complexity
  • Don’t give me output in a format I can use

Familiar enough. And so far so good. John’s misstep is that he put the same question to internal clients of the law department. The response was that in-house counsel:

  • Don’t understand my business
  • Can’t tell me how long anything will take
  • Overwork a problem/introduce complexity
  • Don’t give me output in a format I can use

This result was not well received by the law department.

I laugh because I have seen this problem firsthand.  However, it’s probably not as funny if you earn your living selling advice to in-house lawyers.

Casey’s post contains a level of humility and candor that is rare among people, let alone lawyers.  Here is my own paraphrase of Casey’s thesis: “After 10+ years of relevant work experience and countless hours of reflection, I’ve concluded that successful innovation among lawyers is less complicated but more difficult than I thought.”

The Lawyer Theory of Value

Casey’s “lawyer theory of value” is the insight that makes things less complicated.

Casey writes, “The lawyer theory of value states that the key to value is having smart lawyers.  Lawyer time is the primary resource and the primary unit of measure even in law departments that have no compensable time sheets.” Because in-house and law firm lawyers are the same people, they have the same go-to move — stand back and let me lawyer.  For in-house lawyers, however, the reflex varies by problem-solving hat:

  • Hat 1.  When wearing their service-provider hat, they measure value based upon time and effort.  After all, they know how smart they are and how hard they work for their internal clients.
  • Hat 2. When wearing their client hat, in-house lawyers measure value based on predictability and how the service provider helps them get their work done — just like those folks in sales, HR, and purchasing.

Although in-house and law firm lawyers are the same people, law departments “get them at discount and on a fixed fee.”  Thus, for at least two decades, as Casey points out, clients have dealt with budget pressure by expanding their law departments. See Post 003 (documenting trend).  However, as this approach hits the point of severe diminishing returns, Casey acknowledges that legal departments have fully replicated the management challenges of law firms.  The refrain from lawyers is the same: “not here, not yet.”

“What most in-house stakeholders want,” observes Casey, “is more budget, more headcount, and to be left alone.”  We see the same mindset in law firms: “I’ll work hard and track my time. Otherwise, leave me alone.”  Indeed, the perfect symmetry is what makes the lawyer theory of value so compelling. If we apply Occam’s razor, there’s nothing left to cut.

Seeing the world as it really is

if the lawyer theory of value is true, then it has implications for Casey’s broader views on legal innovation.  To Casey’s credit, he catalogues four faulty assumptions he has personally harbored:

  • “First, I’ve taken in-house counsel at their word. I’ve relied on stated rather than revealed preference. … The desire to change may be genuine. But that in and of itself does not make change a priority. … I expected more law departments to be fast followers. Instead, we’ve repeatedly witnessed innovations by prominent law departments remain outliers.”
  • “Second, I’ve imagined change efforts that are deeper and more transformative than they turn out to be. I’ve taken the highlight reel and mentally filled in the gaps to be equally spectacular.”
  • “Third, I’ve observed success in one area [contract management, diversity, outside counsel spending] and mentally grafted it onto others [e.g., litigation management or use of alternative service providers]… [T]his assumption has it backwards. In-house departments are resource constrained. With finite resources, the essence of strategy is choosing what not to do.”
  • “Fourth, and relatedly, I’ve treated in-house departments as monoliths. Because the legal ops head and one AGC have stood up something cutting-edge, I’ve implicitly assumed that the remainder of the department shares their innovative fervor. But politics is the art of the possible. … While innovation may be embraced and effected by a few, the many view it with suspicion and annoyance.”

What makes these admissions / reinterpretations so striking — and useful — is that Casey is as intelligent and experienced as they come. Yet, he is coming clean with insights that he learned from the trenches, admitting that true progress is a lot more difficult than he thought. God help the rest of us trying to sort things out from the comfort of our base camps.

Why does this matter?

Roughly 55% of all legal services in U.S. are purchased by organizations with at least one in-house lawyer.  And this staggeringly high number excludes the economic value of more than 105,000 in-house lawyers. See Post 003. Thus, Casey is writing about the substantial bulk of the legal services market, not a fractional subset.  The portion of the profession fully outside his analysis, see Post 037 (decline of the PeopleLaw sector), has a different set of problems. Albeit, the answer to both requires a substantial redesign of how lawyers — or, more accurately, legal professionals — serve their clients.

