Insight

Law Firm or Startup: Which Addresses Innovation Best?

In a hypercompetitive environment, each has its advantages and challenges. Here’s a look at how they stack up.

Innovation for Law Firms Challenges
Ronald W. Chapman, Jr.

Ronald W. Chapman, Jr. and Tim Fox

November 4, 2021 06:55 AM

Innovation is critical for law firms to serve their clients successfully in today’s hypercompetitive environment. It’s therefore helpful to think of the challenges confronting a law firm as you might those faced by a tech startup. Let’s compare a half-dozen of the common challenges of innovation in each discipline and then (utterly unscientifically, we admit) score them to see which is more conducive to high-quality innovation.

Where Do Your Ideas Come From?

The first step toward innovation of any kind is idea generation. At a startup, the ideas initially come from the founders, and once the product is in development they come from clients and employees. Typically these ideas are big and bold—no one starts a company solely to build a better toaster but rather to revolutionize how toast is made. The ability to execute big ideas, though, is generally limited by the feasibility of the innovation, the resources available and the ability to sell the resulting product.

At a law firm, by contrast, ideas usually come from the attorneys based on what they see in their daily practice. They therefore tend to be more grounded, intended to make life easier or address a client’s particular challenge, not to revolutionize the practice of law. This has the benefit of making execution far more feasible. In addition, law-firm innovation doesn’t always have to focus on being able to sell a product; sometimes improving an internal process is just as valuable, making client service easier and faster. Based on these elements, we call it a tie between a startup and a law firm regarding idea generation and execution.

Who Are Your Early Adopters?

Finding them is the key to successful product development. These are the people who will stand beside you when your product is lacking 99 percent of the features it needs to actually work—because they see its potential and believe in the vision you’re selling. They’re the ones who offer meaningful feedback to help improve the product and proselytize about you to everyone else in the industry.

The good news is you need only a few of them. The bad news is they’re very hard to track down. At a startup, finding them is challenging because you not only have to locate potential customers, but they also must be willing to be your test cases while you build the product. Additionally, while you might be able to sell individuals on your vision, it’s often harder for them to sell the notion of taking a chance on you to their firm or operations department.

At a law firm, you typically already know who your early adopters are—they’re the ones pushing to do things differently and try new strategies. They’re most often lawyers themselves, of course, and you never know when their lives will be occupied for a few months with an upcoming trial, a slew of depositions or other client commitments. So they’re easier to find, but they might not have the availability you need. That said, we’d take a captive pool of early adopters over having to find our own in the wild any day, so the point goes to the law firm.

Development Resources

To innovate, you must be able to build. This process extends from initial mockups to proof of concept, launch and subsequent improvements. To build, you need resources—usually software developers, product managers and project supervisors. Law firms have a large number of these resources already. However, they’re usually focused on maintaining (and coordinating upgrades for) the current suite of software tools used throughout the firm. They generally don’t set aside time for innovation work and must slot it in, wherever possible, among their regular workload.

Startups, by contrast, have teams of people who are used to jumping from project to project and quickly coming up with ideas. Additionally, it’s easier for startups to hire developers, because they can motivate them with the vision of what they’re building (and with stock options). Law firms have to overcome their ingrained reputation to persuade tech talent to come onboard. The point goes to startups.

Who’s Going to Pay for It?

This one’s easy. Law firms have deeper pockets and don’t need to report innovation financials to outside investors or directors at quarterly meetings. They might have ROI targets for a given innovation project, but they won’t go bankrupt if they fail to meet those goals. The point goes to the law firm for stability.

Access to Data and Subject Matter Experts

Law firms have huge data repositories: millions of documents, time records, matter profiles and the experience of potentially thousands of attorneys both current and former. Harvesting that data and harnessing all that collective wisdom can be challenging, but the information is there.

Startups must beg and borrow to get access to this kind of data, and they’re often limited by contract as to what they can do with it. They can’t necessarily try out their latest algorithm or solution on a client’s data without permission.

As for subject matter experts (SMEs), it’s a much closer question. Law firms likely have more of them, but because you might need only a few SMEs for what you want to build, numbers alone don’t confer a clear advantage. That said, the point goes to the law firm for having data so readily available.

Desire to Innovate

The whole point of a startup is to innovate. By contrast, while law firms profess to be innovative, most really aren’t. Whether through a desire to serve their clients, stay abreast of the competition or seek new profits, they must frequently overcome institutional inertia. Point to the startups.

Based on all the above, surprisingly (or perhaps unsurprisingly to anyone who has worked at both), the law firm tops the startup, 3-2-1, when it comes to addressing the most pressing innovation challenges. If they also have the right commitment from their personnel, law firms present a favorable environment for innovation for law firms to serve their clients successfully in today’s hypercompetitive environment. It’s therefore helpful to think of the challenges confronting a law firm as you might those faced by a tech startup. Let’s compare a half-dozen of the common challenges of innovation in each discipline and then (utterly unscientifically, we admit) score them to see which is more conducive to high-quality innovation.

Ron Chapman, Jr. is a Shareholder at Ogletree Deakins and Chair of the firm’s Innovation Council. The Innovation Council was established to prioritize ideas from clients and within Ogletree Deakins that advance the business of law, create efficiencies, streamline processes, and redefine service delivery models.

Tim Fox is the Director of Practice Intelligence and Analytics at Ogletree Deakins where he leads the team responsible for analytics, data visualization, AI, and related services and solutions. He joined Ogletree Deakins from LegalMation where he was Chief Product and Information Officer.

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