The why and the how of Legal Innovation

Arguably, the way we "practice law" hasn’t changed very much: we still conduct investigations, do research, file motions, conduct discovery, take depositions, go to trial, etc. However, the manner in which those services can be delivered has been forever altered. Technological advances now allow us to practice law more efficiently and effectively by deploying available tools. This in turn should reduce costs and significantly speed up the delivery of those services, thereby increasing value.

But the practice of law and the available legal technology have not fully met; sure, there is the occasional dabbling in the dating pool, but no marriage. In this article, we will address the why and the how to approach this new year, and the beginning of a new decade, with a strategy for innovation of legal services delivery. Comments are welcome.

"Why are we even talking about this? The biggest law firms are still crushing it, and - let us be honest- "the clients" are not demanding much change, if any.”

First, because it would be malpractice if we don’t. It is not up to the client to ask for the lawyer to embrace innovation and deliver services in a more efficient, hence valuable, manner. Unlike other professions, lawyers are officers of the court. We are bound by court rules, fiduciary duties, and rules of professional conduct and responsibility. I always start by asking lawyers these questions:

Who is "the client"?

Who is the “client”? And, what does the client know about the ins and outs of your legal services. delivery? Hint: it is not your college or law school buddy, Mrs. or Mr. J. Smith from Legal, it is the corporation or organization that retains you. So, the question becomes something along the lines of: Does your Client, the Corporation, know, for example, that you are still doing or paying for page by page document reviews, not using or deploying analytics, DMS, MMS, CMS, KM, not using AI for legal research, not project managing your cases, not providing training to your lawyers on legal tech innovation, Lean methodologies, project management, etc.? Do you have a strategic plan to up-skill your lawyers?

Are you satisfied that you are complying with the rules of the court, your ethical duties and your professional responsibilities?

By this I mean, can you act competently (includes tech competency), diligently and speedily in your representation (MRPC)? Can you ensure the just, speedy and inexpensive determination of every action and proceeding you handle (FRCP)? Can you keep your clients’ data confidential, protected from unintended disclosures, and comply with your fiduciary duties (Restatement (rHRD) of the Law Governing Lawyers, MRPC)? Are you deploying reasonable best practices in connection with all the above?

Second, because if law firms do not change, many will face the same consequences as the Digital Equipment Corporation. And if you aren’t familiar with DEC, that is exactly my point. This will not happen tomorrow, but it is inevitable. Many books and theses have been written on companies that failed to innovate and subsequently failed. Remember these companies:

And there are many more examples of companies that failed because of management's inability to innovate and change with the times. Sure, it won’t happen overnight, but unless you live under a rock, or in a gilded castle, you know that change has been happening.

In this new decade, the disaggregation of services that we are seeing today will not only continue but it will speed up dramatically.

The new landscape:

  1. In-house Legal Departments
    The numbers indicate that legal departments are becoming savvier and better equipped at keeping work in-house. In doing so, they are fulfilling their ethical and fiduciary duties to their client, their companies.
  1. Alternate Legal Services Providers (ALSPs)
    ALSPs are not law firms but they can provide sophisticated legal work. What is the difference? For starters, while the law firm ultimately retains the risk (malpractice), a legal services provider is an agent of the law firm or law department that retains it. ALSPs are growing at an alarming rate.
  1. Law Firms that are Innovators or Early Adopters.
    Some law firms have been proactive and have created strong alliances with legal service providers, funded legal tech incubators, or spun off ALSPs of their own. For example, Allen & Overy started 2 years ago with “five flavors of law” that include working on high volume, lower value work. Yes, there are some law firms that have taken significant steps towards innovation, but they are few and far between.

Where are you in the Rogers innovation curve?

  1. The Big 4
    The Big 4 accounting firms are significantly encroaching into the legal market. They have more lawyers than all but the largest firms and do “people, process, technology” better than any firm. At least three of the Big 4 have Alternative Business Structure licenses in the UK, so they can function as law firms there. And their revenue dwarves that of large law firms – by an order of magnitude. Plus, the Big 4 have much stronger global brands than any law firms. Moreover, as noted below, the current push to relax certain states' bar ethics rules to make the legal system more affordable could have the unintended effect of allowing the Big Four accounting firms to gain a strong foothold in the U.S. legal market.
  1. De-regulation of the law profession.
    In addition, we are seeing regulatory changes in the law profession in the form of de-regulation. Even the ABA, a bastion of protectionism, is taking steps to ease the rules of engagement.

