Last month Financial Times published its annual US Innovative Lawyers report. The report was originally conceived as an alternative way to measure law firm success. It breaks with the traditional method of looking at fees and profits as the measure of success. As the category rankings are based primarily on client reviews, the report shows firms that were consistently found to be creating transformative solutions for clients.
Heading the 2011 ranking is Davis Polk & Wardwell on basis that “it was a consistent performer across the legal expertise and operational categories of the report.” Tom Reid, the firm’s managing partner, says: “Every innovative business has to be focused on how to deliver yesterday’s solution for less today. Today, clients can enforce the truism of ‘more for less’. When the advice you deliver is truly unique you can charge premium prices, but it is not all unique – our business model is about driving a higher percentage of the inventive, unique work.”
In second and third place, respectively, were Skadden, Arps, Slate, Meagher & Flom and Cleary Gottlieb Steen & Hamilton. Both firms were responsible for significant innovations for clients from Burger King to AIG. In the report, both firms talk about the importance of culture and human capital to their ability to innovate.
According to the report, all the firms in the FT Law 25 have in common “their commitment, their ability to adapt and to work together in the best interests of business to unusual and important effect. As the report shows, this smart thinking is crucial. Whether it is helping companies survive or helping the banks create liquidity, legal innovation and the efforts of lawyers to be creative plays a central role in the success of US business.”
However, a main reason for the recent focus on innovation is the tougher times, which forces law firms to innovate. “As lucrative mergers and acquisitions work dried up, long-term clients started to scrutinise their legal spending, or even saw their businesses hit the wall. as a result, law firms have had to focus on their business models like never before. “The economic backdrop did more: it acted as a catalyst for Gcs [general counsel] to address latent frustrations with traditional law firms whose goals are often in direct conflict with those of the client,” according to axiom, the firm that avoids using a partnership structure. The financial crisis brought such peripheral innovations as alternative fee arrangements (AFAs) and outsourcing – once regarded with some haughty scepticism by the legal market – to the mainstream. More than anything else, the financial crisis has underscored the old tensions and opposing objectives of clients and firms embodied by the billable hour. General counsel now demand predictability (and affordability). only the firm that really knows its business can offer clients a realistic AFA.”
In the report it is also discussed how the credit crisis has had other repercussions for clients in the form of regulation as policymakers worldwide have tried to redesign the architecture of the financial system. In response hereto Cleary Gottlieb Steen & Hamilton put together an interactive database to help clients to track regulatory reforms, while other US firms such as Davis Polk & Wardwell saw the regulatory overhaul as an opportunity to offer alternative forms of advice. the firm created a regulatory hub, an online platform with advice on a fixed-fee basis. Similarly, Cadwalader, Wickersham & Taft developed a database to give standardised tracking and analysis of derivatives, financial documents and broker-dealer regulations.
In a recent Above and Beyond KM post “KM and Law Firm Innovation“, Mary Abraham analyses in light of the aforementioned report how KM can help make a firm and its lawyers more innovative: “Much innovation arises from making small changes to what came before. In legal practice, this means we need to give our lawyers easy access to precedents and practice guides so that they have a solid foundation from which to innovate. Innovation can go beyond specific matters to providing online information and advice on a subscription basis. KM and library services can play an important role here in gathering the data for the client-facing resource. Innovation with respect to the business of law can have a huge impact as well. KM personnel and practices can help support alternative fee arrangements and project management efforts.”