Legal service delivery innovation – a case study in mitigating six law firm biases

Legal project management (LPM) is ready to evolve. At present its scholarship focuses on billable “matter management” – planning, executing, and reviewing the time, cost, scope, and quality of the legal work product in question 1 – but stops short of advising how that serviced work is best delivered, in order to fully satisfy the client.

In the last decade, LPM’s structured approach to “matter management” has demonstrably increased efficiency and reduced the cost of lawyers and staff to produce excellent legal work. Now, in requests for proposals (RFPs) and outside counsel guidelines, clients often require legal project management capabilities. Yet as traditional LPM’s adoption increases, it loses its force to attract clients away from competitor firms. Because they are largely fungible, law firms can lay claim to very few competitive differentiators: namely, legal work and service delivery.2 Traditional “matter management” LPM provides tools to ensure the legal work stays excellent, but it lacks tools to ensure the service delivery addresses client needs in a way that at least satisfies, and, ideally, delights.3 Without a way to innovate current service delivery, law firms are less able to meet what ought to be the second twin aim of any professional services firm: delighting the client (see Figure 1 overleaf).

Service delivery is critical to delighting today’s clients

Legal service delivery is the means and method by which legal work product is transmitted to the client. Traditionally, legal work is delivered as outcomes (e.g., settlement, trial wins, successful mergers), work product (e.g., pleadings, motions, contracts), and advice (e.g., face-to-face counsel, internal memos, guidance by telephone). Law firms spend enormous effort on making legal work excellent. They set the acceptance criteria as to whether the counsel given is correct and prudent;4 most often this acceptance criteria is exclusively controlled by the fee earner, with little in the way of client input. Unfortunately, even the value of excellent legal work can be diminished when the client is given no explicit way to better capitalize on or contextualize that work.

Figure 1: Service delivery innovation attached to traditional “matter management” LPM framework

As clients focus on the value they receive from law firms in terms of both work and delivery, they also grow the need to understand the legal work they are buying in the context of their specific business needs. Responsive law firms generate service delivery innovations to keep pace with the client’s new legal requests and its changing business needs. Those innovations come in three varieties: changes to people (e.g., partnering with a lower cost alternative legal services provider to execute less skill-intensive or commodified work); changes to processes (e.g., designing a contract management lifecycle with custom escalation paths from business owners to in-house legal subject matter experts to multiple outside counsel); or changes to tools (e.g., building a secure litigation matter tracking dashboard built on a collaboration platform).5 Innovations in how legal work is delivered help ensure that excellent, inscrutable work product retains its value even when it passes from the insulated corridors of the law firm to the raw reality of the business world.

Service delivery innovation can be a force multiplier for value by increasing the amount and quality of the client’s:

• Business intelligence. The information about how the client uses the legal services is sometimes as valuable as the actual service. A law firm, by capturing metadata from a client’s large body of procurement contracts, can create an interactive visual analysis so the client can see the range of concessions and outcomes in the most negotiated provisions of a given class of contract and make better policy about when it should contest or accept terms;
• Legal operations. In instances where in-house law departments are burdened with areas of high volume, low value work – such as spurious third-party subpoenas – a law firm can design a process, partner an expert team, and build a tool, all to rapidly triage subpoenas that ought to receive immediate attention and support from those that can stand to be worked in the order received; and
• New-market strategies. Law firms can help a client extend its reach to previously unknown markets and customers. In introducing a legal service provider (LSP) previously unknown to the client, a law firm can serve a matchmaking role and extend the client’s strategic reach to new markets with new services contracted by the LSP under the client’s own banner.

These innovations require significant investment of capital, time, and people by the law firm. Using a discrete department for designing, prioritizing, and launching such innovations, the law firm can depend- ably deploy new service delivery models targeted to provide excellent work product (for the client’s legal needs) by way of excellent service delivery (for its business needs). However, while the value to the client is immediately apparent, law firms tend to underinvest in service delivery innovation. Largely owing to a series of six cultural biases, the typical law firm culture is anathema to service delivery innovation efforts.

Six biases make law ?rms especially hard soil in which to grow innovation

While, yes, “change is hard, period,”6 the difficulties of changing the culture in a law firm are especially pronounced. Specifically, biases shared by most law firms make rebuffing innovation – especially large- scale change – a virtual certainty. Law firms share biases in relation to training, form, incentive, mindset, investment, and risk that are all inhospitable to innovation.

