Innovation in the Legal Industry

This month our Pasadena marketing agency was honored to be one of 25 companies to receive an award from The Recorder for being among the most innovative companies in the legal industry. At ONE400, we pride ourselves on being innovative and helping one law firm at a time think outside the box. We always refer to what we do on a daily basis as innovative, but to hear someone else say it means so much to us.

The full list of winners is posted below for your convenience:

Julio Avalos, GitHub

Itai Gurari and Adam Hahn, Judicata

Bryon Bratcher, Reed Smith, Periscope

Michael Ward, Morrison & Foerster

Scott Rechtschaffen, Littler Mendelson

Ray Gallo, Gallo LLP

Ron Dolin, Stanford Law School

Josh Becker, Lex Machina

David Faigman and Marsha Cohen, Lawyers for America/UC-Hastings College of the Law

Greg Nitzkowski, Paul Hastings

Robin Feldman, UC-Hastings College of the Law

Janelle Orsi, Sustainable Economies Law Center

Daniel Lewis, Ravel Law Inc.

Julie Lee, eBay Inc.

Roger Royse, Royse Law Firm

Craig Jacoby, Matt Bartus, Peter Werner, Cooley

Mark Radcliffe, DLA Piper

Allen Rodriguez and Eva Hibnick, One400

Noreen Farrell, Joelle Emerson and Monali Sheth, Equal Rights Advocates

Jennifer Hagle, Sidley Austin.

Gerard von Hoffmann and Bryan Wahl, Knobbe Martens Olson & Bear

Eugene Blackard, Archer Norris PLC

Garry Mathiason, Littler Mendelson

Kevin Jakel, Unified Patents

Carrie LeRoy, Skadden Arps

As we were receiving the award and giving our thank you speech, I started thinking about what innovation was. Why was it so hard to achieve in the legal industry? What is stopping big law firms from innovating?

What is legal innovation?

My favorite definition of innovation is “fresh thinking that creates value” said by Richard Lyons in The Economist. [1]. Innovation must include both entrepreneurship and execution, the latter being the hardest part. It is much easier to identify pains in your everyday life that you wish to fix, than to come up with a realistic solution that you can execute on.

Why is innovation so hard to achieve in the legal industry?

“It’s not just your imagination, innovating in the legal market is hard. What passes for a radical change in a law practice—a new training program, some alternative billing, an extranet—is old hat in other markets.” [4]

An article in the ABA journal delineated the reasons why lawyers are averse to innovation. Reasons included the following:

1. “Doing nothing is better than doing something
2. What we’re doing now is right, so why consider alternatives?
3. Others might realize I don’t know everything
4. It’s easier to shoot down ideas than to calculate how they will help
5. I might have to manage or lead
6. My corporate clients object whenever I try something new
7. I’m already making a boatload
8. I remember when so and so tried that 15 years ago and it didn’t work
9. And finally the top reason of them all…Who else did you say is doing that?” [5]

Most of these reasons are fairly accurate, many of which are unique to the legal industry. In the legal industry, there is little incentive for lawyers to be efficient since the more hours they spend, the more they can bill, and the more money their firm makes. This is exactly why innovation and technological advancement are challenging to achieve in the legal industry. Law firms can get away with doing everything manually because they just end up billing the client for the extra hours they could have saved by automating some part of the process. Billable hours and the concept of being paid on an hourly basis are the biggest things standing in the way of innovation.

Another reason worth discussing is that lawyers are issue spotters by trade. They are trained to be pessimists and to avoid risks. They will point out all the flaws and constraints with a new product, before they ever admit that there is value in adopting the new software. They will also think about the amount of hours that the lawyers will have to spend to learn the new software, all time away from billing hours.

What is stopping big law firms from innovating?

Many firms have started to innovate recently by developing software in-house that either improves internal processes or is meant to increase transparency and value for their clients. The International Legal Technology Association recognized three law firms for their innovations in the legal industry in 2014. Bryan Cave developed software that tracks the performance of each attorney, provides a detailed analysis of strengths, weaknesses and attributes the percentage contribution of each lawyer to the top line revenue. Another firm that is ahead of curve in terms of innovation is Seyfarth Shaw, which created an R&D department that builds solutions for clients. “We are not doing this because our clients are asking for these solutions; we are doing this because our clients will ask,” says one of the partners at Seyfarth. Littler Mendelson also has created several knowledge management tools. The firm has allocated a budget to its Chief Knowledge Officer to innovate, one of which is a new client filings alert software that notifies attorneys when cases are filed against one of their clients. [6]

So for all the lawyers out there that would like their firm to adopt new processes, here are some words of advice on how to address some of the concerns others in your firm will have.

1) Play around with existing software

It is best to see what existing software the firm is paying for and see if you can find ways to improve upon the software. It is much easier to convince a firm to adopt a new and improved software that they already have a budget for.

2) Get others in your office on board

Once you have an idea of what software you want to build and how it will either decrease firm expenses in the long run or increase revenue for the firm, start talking about your idea to others in the firm. The more senior people that you get to share your vision, the more of a chance you will have to get the firm to adopt your idea

3) Identify someone to lead the charge

Some law firms are hiring someone to lead R&D or innovation initiatives for the firm. If your firm doesn’t have the budget to do such a thing, offer to take the lead in the interim.

4) Get a budget

Although this is challenging and may take a while, developing software requires the time of a developer, designer, lawyer and marketer, all of which need to be hired and paid, even if on contract. Many law firms outsource the development and design to agenices that can manage the entire process from start to finish.

5) Think about the bigger picture

Not only should you think about how the software could enhance your law firm’s clients’ experience and/or improve internal processes, you should also think about the impact of the software on other firms’ businesses. It is one thing to develop a software that is used in-house, it is another to develop software that your firm can also license out to other firms. This of course could create a predictable revenue stream for your firm if done right. Because you will have your firm’s name and reputation behind the product, and because law firms operate using a herd mentality, licensing the product to other firms will be much easier for you than for a tech startup with no brand recognition in the legal field.

After the International Legal Technology Association and Recorder Innovator, hopefully more and more law firms will invest in developing products and software that will lead us into the future of the legal industry.

[1] Something New Under The Sun (print)

[3] Legal Tech Startups Have A Short History And A Bright Future

[4] Law Practice Magazine

[5] Law Practice Magazine

[6] The Legal Whiteboard