Operationalizing Innovation:The New Work of Legal Operations and the Future of

Work in the Legal Profession

David B. WilkinsJones Day Professorship Lecture

(August 31, 2018)

The Sesame Street Law of Legal Analysis

• Which one of these things is not like the other?– Crowd-Defend: Online platform allowing individuals, organizations, and

businesses to solicit crowd funding for socially motivated legal cases– DIY.Nigeria: One-stop online portal for registration, legal needs, and project

management for small businesses in Nigeria– Integrity Idol: Social media competition to recognize honest civil servants in

Nepal, Pakistan, and Liberia– Five-0: App to allow citizens to rate, review,and track interactions with police

with results made available to no charge to community activists, media, and law enforcement

– StandIn: Helping lawyers find substitutes who can stand in for them in court appearances they can’t make

– Computer vs. Lawyer? Firm Leaders Expect Computers to Win: 47% of Managing Partners: AI will soon replace paralegals; 50%, eventually replace first year Associates

– “Backed by Burford’s Millions Hausfeld Stakes a claim in Germany”: Third party litigation funder underwrites UK law firm to open a German office to help German companies sue companies violating EU antitrust laws

– Deloitte purchases ADT Legal (2014) and Conduit Law (2016), and enters strategic alliance with Kira Systems (2017); EY purchases Riverview (2018)

– American Bar Association Issues Paper Concerning New Categories of Legal Service Providers: Describing Limited Liability Legal Technicians

– Bitland creates a blockchain network to store land registration claims in Ghana to settle land disputes and protect small landholders from fraud and corruption

Answer: None of Them – And All of Them (Vintage Law Professor!)

• They are all the same in that they are trying to bring innovation – and innovation thinking – to solving “legal” problems

• They are also all the same because none are traditional legal service providers

• They are all different in that they target different parts of the legal market and utilize different tools – and all are likely to encounter different challenges from regulators and the marketplace

• But perhaps most tellingly, they all came across my desk in the last few months!

• And this undoubtedly is only the beginning of the coming wave of law-related innovation that will appear in the next few years

• This will be particularly true here in Singapore, which is positioning itself to be the “hub” of legal innovation, and a global center for commercial disputes in international arbitration and the new commercial court.

Missing the Forest for the Trees• Lots of discussion about “legal start-ups” and “Robot Lawyers” • But these discussions both understate and overstate the state of change in the

legal profession – and indeed the entire economy• They understate change because the issues facing lawyers transcend the current

economic downturn and speak to the way that we increasingly see, understand, and consume the world:

– Globalization of economic activity– Rise in the speed and sophistication of information technology– Blurring of traditional categories of organization and thought

• But they overstate the degree that the practice of law will – or should – be disrupted in the foreseeable future

– Although the number of legal start ups is exploding, few have achieved real success (Ravel bought by LexisNexis; Riverview bought by EY)

– Law is both a private service and a public good, and many of these new innovations have implications for how that public good will be distributed and valued

• The future of legal work will be shaped by the interplay between these forces of continuity and change

The New Economy

• Reduction of information asymmetry between buyers and sellers – Unbundling and repackaging of services

along global supply chains• Competition moves from reputation

and credentials to value as measured by metrics

• Unit of analysis moves from firms to networks

The New Normal for Lawyers

• Increasingly sophisticated clients with more access to information –and who are demanding more transparency from lawyers– Forcing efficient unbundling and repackaging of services and a move

toward “value” billing

• All of this puts pressures on the legal profession’s historic models:– Business model: hourly billing driven by leverage– Human capital model: only “lawyers” can provide legal services– Knowledge management model: Go to the library or ask the

senior partner– Education model: three years (in Singapore four years) of

learning how to think like a (18th century common law) lawyer• These pressures are in turn reshaping the legal profession

The New Legal Profession

• Five trends reshaping the legal profession– From Solo Practitioners to Professional

Organizations– From Homogeneity to Diversity– From Oligopoly to Competitive Markets– From Artisanal Craft to Profit Driven Business– From Local Control to “Glocal” Complexity

• These changes in the profession are creating the conditions for “disruptive innovation”

What is “Disruptive Innovation”

• Christensen: “Disruptive innovation” occurs when existing patterns of work, organization, and hierarchy are radically transformed in a relatively short space of time

• Four Steps of Disruption– New competitors arrive– Incumbents ignore them and flee to higher margin work– Disrupters establish a firm foundation in the middle of

the market– Causes a “flip” in the market in which establish players

must compete on new grounds or risk losing significant market share – or worse

Disruption in Professional Services

• Classic examples are in manufacturing– DEC and Wang to Microsoft and Apple– IBM only survivor – because it disrupted itself

