Creating & Establishing a Culture of Innovation in Legal Departments

Innovation is not always about utilizing technology; it can be as much about process as about the available new tools. Innovations don’t have to be moonshots, they can be small and incremental. The technology doesn’t have to be bleeding-edge in order to be effective. And, above all, avoid total transformation in the guise of innovation, which won’t work. These were the main takeaways from our recent roundtable, Innovation in Legal: How to Create and Establish a Culture of Innovation within the Legal Department.

Casey Flaherty, Chief Strategy Officer at LexFusion, which helps law departments and law firms identify and integrate innovative offerings, set the scene for the discussion. He highlighted a number of compelling stats: there are now 6,000 legal tech companies and there are more lawyers working in-house than in the top 200 American law firms. The new law market has grown significantly. “It is now a law-thick world,” he said.

He noted that not only has there been an exponential growth in laws and regulations, leading to a huge increase in fines for those not complying and to vastly increased numbers of filings, but that this is compounding the complexity with which lawyers have to deal.

At the same time, he showed that corporates are reluctant to respond by simply hiring more people or investing in technology. The answer lay in innovation. “The good news is that there is no finish line on innovation. We can keep innovating,” Casey said.

"The good news is that there is no finish line on innovation. We can keep innovating."

The two speakers offered some excellent examples of how their departments are innovating to meet the growing challenges. Philippe Delsaut, Senior Vice President and General Counsel Electrical & Industrial Sectors, Eaton Corporation, which provides power management technologies and services, said the key to innovation was to be clear about what you were trying to achieve. “My first thoughts are always: how can we do things differently than we did before? And begin with the end in mind,” he said.

Philippe said that much could be achieved by just starting to collect, manage, and analyzing available data as without data it is difficult to even know where improvements are needed. He said that his own department had developed various online tools in-house enabling the team to have better visibility on financials, risks, and opportunities. Technology is helpful but what is powerful is what you do with the data. In the space of contract management, one of the important things to look at is how to reduce the time to close contracts as shortening turnaround time may have a positive P&L impact through quicker revenue recognition.

Technology is helpful but what is powerful is what you do with the data.

Processing of contracts was also at the heart of innovations carried out by the in-house team at a large interactive video gaming company. Michael Cuthrell, Group Director, Legal Operations, noted that in one financial year, his company signed tens of thousands of contracts. Breaking down the contracts into different types, they found that NDAs accounted for the majority, closely followed by consultancy agreements. How could they improve the process to draft and execute such a large volume of contracts?

Their response was to farm out the contract work for the lower risk and easily repeatable processes to an outside legal managed services provider, which Michael said was chosen on the basis of three Cs –capability, capacity, and cost.

Having successfully outsourced this work, the object was then to assign further work to the legal managed services provider incrementally, moving up the scale of complexity and risk, with necessary safeguards put in place, such as monitoring quality metrics and adherence to service levels. The strategic and company-differentiating legal functions and tasks would always remain in-house, he said.

Michael also gave the example of workflow automation software that had been configured by the legal team themselves, not the IT department, to execute NDAs. While it used to take five days from start to finish of NDAs, it now took one, Michael noted.

The result of these changes is that in-house lawyers can utilize their skills more productively, aligning work closely with their skillsets, and allocating resources more efficiently.

The talks generated a lively roundtable discussion in which participants offered other insights from their own experience of innovations in their companies.

Five key takeaways emerged from this discussion:

1. Make sure you understand and work within the organization’s cultural context to increase your prospects of getting innovations through. Railroading through change without underlying support across the organization is almost certain to meet resistance because, in general, people don’t like change.
2. Linked to this point, counter those who are resistant to change by always asking what’s in it for them and using language they are familiar with to break down their resistance. The chances of success are increased if they feel that the idea for the innovation has come from them.
3. Lead by example, which helps to establish trust and credibility. Inspect and measure because “people don’t respect what you don’t inspect.” People are more likely to be impressed by hard evidence of innovations working in practice.
4. However, don’t assume your ideas will work straight away. Be prepared to make mistakes and change in response to how the innovations work in practice.
5. “Adoption through absorption” is the most effective way to bring about innovative change within an organization. Roll out innovations slowly.

If you’d like to attend future roundtables on legal innovation, get in touch.