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There are two kinds of innovation: The incremental kind, as simple as faster Internet speeds , and disruptive innovation — think digital cameras or products that kill an entrenched industry. When it comes to the latter, the deck appears stacked against law firms.
In his book, “The Innovator’s Dilemma,” Clayton Christensen lays out three fundamental principles of disruptive innovation: They leverage technology; change the method of delivering services; and offer competent services at a lower cost.
A classic modern example is Airbnb Inc., which allows homeowners to compete with hotels. How’s that working out? Financial Times estimates the company’s value at more than $10 billion. Why couldn’t a similar model work for traditional law firms?
First, leveraging technology has always been a challenge for law firms. Too many lawyers still can’t seem to wrap their heads around the time-saving features of Outlook and Word, let alone high-powered customer relationship management software. To truly leverage technology, firms need to focus on the unique priorities of specific practice areas, perhaps emphasizing promising new areas at the expense of existing earners — obviously, a hard sell. The toughest part isn’t choosing where to invest money, but where to cut off investment. When each practice area has a seat at the table, focusing investment and technology on a single area is a tough sell.
Second, law firms are creatures of habit. Changing the method of the delivery of services makes lawyers uncomfortable. When doctors were routinely throwing leeches at medical problems, lawyers were writing briefs. Doctors now use magnetic resonating imaging and operate with the help of tiny robots, and lawyers are still writing briefs. Law firms are stuck in a box and will contend to the death with anybody who suggests they change.
Third, law firms make too much money billing by the hour. Disruptive innovation requires firms to look at the equation in a different way. Legal Zoom.com Inc.’s founders wondered, instead of collecting $2,500 to help one client incorporate or draft a will, what if we charged $99 or even $79? One million wills later, the math works. Disrupters understand that lower prices and high volumes can also make people very rich.
An innovating lawyer may not be an oxymoron, but an innovating law firm might be. Innovation runs far too firmly against the grain and challenges law firms in ways their stakeholders may never grow comfortable with.
Firms need to overcome this, however. Companies like Legal Zoom were scoffed at to begin with; now they are eating the lunch of thousands of small firms. The bigger firms may be next.