I hope Casey agrees with this additional gloss on his analysis: The lawyer theory of value — solving legal problems one at a time with smart lawyers — is an unstated and unexamined preference of lawyers, not a viable long-term solution for the clients they serve. Further, it is not a preference that law students and younger lawyers can afford to indulge. As I collect my law professor salary, I think about this issue on a daily basis.

There is a lot of hard work ahead on staggeringly complex problems. These problems are made more difficult by organizational politics, the personal agendas of those fending for themselves, and necessity of telling people things they don’t want to hear.  Good ideas are, at best, the first 5% of a solution.  We ought to be grateful we have Casey’s brain power and intellectually honesty to help us cope with the rest.

What’s next? See Successful technology adoption: David Cambria (ADM) and Eric Elfman (Onit) discuss their collaboration (041)

As the above syllabus excerpt suggests, there is now a law school course on how innovation diffuses in the legal industry.  This new ground is being tilled at Northwestern Pritzker School of Law, where I am visiting this fall.  It is one of the few courses at Northwestern Law that enrolls both JD and Masters of Science in Law (MSL) students.  This enrollment is ideal, as the diverse educational backgrounds and professional experiences of the MSL students are a terrific complement to the 2L and 3L students who have already internalized a surprisingly large amount of legal culture.

The class started last Monday (10/16) and runs for eight classes.  As diffusion theory is part of an applied research tradition, see Post 004, we spent exactly one class on the underlying theory and the legal industry before moving to examples.

The examples are supplied by legal innovator and early adopter guest lecturers.  For Week 2 (10/23), we had the pleasure of hosting David Perla, co-founder and former co-CEO of Pangea3, and Ian Nelson, who was part of the original US sales team of Practical Law Company (PLC) and more recently co-founder of Hotshot, a tremendously innovative e-learning company focused on legal professional development.

NewLaw and legaltech start-ups are now widely covered by the legal press. But that was hardly the case during the booming mid-2000s when all the focus was on soaring BigLaw profits and salaries.  I wanted to start our guest speaker series with David and Ian because during this hey day period, both quit top-of-the-food-chain jobs to pursue obscure and speculative business opportunities (David in 2004 and Ian in 2006).  At the time, the future we are now living in was far from obvious.  Yet, when their respective companies sold to Thomson Reuters a few years later at valuations and multiples on-par with highly successful Silicon Valley start-ups, it became clear that NewLaw and legaltech were sectors with enormous opportunity for the innovative and ambitious.

Perla’s story

Over the years, I have heard several renditions of Pangea3 founder stories.  But Monday’s edition provided a new twist, as David focused on the preeminent importance of professional relationships and how, in hindsight, the long game is the only game that really matters.

David went through a long litany of examples of how a decade’s worth of professional contacts accumulated since law school (by both he and Pangea3 co-founder Sanjay Kamlani) were crucial to opening doors or indirectly supporting the fledgling start-up.  From getting free access to 1,200 Indian lawyer resumes from Monster.com so the duo could stand-up a work team in India over the course of a few days (David had just quit the GC position at Monster to launch Pangea3); to several months of office space at Katten Muchin so Pangea3 could signal a midtown Manhattan address (David was a former Katten associate); to an initial investment by a prominent Indian-American lawyer who had credibility in both US and India venture capital and legal circles, thus greasing the skids for everything that followed (this came through Sanjay’s tenure at PWC and OfficeTiger, a first-generation business process outsourcer in India), each story illustrated the tremendous importance of relationships. Cf. Post 020 (discussing crucial role played by “weak-tie” relationships in the diffusion of innovation).

The most surprising and powerful story was David’s family connection to the head of litigation of a major global bank.  The family friend took David’s call, but said at the outset,  “I am happy to help you in any way I can through mentoring and coaching, etc., but I’m never going to send any documents to India.”  David replied, “I understand.  Is it okay if I check in with you every six months?” The head of litigation said “Sure.”  David foreshadowed that this connection would turn out to be key to the ultimate success of Pangea3.

In the meantime, David and his colleagues were trying to crack the code of the large global banks.  One of their prospective customers broke the disappointing news that “we innovate in our trading strategies, but not in operations or sourcing. For that stuff, we’re a second mover. So if you want us to hire you, go get [list of global banks] as one of your customers. Then we can talk.”

Fast forward a couple of years, the big break for Pangea3 was the turmoil in the financial services market in the fall of 2008 and the resulting global recession.  David fields a call from one of his board members, who buoys his spirits, “Doubledown on sales; recessions are good for outsourcing.”  Shortly thereafter, David takes a call from the family friend / head of litigation at the major global bank. “David, the General Counsel just informed us that our budget has been cut by 25%. I know I said never, but never just happened.  Can you be here this week for a meeting?”

