Innovation: piercing the legal services addiction

This is the third in a series of articles on the topic of Innovation in the legal services field.

Whilst I see my industry through the eyes of a practising lawyer, I am also someone who is fortunate enough to work alongside the fantastic set of people that form our Innovations team here at Kennedys.

Just as with any new season from any movie streaming service; it may help to provide a recap before a launch into this year’s plot line. If nothing else, that may assist the reader not to become lost exploring an Amazon of research, tracking down the previous seasons’ highlights.

The recap

Kennedys is a global legal services provider. We are a legal business that focuses on working for insurers and their customers around the globe. We provide a dedicated local service in more than 30 different global jurisdictions.

I wrote the first article on this subject 10 years ago. Back then, I felt that technology was the only solution to the innovation question clients were beginning to form.

I accepted that lawyers needed to change, and that we were our clients’ distress purchase.  I suggested that we were purchased far too often – particularly in any space that could be more easily commoditised.

I penned the second article in 2015. By then I had implemented a “Core Principle” at Kennedys (in the Motor and Casualty Division) of seeking to, “Help clients to use their lawyers less” – and set about focussing product development around that central tenet.

Season 1: Early thoughts

In 2009, a number of experienced authors in this area inspired my thinking. I tried to fit much of the sense that they spoke into the world that I worked in and to consider which aspects might best add value to our clients. 

One option I considered was some form of collaboration between a legal services firm and its clients, whereby we jointly created solutions that streamlined claims processes, allowing those clients to reduce their use of lawyers. I suggested that by dealing with any litigation arising together in such a way, clients would enjoy significantly reduced legal spend, as well as reduced indemnity spend.

Since then the world has moved on rapidly. It is amazing to realise that the first article was written before IPads, Airbnb, Instagram or WhatsApp, and before Uber and Siri.  Indeed, it was written before the first Tesla production car drove stealthily from Elon Musk’s imagination.

Season 2: Rise of the robots

Since 2015, the world has continued to evolve at speed– and we have seen the arrival of Amazon’s Alexa, Google Home, Apple watches, as well as a host of machine learning built into wearable and mobile applications. Since 2015, we have seen insurers like Lemonade adding fizz to their industry by providing customers with a fully automated artificial intelligence (AI) based claims experience.

Before I knew of any such things, in 2015’s article, I advanced some thoughts on clients’ increasing dependence upon legal services, and suggested their own lawyers often created this dependency.

The peddling of that addiction it seems has remained the default position of any legal provider who lacks the imagination to offer anything truly innovative. Instead, they seek to differentiate determinedly only on price. In return, their addicted clients gladly hand them ever-greater volumes of work at ever- lower margins.  

Finally, I looked at the possibility of lawyers being far more than just good at the business of law.  I considered whether my profession should also seek to offer broader insights to assist clients’ businesses.

Season 3: Innovation - unique, cooperative and authentic

In the first article, I suggested that we should, “take innovation to mean the creation of something entirely new”.

However, it also needs to be unique.

The best route to uniqueness is to ensure that differentiation is founded on any given business’s own personality and particular skills. Products built authentically on a business’s own core culture and skills can never really be copied.

Cooperation and corporate “buy-in” are also crucial. Without it, pockets of best practice and new thinking cannot be deployed more widely.

The concept of a group’s authenticity to its own DNA, and that group’s broad cooperation to achieve innovation and to compete is of course as old as ages. Neanderthals failed to compete with Homo Sapiens not because they were weaker, slower or less successful in themselves. In almost every way they were physically superior to our ancestors. They lost their evolutionary battle because they were not as capable of cooperating with one another as were our successful relatives. They were less able to innovate.

Which brings me to the point that innovation has only recently become a cliché for digital advancement.

In our modern world, “tech” will of course remain crucial, unless in some future season, a sentient form of AI decides that we are the Neanderthals. However, the focus on technology risks preventing other worthwhile innovation.

Innovation should be founded on the creating group’s own particular skills, culture and cooperation. It most certainly need not be based solely on the digital.

Mid-season plot twist: increased addiction

Since 2015, the insurance and the legal services markets have consolidated.

When procuring legal services, many clients have switched their focus from “price” to “value”. Many also have a much clearer view of what “value” means to them. Importantly, it often means different things to different clients.

Whether such clients interpret value in order to seek a medium term but overall reduction of indemnity spend, or the suddenly realised benefit of a reduced set of legal fees, is still a choice that needs to be made. I remain concerned that a few stalwarts in procurement teams still feel that both targets can still be achieved.

I made the point above about unimaginative law firms continuing to seek to differentiate solely on price.

Such lawyers‘ ever reducing margins (but ever-larger proportions of their business’s total cash revenue) becomes dependent on larger volumes of work fed by their clients. Consequently, lawyers and firms that seek to differentiate solely on price provide no more than a minimally viable service which needs ever more volumes to feed their own hunger for such clients. They become incentivised not to help their clients, but instead to generate ever-larger volumes of work from those clients. They regularly offer ‘guerrilla-added-value’, camouflaged to persuade each client to leak more legal work, not less. 

At the same time, their client’s focus on price is used by the lawyers as a distraction from barely acceptable service and rising indemnity spend.

