It is hard to believe that months have passed since I last updated this blog!

Our team has been so focused on innovating Conflict of Interest processes and approaches, along with many other law firm processes, that we forget sometimes to come back and talk about it.

Specifically surrounding Conflicts of Interest, it’s amazing to me how stagnant this area has been for so long – and how much arduous, labor-intensive processes firm have been forced to accept as a result.

As firms cut-over to our Conflicts system, or begin the evaluation process, I’m amazed by the variety of initial responses, and then how the responses evolve as the innovations become clearer how what we are doing is truly innovative – and in some cases, ground-breaking.

Initially, there is trepidation, because what we did NOT do is put a pretty face on old approaches.  That just didn’t make sense.  What we did is stepped back, evaluated ROOT CAUSE issues of inefficiency and inaccuracies and then concertedly implemented innovations to address the root cause, not just symptoms.  The result?  A very different approach, with very different capabilities – and that can sometimes be hard for folks to ‘translate’ at first.  But once we walk through and map ‘today to tomorrow’ – the eyes start to widen, and the excitement sets in – that there is the possibility of actually focusing on high-value activities (like analysis and clearance), rather than manual labor activities bogging down teams and attorneys today.

Now we have migrated firms from each of the previous market-share holders for conflicts, and so have had the chance to experience their dismay at the incredible efficiencies our Conflicts System provides – each for slightly different reasons based on where they have been ‘living’ before. 

Here are just a couple of sample comments from key conflicts team members:

“LBMS Conflicts of Interest saved me 60% of my time!”

“When [our conflicts system fell out of support] we were unhappy to face the need to change.  Now, after using LBMS we wonder how we ever lived without the features that are embedded.”

“The other day we missed a key hit using our old conflicts system.  LBMS found it right out of the box with no additional effort from the team.”

So, please forgive my blogging tardiness – I promise - it’s for all the right reasons. 

In this blog, I wanted to share some observations and musings about law firm innovation.  It's a subject we've covered before, but in this edition, let's get to some root cause analysis of why law firms continue to falter around innovating their business models and business operations.

Frankly, as we visit with law firms globally, we find all too often there is a "mostly talk and very little action" approach to innovating the business model and business operations.  It's not because of lack of desire to innovate!  It goes deeper than that.

The good news is - Law firm leaders are fully aware of the following facts:

1. Clients expect law firms to make strategic and long-term investments in Operational Excellence.
2. Clients expect law firms to understand their own business operations inside and out, and again, be continously improving upon them.
3. Clients expect law firms to provide high-value services and INSIGHTS based on specific experience in their industry, geography or problem space.

So why is it taking so long, with so many false starts to make the changes that were needed, frankly, years ago??

We, at Elegrity, are aware of these client demands for law firms too.  Beyond that, with 20 years of deep and broad law firm industry experience under our belts, we know the state of affairs inside law firms themselves.  As  result, we are known for developing solutions to root cause issues by our law firm clients - that by their very nature drive business model and operational innovations. 

This also puts us into an interesting 'seat' to observe the psychology happening inside of law firms when faced with the need (and opportunity) to innovate. 

Based on these observations, I wanted to share the top 5 blockers we discover that gets in the way of law firm innovation most often: 

Law Firm Innovation Blocker #1:  Inertia 

Ever had the experience of letting an exercise regime slip away from you, and the amount of both mental and physical exertion required to get yourself off that couch and back to it?

Well, law firms have been sitting fairly fat and happy for a very long time.  So it's no surprise that the lawyers and leaders who lived through the pre-recession days may have trouble getting into a new pace of motion.

Here's a quote from a law firm leader inside a large law firm that says it all:  "I don't believe you can incrementally change a law firm.  I think the only way to get to the needed changes is to shut it down and start from scratch - hire by hire."

Luckily for law firms, we know that you CAN incrementally evolve a law firm, and we have proof of that - but getting folks to believe it can be tough (keep reading...).

Law Firm Innovation Blocker #2:  Need to 'Know-it-all' Before Taking Action

This is perhaps my favorite one, because it's the most ironic, although when you think about it, it sort of does make sense. 

I see the same pattern happen over and over again.  We meet with law firm leaders and they can literally 'see' how our experience and solutions solves problems they haven't been able to solve for years.  They get excited, and then they falter - they try to learn everything we have learned over the last 20 years, and they 'freeze'.  Why?  Because they think they have to take a 20-year course themselves, understand all of the ins and outs, the how, the why, etc.  They think they have to be everything and do everything themselves.  I've even met some firms that state "we never work with consultants" - and they don't see the irony of that statement! 

