Thoughts on Innovation from the Firm That Brings You the FT's "Innovative Law Firms" Award

Here's an addendum to the coverage I gave to Eversheds' Report on The Law Firm of the 21st Century, as well as to the story I published last month on the conference held here in New York sponsored by Eversheds.  This email came in over the weekend from RSG Consulting. 

If you're not familiar with RSG, you're almost surely familiar with their work.  Perhaps their most high-profile work is as research partner (now for the third year) to the FT's annual "Innovative Lawyers Report." Next year they will be expanding the report to benchmark US firms. 

Dear Bruce,

As the research consultancy, which designed and conducted the 100 interviews for the 21st Century Eversheds report, we wanted to add our thoughts, if we may.

The most interesting revelation emerging from our research is the gap between client expectations and law firms’ performance. A general counsel at a FTSE250 company said, “Law firms at the moment get the benefit of clients not taking a standardized approach to tackling issues. There aren’t many other areas that have escaped so miraculously from significant re-engineering. GCs only have themselves to blame. There has not been a consistent call anywhere for the legal profession to rethink the provision of services to business. It’s a medieval guild. “

That’s a powerful client who knows the symptoms and has produced a diagnosis for what might be called ‘Big Law Malaise’. The general counsel of a Fortune 100 company felt that the lack of forward thinking amongst big law firms would soon end: “At what point in history was the horse and trap most successful? About the time Henry Ford released Model T.“

Is the stage set for radical change? Not even the impending recession will really affect the prosperity of the biggest firms or alter their behaviour. But we do see evidence from another research project we designed, the Financial Times Innovative Lawyers Report, that law firms are gradually re-engineering themselves.

Last year, the UK’s top ten firms earned combined revenues of 6.3billion. Some of this revenue was ploughed back, in the case of Allen & Overy, into an innovation panel with a two million pound budget. Innovations submitted from other firms ranged from non-lawyer project managers to partnerships with third parties to both enhance their client service offering and their roles as responsible businesses.

This year, the innovations are more client-focused and consciously add value. Some are even positively imaginative!

Big law firms are broad churches; they are homes to both great experts and commoditisers. Some high priests pursue the new in legal expertise as if their livelihoods depend on it (they often do) whilst triumphantly resisting any other form of change. Meanwhile, those in the next office devote considerable intellectual and financial capital to the next generation of IT-based systems that will deliver tomorrow’s legal advice quicker and more efficiently.

In other words, great change and great stasis can co-exist – as they have done in the history of many a service industry. But law firms who understand themselves and who are willing to adapt to changing business conditions will close that gap between them and their clients.

Congratulations on a fascinating e-resource,

RSG Consulting

My take on this?

His core observation that large law firms are "broad churches" with room for many approaches to client service is surely correct.   The truly high end, "bespoke" client matters will always go to the Magic Circle, the New York elite, and their equivalents (Latham, etc.), and that is a tried and true model that has worked for a century or more. 

The challenge will, as always, be on the more routine, "commodity" type work.   Specifically, it will be whether those firms—or others, perhaps, that specialize on doing little else—will be able to design and deliver compelling value through the innovative use of IT combined with creative fee arrangements.  People have a tendency to look down on this work and this segment of the market as second tier, ever so slightly "slumming," and not where the excitement and challenge are.

I beg to differ.

If anything, figuring out how to profitably deliver these more routinized—but essential—legal services to the FTSE 100 and the Fortune 500 is the territory that's uncharted.  Marty Lipton presenting a seven-figure bill "for professional services rendered" is at this point an old game that everyone understands.  Few if any people really understand the new market.  Which means mistakes will be made and experiments will fail.  That's what experiments are for, you know; just don't run the failed experiment a second time.  Here, and not in the "premium, price-insensitive, high-end work," is where innovation in new business models will occur.