The Lean Startup: Eliminating Wasteful Practices in Your Law Firm?

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Transcript

Legal Toolkit: The Lean Startup: Eliminating Wasteful Practices in Your Law Firm? – 6/6/2015

Advertiser: Welcome to the Legal Toolkit; bringing you the latest legal trends and business initiatives to help you manage your law firm. Here are your hosts – experienced lawyers, writers and entrepreneurs, Heidi Alexander and Jared Correia. You’re listening to Legal Talk Network.

Heidi Alexander: Hello and welcome to a new episode of the Legal Toolkit, here on Legal Talk Network. I’m your host, Heidi Alexander. I’m also a law practice advisor with Massachusetts LOMAP. LOMAP provides free and confidential law practice management consulting services to Massachusetts attorneys. For more information on LOMAP’s offerings, visit our website at MassLOMAP.org. Here on Legal Toolkit, my co host, Jared Correia and I, provide you with a new tool each month to add to your own legal toolkit so that your own legal practices will become more and more like best practices. So as a law practice advisor, I spend much of my time helping solo and small firms create efficiencies and implement best practices for their success. And this is even more important as the legal market continues to transform, customers are demanding more for less, and competition is rising. So firms need to rethink the way that they do business, and this all starts with the basic business structure. So today I’ll be chatting with my guest about the lean lawfirm, what that means, why it’s important, and how firms can embrace it. I’m excited to have Nicole Bradick on today as my guest Nicole Bradick is the chief strategy officer at Curo Legal. Curo provides practice management advice and consulting to law firms. Nicole previously founded and operated Custom Counsel, a legal services outsourcing company, which was recently acquired by Curo Legal. Nicole has been named to the ABA Journal Legal Rebels List and to the Fastcase 50 list of global legal innovators. So thanks for joining me today, Nicole.

Nicole Bradick: Thanks Heidi, glad to be here.

Heidi Alexander: So let’s begin by talking about the concept we call “lean.” And of course, this stems from the management philosophy that was used by Toyota in the mid century and then it was more recently popularized by David Ries’s book, The Lean Startup. So can you tell me more about this concept and in sort of a general sense?

Nicole Bradick: Sure thing, and I will just start by recommending David Ries’s book. I had, over the years, formulated pretty strong opinions about how firms should operate and how they should approach structuring their operations and their business model. And when I read The Lean Startup for the first time, it basically echoed and in a much more eloquent way all of the things that I had come to believe to be true about the best ways to operate these firms. So I think it’s a really good place to start for a lot of firms. Either firms looking to launch or existing firms that are trying to figure out the best way to create efficiencies and survive in the new marketplace. So this is a concept in lean manufacturing, is just the elimination of waste. Any expenditure, resources that doesn’t create value for the end client. And the lean startup concept was derived from lean manufacturing but really came to evolve into a modern management concept for tech companies. So instead of dumping a ton of money and time into building a product and bringing it to market, the idea is to create a minimum viable product, to test it early and to test it often. And I think you’ll see that it’s become really the predominant concept in the tech world for how to bring a product to market. So the traditional one sort of focuses on creating this polished, finished product to clients. But lean startup really focuses on getting the product in front of the customers as quickly as possible, even if it’s a flawed product, and testing the assumptions that you make in developing the product. And when we start law firms, all businesses, you make a number of assumptions. You just need to make sure they’re the right assumptions, and that’s really the fundamental tennant. You start small, you test regularly so you can adjust quicker, and get customers exactly what they want and you start learning right away from customers what works, what doesn’t work, which is incredible, incredibly diable information. It’s really like the three basic steps are to build, measure and learn. And you repeat that over and over, and you learn with every iteration and it prevents this dumping a ton of time into developing a product and a ton of money and resources and you get to the end and you find out it’s not what the customers wants at all, and you’re kind of like “Crap, I’ve got to start all over again.” It’s a much smarter way to do business in today’s market, I think.

