The Innovation Race

It was quite a surprise to read that Howrey LLP, a large US based law firm, recently closed its doors. From various accounts, there were a host of reasons the firm went out of business. The irony is that Howrey was a pioneering firm with a desire to innovate. 

There are some interesting lessons learned. Howrey began to offer a suite of discovery services similar to those provided by LPO [legal process outsourcing] vendors. Innovative, yes! But perhaps not that smart. It seems that the global legal landscape was innovating faster (than the firm). 

Bob Ruyak, the firms Chairman and CEO, admitted that. “We created a whole portion of the firm to handle discovery efficiently, using staff attorneys, temporary people, computer systems and facilities,” he told the Wall Street Journal. However, in the wake of the LPO boom, competitors were offering to carry out discovery work less expensively. Although Howrey “started to make corrections,” it was never able to respond quickly enough to changing demands, he said.

NewLegal Review asked Brad Blickstein, principal of US legal consultancy Blickstein Group, what kind of lessons the Howrey scenario had in store for other law firms. For Blickstein, Howrey’s demise is “really a shame,” because the firm had made a genuine effort to innovate. 

So how does Blickstein think that traditional law firms, LPO vendors and client organisations can best collaborate to ensure that the work they undertake is beneficial to all parties — forestalling the threat of another “Howrey scenario” in the future?

“Law firms must understand that all their previous income streams will not be available to them forever,” he said.

More and more clients are starting to understand that law firms are typically the most expensive way to solve any problem, and are reserving their use for times when a law firm is the only solution. That’s OK: law firms can survive that. They just need to focus on their core competencies and provide exceptional – and unique – value in all interactions.

In the long term, warned Blickstein, any law firm that continues to count on the income it receives for providing services that it cannot deliver efficiently or cost effectively is committing itself to a losing streak. “The quicker firms stop fighting change for their own self-interest and try to help their clients solve problems as efficiently as possible – even if the solution is to NOT use the firm – the better,” he said.

Law firms who build relationships with LSOs [legal services outsourcing] and other service providers will be viewed as value-added and retain some control over the situation. Firms that do not will be sidestepped or fired. This will not necessarily mean that firms will be smaller. But they will be limited to attorneys who can provide outstanding legal advice, and/or bring in business.