To Innovate or Not to Innovate: A blueprint for the law firm of the future

Introduction

As long as you live, keep learning how to live.

Seneca

Lawyers are not known as creative people. If they had wanted to be creative, they would have become architects or interior designers or city planners. In general, being able to understand regulations or case law does not require an enormous amount of creativity. Assimilating vast amounts of information and applying knowledge to the interpretation of regulations does not necessarily require a creative mind. At the same time, the leadership in a law firm rarely looks beyond its own people for inspiration. A managing partner usually begins his or her rise to the top from within the organisation, beginning as a trainee. On a Friday evening he or she may be a tax or corporate lawyer or litigator and by Monday morning he or she may be managing a £100 million business with no business or leadership credentials whatsoever. The knowledge to bring about change and breathe innovation into the organisation simply does not exist. And neither is there deemed to be the need. The law has long been one of the most profitable industries there is. Why change? Ever since the American Lawyer started to introduce the measure of profits per partner in the United States, closely followed by the United Kingdom, the only thing a managing partner is interested in to guarantee his or her longevity is increasing the profits of the equity partners. That way, the best lawyers are retained and the firm attracts the best in the market. To achieve that, all he or she has to do is squeeze more chargeable hours out of the firm’s lawyers – in particular its junior lawyers. Whereas 1,300 or so hours per annum was once the norm, young lawyers are now expected in many firms to do 2,000 hours or more. A term has emerged in London to describe this new form of voluntary slavery – ‘beasting’. The model therefore is simple – recruit the lawyers, set them an uncomfortable annual hourly target and charge them out at as high an hourly rate as you possibly can. And as long as we all do the same so that the client has no alternative, we can continue to ensure that our partners become millionaires. And so comes to fruition the worst management maxim of all time – ‘if it ain’t broke, don’t fix it’. The death of innovation. The scourge of creativity. And who loses? In the long run, everyone loses. Certainly the client who does not benefit from an evolving modern legal service with new ideas to aid their business; definitely the young lawyer whose passions and ambitions of joining a glorious profession with a desire to serve are stolen; and eventually the self-serving partner who will see change imposed in ways he or she cannot yet envisage unless he or she can get out in good time with his or her monies well invested.

Michael Hayman and Nick Giles in their excellent book Mission: How the Best in Business Break Through (Portfolio Penguin, 2016) describe how businesses make a difference in a fast-changing and innovative world, where commentators report that two-thirds of the companies that will make up the S&P stock market index in a decade’s time have yet to be created. We live in a time where Uber has changed the transport industry, Amazon has turned the book and the retail industries upside down, Airbnb has transformed how we holiday and Google … well, Google helps us to find new ways to understand the world we live in. But why didn’t Waterstones or Barnes & Noble launch Amazon, or Thomas Cook launch Airbnb? They had the knowledge, the capacity and the revenues. But when you have a successful model with strong revenues and profits you are less likely to seek to change your model. Real change often comes about when there is real need. Business thought leader John Kotter¹ refers to it as starting with a sense of real urgency. A time when failing to change would lead to extinction. In essence, when there is no alternative.

This is not a book just about innovation but a book about growth. Every senior and managing partner is seeking new growth. Once the core business of a company has matured, finding that growth can become elusive. How do fast-growing companies such as Amazon, Netflix or Airbnb maintain that growth? How can new growth be generated in a mature industry? Why do leaders in these businesses fail? Do they become risk averse? When they accept that growth is not attainable, they accept that the only way to deliver improved profits per partner is to massage the key figures. Demand more hours from the lawyers, increase the charge out rate, implement a lateral hire programme. That, for a short time, can bring about lower single-digit growth but no more than that. To achieve real growth requires real change. There are only three ways of increasing revenues in a law firm. One is to obtain more transactions or work from existing clients, the second is to charge more for the work and the third is to attract more clients. Innovation and delivering greater value is at the heart of all three. It makes all three easier to achieve.

As with so much else, innovation is a process. Rarely does an idea for a new growth business emanate from the head of an employee. However, if it does, it must be valued, encouraged, shaped and modified until it becomes something real – a business plan and an accompanying action plan. Along the way it will face antagonism and negative voices arguing eloquently (as is a lawyer’s way) against it. In such an environment all innovation will be strangled at birth and it is unlikely that further ideas will appear. Why would they?