The irony here, of course, is that law firms sell their experience to their clients.  The expectation is that their clients need their help because, presumably in many cases, they don't have the internal experience needed to accomplish specific types of work.  And, of course, law firm clients have to take a bit of a leap of faith that the lawyers who are going to do the work, provide the solution, actually do know what they are doing - to the point that they don't have to do the same work on their own before they can proceed!

The reason I think this irony actually adds up is that lawyers are super smart.  They are used to 'knowing' and being the experts.  That expectation that you need to 'know-it-all' before taking action ends up filtering down in the organization.  The problem is, no one can know-it-all, nor can law firms afford to wait until someone spends thousands of hours on something to 'know it', nor can they afford to hire FTE's to put on every business challenge.  Everyone has areas where they are going to need help.  This is ESPECIALLY true when looking to innovate.  Doing things fundamentally differently will necessarily drive law firms and their employees outside of their base of knowledge - and you will need help.

Sadly, this blocker costs law firms YEARS of wasted time.  Not kidding here...we often see firms come back to us 2, 3 or even more years later with the SAME ISSUE we knew how to solve at the beginning. 

Some of the best decisions we've ever made at Elegrity for our own business have been based on seeing solutions and ideas presented by external experts that just 'made logical sense', hiring those experts and taking the chance without trying to learn their expertise ourselves.  Most often, it worked better than we thought.  When it didn't work, we took those failures as lessons that only served to strengthen our business further.  I often wonder if the failures weren't the more valuable...

See this great article about the key role of failure for businesses:  The Role of Failure in Business

Law Firm Innovation Blocker #3:  Short-term thinking

When a firm does identify and move forward on the business model and operational excellence front, they most often come at it with a short-term view. 

The most obvious example for this blocker is law firm new business intake projects.  It's hard for me to fathom, having been involved in this since the early 2000's when the first firms moved to optimize this process, that law firms today continue to make the exact same mistakes they made then.  In fact, I think some firms are going backwards, choosing even more myopic and stagnating approaches - thinking that the initial failures won't be repeated by just going with something just for 'intake'. 

The real root cause of law firm stumbles around New Business Intake and many other initiatives is short-term thinking (combined often with the "Need to Know-It-All Before Taking Action").  There is a fundamental misundertanding in most firms about what 'Operational Excellence' means.  It most certainly doesn't mean you 'buy an app for that' and the issue is resolved.  What it does mean is embedding the capability for EVOLUTIONARY improvements into the fabric of the firm's operational infrastructure AND culture. 

For these capabilities to exist, you need more sophisticated approaches and technologies, not 'simpler' ones. 

Go for the long ball, or you will lose the game. 

Law Firm Innovation Blocker #4:  Perfectionism

Lawyers live inside the details of things.  One word wrong, and the meaning of an agreement can be completely different.  They need to be as perfect as they can.  It's internalized into their very beings.

But in business today, when the world around us is changing faster than we can even imagine, with only the threat of going even faster, PERFECTIONISM IS THE ENEMY OF SURVIVAL.

Biologists have a word for the way in which solutions emerge. That word is "evolution."  Read my blog, my whitepapers, listen to me speak - you will see the words 'evolve', 'evolution', 'evolutionary' a much as any other key word.  It's because innovation requires a combination of strategic direction that has been strongly vetted and a slew of 'trial and error', with continuous adjustments, re-works, incremental additions and wholesale add-ons.

This blocker, along with the 'know-it-all' blocker above causes a lot of 'freezing' for law firms.  Innovation is RISK.  Evolution is the mitigator of RISK. 

Let go of perfect - you simply can't afford it or obtain it when talking about operational excellence.  The definition, in my book, of operational excellence is ADAPTABILITY, AGILITY and the willingness to TRY and live with something less than perfect.

Oh, and just to be clear, I'm a perfectionist myself - so I get it!!

Law Firm Innovation Blocker #5:  FEAR

Last, but certainly not least, the most powerful blocker on the planet - FEAR.  Fear of change, fear of failure, fear of not knowing, fear of making the partnership upset.  It's rampant, and it's real.  I'm not trivalizing it.

Law firms should be afraid - of not moving fast enough to make the changes needed to survive.  That fear, above all of the other ones, should take precedence.  And if you can USE that fear to drive motion and innovation, then you've just changed it from a blocker to a motivator.

Let's Get Moving!

