Posted by George Bull, head of professional practices at Legal Futures Associate Baker Tilly
With management teams and advisers alike urging firms to innovate to succeed, even to innovate to survive, law firm management teams are recognising that innovation, like breathing, is not optional if a firm wishes to prosper in a highly competitive legal services marketplace.
This demonstrates how far the legal service sector has come. What some have seen as the perfect storm of regulatory reform, financial uncertainty and client demands is being embraced by other legal service providers as the perfect laboratory for innovation and change.
Innovation within the legal sector encompasses structure, funding, service delivery, management and people. Each of these must be addressed separately but integrated into the overall development of the firm. Great innovations in one area may be undermined if they are not supported by equivalent developments elsewhere in the firm.
In the provision of legal services to businesses, pricing pressures and the increasing sophistication of clients are the key drivers of innovation.
In the business-to-business arena, the in-house legal teams of large corporations are also proving themselves adept at not only managing the use of external legal advisers but also in providing a wide suite of legally related services across the organisation.
In the retail legal services market, the most successful providers will undoubtedly be those who establish a whole-of-life relationship with their customers. For most retail users of legal services, the whole-of-life spectrum might encompass property purchase, divorce, an accident perhaps, a dispute with a neighbour, a will and subsequently probate work.
These are distressed purchases. The most successful legal service providers in this area will be those who can also supply non-distressed ancillary services and products, becoming the go-to organisation of choice for as many of their customers’ service needs as possible.
Although work within the reserved areas remains fundamental, non-reserved services, innovative service delivery and collaborative working arrangements are crucial when developing the successful legal business of the future.
The increasing complexity of law firm structures will challenge the regulatory framework while law firms and ABSs will adopt marketing strategies much more reminiscent of retail operations.
While the ‘how’ of innovation may differ between law firms and in-house teams, the ‘why’ is very similar. This includes improving value through addressing the buying needs of clients and what they expect; by adding value by providing services which clients are not paying for and which they do not expect.
The development of alternative fee arrangements seems unstoppable. This requires innovation in the processes used by firms to perform and deliver their services to clients. However, most firms will do their best to avoid competing solely on the basis of price.
Innovation in the development of other distinguishing features, such as the style of delivery, value-added elements of the service and the cultural values of the firm, will all be important in this.
Innovation also enhances clients’ loyalty, helps establish a firm’s unique identity and may produce a ‘wow’ factor both within the firm and among clients and suppliers.
If innovation is seen as a non-optional continuing process, then it should be no surprise that it will be clients who decide how they receive their legal advice, not their lawyers.
The potential for innovation offers those in the legal sector transformative opportunities for success. Firms should be looking at their approach to innovation across their entire practices, and developing business models which integrate their chosen innovations for the benefit of the firm, its people and its clients.