    The rule governing a lawyer's professional independence and allowing law firm associations is Rule 5.4. There is a push in certain jurisdictions in the USA to de-regulate the legal profession, fueled by a reformational desire to provide better access to justice to those that cannot afford it. The practical effects of these changes will be transformational, because it will allow legal tech companies, ALSPs and the Big Four to play not only in our sand, but also with our toys. They would no longer merely be invited to the lawyers’ party, they will be asked to dance.

In terms of reform,  here  is where we are today:

California - The Task Force on Access Through Innovation of Legal Services has proposed new rules on fee-sharing and allowing non-lawyers to practice law. It will issue a ruling on 3/31/2020.

DC - Allows for non-lawyer ownership of law firms (an exception to Rule 5.4).

Arizona - Exempts certain document preparers from Unauthorized Practice of Law claims. It allows court navigators. The Task Force on the Delivery of Legal Services Report, adopted by the Arizona Judicial
Council in October, recommends elimination of 5.4 and also the restrictions on non-lawyer ownership and dramatic reform of advertising rules.

Florida - The Special Committee on Technologies Affecting the Practice of Law has proposed an amendment to Florida Bar Rules that would create Registered Online Service Providers.

Utah - Allows Licensed Paralegal Practitioners. This year, the Supreme Court ordered the creation of a working group to study the legal regulatory landscape and make recommendations to optimize it for innovation.

Washington - Created Limited License Legal Technicians.
New York - Allows for court navigators.

Texas - Exempts self-help books and software from UPL claims.

New Mexico-The New Mexico Supreme Court formed a working group to explore Limited License Legal Technicians.

In addition, a new American Bar Association resolution encourages U.S. jurisdictions to consider innovative approaches to lawyer regulation to increase access to affordable and quality legal services. If approved by the ABA House of Delegates, the resolution would support the revision of existing regulatory structures to better align with the public interest. The resolution and report, which was released by the ABA’s Center for Innovation, supports regulatory reform in three broad areas. These include new categories of legal services providers, reexamining Rule 5.4 (which prohibits lawyers from partnering and sharing fees with those who aren’t attorneys), and exploring new approaches to policies on the unauthorized practice of law. The report points out that Rule 5.4’s prohibition on partnering and fee-sharing “impedes the development of innovative legal service delivery models, especially those that require the active involvement of other kinds of professionals, such as technologists, or that need substantial outside capital to succeed.”

Why is it so hard to change?
My top 6, in no particular order:

  1. The Lawyer's Personality Type
    I often hear, and have stated myself, that lawyers do not like change, and that skepticism to change is part of the personality type that goes to law school. Lawyers are stereotyped as being risk-averse, conservative, and detail-oriented.
  1. The Lawyer's Fear of Change
    According to a recent study in the Academy of Management Journal, employees fear that after a change, the organization they value and identify with will no longer be the same. The more uncertain they felt about the change, the more they expected it to be a threat.
  1. The Lawyer's Hidden Scripts

The more I study the lawyer's resistance to change phenomenon, the more I think that lawyers are not even thinking about changing. It is more than just stubbornness; it is that many lawyers don’t change because they are not even thinking about needing to change. In sum, they are not allocating executive function to change management. Learning new skills, abilities, and information require executive function. That means that learning something new demands conscious attention. To truly be successful, time, energy, and focus, need to be deployed in finding “the way.”

Dennis A. Gioia, a professor of management at Penn State wrote that hidden scripts govern collective behavior, including business behavior, and they take a lot of time and effort to rewrite:
" Executives are bombarded with information. To ease the cognitive load, they rely on a set of unwritten scripts imported from the organization around them. You could even define corporate culture as a collection of scripts. Scripts are undoubtedly efficient. Managers don't have to muddle through each new problem a fresh, (Denny) Gioia wrote, because "the mode of handling such problems has already been worked out in advance." But therein lies the danger. Scripts can be flawed, and grow more so over time, yet they discourage active analysis." (Emphasis added.)

