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Law firms are wasting resources on dead-end innovation

'Most firms don't know how much they spend on innovation,' warns Peter Hiscocks

17 November 2015

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By Manju Manglani, Editor (@ManjuManglani)

Innovation needs to be built into the culture of all law firms, Peter Hiscocks, a senior faculty in management practice at Cambridge Judge Business School, has said.

The keynote speaker at ILTA's annual Insight event in London last week, he said that not enough law firms prioritise innovation and build resources around it.

For innovation to be a part of the firm's culture, it needs to be continuously managed from the top.

"It's not like buying a new photocopier, where you do it once and that's it," he warned.

Managing the success of innovation investments

Even with the best of efforts to create a culture of continuous innovation, it can be easily damaged by requiring high success rates for all new investments.

"In many law firms, there is almost an inquisition for failed projects, which makes people less innovative than before," said Hiscocks.

"But, you can't be certain an investment will return value. It's better to invest in a large number of projects and to fail early."

There also needs to be centralised management of innovation projects to ensure resources are being spent wisely.

He noted that some magic-circle firms have innovation departments which do this, but the majority of firms "just hope it happens without doing anything about it".

"Innovation is out of control in many law firms. There needs to be centralised management of innovation by managing partners in law firms," he said.

"Most firms don't know how much they spend on innovation - it happens in a dispersed way across the business."

He pointed to one law firm which, upon investigation, found it had spent six times more than it had thought on innovation.

For Hiscocks, it's important to be ruthless about terminating or 'putting on ice' pet projects of powerful partners which have low chances of success, rather than spreading resources too thin across many projects.

"The best return on investment involves this: invest in the most important projects and stop the rest - you will get more output and more new products and services," he said.

He warned that each firm must ensure the projects it prioritises are aligned with its business strategy and resources.

"Understand your level of resources and match your projects to this level. Overloading your resources is the principal reason for project delay."

Once projects have been selected, the next step is to manage them effectively and to measure success.

"You need good project management and no bureaucratic logjams," he said.

Value of different types of innovation

Many law firms assume innovation is just about new product development, but it is also about developing new processes, services and business models.

Hiscocks noted that there are different types of innovation - breakthrough, platform, derivative and incremental; much of innovation is incremental.

Many businesses invest heavily in breakthrough innovation to be first-out-the-door with groundbreaking new products, without being aware of the costs.

"Eighty-five per cent of businesses that do breakthrough innovation don't make money from it - the follow-on one does," he said.

He suggested that large and long-established law firms are best placed to become a follow-on or derivative provider of a new product or service.

This is because they have the resources to quickly launch a competing offering once the breakthrough innovation has been tested in the market.

 

 

 

 

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