That meeting resulted in Pangea3 landing its largest and highest-profile client, which in turn sped up the sales cycle for several other large banks waiting to go second. David acknowledged that he did not have the benefit of diffusion theory when he was building Pangea3.  Yet, on both the investor and customer side, he could see how certain key early adopters had the effect of making a wide array of disparate pieces fall into place.  David specifically referred to these people as “influencers.”  Cf. Post 020 (discussing how “opinion leaders” within a social system are “able to informally influence other individuals’ attitudes or overt behavior in a desired way with relative frequency”).

Nelson’s story

I first met Ian Nelson in the fall of 2008 at a legal innovation conference–in hindsight, the first of its kind–organized by USC law professor and economist Gillian Hadfield. By 2008, Ian had been working at PLC for two years, initially in content creation but then transitioning to a lead role in sales.  Although PLC had already become a dominant force in the UK, the US was a bigger market governed by different law.  Thus, for all practical purposes, Ian had joined a US-based start-up.

There are two reasons why the PLC model is highly relevant to anyone interested in legal innovation.  First, Thomson Reuters’ acquisition of PLC in 2013 remains the high-water mark for financial success among legal industry entrepreneurs.  See “Thomson Reuters buys Practical Law Company,” Telegraph, Jan. 23, 2013 (reporting the size of the deal between £200 and £300 million, all of it achieved without outside investment). Second, there remains a wide array of activities currently performed non-expertly by law firms and legal departments that could be turned into highly successful businesses by carefully applying the core logic of the PLC model. In fact, this logic is very much at work at Ian’s current company, Hotshot. Thus, let’s briefly review the PLC model.

Practical Law began life in 1990 as a trade journal focused on the UK legal market. Some of the most popular features were practice tips that pulled together and explained the technical aspects of new and emerging methods of finance.  This is not surprising because PLC’s two founders, Robert Dow and Chris Millerchip, began their careers as associates at Slaughter and May, a leading Magic Circle firm specializing in M&A and sophisticated corporate finance.  Quipped Millerchip, “We created the thing that we wanted when we were practicing.” Ross Todd, “Web Practice Tools for Transactional Lawyers,” Legaltech News, Jan. 23, 2009.

With the growth of the web, PLC’s offerings became simultaneously better and easy to access via an online subscription model.  Relatively quickly, firms were being placed in a competitive disadvantage if they lacked access to PLC work product, which included document templates, standard clauses, practice guides, and deal checklists. In theory, firms could create this content on their own.  Yet, the ability to scale across the entire corporate bar enabled PLC to deliver higher quality work product at a much lower per-unit cost. In effect, PLC had become a privately run shared service relied upon by the vast majority of top UK law firms. The economics of a shared services model make it virtually impossible to dislodge a well-run first mover — and PLC fit that description to a tee. Cf. Thiel, Zero to One 97-98 (2014) (“[M]oving first is a tactic, not a goal. …  It’s much better to be the last mover—that is, to make the last great development in a specific market”).

During his guest lecture, Ian recounted his early days as a NYC corporate associate when he first encountered some of the quality gaps later filled by PLC and now being targeted by Hotshot.  The first instance occurred within a few days of hiring when Ian was dispatched to a far-flung city for due diligence on a “reverse triangular merger.”  The supervising partner instructed Ian to review a large volume of contracts and flag anything that “looked weird.”

Despite his law review credentials, Ian had no idea what a reverse triangular merger was, much less the definition of weird. Thus, for the next 48 hours, Ian was thrown into a silent panic, fearing that his legal ineptitude would should be exposed to the world. Yet, what he soon discovered was that neither the partner (and apparently the client) cared about the inefficiency of the process, as Ian’s overinclusive approach to copying “weird” provisions for further study at the firm’s headquarters was all being billed by the hour. Had Ian had access to Hotshot, he would have had on-demand videos and practice guides enabling him to get the answers that the supervising partner lacked the time or interest to provide.

