Making innovation everyone's business with Allister Spencer

Innovation has as many definitions as the number of people you ask to define it. Regardless of what you think of as "innovative," the execution needs to permeate the business. Abhijat Saraswat speaks with Allister Spencer on how to make innovation everyone's business.

In this episode, we’ll go over:

1. Review the state of the union
   • earlier this year firms put their hand brakes on; some thrived, some fell apart. What drove this? 
   • What were the differences between segments (law firm sizes, law firms vs. in-house legal, etc.)?
2. General hygiene across the profession
   • How firms can improve their operational excellence so they can 
     • make clients stickier
     • get more clients
     • Increasing profits
   • How do we establish a baseline
     • discovery
     • benchmark
     • improvement
3. How Alt-V approaches the above
   • legal meth lab
   • Taylor Wessing workshop

Quotes have been extracted from the live conversation and have been edited for grammar and minor corrections. What follows is a commentary based on the discussion from the episode.

Handbrake

Earlier this year, the handbrake was pulled hard, and we saw a massive slow down across both legal and in-house counsel:

Interestingly though the in-house counsel have certainly managed to achieve a little more gains in that space during the 2020 pandemic. But we have noticed that the thawing out of law firms, particularly in APAC… ramping back up. We're also seeing markets across EMEA rapidly getting back to normal. And I think that, given the number of months that have passed, just keeping the lights on for the first few months was absolutely critical. 

Businesses now realize that the programs that they had put on hold have to come back online, and things need to restart - the work must march on.

Factors affecting the adaptability 

Smaller firms with multi-jurisdictional teams fared better because they were better geared up to working remotely, as, in effect, many were already had a remote workforce. 

Many of the mid-tied single office firms, or those with a dated view that ‘bums on seats equals productivity,’ struggled to adjust quickly.

Some of the bigger firms that are spread jurisdictionally also had issues. Several factors contributed to this, and one of those was the rapid lateral hiring approach. This resulted in the firms having disparate systems, and when you bring everything back together, those systems sometimes don’t talk to each other. 

How did the law firms compare to in-house legal?

Allister: I always equate a law firm with the profit center and in-house as the cost center. So, they're two very different, strategic alignments as to what makes money and what costs money. And in-house generally run on the smell of an oily rag. Whereas, law firms are very profitable. But, what we found is that given the opportunity they had, they [in-house] cracked on and because they had the structure and governance from the top they were less disrupted.

Ab: That's important and one of my thesis is that the in-house teams, because they are a cost center, naturally work to streamline their processes and systems first, rather than just throw people at the problem as often happens within a law firm. And therefore you do reap the rewards when the resources for everybody else become tighter. It then becomes a more equal playing field.

What are the next priorities? 

There’s a big push for ERP systems (document management, practice management, Exchange, and other basic systems that firms rely on so heavily) - some firms that have fallen behind are now rapidly coming back on board. However, it’s a cautionary tale:

They’re big-ticket items - they're very expensive processes and implementations. That more firms have to understand that this is a 10-year project, and if you do it incorrectly, it's a 10-year mistake that is very hard to wind back if it's done incorrectly.

The most common foible is taking an assumption-based implementation approach. Each firm has specific requirements, and without teasing those requirements out effectively, you're not going to get them the system they want.

The business of law

Ab: if you look at the law firm as a business, and you're focused on becoming operationally excellent - you're really only trying to achieve only two things:(1) How do you retain the clients you have today (how do you make them stickier); and, (2) how do you get new revenue (how do you attract more clients?) It is literally just those two things. Everything else just feeds into that.

Allister: Yeah, that's right. I'd probably add one more of that and that's the (3) leverage model (actually being more profitable)...So once you've nailed the process and the people within that process, you can leverage down and make it far more profitable? And we work closely with firms, but also with their clients to actually engage in our labs that.

It's slightly controversial and you'll find that the lawyers get quite squirmy when they think of their clients in a lab context with them, showing inefficiencies that they are producing… this is the point to both sides.

What you're trying to do is improve the service delivery of that piece of work to the client, but also hopefully make it more efficient. Hopefully make it more profitable for the firm, but cheaper for the client. So it's a proper win-win 

To achieve this, you need a mindset of future state thinking - those individuals that understand that what may have been working for the last 10, 20, 50, or 100 years may not work the same in the future because there is a changing tide coming and it’ll be disruptive. And the funny thing about disruption is it hits you in the face; as soon as you turn the corner, you don't get a warning. 

Operational excellence

This feeds into running a successful law firm - from a reporting perspective, you have operational excellence and strategic excellence. One can think of one as the dashboard and the other as the table - you have to marry those two up.

Firms, with all the best intentions, often miss the mark because they fall to the exclusion of the inclusion, i.e., they focus on improving things that happened, but not to convert those opportunities that may have slipped through the cracks. 

The rhetoric from our perspective is what's above the line and what's below the line. You've got operational costs below the line that you can't control, but you've got leverage model objects out there that are the leavers that you can pull, and you'v...