1.     Training

Law, like medicine, is a business of hyper-specialization. Most lawyers in large law firms have specialized by their second year of practice and stick with that specialty sometimes for their entire career. Because law demands mastery of precedent and minutiae in few subject areas, lawyers who spend that considerable energy researching specialized information do not equally indulge in the diffuse, decentralized, cross-discipline thinking necessary to apply an advancement in one area to an advancement in a completely different area (a process central to innovation). Broad autonomy accorded to each practice group compounds the siloing of talent and increases the need for de-specialization even further if a law firm wants to standardize innovative thinking.

2.    Form

Unlike C-corporations or LLCs, the structure of general and limited liability partnerships precludes unilateral decision making. At Davis Wright Tremaine, when we meet with management consultants to discuss innovation initiatives, most have rarely worked with a law firm. Inevitably, at some point they hear about so many stakeholders of the project and ask: “Just who exactly is the business owner making the buying decision?” In answering, law firms must detail a complex diagram of different business owners located in multiple practice areas, with no single decision maker immediately apparent.7

The practical result is that the bigger and more expensive the initiative, the more likely the effort will be managed by (and likely die in) committee. These committees are ad-hoc and not necessarily trained in management or finance, and often the lease/buy/build decisions are made on gut and instinct alone.

3.    Incentive

The billable hour is popularly decried as inefficient,8 obsolete,9 and already dead.10 Yet, it remains a reality of law firm life and the primary way in which legal services are valued.11 Even if clients continue to demand more AFAs, law firms have built fee-earner performance review, partner candidate tracking, and attorney and partner compensation all around billable hour requirements. At most law firms, any lawyer not maximally utilized is taking dollars out of the pockets of partners. When pro bono hour requirements and administrative tasks are added to the billable requirements, the hours needed to properly innovate – design, test, iterate, redesign, test, iterate – become nearly impossible to find.

4.    Mindset

Lawyers are a unique breed not just by training: those who join and thrive at a law firm share several defining characteristics. On balance, they are change averse and tend to be more autonomous, more skeptical, more urgent, less sociable, and less resilient than a member of the general population.12 In contrast, creating a culture of innovation requires process standardization, cross-functional collaboration, taking calculated risks, and curiosity to push established boundaries.13

5.    Investment

Law firms tend to prefer conservative, proven, and uncontroversial investments because they run on capital contributions from their many equity partners. Whereas in a corporation a senior VP may have compensation incentives that create a personal interest in reducing expenses that decrease the total profits of the company, every equity partner in a law firm may want to be consulted (at the very least) in expense decisions, since the operating capital is in a very real sense their own money. Given the high number of equity partners, and the depth of their interest, large-scale capital investments must be thoroughly vetted and highly popular to pass muster. Innovation investments, often with unknowable outcomes, are rarely conservative investment plays.

6.    Risk

Law firms, which give consumers little in the way of comparators and which disproportionately win work on the strength of reputation, avoid risk. Indeed, managing client risk and reducing client stress are arguably the most important services law firms provide. Although much has been made of applying lean startup business practice to law firms, the two businesses differ in at least one compelling way. A startup can tolerate substantial failed attempts at service, provided it gets at least one right. A company that launches 10 failed products but then launches an indispensable 11th can be a unicorn with a billion-dollar valuation. Conversely, a law firm that loses 10 sizable matters while winning a notable 11th should only hope to be wound down and shuttered. Even properly managed innovation projects have a high probability of failure,14 and the chance of highly publicized failures are nonstarters when it comes to persuading a firm to launch such a project.

Case study: legal services delivery innovation at Davis Wright Tremaine (DWT De Novo)

In early 2013, the leadership at Davis Wright Tremaine – a mid-sized AMLAW 100 firm with around 500 lawyers – championed an innovation initiative to improve legal services delivery and pricing, and to inculcate a culture of innovation. The firm named a chief innovation partner (CIP) responsible for soliciting new ideas for better process improvement and service delivery from lawyers and staff. As the list of ideas grew, so did the resources needed to vet, plan, and produce working prototypes of those ideas. In late 2013, the firm designated a seven-member innovation team made up of the CIP, a project manager, an IT liaison, and analysts in business development, marketing, quality control, finance, and operations.

As members of a “volunteer army,” these team members played roles on the innovation team in addition to their primary day jobs. Early projects with interminable timelines made it plain that, to get the necessary traction to execute and implement the collected ideas, the firm needed to dedicate full-time headcount to the team. The team was trimmed down to the CIP, project managers, and a business development analyst. It was named “DWT De Novo,” but retained a much larger volunteer army (those closely affiliated and doing DWT De Novo work).

