The Case Against Disruptive Innovation in Large Practice

Change is needed in the legal industry. But change simply for the sake of changing isn’t always a good thing.

There’s plenty of buzz about McCarthy Tétrault LLP’s “radical” transformation, and rightly so. They’re ridding offices for communal work spaces, finally moving away from the billable hour, and slashing redundant support staff. The effort is to be applauded, but the transition is likely to be bumpy.

Although I’ve advocated for importing the Latte Method into legal services, I’m not sure all lawyers want or need to feel like they’re working in a Starbucks. For many small and independent lawyers, working in a coffee store can boost creativity, provide cost effective working space, and create a social environment where client development often occurs organically.

But for a white shoe firm, I’d be concerned about spilling that coffee on that laced suede. The pleasant hum of the espresso machine in the background might make it too informal. The collegiality, which many of these measures are intended to foster, may appear forced or artificial.

Despite all the enthusiasm of late for open offices, there are some dissenters. Facebook’s “hacker cave,” a sprawling 430,000-square foot office housing nearly 3,000 workers, is probably largest open floor plan anywhere, but potential downsides include the increased noise and communicable sicknesses.

Open work spaces can even increase stress levels given conflicts over space sharing and different understandings of appropriate public behaviour. These differences are usually accentuated across generations. The one big advantage of the McCarthy’s shift is for recruitment of new associates, who would feel right at home in a legal cave with plush sofas, customized caffeine, and bring your own devices. The difficulty will be with the partners and older lawyers, and many of them have never really learned how to play well on any team.

In addition to cost savings, the open office advantage to a law firm allows for administration and partners to keep an eye on all the activities underway. But this comes with a corresponding trade-off in privacy. Lindsay Kaufman describes her experiences in the Washington Post,

Our new, modern Tribeca office was beautifully airy, and yet remarkably oppressive. Nothing was private. On the first day, I took my seat at the table assigned to our creative department, next to a nice woman who I suspect was an air horn in a former life. All day, there was constant shuffling, yelling, and laughing, along with loud music piped through a PA system. As an excessive water drinker, I feared my co-workers were tallying my frequent bathroom trips. At day’s end, I bid adieu to the 12 pairs of eyes I felt judging my 5:04 p.m. departure time. I beelined to the Beats store to purchase their best noise-cancelling headphones in an unmistakably visible neon blue.

Kaufman points to studies which suggest the open office may actually decrease productivity. Whereas it’s relatively easy to plug in your earbuds and ignore your neighbour at Starbucks, you might actually be stuck with hearing yet again the escapades of your co-workers’ sordid dating lives. Of course to the judgmental eyes of the overseeing partner, you’re just as culpable in the frivolous conversation.

Kaufman suggests a blended model, where there are both public and private works spaces are available. I see it as a way to rethink the workday in a profession where 40 hours/week is perceived as working part-time.

If trade-offs in productivity come with the benefit of stronger social ties in the law firm it’s a small sacrifice to make, and may help alleviate feelings of isolation often felt by young associates. Developing deeper support networks within the workplace is a highly effective coping mechanism for stress and fatigue. But your peers are still the friends you’re stuck with, not necessarily the friends you choose. Real flexibility comes with the ability to walk out of the firm entirely, to spend time with friends outside the firm or family.

The open office model, at least as predicated within highly traditional law firms, still relies heavily on the concept of face time. The productive lawyer is the one who can be observed, and removing the walls and doors allows us to observe them even more. What should be observed instead is the work product, not the physical body creating it.

The real changes which need to occur in the large firms are with the people in them, before any change in the physical space can have any radical effects. This is obviously far easier to execute in a small firm than it is one of the largest firms in Canada, which is why disruptive innovation is typically employed at the small businesses or entrepreneurial level.

In fact Clayton M. Christensen, Michael E. Raynor and Rory McDonald, who first coined the term “disruptive innovation” in 1995, indicated in the recent issue of Harvard Business Review that the concept is frequently misused. They state, for example, that Uber does not meet the definition because it does not originate in low-end or new-market footholds. Neither does McCarthy Tétrault.