Heidi Alexander: So let’s now connect the dots for our listeners. How does the lean concept that you just very accurately explained, how does it apply to the legal industry and then can you tell us what are the benefits to the law firms? As you just said, it’s become more popularized with David Ries’s book, it’s now what most companies are now using, is it just a passing trend, is it going to continue, can law firms really use this today?

Nicole Bradick: Yeah, so while the lean startup concept came from the tech world, it has a lot of application professional services I think in any industry. So when you start a law firm or a day to day running of a law firm, you make a whole bunch of assumptions. What kind of clients will want your services, what kind of work they’ll need, where they’ll want you to be located, how many associates and staff members you’ll have to serve them, what’s the best technology to use to deliver those services. Tons of assumptions are built into the development and running of a law firm. And so a lot of attorneys who launch new firms may try to be prudent and create a thoroughly well designed, well thought out business plan that they’re sure will take the firm to great places. But if even one of these bigger assumptions is wrong, you can get some real problems. Is lean a passing trend? I think that there’s always going to be new theories for business planning and management that will develop over time, and often I think they involve out of changes in the marketplace. I think maybe some of the foundations of the actual lean startup concept will fall out of favor in time because that’s just what happens historically with the in vogue management theories. But for law firms, I think we know now that the shifts in the market that happened during and after the recession are structural. They’re not just typical changes. We’re not going to cycle back to the heyday that once was.

Heidi Alexander: We hope.

Nicole Bradick: We hope. Yeah, we want the heyday, the heyday ruled. My generation’s never going to see the heyday. So I think firms are operating under a new reality that’s not likely to shift anytime in the near future. Like you said in the beginning, it’s a much more competitive market, firms want more for less. So firms need to figure out how to maintain and increase profitability. And it’s not rocket science, you increase your top line revenue and you try to control your bottom line; some combination thereof. I don’t see that combination going away. And the concept of running a lean law firm can certainly help the bottom line, but it can also drive top line revenue. I think lean management style can allow law firms to deliver more value to their clients, increasing customer loyalty, which we know has been a problem in modern legal market, and helping with reputation in the marketplace. If you’re the firm delivering value to your clients, it’s going to help drive clients to your firm. And it can also allow the firm to more easily respond to changing market demands and client interest as a way to increase revenue. And so I think that “lean startup,” with air quotes around it, may fall out of favor, but I think that people launching law firms by going out and getting the most expensive, fancy office space with beautiful marble and ten receptionists, I think until that is a necessary thing for your clients, I think that model is probably gone for good.

Heidi Alexander: Okay, so that’s probably a good thing. So you talked a lot about these assumptions and I want to just get into that a little bit more here, I want to make it a little more tangible. Can you give us an example of an assumption that a law firm, say, would base their business or their operations on that might end up of all being over time?

Nicole Bradick: Yeah, it could be a lot of things, it could be an assumption about the level of staffing you need or it can be an assumption about the kind of law you’re going to practice. Think of what are the hot things right now, data security. You want to start a data security boutique because it’s everywhere, it’s on fire. So you build this entire firm around this data security practice and you go whole hog and you bring it to market, and maybe it does well but then all of a sudden, every firm in town starts their data security practices, and something happens where data security’s no longer the huge concern. There’s something way even bigger like drones for law firms or drone strikes or something becomes the next huge thing. And that’s really where you think your clients need you and so you need that agility. It’s not a pivot in the traditional sense, but it’s a shifting of traditional focus, and you need to have enough infrastructure that you can respond to these market changes. Something like staffing, you think your clients are going to want associates doing a lot of the more commoditized work, so you have your associates billing $300-$400 an hour, and you hire all these people to do this work, but then your clients are coming back to you and saying – and this is what’s happened to a lot of big firms. Your clients are coming back to you and saying, “Listen, we don’t want to pay for these expensive associates. We want you to outsource this to an LPO or somebody else.” And all of a sudden you’ve got this problem because you’ve built this structure around associates billing a lot at the bottom to increase the profits at the partner level, and so you have a really big weakness in your fundamental business structure at that point. Does that make sense?

