Innovation isn’t just a buzzword or trend. In the legal industry, innovation is becoming a functional area that more firms are prioritizing. To some degree, this movement is in response to changing client requirements. But largely, firms are looking at innovation to increase competitive advantages and proactively improve practice and business operations by leveraging digital technologies like AI, data analytics, automation and more.
Some prominent large firms are already creating their own innovation departments that serve to establish strategies and implement various solutions throughout the firm. But committing to an in-house innovation focus is a complex endeavor. Building a qualified team starts with an in-depth gap analysis to identify the firm’s needs, knowing what roles to include and being able to pay them appropriate market rates. Unfortunately, the required talent to conduct this analysis and fill these roles remains in short supply as few individuals currently possess the expertise to effectively lead or significantly contribute to an innovation team in the legal market.
For most firms, both midsize and even many larger ones that don’t have the appetite or budget for an internal innovation department, there are a few ways to achieve the same goals. The key is to be practical and intentional for whatever path is chosen.
Firms interested in developing a program are now considering a variety of options that may include a fully insourced model, outsourcing the initiative or a hybrid approach. To determine which model to pursue, it’s important to understand the pros and cons of each.
In-House Innovation Departments
Who doesn’t love the idea of having a chief innovation officer? Nothing says a law firm is focused on being modern and cutting-edge more than bringing on a C-level executive to champion those efforts. But saying you’re innovative and being innovative are two different things.
A fully insourced innovation team requires several important components, starting with leadership. Firms that hire an executive dedicated to innovation are better able to create and follow through on plans than those that task one or more leaders to take on the responsibility as a side project. Partners are demonstrating their commitment to the initiative and signaling their support by investing in its leader.
However, success requires more than just executive management. Beyond finding the right individual to oversee the department, the firm must bring on a combination of resources possessing a variety of both strategic and tactical skills. These include the ability to understand the needs of each practice and functional business area, to know what questions to ask to capture all necessary business requirements and to recognize opportunities for solutions that may cross several departments or practice groups. They also need the ability to develop and implement these solutions, which requires both sophisticated technical expertise as well as effective communication skills.
In addition to having the right people, the firm must also have a process or methodology in place to establish priorities and follow through on their development and implementation. Strong project management is necessary throughout and will help the firm achieve its objectives.
A benefit of building a focused innovation department internally is the institutional knowledge the team will either bring, if hired from within, or develop over time, that is uniquely specific to the firm. There is value in having a staff that is completely focused on and loyal to the success of just their firm.
There is also a downside to establishing an entirely in-house department, including the expense and management of full-time employees. Midsize firms could easily spend upward of USD 1M (by conservative estimates) annually in talent alone, not including any investments in software and maintenance, to maintain a functional innovation team.
It also requires a great deal of patience. Determining priorities, creating processes, developing solutions and successfully implementing them take time, and even more time is required to see their results. When patience wears thin, firms may be too quick to abandon their commitment and shelve projects before their completion, which equates to wasted resources.
Another common drawback to building an in-house innovation department is the temptation to simply assign existing staff to help with various initiatives. It is nearly always a mistake to assume current IT resources can handle the development or installation of new projects that arise. Not only may they not have the skills or expertise to execute, but in most cases, these departments are already stretched thin handling all the infrastructure and day-to-day IT needs. They’re busy working to keep the lights on, so distracting them with other priorities means something won’t get the attention it deserves. Firms that are willing to invest in a focused innovation department internally should also be willing to include dedicated staff to fill the roles necessary for its success.
While some firms are working to establish in-house departments, others are hiring outside experts to handle all aspects of their innovation efforts. The key to this approach is not just building strategy roadmaps but executing the program by delivering user-acceptable tools and solutions with agility.
Consultants and strategists are skilled at knowing what questions to ask to help firms evaluate their approach to legal service delivery and how it could be made better. This often begins by facilitating ideation sessions among practice and business leaders to formulate an appropriate strategy, including identifying priorities and creating an innovation road map that will help the firm achieve the agreed-upon goals.
Experienced innovation lawyers, legal process architects, data scientists, data analysts and engineers and talented software engineers with a UI/UX skill set with legal industry background remain in short supply and are very expensive to hire as full-time employees. Outsourcing these functions to a qualified trusted partner lets firms leverage their talent and expertise without the expense or commitment of bringing them on as staff. Whether a firm is implementing a bespoke solution or an off-the-shelf platform as part of its program, ongoing support and maintenance are another aspect that can be outsourced to a qualified partner. Using a single expert to develop, implement and maintain tools provides continuity and consistency, but some firms also feel there is a risk to trusting a single provider to deliver every aspect of their program. In this model, firms feel institutional governance is compromised.
The Best of Both Worlds (Hybrid Approach)
For many midsize and even some larger firms, the ideal approach to innovation is a hybrid of committing to it internally and outsourcing commodity functions. Once a firm is dedicated to the initiative, consulting with an expert can be the best place to start if hiring a C-level innovation officer is not part of the plan.
Internal governance roles hired by the firm would include innovation lawyers, legal process architects and knowledge professionals supplemented with outsourcing roles like data scientists, data analysts and engineers and talented software engineers with a UI/UX skill set. This hybrid approach allows the firm to keep IP know-how in-house while maintaining agility in executing solutions to stay ahead of the curve.
This matrix team can work with internal stakeholders to capture a variety of needs, evaluate the data upon which solutions will be based and create multiple proofs of concept. This same team would also work alongside the internal IT department for production and future maintenance of these solutions.
Regardless of which model is right for a firm – insourced, outsourced or hybrid – any effort around innovation requires the appropriate mindset. The firm must be willing to evolve – and not just by adopting new technologies. While largely driven by technology, the practice of law itself is changing in terms of client expectations around service delivery.
Change can be hard, but it’s also exciting. Lawyers and their staff that genuinely embrace innovation by being open to new processes and updated approaches to both legal and business operations are better positioned to benefit from them. Successful firms typically see a positive attitude throughout their organizations, with leaders promoting this culture of innovation from the top down.