• And now IBM is at it again!– The Watson Project– Deep Blue Beats Gary Kasparov at Chess– Watson Beats Ken Jennings at Jeopardy

• Watson as the loyal assistant to a cancer doctor’s Sherlock Holmes – Diagnosis– Discovery

• The Future– More gamesmanship (Google beats the world’s Go champion)– Medicine is more like Jeopardy– But a lot of law is more like chess

• Law has always been the most conservative discipline• In the common law world, you can’t say anything new unless you

prove definitely that someone already said it before!• Law has also been among the most heavily regulated

business – with the regulation controlled by lawyers– Lawyers control education, admission, standards of practice, and

expulsion– Collectively limit competition from “non-lawyers”

• All those rules are breaking down, particularly in the UK– New organizational forms – New forms of capital – New regulatory oversight

• Singapore has adopted its own version of ABS, and is a leader in legal innovation – and the FLIP initiative will only supercharge this transformation 10

Why Law is Ripe for Disruption

Legal Work Circa 2018

• All of these trends have accentuated in the first two decades of the 21st Century

• Market: The integration of law into global business solutions– Paradox of specialization: lawyers are pressed to become increasingly specialized at earlier

and earlier ages, yet the problems increasingly cross disciplinary boundaries

• People: The “greying” of the legal profession– Lawyers who built Singapore’s modern legal profession are nearing retirement

– Increasing competition for young talent

• Production: Humans in the age of technology– Law remains a “human capital” business

– But technology increasingly important to how humans conduct the business of law (which would you rather have: a great lawyer who understands technology, or one who does not?)

– But professionals always think that technology will allow them to do what they already do cheaper and faster, but it ends up redefining the core ideas of professional practice

And There is Much More Change to Come

• Law is a lagging not a leading indicator – and the broader economy is much farther ahead on these key changes (Highland Capital Partners)

• Market: Digital Darwinism– The “new economy”: In the U.S., average age of a Fortune 500 company: 1950 (60 years); 2020 (12 years)

– People who are running companies are increasingly young – and increasingly diverse

• People: World War Z– Millennials and Gen Z will be 50% of the work force by 2024

• Attracted to autonomy and control; grown up on the sharing economy

– Better educated, with a better understanding of life-long learning

• In the U.S., 39% have a college degree; 28% of all college students have taken at least one online course

• Post graduate education moving to an Exec Ed model (HBS moving from 60/40% MBA/Exec Ed to 40/60%)

• Production: The Gig Economy– Remote work increased from 9% in 1998 to 37% in 2015

– 2015: 43% of Americans use at least one on-demand service; 29% did gig work; gig economy $800B

But the Future is Far From Certain

• How do you foster collaboration, innovation, and culture in an age of remote/transient/gig work?

• How does society ensure objective standards of quality and protect public goods in a world that celebrates deregulation and creative destruction?

– Tradition and stability continue to have important value for lawyers and clients

– Law and lawyering linked to fundamental goods that will never be deregulated completely – the essence of the “Rule of Law”

– Both people and institutions make long term investments that are difficult to change

• How do we protect those who “lose” in the on-demand economy in a time when companies no longer provide a safety net of benefits?

• Understanding these challenges are critical in a country like Singapore that is committed to the rule of law

• And, as the FLIP program underscores, it requires Singapore lawyers to embrace a culture of innovation

The Multiple Meanings and Goals of Innovation

• Innovation means different things to different people and different organizations– e.g. How do the (different and potentially competing) objectives of law firms

and in-house legal departments impact their approaches to innovation?• Innovation means more than just technology – and for technology to be effective,

it must be combined with a deep understanding about law and legal practice• And there are fundamentally different kinds of innovation relative to your position

and the market– Sustaining innovations allow incumbents to operate more efficiently – but may

also block real innovation and change– Disruptive innovations use new technology and methods to create essentially

new markets, which transform old ones– Adaptive innovations embrace the client’s need for change by changing not

just “what” law firms do but “how” they do it (Dolin)• In the foreseeable future, adaptive innovation is the most promising route for

change• And adaptive innovation requires “operationalizing innovation”

Operationalizing Innovation• Clients are increasingly looking for law firms who have a culture of innovation

– 73% of global GCs report that they have seen no innovation in their primary law firms (Acritas Sharp Legal)

– Innovation can therefore be a key differentiator• Creating a culture of innovation requires strategy and leadership

– Most managing partners see the disruption in the legal market and know that they need a strategy for change

– Ironically, junior lawyers who are “born digital” do too– But many senior influential partners in law firms who continue to do quite well in the current system

do not– As a result, firms struggle to align innovation with their existing strategy

