The incumbent’s dilemma is how to drive disruption internally before being disrupted by others. Big firms are building innovation capabilities internally in order to compete with the growing upstarts that surround them.
There have been streams and streams of business writing on the subject of disruption and innovation since Clayton Christensen wrote his seminal book on the subject. The seeming threat in legal is with technological disruption or, as some have it, the Coming of the Robots. But it is not technology alone that will disrupt established firms. New technology requires a lot of effort initially to improve performance; but, at some point, that effort to performance ratio flips and the investment finally pays off (before plateauing; hence the need for constant innovation in the tech industry).
The real threat of disruption for legal services is the impact of that technology on established profit and business models and in creating alternative delivery methods. Entrepreneurs are often advised to find “those who are underserved by established firms and those who are poorly served by them.” By targeting these clients with new technology, new business models and in new markets, innovators threaten the incumbents with the race to adapt and to serve these new demands. And, as delivery and performance of the new legal services improve, the fight for established clients then begins.
Organizations across all industries are attempting to avoid this future by disrupting themselves. The most innovative companies today are those that are teaching themselves to adapt and pivot quickly as they explore new opportunities. Building these internal innovation capabilities needs a change in mindset, however — one that is entrepreneurial and hyper-curious (or “intrapreneurship”). Firms are grappling with how to create the right environment for both intrapreneurs and innovation to flourish on the inside, all without directly attacking the status quo (as it is still working rather well for some).
Strategically, it seems there are two main paths: (1) a commitment to drive innovation internally and (2) investing in or acquiring external startups to stay relevant.
Internal innovation means infecting the corporate culture with a new mindset. Large organizations are adopting collaborative arrangements with entrepreneurs and startups to create a diffusion of innovative ideas and approaches. Such osmosis can spread what it means to be an entrepreneur to internal teams so that more ideas can be harvested and built for clients internally.
Firms are beginning to see the value of bringing lawyers, technologists and entrepreneurs together to create cutting-edge solutions. There are a few different models being tested. Some have built internal corporate incubators and accelerators that follow Christensen’s advice in separating the research and development teams from the traditional hierarchies and structures. This allows for different models and processes to flourish that aren’t typically available to law firms, such as “failing fast,” embracing ambiguity and rapid prototyping.
Allen & Overy, Gilbert + Tobin and Akerman LLP (among others) have followed this model by building internal incubators that bring groups of their lawyers and technologists together to create and execute ideas. Osler Hoskin & Harcourt LLP, on the other hand, has partnered with Ryerson University’s Legal Innovation Zone. LIZ is an external incubator of legal startups that “develops solutions and technologies to improve legal services and the justice system.” The partnership brings lawyers and legal entrepreneurs together for specific innovation initiatives. “Hackathons” and other internal contests are held to harvest ideas and pick those in which the firm should invest, build and commercialize.
Other firms such as Bryan Cave LLP and Simmons & Simmons LLP in the U.K. are bolstering internal expertise and developing intrepreneurial skills among their lawyers to understand what the technology can do and how it can help them deliver exceptional services to their clients. Simmons & Simmons is fostering innovation by encouraging its lawyers and business professionals to take time off from billing to explore their innovative ideas.
And, finally, firms such as Dentons (NextLaw Labs) and Mishcon de Reya (MDR Lab) are combining some of the internal accelerator benefits of the legal technology space with early-stage investing, plus legal advice and mentorship for the startups.
Established firms launching into this space recognize that their core competencies and profit models are not geared toward innovative legal technology product exploration and commercialization. The incumbent’s dilemma, however, is that it also can’t sit by and wait until the industry or market is large enough to be interesting. The risk for late entrants to new markets is that they find it difficult to both replicate the capabilities that the disruptors have already formed (and in dialogue with clients) and quickly enough to capture remaining market share.
This partnering or “spinoff” incubator model within firms allows incumbents to maintain status quo and capitalize on their hard-won position but also have ready access to the tools and business models that have been thoroughly tested and ready for prime time.
With law schools feeding the ranks of new lawyers, there is additional discussion regarding the teaching of entrepreneurial thinking to develop intrapreneurs within our firms.
In law schools, the current format of a professor speaking at the front of a class lends itself very well to substantive law subjects. But an entrepreneurial mindset can’t be taught in this academic way. As business schools have realized, entrepreneurship and learning to think differently are more “experiential” in nature. They need alternative methods of teaching and learning.
Michigan State University’s law school has developed a curriculum that embraces hands-on training in addition to the traditional formats. The “LegalRnD” curriculum, run by the inspirational Dan Linna, includes a course on “Entrepreneurial Lawyering” to help students adopt a more startup mindset — particularly if they’re contemplating launching their own practice. Canadian law schools are experimenting with additional courses for this type of learning. And Ryerson’s law school proposal looks promising by developing real-life scenarios and other experiential learning formats in design thinking, legal project management and legal analytics that will fill the gap of purely academic courses in substantive law.
All of the legal entrepreneurs I spoke with admitted that they could not imagine building their successful legal product while practising law. Innovation and entrepreneurship are full-time jobs. Persistence, patience and laser focus are essential to see an idea through to execution. Startups need to find a happy acceptance in the messy ambiguity of software design and development. Entrepreneurs need to be hyper-curious and to adapt quickly in response to what works and what doesn’t. And these skills can’t be taught from a book.
Partnering with innovators and technologists means firms can continue focusing on doing what they do best for their clients, but they can also test the waters of the future and be ready to adapt and pivot into the disruption that is coming.
Kate Simpson is national director of knowledge management at Bennett Jones LLP and is responsible for developing the firm’s KM strategy and initiatives. Opinions expressed are her own.