Baker Tilly’s George Bull sets the scene for change.
Visiting clients in Chicago a few years ago, I saw in bright lights the title of a show at one of the city’s theatres: The Male Intellect: an oxymoron? When I returned to the UK, my wife had only one question: ‘Why the question mark?’
So it is with innovation and law firms. With management teams and advisers alike, urging firms to innovate to succeed, even to innovate to survive, Axiom Law in its latest advertisement simply observes: ‘Innovative lawyers. No longer an oxymoron.’
This demonstrates how far the legal service sector has come. What some have seen as the perfect storm of regulatory reform, financial uncertainty and client demands is being embraced by other legal service providers as the perfect laboratory for innovation and change.
In the provision of legal services to businesses, pricing pressures and the increasing sophistication of clients are the key drivers of innovation. In the business-to-business arena, the in-house legal teams of large corporations are also proving themselves adept at not only managing the use of external legal advisers but also in providing a wide suite of legal-related services across the organisation.
In the retail legal services market of the future, the most successful operators will undoubtedly be those who establish a whole-of-life relationship with their customers. For most retail users of legal services, the whole-of-life spectrum might encompass property purchase, divorce, an accident, a dispute with a neighbour, a will and subsequently probate work. These are distressed purchases. The most successful legal service providers in this area will be those who can also supply non-distress ancillary services and products, becoming the go-to organisation of choice for as many of their customers’ service needs as possible.
Innovation within the legal sector encompasses structure, funding, service delivery, management and people. Each of these must be addressed separately but integrated into the overall development of the firm. Great innovations in one area may be undermined if they are not supported by equivalent developments elsewhere in the firm.
Law firms tend to innovate in three ways: products and services, service delivery and, finally, structure and strategy. In-house legal teams compete in different areas to law firms. These include not only the role of legal adviser but also strategic adviser, risk adviser, function manager, purchaser and industry thought leaders.
While the ‘how’ of innovation may differ between law firms and in-house teams, the ‘why’ is very similar. This includes improving value through addressing the buying needs of clients and what they expect, adding value by providing services that clients are not paying for and do not expect. Beating client expectations can be an important point of differentiation from peers, which reduces the trend towards competing solely on price. Innovation also enhances clients’ loyalty, helps establish a firm’s unique identity and may produce a ‘wow’ factor both within the firm and among clients and suppliers.
One of the big questions for the next decade will be what it means to be a partner in a firm. The idea of partnership bestowing ownership rights will die out in most parts of the legal sector. Who a ‘lawyer’ is will change significantly as a range of roles develop within legal businesses that do not involve directly providing legal advice. Non-lawyer owners in particular will look at what a person brings to the business, not their qualification. Skills such as project and process management will be critical to the future success of firms.
Successful firms have always striven to identify and meet their clients’ needs, putting clients at the centre of their business models. If innovation is seen as a non-optional continuing process, then it should be no surprise that it will be clients who decide how they receive their legal advice, not their lawyers.
The development of alternative fee arrangements seems unstoppable. This requires innovation in the processes used by firms to perform and deliver their services to clients. However, most firms will do their best to avoid competing solely on the basis of price. Innovation in the development of other distinguishing features, such as the style of delivery, value-added elements of the service and the cultural values of the firm, will all be important in this.
With PwC’s legal arm having been recognised for its ‘standout’ performance as a legal industry pioneer in the Financial Times report, ‘Innovative Lawyers 2014’, and with KPMG having recently registered its entire practice as an ABS with the Solicitors Regulation Authority, multi-disciplinary practices present a growing challenge to traditional law firms. This encapsulates all we are seeing: the potential for innovation offers those in the legal sector transformative opportunities for success. Firms should be looking at their approach to innovation across their entire practices and developing business models that integrate their chosen innovations for the benefit of the firm, its people and its clients.
Innovation, like breathing, is not optional if a firm wishes to prosper in a highly competitive legal services marketplace.