A disruptive innovation provides a “good enough” product, or a new one, and is initially considered inferior by most of the incumbent business’ competitors. They initially focus on the business model, not what is produced, until it moves from the fringe into mainstream and generates profitability. Often, disruptive innovations don’t succeed at all. That is, they are disruptive irrespective of their shift to the mainstream.

A better example than Uber of disruptive innovation would be Netflix, which did not enjoy much popularity initially, until streaming videos took a huge chunk out of Blockbuster’s revenue. Disruption theory is better used for predicting which fledgling businesses will succeed, not the shifts or transformations of established businesses.

Large and established law firms do not want this initial blow to their reputation and revenue as a disruptive innovator, nor should they. Instead, they should employ what is better described as “sustaining innovations,” which make good products or services better. Incumbent businesses employing a sustained innovation model typically perform better than new market entrants, rather than incumbents who attempt to be disruptive.

What McCarthy Tétrault is doing is hopefully incorporating some of the best elements of small and solo practice, and although it may not be essential for their future survival, it’s still a good move. Christensen et al. state conclude,

Incumbent companies do need to respond to disruption if it’s occurring, but they should not overreact by dismantling a still-profitable business. Instead, they should continue to strengthen relationships with core customers by investing in sustaining innovations. In addition, they can create a new division focused solely on the growth opportunities that arise from the disruption. Our research suggests that the success of this new enterprise depends in large part on keeping it separate from the core business. That means that for some time, incumbents will find themselves managing two very different operations.

Of course, as the disruptive stand-alone business grows, it may eventually steal customers from the core. But corporate leaders should not try to solve this problem before it is a problem.

Heenan Blaikie may have been that sign of a problem for even the larger law firms today, but no fix will work without top level buy-in. Law firms, unlike other corporate entities, are incredibly complex in their power sharing and hierarchies, and will require buy-in from multiple high-level internal stakeholders. In other words, the disruption needed here is at the human level.

Whitney Johnson is the author of Disrupt Yourself: Putting the Power of Disruptive Innovation to Work. She moved to New York 25 years ago with her husband, with absolutely no background in business or any connections in the city. She worked as a retail sales broker, took business courses at night, and eventually became an investment banker. She transitioned to an equity analyst, and then co-founded the investment firm with Christensen.

Her version of disruptive innovation is one where a person takes the right risks, play to their distinctive strengths, and step in the right directions to grow. The biggest obstacle to personal disruption is a sense of entitlement. Entitlement leads to complacency, and that leads to inaction.

Large law firms invariably recruit, hire, and retain from certain socio-economic and cultural demographics of society, usually those with strong feelings of entitlement. They may not intend to do so, but this is typically the net effect. The result is resistance to change from anything that is different.

Johnson refers to this confirmation bias in her book in explaining the concept of intellectual entitlement,

We like ideas and people that fit into our worldview, but there is tremendous value in finding room for those that don’t. According to Paul Carlile and Clayton Christensen, “It is only when an anomaly is identified—an outcome for which a theory can’t account that an opportunity to improve theory occurs.”One of the ways you’ll know you are coming up against an anomaly is if you find yourself annoyed, defensive, even dismissive, of a person, or his idea.

Imagine telling a partner in a large firm that they should learn to be annoyed by ideas and people who don’t fit their world paradigms. This is one of the main reasons why the idea of McCarthy’s transformation could likely only be executed by a non-lawyer, Tracie Crook, because it’s harder for them to dismiss her. But it’s the lawyers who also need to transform.

Going back to recruitment, large law firms should actively seek out “different” lawyers from all types of backgrounds. Not just at the junior levels, but at the mid to senior level as well – possibly plucking them out of the Starbucks they are working in, into the Starbucks they have created.

It means hiring graduates who would’ve been too poor to go to law school, went to law school abroad, or who participated in the Law Practice Program. They all have something new to offer in a sustained innovation to change, even if considered somewhat inferior by incumbents.

These are your disruptors. Don’t be too annoyed, and definitely don’t dismiss them.