In this modern world of external investment in law firms, (I count four or five now in my particular sector), some legal providers even offer loss-leading pricing in order to secure fresh contracts. That is done to bolster their corporate “value” before being sold on. Their owners of course then most definitely profit handsomely on sale. Their clients and their customers most definitely do not. It is a surprise that some procurers of legal services still accept such practices from their service suppliers. They appear not to anticipate the result.

A better way?

There is one. It is not one that lawyers should be afraid of. Most importantly, clients themselves should be demanding it.

There is a 21st century role for lawyers to be strategic advisors to their clients’ business, and not merely the providers of a barely professionally product.

Richard West, Partner

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Those who wish to succeed in the future must focus on helping clients’ businesses to make and save money. They can do so by understanding that their role is to remove unnecessary lawyering (and so true cost), to empower clients to become more self-sufficient in the traditional legal space, and to offer insight and guidance to inform clients’ businesses.

Superb global human lawyering in more complex areas, delivered by people deploying their experience, empathy, and interpersonal skills will remain necessary. We will not see machines replace such skills for many years, if ever they do.

Lawyers should be proud of their intelligence, resilience, adaptability, skills and experience. They can provide excellent 21st century legally based services to clients that benefit their clients’ broader businesses. They need a determination to be once again seen by clients as worthy business advisors and not mere service suppliers.

They should create a healthy symbiosis, not behave virally.

So, can I offer an example of such an approach?

The strategic 21st century business adviser

Kennedys’ global reach has enabled new thinking and generated new ideas and best practice that would otherwise have remained undiscovered. Such new thinking is regularly deployed in jurisdictions and product lines often thousands of miles from an originating thought.

Consequently, we have driven our innovation globally, for the benefit of our clients, locally.

This has required a multi layered approach. We have created an Innovation arrow, a concept piercing our industry far deeper than I could have imagined.

Kennedys Innovations – the beginning

The Kennedys Innovation Group was created in 2016. It was originally made up of three separate strands of the innovation arrow, each tasked with working together and tasked with helping those clients and their customers to either make or save money.

Collectively, the Kennedys Innovation Group horizon scan, identify emerging risks and trends. They empower our clients to look further along the business road ahead - and over the future hill - than would otherwise be possible.

The Group is required to be resolutely client focused. All three strands are required to operate globally and to gather the best ideas from every one of the available 30 plus jurisdictions, and to deliver those ideas in a focussed, locally relevant manner back into each of those jurisdictions. All three strands weave legal expertise into their solutions:

Analytical innovation

The Client Insights product is the fletching to our innovations arrow. It applies science to the global data that we divine. Data Science allows us to better identify emerging risks and trends patterns from the data itself, and to do so from an international viewing platform.  

It was not so long ago that our lawyers reached educated assumptions, and then asked our data team to prove them. As lawyers, we assumed that we were intelligent enough to just know the answers. Now that we rely on data scientists to gaze further into the future than we could once have imagined, we recognise that offering unproven assumptions is entirely the wrong end of the analytics telescope.

 The science within analytical innovation can predict with extraordinary accuracy emerging claims and underwriting trends from around the world in order to best inform our clients’ wider businesses – wherever they may be.

Intellectual innovation

The Corporate Affairs product is the armoured tip of our innovations arrow. It delivers jurisdictionally focussed horizon scanning: engaging with governments, predicting the consequences of anticipated legislation; and generating thought leadership for our clients.

Armed with such intellectual innovation our clients are better able to align their own businesses for the future, having taken into account such advice from the team. The Thought Leadership that is delivered, in particular, offers clients the opportunities to identify emerging risks that will impact their books of business. That such work is done across borders in a globalised economy also provides an international perspective for our local and global clients.

Technological innovation

The R&D product is the shaft of our innovations arrow. It delivers technological innovation building on ideas created from any one of its multiple jurisdictions, and delivering them in a local and dynamic form into others. Such ideas have to date been delivered across the globe, including in Australia, Bermuda, China, the UK, USA and Latin America. .

Expedition is key, but so is ensuring “baked in” legal knowledge at every stage, in every jurisdiction. In this space we are, as one client generously concluded, deliberately de-lawyering by design.

Innovation in combination

All three strands collectively form our innovations arrow.  Working as one, they fly straight and hit hard - offering a level of insight, guidance and advice to clients and their customers that I could not have imagined possible ten years ago. They can do so with such power and impact because they are embedded into our culture, core strategy and remain authentic to both.

Such an approach has changed how many insurers are beginning to ask what should be expected of a modern legal services supplier. Ten years ago, it was shocking for them to imagine a law firm suggesting that one of its core missions could be “Helping clients to use lawyers less”.  Ten years on, that is what we have achieved.

We will continue to pursue that core mission. However, our global network of innovators is also now tasked with helping our clients to make or save money – which seems to me to be the very essence of what professional service suppliers should be seeking to do.

The final scene

Lawyers and insurers share a number of challenges.

Our customers hope never to need our actual service and often hope to be buying no more than reassurance.

Historically our industries’ customers have both bought on a mixture of price (mostly) and service / pedigree (if we are lucky).  In either of our cases - when we are both needed it is often at a moment of crisis – at a moment of truth.

Both professions therefore need to ensure that we are innovative not just in the attraction of customers but also – when that moment of truth comes – the delivery of our service. Working together, in a healthy symbiosis, we can both ensure we deliver to customers when it really matters.

Read 'Innovation - opening a can of worms' Read 'Innovation - the worm that is still turning?'