While the legal profession is considered one of the oldest, dating back to Roman times, as Karen and David Skinner pointed out in a recent KaiNexus webinar, innovation is a hot topic in the legal industry right now.
Mark Graban, KaiNexus Vice-President of Improvement & Innovation Services and founder of LeanBlog.org hosted a webinar, titled Creating a Lean Foundation for Innovation in Professional Services Firms, wherein Karen and David spoke about innovation in law today and how Lean can be used to support it.
Karen and David are the founders of Gimbal Canada Inc, a Lean practice management advisory firm that specializes in the legal industry. For the last three years or so, Gimbal has been working with law firms across North America on improving the way lawyers deliver legal services. They teach, write, and speak about Lean and the benefits of legal process improvement for law firms and in-house legal departments, and they work directly with their clients on improvement projects that focus on legal processes, as well as the business and administrative processes that support the work of lawyers.
“The question that comes up is, ‘Why is innovation such a hot topic in law?’
Well, it’s a bit of a perfect storm; technology is developing rapidly, including some fascinating, machine learning and artificial intelligence applications that are capable of doing some of the work of lawyers. At the same time, the economic downturn since 2008 has revealed serious cracks in the typical law firm business model. For the last few years, productivity, profitability, and realization [the percentage of standard rate fees actually collected, after discounts and write-offs] in many law firms, big and small, have been down,” David said. “And all of this gives clients unprecedented say in how they are charged for legal services.”
Karen highlighted other trends influencing the market for legal services like globalization, which has made it possible for legal work to be done anytime and anywhere. This often leads to work being outsourced to lower-cost jurisdictions, sometimes even within large, global law firms created by mergers. Commoditization is another trend finding itself into the field of law, as the idea that routine and repetitive jobs can be done by anyone spreads. The growing trend for general council to disaggregate legal work, allocating parcels work to people who are best placed to provide the desired quality at the lowest price, rather than bringing all work to one firm as was the tendency in the past. Excess capacity of lawyers is also a pressure, as is the do it yourself with Google mentality of modern times also impacting the legal services market.
“A lot of these trends, the idea of globalization, commoditization, and technology especially are having the same impact in other professional service industries,” Karen added. “Our focus in our work is really the legal industry, but a lot of what we see and do in law firms is happening now in other professional service firms too. For example we see it in accounting firms, in finance, in architecture firms; and Lean can be used the same way, as this idea of a foundation for innovation, in pretty much any knowledge-based industry.”
In addition to these trends, there is now a tremendous amount of competition, a lot of it by new entrance and non-traditional providers. This means firms are experiencing increased pressure to optimize all aspects of their operations, not just how they perform their service, but also their processes on the business and administrative side.
“The idea is changing so that they can deliver better quality work in less time and at less cost, which is obvious to those of you who are familiar with Lean and its principles,” David said.
Change and innovation is difficult, which is especially true for lawyers who are trained to be careful, prudent, and risk-averse. A change in mindset is necessary so that lawyers think about how to make something happen, instead of reasons why it might not work.
Despite the internal struggle of change, outside pressure is leading to innovations being made. Some of the hot innovations in the legal industry include (listed per popularity):
- Knowledge Management: designing and maintaining a database of documents, precedents, and other communications.
- Legal Project Management (LPM): Many firms are deciding they need project management as clients are demanding transparency, though it is still resisted by many individual lawyers who feel it is a burden.
- Pricing and Alternatives to the Billable Hour: Figuring out how to price their services accurately and designing pricing models that accommodate clients who want to know the price up front and want to pay for the value of the service they receive vs. the time it takes the professional to get it done.
- Process Improvement: Changing the way firms deliver legal services.
However, while many firms have used this list as is, Karen and David feel it’s upside down and firms should start with the process improvement, using it together with Lean to develop a culture of continuous improvement. Once embedded in a firm, continuous incremental improvement builds foundation for larger, more ambitious innovations and change initiatives, and they suggest that Lean can provide the essential basis for performance excellence.
“We use Lean and this idea of making incremental changes to help professionals see that they can find more time. The changes that we advocate are not huge,” Karen said. “When you can build a core group of people who are committed to change, and you start to develop and support this idea of incremental but continuous change, you can accomplish a great deal. Even in a traditional, change adverse industry, like a lot of the professions.”
Karen outlined how saving one minute, five times a day means 20 hours per year is saved. If five people do that, it amounts to two and a half weeks per year just from shaving one minute of time from a process.
“We’re all busy, but wouldn’t it be great if you and your team could do two and a half weeks of extra, value-adding, revenue-generating work without anyone actually having to put in more hours? That’s the goal. We stress to professionals that every day, in every matter, there are time-consuming things that they do that don’t add any value, and that actually keeps them from doing the work they like to do that does add value, and that they can feel confident in charging for,” David added.
When looking at what value is, Karen and David explained that value meets three criteria:
- The work moves the matter forward;
- It is what the client wants and is willing to pay for;
- The work is done right the first time.
Anything that doesn’t fit that criteria is waste.
Karen and David use the framework of Lean’s Eight Wastes to help professionals recognize waste, and have found that once people have learned to spot waste, they will never look at work the same way. They also use DMAIC (Define, Measure, Analyze, Improve, and Control), because they find these five steps help slow professionals down, as Lawyers for example, tend to jump to solutions and want to solve issues immediately without considering the client’s perspective.
Karen and David said the groundwork for continuous improvement depends on developing a core group of people who understand critical importance of adding value and identify, evaluate, and eliminate waste. Knowing a bit about the reason for improvement allows more people to participate meaningfully in projects, and is critical to spread the idea of continuous improvement and change throughout all levels of the organizations. Only then the move on to actual projects, in which they use the discussed ways to set the foundation for innovation.