Above all else - you have to have trust in yourselves. Trust that you can change, and still be successful (and actually, be more successful).  Don't just look to other law firms, who are having the same struggles as you, to figure out what your firm should do.  They aren't your firm - and maybe they have it wrong!  If something or someone comes along that just makes good, logical sense and seems to support the key strategy shifts you need to make - then JUST DO IT.

Whatever you do, stop trying to be 'safe' all the time.  Try out some things that just make good, logical sense.  Some will work, some may not, but movement with continous evolution is the key. 

Some of you are likely sick of hearing about the need for law firms to innovate; others are wondering what on earth that actually means; still more of you are struggling to figure out how to move a culture steeped in tradition and governed by a loose group of partners to drastically different ways of thinking and operating. It probably feels like an uphill battle.

It can seem puzzling to understand innovation in a purely services-based organization. Innovation seems to make sense when we are thinking about products, like the iPhone, or other technologies like Twitter, Facebook, Google search, etc.  But innovation in SERVICES? What does that really look like?

Let's not kid ourselves. Innovation isn't an easy thing to do.  But comparatively, Law Firm innovation can seem so difficult it might seem like an oxymoron.

As I ponder the conundrum of innovating inside of law firms, it has caused me to pause and reflect upon what has prompted the innovations Elegrity has made in our 15 years working with law firms and other corporations.

In these reflections, I realized there are varying factors that have prompted our innovations. "Necessity is the mother of invention" jumps out quickly. Survival in the technology business is based on innovation. No innovation, no business. So there is that. But then I realize that necessity has served more as a motivator than the actual root cause of innovation.

Continued reflections highlight the fact that some of our innovations are based on adapting and integrating innovations of other technology companies to produce innovative solutions - that is, taking tools and actually building something from them.  Sort of like taking the various components that make up a house and then architecting and building a unique, one of a kind creation.

Still, though, this doesn't get to the crux of it. Then it occurred to me - if I look back on our years of work with customers and prospects, what are the things that THEY perceive as 'differentiators' of Elegrity's products and services? Now, the 3 key factors come into focus.

3 Key Factors for Innovation

1. We listen INTENTLY to our customers and prospects. Not just to what they are saying, but 'through' what they are saying - looking for root causes behind their pain points, not just to the symptoms themselves.
2. We have EMPATHY for our customers and prospects and their specific challenges and strategies. We know that to help them implement their strategies and overcome their barriers, we have to take our experience and solutions and morph them to match their specific needs.
3. We DELIVER value through meaningful collaboration with our customers and prospects. And for our law firm customers specifically, we consciously do so incrementally, helping executives introduce fundamental business shifts in palatable bites based on the culture of their firms. We see ourselves as true business partners to our clients. We care about their business and their success. We know it is our responsibility to bring our experience and knowledge to the table to combine with theirs - and so, we innovate together, collaboratively, over the long term.

In the last couple of years, specifically, I have learned to stop thinking about innovation. Instead, I trust that it will naturally occur as we LISTEN with EMPATHY to our customers, prospects and THEIR customers and prospects. True empathy means we must be students of their industries and the changes they are experiencing. As their needs and business environments change and evolve, so must our our services and solutions be reinvented, restructured, adapted - INNOVATED.

So law firms - fret not as innovation is infinitely achievable. If you listen with empathy to your customers and prospects;  if you study the environments in which they are operating and apply your unique experience to help them anticipate what challenges they will face, or new strategies they must think about incorporating - YOU WILL INNOVATE - naturally.

The Bottom Line

Innovation is an outward-looking result, not an inward-looking one.  Oh, and by the way, overly paying attention to what other law firms are doing is an inward-looking approach – not to mention the fact that it fosters a follower mentality. Both of which are dangerous threats to innovation.

Read more about Elegrity’s thought leadership for law firm innovation and competitiveness by downloading our complimentary e-books and whitepapers on the subject.  Here are a couple of starters:

A couple of weeks ago I was having lunch with a friend. We were talking about Alfred Hitchcock movies - and she mentioned she had recently seen a silent film he had directed. "I had no idea he directed silent films", I said. "What was the name of the movie?" I asked.  

She said "I can't remember, let me ask..." and picked up her phone. I thought she was going to call someone that knew the answer - but instead she went to her phone's browser and 'asked' Google!  I had never heard anyone say that they were going to 'ask' the internet for information before - search yes, but 'ask'?

Then it struck me just how different our world has become.  

It used to be we asked each other for information, now we ask the data available to us instead! And our expectation is that all data is available to be 'asked' - is your law firm's? 

