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!

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!