LTH Insights for Corporate Legal/LAW DEPARTMENT INNOVATION – NOT THE SAME AS LAW FIRM INNOVATION

Law Department Innovation – Not the Same as Law Firm Innovation

Published on 2024-04-17 byDennis Kennedy
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While teaching law students about legal innovation this semester, I was struck once again by how different law department innovation is from law firm innovation and why I find the potential of law department innovation so attractive. Yet, people often ask me how law department innovation differs from law firm innovation.

If I were to sum up the difference in one word, it would be “outcomes.” Of course, I’ll need to explain that.

Innovation efforts in both settings use (or should use) the same tools, methods, and processes. You can adopt the techniques I’ve written about my columns and book in either context. It’s the problem to be solved or the job to be done that changes.

In my classes, I’ll switch some of our group innovation exercises from law firms to law departments. It’s instructive because you can more easily see how the thinking, approaches, and even vocabulary changes. In law firm innovation, we talk about increasing revenue, increasing “stickiness” to make it harder for clients to leave, and helping the firm compete in the legal market. In the law department setting, we talk about aligning with business goals and strategies, eliminating workflow pain points for internal business customers, building collaborative cross-functional teams, and making the law department a key participant early in the process.

Just seeing the word choices made reveals a big difference in the types of innovation under consideration.

I’ve often seen outside counsel present “solutions” that neither understood their client’s fundamental business, its current and future strategies, nor the work that in-house counsel actual did and the problems they faced. The presentations too often end with a “you’ll need to call us to help you” pitch that is neither earned nor convincing. And, sometimes, that’s exactly the kind of “missing the point” that kicks off an innovation effort in the law department.

Innovation efforts in law departments often are driven directly by the business side at the C-Suite level. Today, whether the word “innovation” is explicitly used or substitutes like “transformation,” “efficiency,” “productivity,” or other common substitutes are mentioned, innovation filters its way through law department and in-house counsel objectives. Doing the same things in the same way is not considered the recipe for success.

 

What are some of the key differences between law department and law firm innovation strategies?

  1. Customer Focus vs. Service-Oriented Model. Law departments live within a larger organization in alignment with the business's evolving overall goals, prioritizing internal customer needs, risk management, practical advice and results, and operational efficiency. Law firms serve external clients, focusing on limited and discrete legal issues without the full business context, billable hours, and expanding client bases as their primary metrics of success.
  2. Internal Collaboration vs. External Collaboration: Innovation in law departments requires cross-departmental collaboration, integrating legal considerations into broader business strategies. Law firms prioritize external collaboration to deliver targeted legal solutions.
  3. Risk Management and Prevention vs. Risk Resolution: Law departments concentrate risk management and prevention to protect the company's interests. Law firms, however, are typically more reactive, such as resolving disputes and legal challenges only as they arise. In simpler terms, law firms see litigation as a solution and law departments see litigation as a problem to avoid.
  4. Regulatory Compliance vs. Legal Expertise: Law departments are deeply involved in ensuring that the entire organization complies with regulations, which requires ongoing innovation in compliance management. Law firms focus more on providing specialized legal expertise more profitably for the firm.

 

The core motivations behind innovation in law departments versus law firms lead to fundamentally different perspectives, problem definition, goals, and innovation strategies that inevitably lead to different outcomes. Law department innovation is a business-to-consumer effort with b2c solutions, while law firm innovation is a business-to-business-to-consumer effort with b2b2c solutions. All that makes a world of difference in what outcomes will be successful.

As a result, law departments must be adaptable to the rapidly changing legal landscape in practical and action-oriented ways while aligning and integrating legal strategy with overall business objectives and priorities. This mandate is why the use of technology for speeding up legal workflow and for regulatory compliance have become highly attractive areas for law department innovation.

 

Five Recommendations.

 1. Don't delegate your innovation efforts to external providers, such as law firms, unless they have demonstrable capabilities in running client-facing innovation. Unless the team is focused on the same outcomes as you are, and brings to bear a team skilled in achieving those outcomes, there is likely to be too great a mismatch in priorities, interests, and likely outcomes.

2. Determine what is really needed. Assess both the internal law department needs and the demands on your business owners. Surveys, interviews, or workshops can identify gaps and opportunities for innovation and create alignment and momentum. Just ask.

3. Establish cross-functional innovation teams: Create teams that include members from different departments within your business and department. At Mastercard, I sat near our user experience group for many years and talking with them had a profound impact on my approach to innovation.

4. Invest in technology and training: Allocate resources not just for purchasing new technology, but also for training staff to maximize its benefits. Don’t just fret about AI; invest in training people to use it well and experiment.

5. Align, align, align: Develop a clear, actionable roadmap for innovation that aligns with strategic business goals or client service objectives.

 

Law departments and law firms use very similar toolsets for innovation, but they use them in different ways for different outcomes. Understanding the differences and basing your strategies and efforts on that understanding will greatly increase your probability of success in ways that align with business goals.

 

SUGGESTED AI PROMPT TO TRY

“You are an experienced expert in law department innovation. Assume that I am in charge of innovation in a corporate law department and want some practical guidance and direction and the following two questions: "What are effective strategies for fostering cross-functional collaboration between the law department and other departments such as IT and finance? How can we ensure that our legal innovations are well aligned and integrated with the broader business strategies?" Based on your expertise and experience, generate a detailed list of 15 insightful and helpful answers to these questions for me.

About the AuthorView Profile
Dennis Kennedy

Dennis Kennedy

Director, Center for Law, Technology & Innovation Michigan State University College of Law

Dennis Kennedy is the Director of the Michigan State University Center for Law, Technology & Innovation, the author of the book, Successful Innovation Outcomes in Law, and the founder of the Law Department Innovation Library. He writes and speaks frequently on legal innovation and technology topics. He has co-hosted The Kennedy-Mighell Report podcast on legal technology with Tom Mighell since 2006. 

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