As a law firm manager, not only do you not have time to go and 'ask people' for the information you need to make decisions or strategy shifts, but the people you would have asked also don't have time to answer - at least not as quickly as you need the answer. It's ironic really - a big part of the reason we all seem so much more overwhelmed these days is because there is so much information coming at us all the time.  That said, unstructured or unrelated information really isn't information at all - it's just a lot of data that we need to rationalize and analyze ourselves - taking even more time - so often we just go without. That, of course, increases the risk that you will make the wrong decision at the wrong time.

I bet if you added up all those spreadsheets you are using to try to keep all those little pieces of information organized and then added on all the emails traveling around the firm from people 'asking' for information that exists 'somewhere', you would discover just how much the lack of effective information flow in your firm makes up a good part of your overwhelmed feeling - not to mention inefficiencies. It's costing you a fortune - don't doubt it.

What if you could ask your most important questions from your firm's information and trust the answer?  Imagine 'asking': "What clients do we have in the food & beverage industry?" and getting a response from your firm's information just like you would if Google could search your enterprise?

You can and it's a lot easier than you think - if you are a law firm manager and you can't, you should "ask" us!

Law firm leaders are more than aware of the perfect storm of fundamental industry shifts that have shaken the legal industry from to its core.

Let's Review...

• Revenue pressure
• Challenged profitability
• Cash flow pressure
• Reduced realization
• Reduced leverage

Leading Indicators - More Turbulence on the Way

• Large firm shutdowns and Mid-size firm shutdown threats
• Significant reduction in law firm student enrollment - this indicates broader recognition that becoming a lawyer isn't the sure thing it used to be
• Higher partner versus associate billable hours ratio - indicates experience is key to continued revenue and profitability

Culture May Be the Biggest 'Hidden' Threat

Perhaps one of the most dangerous threats to law firm survival are the long-term cultural considerations that directly impact the ability of firms to respond to the real-world current and coming survival threats.

I've been consulting nearly 20 years with law firms and other corporations, so have had a third-party observer seat to the differences between other industries and the legal industry.  It has become crystal clear to me that the legal industry, more than any other I've worked with, operates on a 'follower' approach to both strategic and tactical decision-making.  

"What are other law firms doing?" is the most common question I hear when a firm is considering any perceived 'new' thing.  

I suppose that approach may work well when pretty much every law firm is fat and happy doing what they've been doing in essentially the same way they've been doing it for decades.  And, of course, when your only real competitors are other law firms - but those days are over.

Very quickly this deeply embedded 'follower mentality' has become the enemy of survival and the ability to thrive.  That's because INNOVATION and UNIQUE DIFFERNTIATION are the attributes now key to success.  You can't get either of those things when you are following - because that means you are already behind and in danger of being tromped by what are now deeply intensive competitors - and not just other law firms!  

The fact is, that firms that will survive and thrive in these new (and forever evolving) market conditions are those that are able to transform (not just 'change') the way they operate and deliver services (and products!) to their clients.  Fundamentally, it will be the firms that lead the charge in innovating and effecting these transformations that win and win big (with a bigger chunk of the pie becoming available as other firms fall off).  Those that don't innovate, but follow, will enter the 'spiral down decline' spin cycle from which they won't be able to recover - it will simply be too late.

Learn How to Win As a Law Firm Leader

We help law firm leaders and their teams think differently on a strategic level - but we don't abandon them there.  We keep going - helping them implement their transformational strategies in ways that are 'digestible' inside the law firm culture that exists today.  Our customers leverage our experience in introducing 'disruptive' ways of conducting the business of law while maintaining the cohesiveness of the running firm.  Its an art form to say the least...because you have to push the envelope, while at the same time bring everyone along with you.  We know how to do that strategically, incrementally and over the long-term.  

If this discussion resonates for you, I encourage you to schedule a strategy session with us.  If nothing else, our experts can help you vet your thoughts and ideas and provide some key lessons learned that will help you not just weather the storm, but come out cleansed and ready to take on the new world!

There is no doubt that Conflicts of Interest is a crucial risk management concern for law firms. Ensuring appropriate parties are checked for conflicts, that the conflicts clearance process is audited and associated concerns (such as ethical walls) are evaluated and managed are all needed loss prevention aspects in a law firm.

That said, conflicts processes are only part of, not synonymous with, the holistic New Business Intake process.  In the old days, law firms bought a conflicts of interest package and then wrapped rudimentary New Business Intake procedures around the checking and clearing of conflicts.

