Only a third of law firms are innovating – why so few?

Only a third of law firms are innovating – why so few?

A statistic within July’s excellent Oxford/SRA report regarding potential barriers to innovation within the legal profession caused me to reflect upon what makes an innovative law firm culture. Firms who believed that they were not “innovating” or using legal technology (a problematic combination of terms that the report goes on to clarify) were doing so because of 1) uncertainty of business benefits (36%), 2) because they did not see it as a strategic priority (31%), and 3) because they did not see the need for using either technology or innovation within their business (27%). To help put this in context, only 37% of firms said that they are currently “innovating” or using legal technology. So why are such a big proportion of law firms not changing the way they create and capture value?

The importance of innovation

I argue that innovation is not just important but essential for any business, including law firms. Sure, exploit what you do well, but make sure you have the organisational ambidexterity needed to explore other avenues of value creation and capture to identify future opportunities. There are plenty of case studies of organisations that did not innovate and subsequently failed (think Blockbuster, BlackBerry, Kodak). 

But this is obvious, isn’t it? Business leaders know that “improving existing services or introducing new services, or making improvements to the delivery or marketing of your services” (the report’s definition of innovation) is crucial. In which case, what’s going on? I think we need to look deeper into why it is so hard to innovate and why people naturally resist change. 

Is technology innovation?

First, I need to challenge that seemingly interchangeable combination of terms: innovation and technology. As the report recognises “Innovation is not just about technology. Some innovation is technology-led, others less so.” Spot on. The two are not synonymous but are often used as if they were. I am sure that this common confusion is a barrier to change. The main obstacle to innovation identified was money, as many see legal technology as inherently expensive. Ergo if technology is innovation and vice versa, innovation is expensive. But experience shows that innovation doesn’t have to be expensive and (as per the above definition) nor does it have to be revolutionary. Money is an inaccurate defence. Instead, the fundamental issue is culture. 

A routine innovative culture

To be innovative, you must be open to innovation, which must be embedded in day-to-day business. It can’t be seen as only the CTO’s role to innovate, for example. It should be the responsibility of all. However, there is tension between routine and innovation, as routines work against change. The answer is that routines must be created that support and include innovation. 

One challenge we have all been experiencing for the last eighteen months is working remotely. Lots of benefits have come from this, but is this the ideal environment for creativity? No. Ideas don’t come from sitting by yourself and contemplating problems or even from planned Microsoft Teams meetings within the usual silos. Ideas come at seemingly obscure times, from busy places, with interactions between multi-disciplinary and diverse groups. In today’s Covid business culture, special routines need to be introduced to help underpin the practice of innovation.

How to move away from the status quo

In an article that is broader in scope than just culture and routine change alone, McKinsey outline their “nine golden rules for successful organisational redesign”. It acknowledges that when trying to alter a culture, sometimes irrational attitudes need to be changed and that “the first step is to identify negative mind-sets” before “communicating a compelling reason for change, role modelling the new mind-sets, putting in place mechanisms that reinforce the case for change… and building new employee skills and capabilities.” Great advice. 

What this recognises is that just changing a structure isn’t enough, you must alter the firm’s shared values and norms as well. This is hard to do in practice and takes huge commitment and sustained effort by everyone to learn a new way of doing things, but without it you will not successfully innovate. 

The importance of failure

Innovation is hard because, to make improvements, working culture must tolerate failure (albeit not through ineptitude) and encourage experimentation and open communication in a psychologically safe space. Law firms are not alone in finding this difficult, but arguably lawyers find taking risks and potentially getting stuff “wrong” particularly hard. They’ve spent their entire careers trying to do the exact opposite, so being able to redefine failure and feel safe in taking a risk is going to be vital. 

In the words of Max Beerbohm: “There is much to be said for failure. It is more interesting than success.” Law firms that want to innovate and are struggling with change would do well to understand this. Acknowledge that innovation is difficult. Recognise that your workforce will find change difficult. But remember that, with a culture that encourages innovation by way of altering routines, values, and norms and a leadership team that truly embraces the “fail fast, learn, then iterate” aphorism, law firms will start to quickly recognise the business benefits of innovation. 

Related Articles:
Latest Articles:
About the author:
Simon White studied strategic innovation at Saïd Business School, University of Oxford and is a Strategic Account Manager at LexisNexis, where he manages a portfolio of key accounts of leading international and UK law firms.