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Wednesday, July 18, 2007

How can Knowledge Management drive innovation in your firm (or any other professional services firm)

This is a long post

I have recently had an article published in KM legal in June following a talk that I gave at a conference on KM in the Legal profession. This is the original wording before it was sub edited.

I hope that you enjoy it and want to place some comments on site.

Innovation is usually defined as the creation of something new – for organisations it is usually a change in products, process, or in law firms a change in a service.

Law firms now deal in a more competitive market place not only in terms of globalisation but also with the oncoming liberalisation of the legal market. Also, the life cycle of services is diminishing as competitors quickly copy and reverse engineer what was innovative.

In this hyper competitive world – we should consider Schumpeter’s observation that Innovation is hard to produce and harder to sustain and that businesses stand on ground that is “crumbling beneath their feet”.

I have worked in organisations that didn’t innovate and no longer exist in their once dominant state. Too often they were complacent and fell into a comfort zone thinking that because they were dominant in their market that their competitors would not succeed.

Organisations that do not innovate destroy the value of their company and the business lurches towards commoditization and away from premium pricing. Innovative companies also are more likely to retain people. If a firm has energy and encourages innovation then, people, given the choice, would want to work in an organisation that was thriving, interesting and full of challenges, rather than an organisation that considers the status quo the way forward.

Lawyers are innovative and as the law changes then new markets evolve. A few years ago who had heard of phrases like sukuk, murabaha and haram – the lingua franca of the new market based in London of Islamic Finance.

However as knowledge management practitioners in the legal market we acknowledge that there are barriers to knowledge management and it is interesting to note that some of these barriers are also some of the barriers that affect innovation.

1. Culture. We know that if a firm has an open culture and is approachable to embracing new experiences, then this can be difficult to replicate and therefore is a source of sustainable competitive advantage to the organisation.

2. Many organisations have also bought into the concept of continuous improvement or kaizen or as I call it ‘small I’ However they neglect to remember that all products/services have a finite life

We can continuously improve by all manner of techniques a 33 rpm Long Playing record by making it thinner or cramming extras on it – it does not disguise the fact that there is no major market for it.

We must therefore remember the second half of the equation where the big innovation takes place or the Japanese call it kaikaku and not only rely on kaizen to deliver innovation to our product in the long run.

3. The third barrier relates to collaboration and what I call the team player paradox. If economic times are hard – people tend to hoard knowledge feeling that they are securing their future in the firm. However, showing that you are a team player and disseminating knowledge to work colleagues is more likely to show success as you highlight that you are a key knowledge resource. Unfortunately, as my niece reminded me recently, our schools don’t always encourage collaboration between people and call it cheating; so what children are told to avoid in school, we, as knowledge based organizations, want them to do in the work place. From research we know that from collaboration comes the dissemination of shared experiences, and through this, can come innovation.

4. The fourth barrier comes from fear of failure and to the professional mind the fear of saying ‘I don’t know’ and the resultant fear of failure. It does come from the tone of the senior managers in your organisation – they need to encourage failure to encourage risk and see what happens. If your organisation celebrates failure then people will feel emboldened to take risks and develop innovation. James Dyson’s vacuum cleaner took 5127 attempts before it was completed. How many law firms would accept that level of delay? Organisations need to understand that success doesn’t come in one mighty bound but occasionally is graduated. Rome wasn’t built in a day but it was built.

I was reading an article by Seth Godin where he highlighted that organisations might recruit bright people to work for them but they are in danger of becoming sheep walkers due to organisations that do not encourage innovation. My view is that an innovative enterprise galvanizes people. The good thing from an organisations viewpoint is that naturally most human beings want to improve – it is hardwired in us but regrettably organisations do get in the way.

Effectively what law firms need to recognise is that to encourage innovation as well as knowledge sharing, is to recognise the importance of giving people time to think, allow them to relax and most importantly of all, provide recognition for their efforts.