Sadly, some firms are stuck in this old way of thinking - that somehow New Business Intake and conflicts processes are essentially equivalent - or at minimum that conflicts checking and clearing is the central concern of New Business Intake.  Neither is correct in 2013 - but as a result of this thinking, we see firms falling into the trap of making the same choices in 2013 that were made in the last 'era' (circa 1999-2002).  The difference today is - making these faulty assumptions costs firms MILLIONS of dollars (no exaggeration)....

The facts in 2013 and the future are as follows:

1. The needs (and value) of a properly implemented and evolvable New Business Intake process are substantially cross-functional and NOT centrally focused on conflicts.  In fact, financial and marketing considerations are far and away the most central themes of a transformed New Business Intake process.  These financial considerations also include multiple risk management considerations (LOSS PREVENTION), which necessarily include, but are by no means limited to, conflicts of interest.

2. New Business Intake is a process that will be forever evolving - primarily in areas that are not directly conflicts-related.  

3. New Business Intake is one of DOZENS of client/matter related processes.  Cross-functional considerations continue across these additonal related processes - and again, are not conflicts-central.

Unfortunately, the same vendors that persuaded firms to the old dead-end approaches are still at it - leading unsuspecting firms into the same rabbit holes they did before.  Why?  Well, because they have a new conflicts system to replace the old conflicts system, of course.  

But your firm doesn't have to fall into the same old traps.  New Business Intake and the other dozens of business processes that occur for your clients/matters are decidedly more about making money than checking conflicts.  And we haven't even started to talk about the other entities we need to manage (legal projects (matter delivery); employees; vendors; contracts...).

Recognizing that all business processes at your firm must be considered from a cross-functional perspective is the first step towards moving towards the required new sustainable business model for law firms.

Don't let the fact that a vendor has pulled support for your conflicts system because they want to sell you a new one cause you to make a decision with long-term detrimental financial consequences.  

There is a new and better way...

The old ways simply won't cut it - don't let your firm go down the same rabbit holes.  Elegrity helps law firms think and operate in accordance with the new world, not the old.  

Join Us for a Free Webinar to See the Future of Law Firms

On February 6, we will be re-running our very popular webinar as first presented at the Thomson Reuter's Law Firm Leaders Forum in November 2012.  Come and join us for this encore presentation and move your firm into the future, not the past.

Make sure the investments you make today are still paying you dividends 5 years from now!

In future blogs, I'll expose additional rabbit holes that you and your firm can avoid.

Last week, I had the pleasure of attending and presenting at the 17th Annual Law Firm Leaders Forum in San Francisco (hosted by Thomson Reuters).

The news for law firm leaders in 2012 and looking ahead to 2013 seems pretty dismal.  Both Citicorp and Wells Fargo have published reports showing a decrease in billable hours and realization for the majority of law firms in 2012.  They report things won't be much better in 2013.

If you've read the blogs and content pieces we've published over the last 18 months, then you won't be surprised - we've been advocating fundamental change in how law firms operate on multiple levels - operationally, in areas of marketing and business development, and of course in the way services are delivered, priced and managed. 

In our discussion at the breakfast briefing on Friday, Mr. Richard J. Mackessy, CFO of Steptoe & Johnson PLLC and I asserted that law firm survival today and tomorrow must be accomplished by evolving from the current ("old") business model to a new, sustainable model.  In other words, take a breath law firm leaders - no one is telling you to throw the baby out with the bath water here.  Not at all.  In fact, given the sensitivity of the law firm partnership structure and resulting culture, it would be suicide to think you are going to make revolutionary changes! 

Ok, so now that you are breathing a bit better, let's examine the top 3 threats to Law Firm Survival as I see them:

I actually believe that the last one (business entropy - simply put - wasted energy that is seeping out of existing processes thereby removing it from the 'energy pool' for productive work) is the key to addressing the first two.  If law firms can't find the organizational energy to put into reshaping (and rethinking) their business model in the immediate future, they are facing extinction. 

We are working together with our law firm customers to reinvigorate previously wasted energy (and, oh, let's not forget money) back into the organizational system so that the firm can recapitalize that energy and money as investments into their shifting business model.  This is incredibly exciting stuff!

How do we do it?  Through our Legal Process Management thought leadership and powerful technologies (Law Business Management System).  By first transforming how firms think about work, then transforming how firms do the work, we are accomplishing incredible reductions in business entropy. 

Law Firm Leaders - where is energy seeping out in your organization (wasted)?  What would  you do if you could get it that wasted energy back? You can and you MUST!