• Leading innovation requires collaboration across boundaries, both organizational and personal– 2017 PwC Innovation study – “collaborative” innovation outpaces traditional R&D (61% using open

innovation, 59% design thinking, 55% co-creating with customers, partners and supplies; just 27% using internal incubators and 21% investing in start-ups). Difficult for a profession that has traditionally been driven by short-term budgets and that tends to value internally generated “customized” solutions

– Diversity is critical to creative problem solving (Acritas Diversity Report: Diversity significantly increases client satisfaction and share of wallet). Difficult for a profession – particularly law firms –that struggle to attract, retain, promote and fully integrate women and those from diverse backgrounds

• As a result, firms and companies need a new strategic approach to innovation – and new professionals to drive it

The Rise of Legal Ops

• CLOC: The Corporate Legal Operations Consortium– 2015: fewer than 10 members – 2018: 2500 members and growing with chapters in

London, Hong Kong, Sydney, and Johannesburg – with Singapore soon to follow

• Reacting in part, many law firms are creating “Chief Innovation Officers” and other similar roles

• Yet there is little systematic information about who these new professionals are, or what they are doing

CLP’s Research • To close this information gap, CLP is conducting a major research initiative

on these new professionals

• Three on-going projects– Survey of innovation professionals in companies and law firms– Colloquia bringing these professionals together (80 at Google in June 2018; 50

in NYC in Oct. 2018; major meeting planned for June 2019) to address two key issues:

• What is the career path for innovation professionals in a legal organization?• What are the metrics by which organizations will measure the quality as well as the cost

of these new innovations – and the “traditional” methods to which they are compared– Pilot projects by individual companies and law firms, and a sustained co-lab by

selected companies and law firms in collaboration with IDEO, to use design thinking methods to identify “pain points” and scalable solutions

• Project is in its early stages – follow it other research in our digital magazine The Practice, available at https://thepractice.law.harvard.edu/

• The following are some preliminary conclusions from our research

The Surveys

Background InformationDemographics

Career Background and HistoryJob Responsibilities

Law Firm/Company BackgroundInnovation Team and Functions

Innovation StoriesLaw Firm Collaborations

Legal Start-Up CollaborationsGeneral Comments

A Quick Preview of What We Know So Far…

• Exploding new and critical role within in-house legal departments and increasingly in law firms

• Legal Departments: – 70% female; 30% male– 27% have a JD (49% identify their primary professional orientation in law – 36%

worked in a law firm before joining their company – Other backgrounds: project management 37%; data analytics/info technology 28%– 63% report to GC/CLP – Average innovation team size of 14 (35% of teams have at least 1 lawyer)

– Law Firms: • 72% men; 28% women • 22% report having JD (highest percentage after BA/BS); 16% LLM; 72% not practicing• Other backgrounds: info technology 29%, project management 15%; design thinking

9%• Nearly 80% worked at another law firm/always been at current firm prior to current

role• 52% report also chairing a formal innovation committee• 60% report to Managing Partner/ExCom; 25% to Admin leadership (e.g., CAO/COO)• Average innovation team size of 9.5

What Are Legal Operations Teams Charged With

What Are Law Firm Innovation Teams Charged With

Sources of support – In-House

And Resistance – In-House

Sources of Support – Law Firm

And Resistance – Law Firm

In-House - Law Firm Collaborations

• 55% reported that they do not collaborate with their outside law firms on innovation efforts

• Of the 45% that do– 50% identified doing so in the context of “law firm

relationships (e.g. pricing, panels)”– 17% did so in e-discovery– 50% identified the “relationship partner” as the main

point of contact on the firm side

• Tremendous opportunity for collaboration beyond these limited but important areas

Why Difference Does it Make?

• Transitioning from a world in which knowledge resides primarily in the heads of individual lawyers to one where lawyers work collaboratively with other professionals to master “big data” and the tools to understand and control it

• Understanding the possibilities and challenges of “modularization”– Unbundling (for whose benefit?)– Collaboration (whose responsibility?)– Reintegration (remember Humpty Dumpty!)

• Doing all of this while preserving the core commitment of law as a public profession (Heineman Lee and Wilkins 2014)

• Creating an educational system for lawyers – and for other “legal” professionals – that adequately prepares students (and professionals) for the challenges they will face, at a price people can afford (both in the short and long term)

Toward a New Partnership• To accomplish these goals will take a new partnership

in which lawyers, academics, policymakers and judges work together to understand the profound changes taking place, and to craft wise policy that helps supports the best of these changes, while preserving the legal system’s core values

• Singapore, as a country that was founded on a commitment to the rule of law, but which also has made innovation in the legal sector a national priority is the ideal place to work through these critical questions

• Which is why I am so honored to have the opportunity to discuss these issues with all of you!