ABSs delivering on the promise of innovation, major research concludes

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Moriarty: room for much more innovation

The goal of promoting innovation and diversity in the provision of legal services through the introduction of alternative business structures (ABSs) “has been realised”, joint research by the Legal Services Board and Solicitors Regulation Authority has concluded.

It found that across the legal market, innovation is used to extend service range, improve service quality, and attract new clients – but is “not typically used” to lower costs.

The wider adoption of ABS status, it continued, “would be likely to increase the range of legal services on offer”.

Further, “innovation in the sector may be further enhanced in the longer term as ABS firms increase the level of competition in legal services”.

A joint project conducted on behalf of the regulators by members of the Enterprise Research Centre, Warwick Business School, OMB Research Ltd and University College Cork, it is described as the largest-ever survey of innovation among legal services providers, covering 1,500 organisations – made up of 943 solicitors’ firms (including 93 ABSs), 156 barristers’ chambers, 72 other regulated firms (such as licensed conveyancers and costs lawyers) and 329 unregulated providers.

It defined ‘innovation’ broadly to incorporate developing new or improved services and better ways of delivering them – this could range from a firm simply opening a new department or making more use of electronic communication, to a radical move not seen before in the market.

It found overall that while providers were keen to talk up their credentials when it came to innovation – around 80% of those polled felt they had a culture and leadership which was open to new ideas – only around 40% actually have in place organisational procedures to support the introduction of new ideas.

The research said: “This translates into around a quarter of organisations which have introduced new or improved services over the last three years. A quarter of legal services organisations also report having changed or significantly altered the way they deliver services over the last three years.

“Given these proportions, it is perhaps unsurprising that for the majority of legal services organisations, innovative services remain of limited importance in terms of revenue. Specifically, across the sector as a whole, new or improved services account for around 6% of turnover.”

But ABSs scored higher in all of the indicators used by the researchers to judge levels of innovation. This was “consistent with ABS solicitors’ higher level of investment, staff engagement and external involvement in innovation”, they said.

ABS firms were more likely to introduce new legal services, “with potential benefits for service users”, and also “more likely to engage in strategic and organisational innovation”.

ABSs were markedly more willing to seek external help. “Innovation in legal services is rather ‘closed’,” the researchers found. “Ideas for new innovative services rarely come from outside the organisations concerned, and we do not see in legal services the extensive networking with external knowledge sources which characterises innovation in some other business and professional services.

“Innovation is more often than not incremental in nature with very few providers consider[ing] themselves to be radical innovators… Overall, the impression is of a profession in which ideas for new services and new ways of working are internally generated and rarely radical in nature.”

Some 13% of ABSs had introduced “radical” service innovations, compared to 6.2% of other solicitors’ firms.

There was also strong evidence that larger practices of all stripes – except for barristers’ chambers – were far more likely to embrace innovation.

Legislative and regulatory changes were found to be the main drivers of innovation – rather than a constraint – with the intensity of competition a “middle-ranking” motivation.

Richard Moriarty, chief executive of the Legal Services Board, said that while he was encouraged by the innovation that was appearing in the market, “there’s room for much more”. He said it was needed so as “to reflect consumer expectations” and also to tackle unmet legal need.

Mr Moriarty said he was “disappointed” that there was not much evidence of legal services providers trying to meet this need.