Steam, Electricity and Law Firm Management
Posted By Rob Millard - 0 Comments -
At 3 PM on September 4 1882, Lower Manhattan was transformed as Thomas Edison’s spectacular, cutting edge electric illuminating system went into operation. The American public was astounded at this revolutionary new energy supply. Clearly, it was only a matter of time before it would take over as the primary energy source in industry too.
So it did, of course, but four decades later, only half of America’s factories were fully electrified. Why did it take so long for a clearly superior technology to establish itself?
The reason is simple: The very best, state-of-the-art factories at the time (the product of a century of refinement and innovation through the course of the industrial revolution,) were designed in such a way that electricity provided little advantage. Unlike today’s factories, where every piece of machinery has it own electric motor, factories at the end of the 19th Century were designed around central energy sources. Machines were powered by elaborate systems of pulleys and shafts called “group drives” that transferred energy from the central source (typically a water turbine or steam engine) throughout the factory. The most efficient way of doing this was to minimize the length of the drives. Factories, as a result, were multi-storey buildings with one or more shafts per floor, each driving a group of machines. The entire factory, in effect, was designed around the limitations of the power supply.
So what use was this newfangled electrical energy? Initially, it was used to provide lighting and steam/water turbines were replaced with central electrical motors. Electricity only came into its own when a new generation of factory buildings started being built, where machinery could be arranged and rearranged to optimize production line efficiency. These were typically sprawling, single storey plants. Small, efficient electrical motors powered each machine independently. Electrical wires replaced the cumbersome group drives. There were no more awkward steps and elevators to navigate between floors.
Replacing the factory buildings was a slow and expensive process, however. One does not simply through out such capital investment and the know-how built up over a century or more.
This little case study provides a valuable lesson in how innovation progresses in law firms too. Many of the great ideas out there today provide little advantage to law firms as they are currently constituted.
The Chairman of a very prominent national US law firm mentioned in a conversation that we were having recently that except for the computers, there is little difference in a law office today, to what existed 50 years ago. The arrangement of offices, structural hierarchies and suchlike are still “just as they always have been.” Other practices like hourly billing and aversion to alternative work arrangements would fall into the same category. This is more than just generational differences in perception between Baby Boomers / Gen Xs / Gen Ys. The changes that people talk about today are challenging the very foundation of the way in which legal services are being provided to clients.
The good news is that just as electricity was around for 40+ years before it was fully adopted, so many of the solutions to the problems facing law firms today are also out there, in plain sight, in the market. The challenge is not so much in finding the solution, as in overcoming the corporate inertia of the firm’s business model, to get those solutions implemented.
Billing by the hour a problem? Fine … replace it with value pricing or risk sharing models. But how does one actually do that with the same ease as filling in time sheets? (My view on the billable hour is that it is an excellent example of something that will eventually go the way of the dodo, but first the "factories need to be reinvented.")
“Generation Y’s” want flexible work arrangements and a work/lifestyle balance? Fine … let them work from home and other remote locations. But how does one actually do that while maintaining teamwork and service quality?
You want to be able to harness the combined intellect of your firm whenever necessary, to craft strategy, to develop virtual client teams, to share knowledge? Fine … create an online collaborative system using one of the emerging Web 2.0 internet based tools (see here and here.) But how does one actually do that in an environment where there is deep suspicion about such tools?
Performance levels differ widely amongst individual lawyers and sometimes, truth be told, some (ever more expensive) junior associates do better work and are more valuable to the firm than some of their senior colleagues. Fine … develop a system that easily measures performance and links it to reward in a way that is seen to be transparent and fair. But, how does one actually do that where the hierarchy of partners and associates/assistants developed over a century is heavily entrenched, true performance is difficult to measure and compensation discussions are often a source of considerable stress?
Some firms are quicker than others in developing ways to implement solutions. Market changing revolutions that effectively deconstruct the environmental parameters of a profession, like those that will follow final enactment of the Legal Services Bill in England and Wales will catalyse a whole slew of innovations and firms elsewhere would do well to watch those in England carefully. Likewise developments in Australia. Sometimes, there may be some “first mover advantage” for firms that adopt new practices quicker. More often that not, though, it is the “second mover” that gains the real advantage. Innovations are typically adopted sequentially. First: by small, fringe firms with entrepreneurial leaders and less corporate inertia. Second: by market leader firms that can afford to “try” something new without the change (or possible failure) being threatening. Last: by the mainstream in the middle, who are driven (rightly, in most cases) by precedents.
If you are a leader in a mainstream firm, the key is therefore to constantly be a thoughtful observer of what your competitors are doing and what your people are saying. Then, to have the courage to shamelessly “steal” the best ideas that others come up with and build them into your firm.
Hat tip to Alan Greenspan, who wrote of Edison and the adoption of electricity in industrial America in his book The Age of Turbulence: Adventures in a New World
, on page 474-475.
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