In order to overcome such negativity and to generate new ideas on a regular basis, a culture of innovation must be created. An infrastructure that supports innovation and lauds innovators as the real heroes in a business must be established. Negative naysayers must be marginalised. Failure must become acceptable.

Creativity in a corporate environment does not just depend on an individual as was the case with Jobs and Wozniak when they assembled the first Apple computer in Jobs’s garage. It depends just as much on the infrastructure and environment. Not just physically, but how well suited the environment is to the diffusion of ideas. Jobs and Wozniak had the freedom to go in any direction they wanted. They had a passion and an attitude to change the world. They were not hampered by the politics, the bureaucracy or the resistance to change that is often found in large organisations. At the outset they answered to themselves and to no one else.

Chapter 1

If it ain’t broke, don’t fix it

If there was nothing wrong in the world, there wouldn’t be anything for us to do.

George Bernard Shaw

A longstanding client of my firm describes his R&D department as standing for rob and duplicate. He says it tongue-in-cheek but he is not far from the truth. Innovation occurs usually as a result of different personal experiences, often subconscious, converging on each other to create a new and better way. David Kord Murray describes in his book Borrowing Brilliance,² the six steps to business innovation by building on the ideas of others.

In his brilliantly researched book The Innovators, Walter Isaacson describes the invention of the computer as an evolution of scientific minds drawing on each other’s knowledge over a period of more than 150-years.³

This period stretched from Charles Babbage’s invention of the Analytical Engine in the early 1800s – a general-purpose computer that could carry out a number of different tasks based on programming instructions given to it and which was formed as a result of combined innovations that had been developed in other fields – to the work undertaken by Alan Turing at Bletchley Park, Howard Aiken, Konrad Zuse, Claude Shannon and George Stibitz at Bell Labs, John Atanasoff, John Mauchly and the US War Department’s funding of ENIAC as part of the war effort.

Peter Galison, the Harvard science historian, refers to this evolution as a ‘trading zone’. According to Isaacson: When these disparate practitioners and theoreticians came together, they learned how to find a common parlance to trade ideas and exchange information.⁴

And, of course, innovation does not end at the invention of the computer but continues with the work done by Texas Instruments, Hewlett Packard, Intel, Microsoft, Apple, Tim Berners-Lee, Google and IBM to create the digital revolution that continues apace.

As Isaacson writes in The Innovators:

One way to look at innovation is as the accumulation of hundreds of small advances, such as counters and punch card readers. At places like IBM, which specialise in daily improvements made by teams of engineers, this is the preferred way to understand how innovation really happens. Some of the most important technologies of our era, such as the fracking techniques developed over the past six decades for extracting natural gas, came about because of countless small innovations as well as a few breakthrough leaps.⁵

Of course, if companies were to adopt the management maxim ‘if it ain’t broke, don’t fix it’ then no progress would be made until there was no other way or, to use Daryl Conner’s analogy, as referenced by Kotter in his eight-step change model, a ‘burning platform’ has occurred. ‘If it ain’t broke, don’t fix it’ kills vision, passion, innovation and the excitement of being different.

Innovation is essential to the forward movement of a business. Standing still means that you watch your competitors pass you by. It rarely happens quickly but it will certainly happen if you do not prepare for the future.

Kaizen is the Japanese word for improvement. ‘Kai’ means change and ‘zen’ for the better. It is a business philosophy. It is about continuous improvement in a business looking at all parts of the business, the product, the people and the process. It is a daily process that goes beyond simple productivity improvement. It becomes a culture of small aligned and focused improvements. It can be all types and all sizes of improvements. The important thing is that it creates a culture of improvement at every level.

Kaizen has been at the heart of many companies’ success. When established as a philosophy in a business it is built into every level and becomes part of everything a company does. It has to be adopted by everyone, practised every day and everywhere.

Dr W Edwards Deming, a statistician who went to Japan to help with the census after World War II, taught statistical process control to leaders of prominent Japanese businesses. His message was that by improving quality, companies will decrease expenses as well as increase productivity and market share. He created 14 key principles for management to follow in order to improve the effectiveness of a business or organisation, which can be downloaded from the The W Edwards Deming Institute.⁶

Kaizen has become one of the core principles of the Toyota production system. It is described by Toyota as a quest for continuous improvement. Toyota has adopted the slogan always a better way.

