Technological disruption and innovation excellence in the legal sector
28 January 2020
Law firms recognise that AI, process automation and blockchain are major technological disruptors. In responding to this, the 2019 PwC Law Firms Survey revealed “an overall increase in funding, from partner capital, current accounts, banking, and PE funding”, which is a step in the right direction. After all, investment “is never straightforward in a full distribution model when the likely payback period of investment extends a number of years into the future”.
Unfortunately, only a small portion of this investment was in disruptive technology. It may look like progress, especially where firms are investing in tech that allows lawyers to produce work in a fraction of the time it took in the past. But echoing David’s comments last year, there is a long way to go.
This year’s results state that only a few firms are “developing or implementing market-changing technology programs.” Of more concern, “only a handful have a clear and flexible strategy for realising the benefits of innovation, backed up with clear objectives and measurable metrics to monitor success”.
Both are necessary to maximise the return of partners’ investment, and to ensure firms stay relevant in an age of digital disruption.
Why law firms need to innovate
Despite adopting new technology, larger, more-established firms have been hesitant to move away from traditional go-to-market models. Meanwhile, challenger firms have entered the market and seen considerable success. Using technology to undercut larger rivals and improve service offerings, they are often operating within a ‘dispersed model’ where fee earners work remotely and use virtual practice management to pool their collective talents.
Innovation is a necessity, and innovation excellence is becoming increasingly important. Yesterday’s strategies are no longer sufficient to respond to this increasingly disrupted landscape. Realising that nobody can predict the future, firms need to develop specific capabilities to navigate this uncertainty:
- the agility to experiment rapidly with new products and business models
- the foresight to empower their most entrepreneurial people
- the ability to engage repeatedly in the innovation process to unlock new opportunities for growth.
It is notoriously hard to innovate. Across all sectors, 55% of CEOs admit they are not innovating effectively (PwC 22nd Annual Global CEO Survey), and only 50% of senior executives believe that they have a winning strategy for the future (Strategy& Fit for Growth survey).
How can law firms successfully embrace innovation?
The Strategy& and PwC Global Innovation 1000 Survey highlighted six key characteristics of successful corporate innovators:
- The innovation strategy is closely aligned with the business strategy
Connect projects with strategy to ensure investments in innovation have a clear purpose and directly support business objectives.
- There is a company-wide cultural support of innovation
Ensure buy-in by making staff at all levels aware of how innovation can benefit them, and by explaining how they can support its growth and development throughout the business.
- Leadership is closely involved with the innovation programme
Help leadership communicate a clear vision to provide direction and empower staff to drive the innovation strategy.
- Innovation is based on direct insights from the human behind the keyboard
Put the impact on your people and your clients at the heart of all innovation – to ensure your investment has a purpose and results in tangible business benefits.
- There is rigorous control of project selection early in the innovation process
Document your processes clearly and rigorously to filter out high risk projects from the innovation process and to ensure remaining projects are appropriately monitored and managed.
- The organisation has the ability to integrate all these characteristics
Have an agreed innovation strategy that is flexible and ensures these characteristics are embedded within the firm. This serves as a strong foundation for innovation to drive long-term growth.
These principles apply as much to law firms as to any other businesses.
As Luca likes to say, “Innovation is just smart risk taking.” If you have a strong risk management capability, you can create the space for innovation to occur.
Please contact David or Luca to hear more about the experience, tools and framework we can use to help you to unlock your innovation potential while ensuring your investment is managed effectively.