Companies all over the world and in all sorts of industries or sectors constantly have to adapt to changes in the market. Keeping up with developments and expanding into new lines of business or new markets can be challenging. More often than not a business has to enter into uncharted territories, where there is little guidance or historical data to fall back on. This is not only about 5G edge computing, Artificial Intelligence or self-driving cars. Also, more traditional industries are faced with massive changes. The construction industry is moving towards circularity and aircraft engines are no longer being ‘sold’ but exploited as a service (they don’t sell the engine, they offer propulsion). All this raised legal questions on ownership, finance, liabilities, the regulatory framework and much more. However diverse, what all developments have in common is that some uncharted legal territory is involved. There is a need to have free brainstorming discussions in the earliest stages of product development. Long before there is a concrete direction to pursue.
In my day-to-day practice, I have regular conversations with business leaders and their legal teams. After a while I started noticing that on strategic product development there is often a significant gap between what companies need and what law firms offer. Frequently companies share their frustration that their outside counsel is unable to provide them with significant input in the early stages of new developments. Companies are looking to embed their outside counsel in internal working groups that are working on exploring developments that will drive change in their business. This cooperation is sought for the early stages, well before any concrete product will be launched. It is part of the strategy development process. The issue is that few if any law firms are able and prepared to do this.
There seems to be a misalignment between what clients need and what law firms can offer.
So, this is the situation: companies are looking for lawyers to actively participate in early stage thinking processes. Law firms are in general unable to meet this demand, leaving clients frustrated. Let’s examine what is causing this disconnect between demand and supply.
In general, when law firms are talking about innovation, they mean digital innovation but technology does not equal innovation. Countless law firms make statements on their websites on how innovative they are. These days many law firms even employ an official ‘Head of Innovation’ or ‘Chief Innovation Officer’. Innovation has become a PR and IT thing and is often delegated to an individual or department. Innovation is hardly ever carried into the micro-vessels of the firm. Innovation is seldom part of the primary process. There is very little appetite for autonomous legal innovation. Few law firms have working groups that think about legal aspects of future developments in society and technology and their impact on their clients’ businesses (no, Blockchain does not count).
Narrow spectrum expertise Increasingly law firms are organized in silos that operate independently alongside each other. Also lawyers have become more specialized (I have written about this before). These developments have narrowed the scope of lawyers. Today’s lawyers show little interest outside their core area of specialization. Why would an expert in construction law be even remotely interested in ISDA and derivatives? And that exactly is the problem. If contractors or property developers start building circular buildings, they might be interested in putting a cash value on the future recycled building materials and sell it already before the building is even completed. Someone else could then turn this in a tradable derivative helping to create upfront cash flow. I’m not saying exactly this should be done, it is merely an illustration of the type of lateral thinking that clients are looking for. Silos and specialization are currently standing in the way. Lawyers are no longer equipped to look beyond the scope of their expertise.
Pressure on individual performance The other aspect that might stand in the way of meeting clients’ demand as it comes to ‘brainstorming’ might be the business economics of the law firm. Law firms in general are pushing very hard for individual partner performance. Partners need to perform individually, not collectively. Partners are under a lot of pressure to meet their individual targets. For clients it is sometimes hard to imagine just how stressful it is to produce >1500 billable hours and > 1.5 million in annual revenue. The pressure is always on. So why personally invest valuable time in innovation and risking not meeting the targets. Much safer to handle innovation on a firm level and spread the costs and the risks evenly among all partners.
Simply not interested in the law Just to provoke a little and to make a point, I sometimes state that lawyers are not interested in the law. This will sound strange at first glance. How can someone who made a career as a lawyer not be interested in legal issues? What I mean is that lawyers are typically only interested in the file that is on their desk right now. This is the culmination of specialization and personal pressure described above. After years of practice most lawyers have lost their general legal curiosity. Why be interested in the legal aspects of issues that do not have any direct relevance for one’s personal day-to-day practice. Legally lawyers are becoming narrow minded. When trying to remain relevant in an ever evolving, increasingly complex and interconnected world, this is not very helpful.
Lawyers need to regain their curiosity!
Solving tomorrow’s problems and helping create business opportunities for clients requires lawyers who are capable of connecting the dots. True innovations can only come from multidisciplinary creative thinking. In order to remain relevant to their clients and provide value, lawyers need to regain their curiosity. The natural curiosity everyone possesses as a child. The curiosity that helps explore, navigate and understand the world and to find new solutions. This is a quality the profession will need to develop and nurture from early on. Even as early as from university. The legal profession needs to escape from the silo’s, stimulate true interest in legal dimensions and start contribution to its clients’ innovations.