In both 2015 and 2016, new service delivery solutions that DWT De Novo built helped the law firm win the International Legal Technologists Association (ILTA) Innovative Firm of the Year Award. In 2016, similar solutions helped DWT win the Financial Times’ Innovative Lawyers Awards North America’s US Standout for “Redesigning the service & delivery model.” In 2017, DWT won Top Firm in that same category and was included in the FT’s list of 25 most innovative law firms overall.15 In 2018, just prior to this book going to press, it was nominated as a finalist for a Legal Services Innovation Award from The American Lawyer.

These accomplishments were happy by-products of the firm’s commitment to innovation in its 2012 strategic plan. To accomplish any degree of success, the firm had to overcome each of the six biases of law firms, mentioned above.

1.     Training

Attorneys at law firms specialize, and each of these specialists is a potential source of better service delivery for their client. Because the DWT De Novo team is just one small department (outnumbered by a pool of energetic partner sponsors), it employs generalists. To assist a partner in exploring and designing a new idea, and to do so in a way that safeguards prudence and pragmatism, requires skill sets not yet commonly found in most law firms. To span these gaps, DWT De Novo commissioned the role of Legal Solution Architect (LSA).16

An LSA has expertise in three specific domains. First, an LSA understands and employs business analysis tools to better understand: the features of a particular idea, how the idea is different than others proposed, how its features match current law firm resources, and its potential upside. These tools include requirement gathering techniques, feature prioritization, stakeholder management, and go-to-market strategies. Second, to compensate for the partner sponsor’s busy schedule, the LSA has project accountability for an idea’s design, implementation, and maintenance. LSAs have training in a variety of project management and change management methods such as waterfall, agile, lean, and six sigma. Finally, LSAs build expertise in the innovation thought leadership of the firm by cataloguing and reporting on wins, failures, and lessons learned on projects in a bid for continuous improvement of the DWT De Novo department.

This expertise and training allows LSAs to manage the development of a partner sponsor’s idea – a legal business solution – in relation to: the desire and cost to the client and/or firm; the internal architecture and capability of existing people, process, and tools; and the external offering of business partners or third-party providers.

2.    Form

Because law firms lack a strong ability to make quick, unilateral decisions, the DWT De Novo group launches many small initiatives at one time, each with its own partner sponsor and project manager. Whereas a corporation with a hierarchical structure might become confused and overwhelmed by so many projects being undertaken without central control or notice, a law firm is already used to supporting a host of simultaneous decentralized programs, provided that some standard process keeps every project as profitable as possible.

In DWT De Novo, the innovation team is trained to listen to an initial partner sponsor’s idea and then ask questions17 to increase the positive impact on the firm (in terms of revenue or reputation) and decrease the effort necessary to bring the idea to life. The DWT De Novo team uses a paper template called a Solution Idea Canvas to map a partner’s idea.

The Canvas prompts a structured conversation in four parts. First, a back and forth with the partner about the history of the idea and its uniqueness to the market. Second, the LSA reviews the business use case and asks a battery of questions to quantify the effort to make the idea real versus the impact a successful project will have on the firm. Third, the LSA reviews current available and applicable people, process, and tool resources with the partner sponsor. Finally, the LSA guides the partner sponsor through an exercise designed to get value faster, get bigger impact, and broaden the application of the project.

Each idea is catalogued, tracked, and prioritized, with top priority going to the most energetic partner sponsor (energy usually created by having the largest potential revenue upside). One of the DWT De Novo’s earliest lessons learned was that the power to prioritize innovation projects for the firm should not rest with the innovation team (DWT De Novo), because proper prioritization requires analyzing all the collected ideas against all the potential practice area growth, the costs and benefits of each idea, and then current technical, infrastructural, and personnel capabilities and resources of the firm as a whole. That kind of holistic analysis is better suited for a cross-functional committee comprising executive-level fee earners and staff. In absence of such a committee, however, individual partners – aided by members of the innovation team – prove more than capable of lobbying for firm resources for their individual projects, and this natural competition for limited resources produces a healthy model for which projects should be augmented, implemented, or abandoned.

3.    Incentive

Although some law firms have found success creating innovation teams of hybrid fee-earners, DWT De Novo intentionally builds its core team of legal solution architects (LSAs) with non-practicing lawyers and business consultants. Believing its practitioners have the ideas, if not the time nor technical skills, to innovate service delivery, it developed a core innovation team solely dedicated to cultivating and executing the best ideas of DWT practitioners. This team is wholly staff-side and has no billable hour requirements, allowing it to move quickly when necessary, and eliminating any bias that might occur if the core team members were earning fees for individual practice groups.

