Innovation in the Legal Sector

Innovation is a big deal.

It’s been a big deal ever since customers rewarded differentiation and punished companies that failed to maintain their creative edge.

I never fully understood the role of innovation until I spent time as a post-graduate research fellow at the Kellogg School of Management’s Center for Research in Technology and Innovation (CRTI). I spent time at the CTRI (three years) after completing my law degree at Northwestern Law School.

In law school I never heard much about innovation and was never exposed to the subject in courses, or in any of my assigned readings. In hindsight, I now realize this was, and still is, a major failing of traditional legal education. Much has changed, however, since I graduated. More and more law schools emphasize entrepreneurship and clinical practice. Some law programs have fully and bravely embraced innovation as a major component of their curricula.

The role of innovation in the legal sector has yet to be fully analyzed, so in this blog post I’ll try to classify the different types of innovation occurring in this industry. Before I do that, however, I have to address: what is innovation?

Although it might seem easy to identify and define innovation, it’s surprisingly difficult. According to economist Joseph Schumpeter, widely regarded as the most important writer on the topic, innovation is a process initiated from “new combinations” initiated by entrepreneurs who unleash the gales of creative destruction within the economy. As a matter of degree, some innovations are incremental and others radical, as the important work by Harvard Prof. Clayton Christensen demonstrates. Studies show that the vast majority of innovation that captures value in the marketplace is incremental, although radical innovations get the majority of headlines, particularly when they displace existing businesses and become disruptive. As pointed out by Schumpeter and others, innovation is not the same as invention, since the vast majority of inventions (e.g. patents) are not commercialized and are thus worthless. Innovation has to possess some commercial validation and success.

These are core definitional aspects, but what captured my interest were the organizational factors behind innovation success and failure. Through my readings and conversations with CRTI faculty members and fellows I came across important organizational perspectives. For example, during most of the industrial era firms employed an internally-focused view of innovation. This closed R&D perspective often yielded a hermeneutic culture that led those within the firm to view outside innovations with skepticism, or outright disdain. This approach (which still exists among some firms) yields the infamous “not-invented-here syndrome” which is a bias against external innovations. This closed perspective proved dangerous and untenable as we shifted into the Knowledge Economy. In this context, licensing innovations externally from startups, universities and independent inventors proved to be a successful innovation model. The research of Prof. Henry Chesbrough yielded important insights into the practice of open innovation, which relies on knowledge transfers.

For me, one of the greatest insights on innovation came from CRTI faculty member Prof. Mohan Sahwney, a globally recognized innovation thought leader. In his 2006 MIT Sloan Management Review article “The 12 Different Ways for Companies to Innovate” he and his co-authors laid out a framework called the “Innovation Radar” that helps companies look at innovation from multiple perspectives along four major dimensions:

Offerings (What)

Customers (Who)

Process (How)

Presence (Where)

As the article points out, product-centered companies often myopically emphasize offering-related innovations and neglect the other three major categories. Successful innovators such as Home Depot innovated along the lines of Customers as it targeted a new DIY home repair customer segment. Dell was able to capture value by innovating along the Process dimension by creating new manufacturing methods and a direct-to-consumer sales model. Redbox innovated along the Presence dimension since it introduced the concept of DVD rentals at an entirely new location (supermarkets). The holistic “business innovation” perspective offered by the Innovation Radar offers a comprehensive tool to diagnose where innovation occurs and how it leads to value capture and differentiation. The article magnificently discusses these four major aspects of innovation and introduces eight other dimensions that build from the four major categories and which altogether comprise the “Innovation Radar”:

Innovation Radar

Source: Sawhney, Wolcott & Arroniz (2006)

Richard Susskind, Ray Worthy Campbell and Michael Katz and others have all written about, and in some cases helped pioneer, legal services innovation. The legal services industry is facing rapid transformation and innovation. In fact, legal hackathons are becoming increasingly popular and offer a platform for engineers and lawyers to brainstorm and develop new ways to simplify the legal system.

Here is a brief attempt to identify some (not nearly all) of the innovations in the industry introduced since I graduated from law school nearly ten years ago, and that apply to the four major Innovation Radar categories:

Offerings (What):

  • One of the key elements of legal practice is the ability to conduct comprehensive legal research. Casetext and FastCase are two recent innovators that use a crowdsourcing method for legal research
  • The art and science of effective legal practice often hinges on giving accurate predictions about the merits of a case. Lex Machina and IBM’s Watson supercomputer offer big data predictive analytics services to lawyers.
  • Previously, only attorneys could dispense legal advice under state bar rules. The state of Washington has pioneered a new category of Limited License Legal Technician, a non-lawyer who can provide legal advice in limited areas of practice.

Customers (Who):

  • Lower income individuals and small businesses were traditionally priced out of legal services, but the innovative delivery methods offered by companies like LegalShield offer a prepaid plan to market low-cost services to these customers.
  • LegalZoom also services lower income individuals and small businesses and offers monthly rate plans and standardized forms online.

Process (How):

  • RocketLawyer is a pioneer in crowdsourcing legal advice among various attorneys through its website.
  • The Avvo website is a question and answer (Q&A) website that also crowd sources legal advice from attorneys.
  • Many innovative companies have perfected techniques for managing the e-discovery process during litigation and have developed new technologies to manage this complex legal process.

Presence (Where):

  • Wal-Mart has started to offer fast and affordable legal services at some of its locations.
  • Several of the companies identified here, such as FastCase offer apps that are available for use on mobile devices

The period of rapid innovation and transformation in the legal services industry is here. It’s both interesting and exciting to watch it unfold, and to see innovations occur among all the dimensions of the legal services business system.

2 thoughts on “Innovation in the Legal Sector

  1. Pingback: Social Media Week Part VI – Social Media and CCO 3.0 | FCPA Compliance and Ethics Blog

  2. Pingback: Social Media Week Part VI – Social Media and CCO 3.0

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s