Heidi Alexander: Yeah, I think that’s all very helpful. Again, that makes a little more tangible. But we do need to take a quick break, but everyone stay tuned, because after the break we’ll be talking about how to

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Heidi Alexander: Welcome back to the second half of our show with Nicole Bradick, chief strategy officer at Curo Legal. Let’s talk now about how firms can create a lean law firm. So let’s say I’d like to start up my own lean law firm. What’s the first step in creating a lean law firm?

Nicole Bradick: Step one has to be to think about the client or whether or not you want a quote on quote lean law firm or just any law firm at all, I think you have to start thinking about the client. So what kind of client do you want to serve, and you start by making a few assumption about what your ideal client wants, but understand that some of these assumptions may be false. You start small and you don’t invest in overhead – that’s hard to get out from under. Like old school technology systems, long term leases, employment arrangements, and even partner compensation models. So steer clear of the stuff that’s hard to move out of, and then you build it. Launch your firm, you test it with a small sample of your clients, you get in-depth regular feedback, and then you learn from it an adjust. You need to constantly go back to the clients and what they want.

Heidi Alexander: Oh, you make that sound so easy.

Nicole Bradick: It’s definitely not easy.

Heidi Alexander: So let’s talk a little bit about the role of technology in the law firm, because clearly, technology can create efficiencies and eliminate those repetitive processes, which is precisely what the lean law firm is all about. So what types of technology are useful for the lean law firm?

Nicole Bradick: The type of technology depends a lot on the type of firm and the type of client. But generally, I think as a category, Cloud-based software is heaven-sent for these law firms. If we accept that starting small and testing carefully as a sound business is eye method, it’s pretty easy to see why old school technology may not be the best choice. Because if you’re making this upfront investment on an on-premise server and software licenses, it becomes difficult to make the adjustments that you may need to make. So SaaS platforms that operate under a monthly subscription model, it makes adjustments and pivots if need be simple, if it turns out that the technology isn’t allowing you to provide optimal value to your client. But sort of going back to this concept of reducing wasted effort, I think for most firms, Cloud-based management systems are pretty critical at this point to reducing wasted efforts. It sort of helps keep lawyers organized, keeps them on track, I think it adds a lot of order, which reduces a lot of wasted effort. The same with the solid CRM if we’re talking contact relationship management system, if we’re talking about the marketing. So I think the modern firm really needs a good practice management system, email platform, research tool, document management system, and a CRM. If you have those tools and you select the tools that play nicely together and you know how to use them, then your firm performs more efficiency. And knowing how to use the technology is a big part of reducing waste. You can have the best technology in the world but you need to know how to use it, and if you’re not using it well, then your clients aren’t getting the value that they need from you, especially if you’re billing hourly. So I guess my number one recommendation is get training. Don’t wear it as badge of honor, it’s not cute and it’s not good for clients and it’s pretty damn bad for business. I’ve got some good horror stories of how bad technology can create ways but we can save those for a round of drinks one day.

Heidi Alexander: So what happens if you do have someone who’s not so technologically-savvy? Would you tell them to outsource this?

Nicole Bradick: One of the things that Cura does and I think that our clients who use it get that value if they’re not the best with technology is they have the practice management platform, they have the platforms they need, but then they’ll hire a virtual assistant to help manage that. And in so much of this, both from a profitability and productivity perspective is about who’s the right person at the right level to be doing these tasks. So if you are not that great with technology and you’re spending more time than you need to, either go and learn and don’t just accept it as is, or get somebody who can do that work for you so you’re not expending any unnecessary effort. But I think that hiring another person to input your client intake, do that sort of thing when you’re running a law firm, I think for a lot of lawyers that makes a lot of sense because that’s just time productively spent for that.

