From Skunkworks to Subsidiary: how to make innovation happen at your firm

How is innovation delivered in your firm? This panel takes us on a four stage journey from (1) the solo innovator working skunkworks-style, to (2) the implementation of firm-endorsed innovation incentives, to (3) the funded innovation function and program, and finally to (4) the establishment of a separate innovation/legal tech entity. In addition to describing how to make each stage work well, our panelists will share how they transitioned from one stage to the next and the highs and lows of the journey!

These are my notes from the Strategic Knowledge & Innovation Legal Leaders’ Summit (SKILLS 2021), is a private gathering of large law firms. As with all live-blogging, there will be inevitable errors so please excuse them. My editorial comments are noted in brackets.


Skunkworks innovate under the radar without the heavy burden of bureaucracy. Skunkworks attract the enthusiastic amateur as well as those who just think they know better and can do better.

KM can help by providing support and resources for these solo innovators and small innovation teams. And, when the project is ill-advised, KM can withdraw support and resources. Knowing which projects to support depends on having a structured, strategic approach to innovation for the firm. This helps filter out the potential innovators who are loud and demanding as opposed to those who are quieter but working on more strategically important projects.

Firm-endorsed Innovation Incentives

Firm-endorsed innovation incentives are a way for the firm to back innovation with real muscle. This involves providing “good citizen” or billable hour credit for participating in nonbillable projects for knowledge management and innovation. Create a firm committee to collect, triage/prioritize and then monitor the innovation projects. Invite partners to get involved and even provide oversight for these projects.

Also consider providing cash incentives and competitions to encourage teams to implement, use, and document the results of innovative tools. This will generate helpful ROI data.

Above all, create a community of innovators across the firm. By connecting them, you help provide moral support for them and also cross-fertilize innovation across the firm. This creates a fly-wheel effect within the firm.

Key learning:

  • Make sure you manage and monitor the innovation projects
  • When you get the monitoring data, use them to build momentum and support for increased innovation.
  • ROI can be identified with respect to documented time reduction and efficiency gains.
  • Be sure to publicize the wins. It provides important recognition and reward.

Funded-Innovation Function

A formal innovation function is useful for bringing a measure of structure and discipline to the innovation effort. It helps focus on strategy and outcomes. In addition, it can help guide the creation of an innovation culture within the firm.

To give the function influence within the firm, give it a budget of dollars and a budget of billable hours to be allocated to lawyers involved in innovation projects.

In terms of staffing, considering hiring an innovation solutions architect with strong analytical capabilities. Another potential source of staffing is the group of professional support lawyers who may be looking for new ways to demonstrate their value to the firm.

Connect the innovation effort to your learning and development function. In this way, you can embed innovation in the most recent hires and then reinforce this throughout their professional development.

Innovation Subsidiary

To the extent that there is a “journey” through the innovation stages, it does not need to end up in a subsidiary. That said, an innovation subsidiary that is wholly-owned by the firm can provide real benefits.

A fully built-out innovation platform needs three horizons: (1) how to make today’s practice of law more efficient. This deserves about 70% of your attention and effort. (2) how to create new revenue for the firm. This deserves about 25% of your attention and effort. (3) seeing the next new thing before it hits you. To do this, invest in identifying the model that will break the current model. This may mean simply monitoring developments; for other firms it may mean shaping the new model. This deserves about 5-10% of your attention and focus.

The benefit of creating a wholly-owned innovation subsidiary is that you can focus on creating and then developing products and services in a disciplined fashion. Above all, the subsidiary can create and sustain an effective marketing and sales channel. (Law firm partners are too expensive to work on lead generation and customer calls.) Introducing a different way to market products has been a real benefit to the subsidiary and its affiliated law firm.

If you need to bring in specific legal expertise from your affiliated law firm, you will have to compensate them. Sometimes, compensation is in the form of billable hours. Sometimes it is in the form of a success fee.

Why choose a separate legal entity? Running a startup company is very different from running a traditional law firm partnership. It is very hard for a start-up to predict its revenue — particularly in the absence of historical data. This makes many lawyers extremely uncomfortable. In addition, some regulatory frameworks frown on law firms providing non-legal advice, products, and services.

Main lessons learned:

  • Stay close to the client and let client demand drive what you build. Ask the client — they like to be asked.
  • Listen to the partners — but only to a reasonable extent. They know the law but do not know marketing.
  • Never build a product without partner support.
  • Say close enough to the firm to maintain firm support.
  • Stay nimble — don’t get bogged down in red tape.
  • Stop giving things away for free. If you have “free stuff,” make sure you understand the benefits to the firm and to the client.
  • Finding new sources of revenue for a firm is a critical part of a fully built-out innovation platform.

[Photo Credit: Johannes Plenio]


New Frontiers in Data Analytics

Data analytics has been hot in large law firms for several years. Much of the activity has been focused on improving law firm business, for example, better budgeting and pricing. Can we use data analytics to improve the advice we give to clients? To reduce the risk of malpractice? We will examine new data analytic frontiers with three short case studies. Case studies will include uses of firm, client, third-party, and public case law data that drive better outcomes and surprising insights.

These are my notes from the Strategic Knowledge & Innovation Legal Leaders’ Summit (SKILLS 2021), a private gathering of large law firms. As with all live-blogging, there will be inevitable errors so please excuse them. My editorial comments are noted in brackets.

Three Types of Data

There are three key types of data: firm data, client data, and third-party data.

  • Firm data enables operational efficiency.
  • Client data combined with firm data provides matter intelligence.
  • Firm data combined with third-party data provides environmental intelligence (i.e., how we conduct our business and benchmark it against various industry sectors).
  • Client data combined with third-party data provides tactical insight and enables client service enhancements.

