By Erik Mankin
Law firms introduce new services for clients all the time. But those are external, service-based innovations. When it comes to internally focused, institutional innovation-changes in the way a practice is managed-firms face unique barriers. After conducting a recent study on law firm innovation, an expert shares his insights on the barriers-along with four keys to increasing innovation success.
In summer 2006, the College of Law Practice Management asked Eric Mankin, Executive Director of the Babson College Research Center on Innovation and Corporate Entrepreneurship, to research the subject of innovation in law firms. The results of his research formed the basis for discussion at the College's annual meeting in San Francisco this fall. The following summarizes some of the key points. (Go to www.colpm.org and click on “Fellows Corner” and then “Meetings” to link to the entire audio version of Mankin's presentation at the meeting.)
At Babson's Research Center on Innovation and Corporate Entrepreneurship, we define innovation using these six words: “implementing new ideas that create value.” When discussing innovations in law firms, though, it's useful to further distinguish based on whether the innovation creates new services for clients or whether it changes the way in which the practice operates.
In generating new approaches to meet clients' needs, the legal profession innovates all the time. For example, law firms introduce new legal services and products on an ongoing basis as part of their work with sophisticated clients in industries such as entertainment and financial services. These types of externally focused, service-based innovations can be lucrative. Indeed, pioneers in these areas can expect positive differences in terms of reputation, growth and profitability.
However, when it comes to internally focused innovation in firms—generally, changes in the way a law practice is managed—it is quite another story.
Internally focused, institutional innovation is something that may not be new to the world but is new in your organization. For example, should you implement a knowledge management system, move to fixed-fee billing, or adopt a flex-time approach to legal careers? It requires change, of course, and it should deliver value.
Apparently, it is a given that law firms are slow to adopt institutional innovations. As one law firm operating officer said, “They'll try little things that are new, and they usually don't succeed because they don't have the infrastructure or support.”
Given this, some of my colleagues wondered whether innovation was financially valuable to law firms. Their logic was sound, if somewhat circular: If it was valuable to law firms, then you'd expect to see more of it. Rather, I think the value of potential new innovations at law firms is reduced because of barriers that are particular to law firms. But I also believe that each of these barriers can be overcome.
During my research, I found that people had surprisingly similar reasons for why law firm innovation is so slow and difficult. Time and again, they cited barriers of structure, conduct and performance.
For all these reasons, it's no wonder that innovating within a law firm structure is so difficult. Yet the lessons of innovation from other industries apply to law firms as well. The right innovations can improve quality and productivity and, thus, increase profits—which is especially true for firms that adopt innovations early. Early movers on new technologies, for example, are already reaping substantial benefits in efficiency, productivity and profitability while the late adopters are just trying to catch up to maintain their current ground.
There is good news for those who, despite the barriers, might have an interest in innovation. Research over the past several decades has generated “dos and don'ts” for increasing innovation success that you can adopt in your firm.
It's not easy to succeed at innovation in any industry. In the legal profession, it's even more difficult. Yet new technologies and market forces always continue to drive change and law firms are not immune from this pull. Be assured, the firms that successfully adopt these changes will outperform their peers.