Heidi Alexander: That’s a good point. So any other components that you think are necessary for the lean law firm?

Nicole Bradick: I think that I wouldn’t say that there are components necessary for a lean law firm that are different from a regular firm, I just think you need to think about the components a little differently. So staffing for me is a huge area. Custom Counsel, that’s sort of what we do. So it’s this concept that not everything complex needs to be performed by a senior partner. Not every attorney on the matter needs to be an employee. Not every task on the matter needs to be performed by an attorney. It’s about giving the client exactly the right solution for a particular problem or a component of a problem, but not more. More does not add value, more is waste. So take a piece of litigation; even if it’s a complex piece of litigation, you don’t need to handle it all, nor does your client benefit the most from that. You break the matter down from its component parts, determine what is the right person to do each part, and maybe it’s a non-lawyer. Maybe it’s a contract lawyer, maybe it is a senior partner depending on the component if there’s an oral advocacy piece, for example. And that’s how you get optimal productivity out of your employees and contractors and it’s usually the best way to deliver value to your clients. So if you’re small shop, you think about using contract attorneys, virtual assistants, that sort of thing, so you can pass the cost savings to your client and not over serve them and then you also don’t have this heavy infrastructure in case you need to make changes like we were talking about earlier. I mean there’s other overhead too to that can be considered to through the same lens like viscal face. If your client doesn’t need fancy downtown office space, don’t get fancy downtown office space. It also applies to things like summer associates, associate training programs, and it all has to tie back to what’s going to provide value to the clients. But I think the one component that should be a part of firms that like the lean startup concept is a more formalized way to get feedback from your clients. It’s not a survey you blast out to all your clients from time to time, but it’s actual more in-depth conversations with your clients about what they liked, where they saw value in your work and things like that. So you need to build these discussions into your management of any project and then also have the system for gathering the data. Especially if you’re a multi-lawyer firm, you have to have the system for gathering data and then very regularly taking a look at the feedback and making the adjustments.

Heidi Alexander: Okay, so you sort of touched on my next question, actually, which was you’re obtaining the feedback and you’ve created these systems. And clearly overtime, there’s going to be new trends, the market’s going to change, and part of the concept of being lean is working to constantly improve your systems. So what’s your advice to law firms or management of law firms to make sure that they’re continuing to adapt to what’s new, what are the trends, and make sure that they’re constantly incorporating that feedback and getting that feedback from their client?

Nicole Bradick: I think as lawyers, we generally are not very good at listening to feedback. And you can solicit feedback but not really listen to it. So it has to be systematic, it has to be part of your DNA. And picking up the phone and calling your client for more substantial clients, I think weekly call-ins are absolutely appropriate. How are we doing, and ask the direct questions, do you feel you’re getting value from the work we’re doing for you. But again, this is all about having a strategy and the vision and be willing to adjust it if necessary. And you’re thinking about all the tactical, operational decisions that you make on a day to day basis, just make sure you’re making those decisions with purpose. The purpose to increase profitability, to respond to client feedback, to provide more value, so often I talk to firms that make day to day operational decisions with no reference to overall strategy.

Heidi Alexander: So I think this is a good stopping point, so we have reached the end of another episode of the Legal Toolkit. I do want to thank my guest, Nicole Bradick, for taking the time to drop by our virtual studio. Nicole, if any of our listeners would like to learn more about you and your adventures, how would they go about doing so?

Nicole Bradick: You can find me on Twitter, @NicoleBradick, my company Curo Legal, also on Twitter, @CuroLegal, and our website is CuroLegal.com. And Custom Counsel still exists as a brand of Curo and you could find that either through the Curo website or at CustomCounsel.com
Heidi Alexander: Great. Well thank you again, Nicole, and thanks for our listeners for joining me for another episode of the Legal Toolkit. Remember that you can check out all of our shows any time you’d like at LegalTalkNetwork.com

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