Will This Time Be Different? Post-COVID Change and Innovation

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"I'm worried that I have adjusted to this new reality…and I like it."
— Law firm leader discussing his firm's outlook for the next 18 months

The management generation of Baby Boomers were shaped by the Golden Age of law firms. They had little or no experience in the art of true competition and in particular low-cost competition. They were protected by three decades or more of competitive insulation which has been stripped away over the last dozen years, first in the Great Recession and its aftermath and now by this new economic crisis. Now that law firms are in a world of relentless, escalating, even brutal competition, will they change? And if so, how much? Automatic market growth of prior decades has given way to the tough grinding fight for a piece of a no longer growing pie.

The myriad challenges that American law firms face have been discussed in many forums, even before the current crisis. And many have expounded on needed change, although often without clearly articulating what that means (especially to the law firm business model).

Competition has changed in a variety of ways. Lower-end (commoditized) work can be done more effectively with alternative staffing and technology. And non-law-firm competitors have virtually instant access to capital, far greater technology capacity and many, if not all, barriers to their entry into the marketplace have disappeared. Competition in a commodity environment is not something many firms are prepared for.

The consumers of legal services have changed. It is not a revelation that clients are better informed, more demanding, and more insistent on quality and value in the services they purchase. Clients want to be treated as individuals not as a fungible mass with the same attitudes and preferences about legal service delivery.

Law firm leaders are well aware of all these dynamics, but firms have not been changing (or at least seriously considering or evaluating) their business model to better align with new market realities or to create differentiation from competition. Will COVID-19 provide a shock to the system that will finally move law firms out of their comfort zones?  

Following is a two-step process for how forward-looking leaders might finally begin to address the changing market in an innovative, progressive way.

1.  Engage in a Clean Sheet Analysis at the firm and/or practice group levels

What does this mean? It is an approach to decision-making that in some respects can emulate traditional strategic planning efforts. But the difference is that it’s an exercise that allows leaders to visualize the ideal organization — one that is aligned with current and future realities instead of burdened by past operational biases and potentially constraining cultures. It is accomplished by starting with a clean sheet of paper to envision a firm or practice group that would be truly competitive by fully aligning with the current realities in the marketplace.

This is an exercise best undertaken by people in the firm or practice group with longer-term professional horizons (not “short timers”). Forward-looking leaders will reject the inertia of the status quo, as well as current constraints that arise from established organizational structures, bad habits or old assumptions.
 
For example, you might examine your lawyer staffing structure:

  • Are If you were building the professional cohort from scratch what kinds of people would you want in order to provide excellence in client service and efficiency?
  • Would you use the current law firm business model of bringing in fresh new lawyers, training them and hoping that they will ultimately become highly productive partners?
  • Perhaps you would adopt another model in which you would only train a few promising newcomers while using efficient, professional alternative staffing for most routine work.

Or, having learned what we have learned about working from home in the last 60 days, you might ask how you could reconfigure office space if you began with that 'clean sheet.' Ask the same question regarding administrative support. There are many avenues your analysis might take.

The value and beauty of such an approach is you can dictate what the reimagined organization looks like — nimble, highly aligned with current realities and clearly differentiated from competitors. The clean sheet analysis may not lead to large structural change, but it forces leaders to think differently and, when that happens, you might just discover a better path forward.

If, in your Clean Sheet analysis, you find one or more ideas that you want to test, you will need an effective way to move from the theoretical to the actual.

2.  Create Innovation Incubators

Innovation is poorly understood by law firms and lawyers. Often, it’s thought of as something done only through technology, or that it must be a new invention that has never been tried before, or that it is incredibly expensive. None of those assumptions are true, and yet they often deter firms from attempting anything new.

To learn if compelling transformation is possible, you need to be willing to consider a new vision — not necessarily for the whole firm, but for a cohort that is willing to invest in a “new firm.” It also requires a commitment to velocity of change and must move from theoretical ideas to a proof of concept.

Few firms are willing to abandon who they are, and that’s okay. You can have a bifurcated approach by pursuing reasonable, externally-oriented strategies and tactics while also creating new business unit(s) for experimentation, or as we call them 'Entrepreneurial Spear Points' (ESPs).

How does this work? Find a few individuals in high-growth-potential practices who want to bet on the future and commit to implementation of superior (i.e., beyond current best practice) service delivery methods, staffing tactics and pricing consistent with becoming a clear market or segment leader. Free these people from billable hour requirements, give them a healthy budget to produce new business model(s), commit to supporting high velocity implementation of their ideas, and do not punish them if they fail.

This can benefit the firm in a number of ways:

  • A catalyst for increased velocity of innovation
  • A clear incubator for learning which can be disseminated to the rest of the firm
  • An opportunity for highly entrepreneurial professionals and retention of the same
  • A magnet to attract top talent looking for a different way to practice
  • A means to escape structural issues of bulky and cumbersome law firms
  • A way to emerge as a differentiated market leader

Few firms are pursuing such a strategy of experimentation and transformation, and I don’t know of any that are doing so to the degree and urgency that I would recommend. And, in a time of economic uncertainty, many would be even more unwilling to make such an investment. But I am confident that as we work through the current crisis and the subsequent shakeout and we see what the new landscape looks like, for those firms that take “the road less traveled,” it just might make all the difference.


 
Thomas S. Clay is a principal with Altman Weil, Inc. He heads complex consulting assignments in strategic planning, law firm management and organization and law firm mergers and acquisitions. 

If you want to talk about creating a Spear Point Initiative or Clean Sheet Analysis let me know and I am happy to chat. 

Contact Tom Clay at tsclay@altmanweil.com

 

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