Why take the risk?

Why take the risk?

This is a the second in a series of nine posts about successful - and profitable - innovation in law firms.

As readers of this blog already have observed, Walker Clark, LLC, takes a strong risk-management approach to many aspects of law firm strategy and management. However, we also recognize that sometimes the best risk-management strategy is to take the risks of innovation.

The four Iron Laws of Innovation in Law Firms

In our practice we have observed four "iron laws" of  innovation in law firm. We refer to them as "iron laws" because, if respected, they can provide a strong foundation for success. If ignored, they can crush even the best-intentioned idea.

The "iron laws" apply to all types of innovations, whether in marketing strategy, the development of a new product or service, or innovations in the internal operations of the firm. They are the primary forces that will determine, in large part, whether an innovation in a law firm will be successful, a waste of time, or worse.

These are not hastily conjured post-Recession revelations. In fact, our firm was promoting these four principles as early as 2004, when we were advising our clients to think about innovative ways to prepare for the risk of major economic disruptions by the closing years of the 2000s.

Iron Law 1: Clients expect more from their law firms than ever before.

This is nothing new. Client expectations, both respect to the substantive quality of the legal services that they purchase and the quality of service delivery, have been growing since the mid-1990s. What is different now, in some legal markets, is that client expectations are changing faster than ever before. In the past five years, we have seen a marked increase in the sophistication of business leaders and high net-worth private clients concerning legal services. They expect their law firms to be equally sophisticated in understanding client needs and in meeting them the first time and every time. Some firms are meeting this challenge. Others are not.

Iron Law 2: Innovation often involves hidden risks that many law firms overlook.

Every innovation involves, to some extent, overcoming the fear of the unknown. There is a relatively simple method by which planners can identify and prioritize, with a remarkably high degree of accuracy, the risks that are likely to result from an innovation. One of the inherent dangers in a "rush to innovation" is that these risks - almost all of which are manageable - are overlooked or minimized.

A disciplined approach to evaluation of the risks does not crush creativity. Except in the case of a truly dreadful idea, a search for hidden risks and their probable consequences can dramatically increase the chances of success.

Iron Law 3:  Great ideas can deliver disappointing results.

As we will discuss in subsequent posts on this subject, most innovations fail to deliver the expected results. There are a number of sound reasons in each disappointing case. In our experience, about half the disappointing innovations were the product of poor planning; and the other half were due to bad execution of a good idea.

Even with good planning and good execution, some attempted innovations just simply fail. Even so, our experiences and observations - and those of our clients - soundly demonstrate that, even though some innovations might fail, a culture that favors innovation over the status quo will, in the long run, produce the better results.

Iron Law 4:  Innovations in client products and services can produce large returns on investment.

Copying a competitor is not an innovation.

The law firm that is "first to market" with a new service or, as is more often the case, a traditional service delivered in a new way, can achieve strong competitive advantages that, in some instances, the competition will never overcome, even if competitors copy the innovation exactly.  Moreover, as will be explored in an upcoming post, most successful innovations often involve very small investments.

How do they do it?

As we have helped law firms to execute innovations in their businesses, my colleagues and I have observed seven "secrets" that describe, to varying degrees, the most successful innovations:

  1. Act now!
  2. Test the concept in depth.
  3. Write a conservative plan.
  4. Pay attention to the numbers.
  5. Understand the dynamics.
  6. Easy in / easy out
  7. Avoid sunk-cost bias.

We will explore each of these in upcoming posts.

Read more on the Walker Clark Worldview Blog.