Lawyers and Innovation – a Contradiction?

According to the Globalen Innovationsindex der WIPO (GII) Switzerland was the world’s most innovative economy in 2023. Law firms like to describe themselves as innovative in advertisements. The Financial Times honours the most innovative lawyers every year (FT Innovative Lawyers Award), and the American Bar Association has set up the ABA Center for Innovation with the aim of improving legal services. So the topic seems to have arrived in the legal market. 

Innovation is not considered a core competence 

Lawyers are often said to be resistant and slow to react to change, if at all. Areas such as innovation, pricing models and alternative delivery models are seen as unnecessary for all lawyers to address, or which only a few lawyers want to be involved in (Thomson Reuters Institute 2022 Report on the State of the Legal Market, p. 19). In this context, it is also interesting to note why business development seems less important for increasing turnover in professional services firms and why partners should develop from ‘experts’ to ‘activators’ (Matthew Dixon, Ted McKenna, Rory Channer, Karen Freeman. What Today’s Rainmakers Do Differently. Harvard Business Review, Nov/Dec 2023). 

Areas for innovation 

Theoretically, innovation should appear less often and with less prominence in a strategy which, if one is formulated at all, should focus on the long term. Rather, changes can be made to the business model and operations once the strategy is implemented. If no clear distinction is made between strategy and business model development, elements of strategy work are also integrated into innovation work. Innovation can take place in many other areas, e.g. in processes, products, resources for production, distribution and sales, value creation, and the pricing and revenue model. From the multitude of possible examples in law, the following random ones are mentioned for illustrative purposes only: offering platforms or more favourable products or expanding the offering by acquiring business areas. The technology itself or its use is not considered innovation, but merely a means or tool to support it.

How does innovation come about?  

There are many hurdles to overcome with innovation. First, one needs to be willing to look for new and uncertain things. Then, creativity is required to generate ideas in the first place. Next, a decision must be taken to start the transformation. Finally, the biggest challenge lies in the implementation of the idea itself, which must be accompanied by a well-managed change process.  

It is important to remember that people, in principle, are fundamentally comfortable and reluctant to accept change. Only if implementation is successful in the market and the market accepts it, can it be recognized as innovation. Moreover, if it influences an entire industry, it can even be considered disruptive innovation. One should not forget that the innovation process is considered painful and frustrating as most attempts to implement even brilliant ideas fail repeatedly. Compared to the USA, failure is still overly stigmatized in Europe. Risks should be worth taking. And the innovation process is often insufficiently separated from day-to-day business during the development phase.

Managers like to work with reliable data and merely optimise business results along predetermined lines. Entrepreneurs and leaders, on the other hand, cultivate foresight, seek out the unknown and are happy to work with non-existent, unreliable data or assumptions. They break out of the existing framework and look for new opportunities. Optimisation therefore has nothing to do with genuine innovation. In extreme cases, the latter could lead to existing certainties being abandoned despite related uncertainties and threats.

And the legal market? 

The decades-long slow change in the legal market should not be underestimated. The following milestones should be mentioned here: the introduction of the Cravath system, the growth of legal departments, the development of multidisciplinary professional services firms (MDPs), the establishment of law firms and the acceptance of third-party ownership, legal arms of the major accounting firms, outsourcing to LPOs, the development of flexible staffing solutions, the launch of legal tech, the growth of alternative legal services providers (ALSPs), and today the introduction of artificial intelligence (David B Wilkins/María José Esteban Ferrer, Taking the ‘Alternative’ out of Alternative Legal Service Providers, in DeStefano/Dobrauz-Saldapenna, New Suits: Appetite for Disruption in the Legal World, 2019, p. 29 ff.). 

Going back to the initial question of whether the legal market is innovative: yes, but selectively and not necessarily quickly. The legal market should not rely on the fact that the amount and pace of change demonstrated in the past can simply be extrapolated into the future. Caution is advised here against a false sense of security.