It’s got to be true that if what you offer is pretty much the same as your rivals, the way to differentiate your firm’s offering is in how you deliver your service.
Eversheds is one of the firms leading the way. They’ve even appointed a Head of Innovation who said when his firm won the FT Innovation Award: ‘We’re in the process of challenging the way we do things and break down the core legal processes. We’ll put a fixed fee on them where possible’. They’ve also set up Eversheds Consulting to advise clients on wider business problems.
But not all firms have grasped the innovation challenge. There’s no better time than now for firms to look at this issue. The firms that can build a culture of innovating will do better than the others.
My regular readers will know that I often look for relevant case studies outside the legal sector. This will be the second time I’m going to write about the consumer goods company Procter & Gamble (P&G), where I learned about business strategy. P&G has become famous for its recent revolutionary approach to innovation. The story has been covered in the Harvard Business Review as well as in Legal Week.
And here’s what AG Lafley, Procter’s CEO, had to say about innovation in today’s economy:
“We discovered that important innovation was increasingly being done at small and midsize entrepreneurial companies [including] access to talent markets throughout the world. And a few forward-looking companies like IBM and Eli Lilly were beginning to experiment with the new concept of open innovation, leveraging one another’s (even competitors’) innovation assets – products, intellectual property, and people”.
Most of P&G’s best innovations had come from connecting ideas across internal businesses. And after studying the performance of a small number of products they had acquired, they knew that external connections could produce highly profitable innovations, too. Betting that these connections were the key to future growth, Lafley made it their goal to acquire 50% of their innovations outside the company.
The strategy wasn’t to replace the capabilities of their 7,500 researchers and support staff, but to better leverage them. Half of their new products, Lafley said, would come from their own labs, and half would come through them.
It was, and still is, a radical idea. As they studied outside sources of innovation, they estimated that for every P&G researcher there were 200 scientists or engineers elsewhere in the world who were just as good – a total of perhaps 1.5 million people whose talents they could potentially use.
But tapping into the creative thinking of inventors and others on the outside would require massive operational changes. They needed to move the company’s attitude from resistance to innovations “not invented here” to enthusiasm for those “proudly found elsewhere.” And they needed to change how they defined, and perceived, their R&D organization – from 7,500 people inside to 7,500 plus 1.5 million outside, with a permeable boundary between them.
The new model worked: From 2000 to 2006, the proportion of new products on the market that included one or more elements originating outside P&G went from 15% to 35%, an increase of 133%, and the number of P&G brands generating a billion dollars or more in annual revenue was up to 22.
Essentially, what Lafley led P&G to do was to introduce completely new ways of doing old things or slightly different ways of doing old things that consumers perceive as better, hence more valuable. Have a look at the number of varieties of Head & Shoulders are on the shelves now compared to a dozen years ago.
C’mon law firms – let’s follow Eversheds’ lead and get innovating. How about starting by finding more efficient and cost-effective ways of delivering your services!