Critical First Steps

  • Win hearts and minds within your firm to gain a commitment to data cleansing. This requires committed investment and focus. You will not obtain useful insights unless the data is usable.
  • There will always be tactical pursuits and quick wins for data analytics. But make sure they are aligned with your long-term vision for data analytics in the firm.
  • Use the PPDAC Framework:
    • Problem
    • Plan
    • Data
    • Analysis
    • Conclusion

Recommended Data Practices

  • Don’t rush to data analytics. Start with data mining. Then build your data models.
  • Model explainability is key. Use a combination of text and excellent visuals to make your models more comprehensible to decision makers.
  • Data Trends to Watch
    • Natural language processing (e.g., text processing, text generation, Legal BERT)
    • Differential privacy — more effective than anonymization for masking identifying data. It works by “adding noise” to the data, thereby obscuring the critical data.
    • Client delivery

Learnings from Case Studies

  • Data analytics allow more sophisticated matter pricing and budgeting.
  • Data analytics can drive legal strategy — what patterns emerge across matters? How do these patterns inform business choices and client choices? (Clients now expect to be able to get this kind of data from their law firms.)
  • Predictive analytics / machine learning: Some examples are using advanced machine learning algorithms to tackle complicated business problems; using statistical analysis to identify impacted groups; doing predictive pay analysis for groups that have experienced discrimination.
  • Using data to manage the workplace: this allows clients to mitigate risk in their own workplace. This could involve combining legislative updates with focused analysis of the client’s own data.
  • Create tools that help clients identify trends that are critical to their business and workplace.

[Photo Credit: Franki Chamaki]


Your Roadmap to KM Success in 2021 and Beyond

This panel will share their advice and experiences for growing and sustaining a KM program in the virtual world. They will touch on a range of topics including engaging with internal clients and successfully driving knowledge initiatives when informal and in-person interactions remain limited. The panel will also look at how managing, mentoring and motivating their teams has changed and what they are doing to ensure their team members are continuing to grow and develop the skills they need to support the evolving KM strategy.

These are my notes from the Strategic Knowledge & Innovation Legal Leaders’ Summit (SKILLS 2021), a private gathering of large law firms. As with all live-blogging, there will be inevitable errors so please excuse them. My editorial comments are noted in brackets.

The pandemic has reinforced the importance of the traditional knowledge management focus on people – their well-being and productivity. January is not too early to think about how to keep your team engaged and energized.

Staying Connected

  • Firms that are email-centric need to find other ways to stay connected in meaningful, human ways.
  • You can’t jump straight into business. You need to start meetings with a moment of social connection.
  • In the early days, we forced everyone on camera. Now we are focusing on doing more screensharing.
  • Pay attention to the latest research on Zoom fatigue.
  • Team members with young children have a great deal of stress to manage — and their stress affects the entire team.

Find Your WHY then stay Positive

  • Your KM team should be very clear about its WHY.
  • This helps you sort your priorities and keep your focus.
  • Don’t read every bit of COVID news. One firm provides regular updates on the good, as well as the concerning, COVID news and suggests that its people focus on those updates and ignore the rest of the information provided by the relentless 24-hour news cycle.
  • Be sure to share the positive news wherever it occurs in the world. One firm shared pictures of new babies born in the firm. Others share good news from other countries.

Managing a Large Team

  • Remote working can lead to a sense of insecurity — especially when people feel untethered from their teammates, from the various practice groups, or from the firm generally.
  • Developing a core competency model helps your KM team members focus on concrete next steps. It gives them a sense of being connected to their own career path.

Stay Connected to the Business

  • Stay visible — attend practice group meetings, stay in touch with individual fee earners.
  • Communicate value — even if there has not been a recent breakthrough in your area, is there a breakthrough in another practice that would be useful to share?

Branding & Marketing

  • Lawyers express interest in KM resources and opportunities but they get distracted when billing work comes in so their interest is not always sustained.
  • One firm does internal marketing by interviewing a single member of the firm who has found a better way to deliver client services and meet client needs. They then send a written update to the entire firm sharing their learning. This provides recognition to the interviewee and sparks the interest of others in the firm.
  • Remember: you have to communicate a message seven times in seven different ways.
  • Taking the time to craft a high-level presentation to the firm regarding your function helps your own team bond and get a better sense of what it does and why it does it.

KM After the Crisis: What’s Next?

  • The biggest mistake we can make is to revert to the three-year plan we were using before the pandemic. So much has changed.
  • People in the firm do not want to go back to the office five days a week. So the KM team needs to think about what hybrid work arrangements look like. How does KM support critical functions such as training and integrating new lawyers?
  • Think and read more broadly about what might happen after the pandemic. For example, what happens when we can move about and socialize freely. Will productivity drop radically?
  • Think about lawyer technological proficiency. Lawyers need to be proud and able to be their own help desk.
  • Boundaries will be an issue: just because you know everyone is online after business hours does not mean you should be touch. People need boundaries so that they can have some personal time.
  • Training will look different going forward. Large-group training sessions are less useful than small-group or one-on-one training.
  • Employers will shift from managing an employee’s work experience to managing an employee’s life experience.

Reimagining the Future

  • Looking beyond the immediate crisis, ensure that you have corporate legitimacy. Pay attention to external training, credentialing, and standards (e.g., new KM ISO standard).
  • Find more ways to exchange knowledge with people outside the firm. The resulting learning will keep you at the cutting edge.

[Photo Credit: Kevin Bhagat]