George Bull of Baker Tilly says that law firm management teams are recognising that innovation, like breathing, is not optional if a firm wishes to prosper in a highly competitive legal services marketplace.'This demonstrates how far the legal service sector has come. What some have seen as the perfect storm of regulatory reform, financial uncertainty and client demands is being embraced by other legal service providers as the perfect laboratory for innovation and change.' He divides legal innovation into different silos -  structure, funding, service delivery, management and people. 'Whilst they must addressed separately, if they are not  integrated into the overall development of the firm great innovations in one area may be undermined if they are not supported by equivalent developments elsewhere in the firm.' 

Differing legal services

The provision of legal services to businesses differ  from that to the retail legal services market. In the former, pricing pressures and the increasing sophistication of clients are the key drivers of innovation, Mr Bull believes. In the retail legal services market, the most successful providers will undoubtedly be those who establish a whole-of-life relationship with their customers. 'For most retail users of legal services, the whole-of-life spectrum might encompass property purchase, divorce, an accident perhaps, a dispute with a neighbour, a will and subsequently probate work. These are distressed purchases. The most successful legal service providers in this area will be those who can also supply non-distressed ancillary services and products, becoming the go-to organisation of choice for as many of their customers’ service needs as possible.'

Challenges to regulatory framework

He predicts that whilst work within the reserved areas remains fundamental, non-reserved services, innovative service delivery and collaborative working arrangements are crucial when developing the successful legal business of the future. 'The increasing complexity of law firm structures will challenge the regulatory framework while law firms and ABSs will adopt marketing strategies much more reminiscent of retail operations.' 

While the “how” of innovation may differ between law firms and in-house teams, the “why” is very similar, he says, adding that this  includes improving value through addressing the buying needs of clients and what they expect; by adding value by providing services which clients are not paying for and which they do not expect. 

Alternative fees

The development of alternative fee arrangements seems unstoppable. This requires innovation in the processes used by firms to perform and deliver their services to clients. However, most firms will do their best to avoid competing solely on the basis of price. Innovation in the development of other distinguishing features, such as the style of delivery, value-added elements of the service and the cultural values of the firm, will all be important in this. And he believes that innovation also enhances clients’ loyalty, helps establish a firm’s unique identity and may produce a “wow” factor both within the firm and among clients and suppliers.

The clients decide

If innovation is seen as a non-optional continuing process, then it should be no surprise that it will be clients who decide how they receive their legal advice, not their lawyers, Mr Bull points out.  'The potential for innovation offers those in the legal sector transformative opportunities for success. Firms should be looking at their approach to innovation across their entire practices, and developing business models which integrate their chosen innovations for the benefit of the firm, its people and its clients.'