When I was talking to a friend recently, he felt that lawyers were traditionally poor innovators. This is surprising, as law firms tend to recruit some of the brightest minds and also have access to a pool of external talent. He is an entrepreneur and highlighted that an entrepreneur tends to deal with the imperfect idea whereas lawyers by the very nature of their jobs have to work to achieve perfection.

Also by the nature of the partnership organisational structure there is a tendency to herd and to look for the consensual way forward.

Innovation tends to come from organisations encouraging positive deviants – the people who turn left when everybody goes right, or use an Apple Mac when everybody uses Dell. These deviants have a positive role in the organisation and can warn the firm of the dangers of clinging to the status quo and can envision the rewards of embracing a radical but different future.

However, in most organisations rather than being praised and becoming corporate heroes, they are considered Cassandra’s and are all too often forced out of the organization, taking their innovative ideas elsewhere while the company they leave behind wallows in it’s own complacency.

Also by utilising the billable hour model, this encourages people within law firms to become slaves to that rhythm. Law firms desire creativity and innovation but it can be difficult in a firm where the emphasis is to be quick but also resulting in the dead tired. Hence people are more likely to be suffering from cognitive dysfunction and higher rates of error than producing innovation.

So are there knowledge management techniques that can be utilised to encourage innovation? There are a number, such as using de briefing after the end of every major project to learn lessons and to identify innovation.

However, for the purposes of this article, I wish to introduce the concept of the Watson Group (named after Bell’s assistant, Thomas Watson who worked with him in inventing the telephone) and the use of the Innovation time account.

On many occasions in a meeting, I have observed, that junior members of the group tend to be silent – not willing to stick their head above the parapet and propose new ideas usually for one of the reasons cited earlier in this article.

However I have found following research and observation that junior people are more likely to broach ideas in an atmosphere that they find less threatening.

This Watson Group would be a group made up of their peers and based around the concept that there is no bad idea, only not articulating an idea. Ideas are discussed and approved through lively but respectful conversation where people suggest and discuss their thoughts, be it a change of process or an idea for a new service.

Once this has been approved by the collective – the idea can be submitted to senior management – knowing that it has been tested and also by having the support of the collective group. As on MBA courses, it can provide people with the opportunity to ‘play’ and explore options that may not have been considered before, and with being looked at by new pairs of eyes.

Management can be invited to attend the meeting, but one area that is often overlooked, are people from other departments, for example, business development and finance that can often provide valuable input and can also bring a more business edged perspective to the group. They can also act as ideas mentors helping people to develop ideas that will assist in obtaining senior management approval. A very radical step would be allowing client input in order that people look outside the boundaries of the firm and also see the idea by standing in the shoes of your client. A client might well be interested in this as ultimately they have a vested interest in your law firm’s innovations.

The final element is that of recognition, people will provide innovative ideas so long as they are recognised for it. A lot of junior staff are concerned, that senior management will take the credit for their idea. By articulating the idea in a Watson Group, then you are recognised by your peers, but also it acts as security that the idea will be credited to you.

In respect of the innovation account – innovative companies like 3M provide people with time to work on renewal and reflection. It cannot be right that the maximum time that lawyers have to spend on professional development is less than 20 hours in a year. What would be the effect of people having 2 hours a week to read and reflect, or get involved in a Watson Group in your organisation? I believe from experience, that using this variation on a knowledge management technique would benefit the company in the long run. It would highlight the importance that the firm placed on innovation and not just lip service. Law firms need to appreciate that innovation, comes from having the courage to trust their staff and to give them time to think, the ability to relax and to recognise them when they produce an idea.

We are moving rapidly from the information age to the knowledge age and it is our role as knowledge management practitioners to help people to become more innovative through our toolbox of techniques and also so that our organisations see us as providers of a value added service, rather than a ‘nice to have.’

We need to encourage and support people to share firstly knowledge and then potentially innovation by connecting with other people across the silos. Then to provide them with time and techniques to share existing, or to create new knowledge either individually or collaboratively. As a result of these, we can then in the future collect the profits from these innovations or from the law firm having faster knowledge recovery than its competitors.

But my final question is this, are we and the organisations that we work for ready for that jump or will we still see knowledge management as a nice to have?

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