  1. The Lawyer's Motivation
    In addition, lawyers may lack the incentive or motivation to change. Elliot T. Berkman Ph.D. writes, "Motivation is intertwined with reward value." And reward value, in turn, is deeply influenced by past experience. An important consequence of this biological fact is that new behaviors are rarely as motivating as existing ones that have previously been rewarded.” This is a fundamental problem for those wanting to innovate the practice of law.
  1. The Lawyer's Training
    Lawyers traditionally have been rewarded for perfection. The “leave no stone unturned” approach is taught early and forcefully. Mistakes are frowned upon, a missed legal authority in a brief is not easily forgiven, etc., and the consequences can be serious. We are taught to over-prepare to avoid public humiliation with the Socratic method in law school. Generally speaking, lawyers don’t see themselves as business people, but rather as warriors. The phrase "at all costs” is meant literally because, until recently, the war was won by brute manual human force. Those of us that worked harder and longer were the ones likely to find the needle in the haystack. How many "all-nighters" you put in a year were (still are?) a badge of honor.
  1. The Lawyer's [Generation X] Leadership
    Generation X is still calling the shots and the technological transformation happened under our watch and also, for many, under their noses. So, if motivation is intertwined with reward value and reward value is influenced by past experience, then the current leaders/owners/stakeholders may have never been rewarded for embracing the technological transformation, and innovation, that artificial intelligence and automation of processes allows. Therefore, they may lack the "will" to change.

"How do we change management?"

With honest and careful introspection, followed by a solid strategic plan that focuses on people, process, and technology.

You need to find the will and the way to change management. The “will” is the “why” of behavior change. We discussed the why in the sections above. In contrast, the “way” refers to the cognitive and informational aspects of behavior change. The “way” is the “how” to change. How are you going to innovate your practice? Where do you start? What skills and capabilities are required? Do you have a process map ready? Both - the will and the way - are necessary for successful change management.

In this regard, I strongly believe that adopting a Lean culture will go a long way in effecting change management in your organization. As we discussed, to be able to innovate successfully you need to re-write old scripts. Re-writing the many hidden scripts of lawyers will take executive function, time, and training. It is true that behavior change will always be hard, but you can facilitate it. And using a Lean approach is a proven way to facilitate change and process improvement.

Here is a readers' digest explanation of how to use Lean to assist change management. The Lean concepts have been bolded for emphasis:

  1. Train your Team on Lean principles and tools.
  2. Define, Measure, and Analyze where you are in the innovation curve.
  3. Take steps to Improve your Legal Services delivery to make them more Efficient, reducing Waste.
  4. Continuously find ways to improve the Flow of your legal services delivery models.
  5. Always focus on the Voice of the Client (VOC). And what the client wants is Value.

The first step is to train your team on the principles of Lean. This does not require your team to become Lean Six Sigma certified, far from it. This is merely providing your team with a toolbox full of options for implementation of change management.

Second, define, measure, and analyze where you are in the innovation curve and where you want to be. Prioritize and identify the top 3-5 things you will work on beginning in the 1st Quarter of 2020. To help achieve this, it would be ideal to facilitate a Lean Kaizen event with the relevant team. In this type of event, the team will collaborate to create the right process map for your organization and your innovation goal. Through a Kaizen event, you will be able to determine if the barrier is a lack of will (not being sold on the “why”) or not knowing the “way” (lacking the know-how to get there). If the organization lacks the knowledge, skill, or capacity, you can tackle those issues one by one, as a team, and then create a process map to implement the change.

Third, take the necessary steps. Depending on the type of innovation you are trying to launch, tools can be identified, training can be implemented, and a path of continuous improvement can be forged.

You need to keep in mind that learning new skills, abilities, and information requires executive function and this means there is an opportunity cost to deploying the path to finding “the way.” For attorneys, this is significant because it takes time away from billable work, meeting deadlines, preparing for a pitch, writing briefs, etc. Opportunity cost is possibly the biggest challenge we have as legal professionals in trying to innovate the industry. The stakeholders and the leadership have to reduce the stress of allocating executive function to upskilling. They need to actively encourage it, actually providing incentives to upskilling.

Fourth, engage in a relentless pursuit of perfection. The quest for perfection is a Lean principle but also something lawyers understand very well. It is in our DNA to seek perfection. Create a team dedicated to the continuous improvement of legal services delivery. If you are in-house, create or beef up your legal ops team. If you are in a law firm, create or beef up the team of your Chief Innovation Officer. And always communicate with everyone in the team the virtues of, and gains achieved with, innovation. An Academy of Management Journal study found that the more leaders communicated a vision of continuity, the more they instilled a sense of cohesive organizational identity. These effects were greater when employees experienced more uncertainty at work (as measured through employee self-ratings). Leaders must communicate an appealing vision of change through emphasizing the positive – the purpose, goals, identity, and value of the employees remain, only under improved conditions.

Finally, it all goes back to the client. A key Lean principle if always listening to the Voice of the Customer. Lawyers are in the service business and our clients want value. In today's digital world, true value is provided only when delivered using the available legal technologies. There is no time like the present. Embrace this new decade with a fresh approach to your delivery of legal services. As you set your sights in 2020 and beyond, resolve to begin or continue your journey of legal process improvement to stay competitive in this new landscape.