4.    Mindset

Given attorneys’ predilection to be more autonomous, skeptical, and urgent, and less sociable and resilient than average, a law firm’s innovation group should build its staff to compensate for these characteristics, while sharing enough of them to encourage fluid interaction. In practice for DWT De Novo, this means building a role that can be credible enough to start a trusting relationship, while deferential enough to keep the partner sponsor squarely in the role of “solution champion”. The majority of DWT De Novo LSAs are non-practicing attorneys, and those who aren’t have deeper experience in business analysis. While there doesn’t appear to be any concrete skill learned in law school or practice that makes an LSA more apt and able to help bring a partner sponsor’s idea into reality, for whatever reason the process encounters less friction when the LSA has or is actively earning a professional school credential.

Beyond credibility and deference, the innovation group also needs to de-silo information (about the project, the practice, the client, or the attorneys) so that it can make use of the firm’s “volunteer army”. This de-siloing is primarily accomplished by two types of periodic meetings. One type is a 15-minute “scrum-styled” project stand-up meeting18 led by the LSA, which moves beyond project status to also solicit what competing priorities members of the team are working on. This meeting serves several important functions. It keeps the team informed of all challenges to the project; it provides a glimpse into the possibly unrelated tasks and challenges of all team members and presents opportunities for assistance and otherwise missed connections; and it generally familiarizes team members with each other. While a project may only last a couple of months, those months spent on a shared goal mean that members will be much more likely to reach out to each other in the future.

The second meeting type is one-on-one between LSAs and partners, executives, directors, managers, and any other employee who might have a perspective the LSA cannot currently see. These meetings are less regimented and center around capabilities and constraints.

At DWT, while the dedicated headcount for DWT De Novo has stayed small, its volunteer army ranks have dramatically ballooned. So many key members of successful service delivery innovation solutions sit in legal practice groups, finance, technology, administration, and marketing. This means that it is difficult to say where DWT De Novo begins and ends. We see this as an encouraging sign that idea by idea, the firm as a whole is beginning to encode innovation into its DNA.

5.    Investment

Because the equity partners supply the capital for innovation projects, any law firm innovation group must be committed to being a good steward of the partners’ money in as structured and transparent a way as possible. DWT De Novo accomplishes this in two ways. First, as discussed above, any innovation project is matched with a partner sponsor, who can make the case for capital expenditure to the firm’s management committee. The prerequisite of a partner sponsor is critical to preventing DWT De Novo from making investment decisions – either in perception or in reality – on behalf of the firm. Second, every innovation project must pass through a series of decision gates wherein the LSA helps the partner sponsor explicitly explore alternatives to make the impact larger (e.g. by widening the market, increasing adoption, or broadening the use case) and to make the cost and effort smaller (e.g. by using existing tools, combining similar projects, or reducing the scope of work). For the life of the project, the LSA helps the partner sponsor finetune the best balance of impact and effort. Prescheduled milestone, effort, and impact reporting keeps the project from running off course or languishing without any progress.

When all projects are managed through this framework, equity partners’ fears of waste are assuaged. Even if a project ultimately fails, the partners can trust that the project was executed as efficiently as possible and closed as soon as possible.

6.    Risk

To protect strength of reputation accumulated over decades, law firms need to avoid public failures. However, as we have discussed, some tolerance to failure is necessary to properly encourage innovation. With the staff-side DWT De Novo, DWT is able to reconcile these opposing interests by creating day jobs for a team that prioritizes balancing effort and impact, making a “volunteer army” available for more subject-matter specific needs, and prioritizing the ideas of the most energetic partners (who usually receive that energy from critical client needs). The result is a pragmatic system that naturally diversifies its “innovation wagers” and prevents one or two initiatives from being overfunded or overengineered. Multiple projects competing for resources create a natural selection effect that dictates project failures are wound down early and quietly. Successful projects receive more resources commensurate with a new round of goals set by the partner sponsor, while the primary project management by an LSA means that no partners bear the stigma of any failed projects.

Figure 2: Mitigating law firm biases to innovate service delivery

Differentiating legal service delivery requires mitigating the six biases inherent in law firm culture

As detailed above, traditional forms of LPM are becoming table stakes in the legal industry. Excellent legal work and effective matter management, while critical to meeting clients’ expectations, will largely fail to delight clients who increasingly demand the delivery of legal services customized for their own legal and business needs. As entities, law firms express inherent biases that inhibit successful service delivery innovation. Figure 2, above, provides a systematic accounting of how Davis Wright Tremaine’s innovation group successfully mitigated those biases to pave the way for delivering client-focused service delivery.

This excerpt was written by Samuel Davenport and Brian Fanning, director of legal business solutions and director of practice economics at Davis Wright Tremaine, and features in Ark Groups publication Innovations in Legal Project Management