It is described by Toyota as:

a philosophy that helps to ensure maximum quality, the elimination of waste, and improvements in efficiency, both in terms of equipment and work procedures. Kaizen improvements in standardised work help maximise productivity at every worksite. Standardised work involves following procedures consistently and therefore employees can identify the problems promptly.⁷

Toyota describes the philosophy as humanising and empowering the workplace and it allows individual members to identify areas for improvement and suggest practical solutions. The focused activity surrounding solution finding is often referred to as a kaizen blitz where activities are focused around a process or product for a short period of time and solutions sought at all levels.

Brailsford believed in a concept referred to as the ‘aggregation of marginal gains’; that if you improved every area related to cycling by just 1%, then those small gains would add up to a remarkable improvement.

In 2010, Dave Brailsford became the performance director at British Cycling. He led the rise of Team GB Cycling and, ultimately, of the incredible Olympic success in 2012. No British cyclist had ever won the Tour de France, but as the new general manager of Team Sky Brailsford was asked to change that. His approach was simple.

Brailsford believed in a concept referred to as the aggregation of marginal gains; that if you improved every area related to cycling by just 1%, then those small gains would add up to a remarkable improvement: Put simply … how small improvements in a number of different aspects of what we do can have a huge impact to the overall performance of the team.⁸

This means that no stone is left unturned. Everything is measured and analysed, everything is challenged, and improvement is sought at every stage.

They started by optimising the things you might expect: the nutrition of riders, their weekly training programme, the ergonomics of the saddle and the weight of the tyres.

But Brailsford and his team did not stop there. They searched for 1% improvements in tiny areas that were overlooked by almost everyone else: discovering the pillow that offered the best sleep and taking it with them to hotels, testing for the most effective type of massage gel, and teaching riders the best way to wash their hands to avoid infection. They searched for 1% improvements everywhere. During Bradley Wiggins’ Tour de France win they arranged to have his bed moved to each overnight stop to ensure a good night’s sleep.

As Brailsford said when interviewed by the BBC:

The whole principle came from the idea that if you broke down everything you could think of that goes into riding a bike, and then improved it by 1%, you will get a significant increase when you put them all together.

There’s fitness and conditioning of course, but there are other things that might seem on the periphery, like sleeping in the right position, having the same pillow when you are away (or even bed) and training in different places … They’re tiny things but if you clump them together it makes a big difference.⁹

Brailsford believed that if they could successfully execute this strategy, then Team Sky would be in a position to win the Tour de France within five years. He was wrong – they won it within three years.

In 2012, Team Sky rider, Bradley Wiggins, became the first British cyclist to win the Tour de France. That same year, Brailsford coached the British cycling team at the Olympic Games and dominated the competition by winning 70% of the gold medals available. In 2013, Team Sky repeated their feat by winning the Tour de France again, this time with rider Chris Froome. Many have followed the approach taken by British Cycling.

Brailsford was right. If you could make 1% improvements in lots of areas then the cumulative effect was immense. He developed a culture at British Cycling of constant improvement – kaizen. He looked for problems so that he could improve on them.

By analysing mechanics in the team truck, he discovered that dust was accumulating on the floor and thus undermining bike maintenance, and so he had the floor painted pristine white so that impurities could be detected more easily. Each weakness was a threat but by addressing them they could become an opportunity. While the competition ignored this obsession, Brailsford, by focusing on small changes, could create an advantage. These small advantages not only created real benefits but they also created increased confidence in the minds of the riders.

Whether you call it the aggregation of marginal gains or kaizen, gradual improvement has revolutionised sport. But as Matthew Syed in his book Black Box Thinking explains, it also has a major role to play in just about any business.¹⁰ In business, many of the most innovative companies are now using a marginal gains approach. Google runs 12,000 data-driven experiments annually in order to discover small weaknesses and so make small improvements. One experiment found that by tweaking the colour of the toolbar from darker to lighter blue it increased the number of click throughs.

The challenge for