A second formative incident occurred a couple of years later when Ian headed to London to work on-site at a UK firm that was co-counsel on a major transaction. During a tour of the office, Ian was shown the cafeteria, the copy room, and the work area for the PSLs.  Ian asked, “What’s a PSL?”  He was flabbergasted to learn that in the UK it was common practice to have “Professional Support Lawyers” who were responsible for, among other things, organizing and cataloguing the firm’s work product so the very best precedent could be quickly located for use on future client matters.  Ian subsequently returned to the US and lobbied his firm for the creation of a similar role, as it would replace the then-common practice of firm-wide emails soliciting documents that could be used as a starting point for current client matters. Upon hearing these ideas, however, the partners shrugged with indifference.

Six years into corporate law practice, these were some of the formative experiences that caused Ian to respond to a job ad for PLC — experiences that really struck a chord with the students. At my request, Ian did a deep dive into Hotshot. However, Hotshot as a business and product offering warrants its own future post.

What diffusion theory insights did we learn?

As I reflect on Week 2, three themes stand out.

  1. There is no innovation without execution. It’s easy to discuss innovation as something conceptual, but until the early adopter end-user receives full value, innovators are just trafficking in ideas.  Although this terrain is covered in LE’s “Crossing the Chasm” and “Hype Cycle” series, see, e.g., Posts 024025, it was made more vivid by Perla’s description of solving funding and operational challenges while also hunting down the early adopter customers. Standing up a quality-first operation in India (the putative innovation) is extraordinarily complex, time consuming and costly. Although Pangea3 was able to hit its ambitious sales targets relatively early, the time span between a signed deal, doing the work, and getting paid — particularly when large corporate clients string out vendors for 45 to 90 days — resulted in a “near death” experience for Pangea3. Suffice it to say, there is enormous risk in translating an idea into an innovation that warrants diffusion. Innovator-leaders like David and Sanjay who can skillfully coordinate the technical talents of others are very rare and very valuable.
  2. There are usually several social systems that matter; not just one.  As I listened to David and Ian, it became obvious that several social systems were interacting with one another.  For example, David describes how inroads with the New York global banks had little to no impact with legal departments at large US tech companies.  In fact, it was an investment by famed Silicon Valley VC firm Sequoia Capital (on less favorable terms that other VC shops, though the discount was worth it) that opened doors with tech companies on the west coast and, in turn, reverberated throughout India, signaling to young Indian lawyers that Pangea3 was the firm to join.  In Ian’s case, the early adopters at Hotshot were all Silicon Valley-based law firms who saw real advantages to having better-trained associates who could actually understand and do the math in venture capital deals.  A credible roster of west coast-based AmLaw 200 firms were eventually enough to open doors on the east coast and in the midwest where the deal flow was more traditional M&A.  Cf. Post 004 (“Rogers’ core insight … is that the diffusion of innovation is a process that occurs through a social system“).
  3. Relative advantage, cultural compatibility, and trialability really matter.  Apparently, for a large global bank, the difference between “never” and “this week” is a 25% budget cut.  Thus, drawing upon the Post 008 rate of adoption model, Pangea3’s big break turned on a sudden shift in the “relative advantage” of legal process outsourcing. Likewise, regarding cultural compatibility, both David and Ian emphasized how their status as former BigLaw corporate lawyers, including knowledge of cultural norms related to speech, dress, and credentials, opened both minds and doors.  Finally, Ian gave examples of how trialability was key to making sales for PLC and Hotshot, while David discussed how small projects resulted in growing sales, including a mandate from a major client that Pangea3 would be used by all outside counsel for all large-scale document reviews.  Apparently, nothing is more convincing than tasting the soup.  If it tastes good, your early adopter customers will set off a chain reaction (within a firm or legal department, or among peer firms or legal departments) that will do the work of an army of salespeople. Cf. Post 025 (Geoffrey Moore noting that word-of-mouth marketing is essential to crossing the chasm).

Week 3 of How Innovation Diffuses in the Legal Industry features three highly accomplished Thomson Reuter professionals:

  • Joe Borstein, Global Director of TR’s Managed Legal Services (formerly Pangea3) and Innovation Columnist at Above the Law
  • Rebecca Thorkildsen, Global Director of Legal Solutions (a person with an amazingly broad and deep grasp of the rapidly expanding legal ecosystem)
  • Paul Stroka, Director of Legal Solutions (a very capable corporate lawyer who has a deep understanding of consultative sales — i.e., selling as a second-order effect of customer problem solving — which is the core skill of a change agent)

I’ll do my best to pass along what we learn.

What’s next?  See The 2017 Forum on Legal Evolution (033)

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?

The Index in its current form is really two systems of quantification: The Innovation Catalog and The Law Firm 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.

Conclusion

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)