Our last post introduced the principles underpinning a valuable strategy tool – co-creation. We noted that co-creation is a tool particularly well suited to sophisticated legal practices for two reasons. First, in many respects co-creation principles align well with attorneys’ instinctive approach to managing client relationships. And second, co-creation is proverbially “just what the doctor ordered” relative to having an effective tool to respond to the Association of Corporate Counsel’s (ACC) Value Challenge.
As we noted in that last post, co-creation is built on four principles: open dialog; access to information; shared risk assessment; and transparency (especially on costs and pricing practices). We promised to share a few real world examples of how those principles were put into play by forward-thinking law firms and partners – working collaboratively with clients. We share three real world cases below (disguised sufficiently to protect both the identity of the law firms and their respective clients).
Managing A Large, Growing Patent Portfolio
A global technology company, spending well into the seven figures to manage and expand their patent portfolio in the U.S. (exclusive of litigation costs), approached their leading intellectual property law firm looking for an approach that would save money, while effectively supporting a core business strategy that highly valued a strong and growing portfolio. The existing relationship was long-standing and strong. The law firm currently supported more than 60% of the company’s patent portfolio. Further, the primary relationship manager was predisposed toward open dialog, access to information, and shared risk assessment.
Supported by solid financial analysis on the law firm side and progressive thinking in the general counsel’s office (including the associate GC for intellectual property), the following solution was crafted
- An open dialog regarding the full scope and nature of the company’s patent portfolio – and the law firm’s technical capabilities – led to a realization that efficiencies could be gained by having one firm support the entire portfolio in the U.S. (as well as much of the rest of the world). Essentially, consolidating the work with a single firm would free-up resources in the GC’s office and the law firm and would streamline docket management.
- The law firm already provided real time visibility to the client’s patent docket. By consolidating all the work in a single firm, it also became feasible to have secure access to the underlying documents (e.g., applications, USPTO responses, etc.) across the law firm’s and the client’s networks.
- Real savings emerged from shared risk assessment. The company had a highly sophisticated strategy for its patent portfolio. They had a very clear sense for which patent families were most valuable and/or integral to that overall strategy – and the law firm became a valuable partner in helping to assess both value and risk. That in turn enabled the firm and the company to deploy the right level of resources to each element of the patent portfolio – especially in areas driving the greatest costs (e.g., the application docket and management of the pipeline of new technologies and patents).
- Entrusting the entire portfolio to a single firm enabled the company and the law firm to create a rational budget for managing the entire portfolio (i.e., via transparency on costs and pricing). That budget included meaningful insights into what work should be done in the GC’s office and what should be done at the law firm – in the process optimizing total costs to the company. And, because the right work was being done in the right place by the right people (including administrative support), the law firm was able to maintain profit margins even as the company’s total spending on outside counsel declined.
Controlling Costs on Recurring Litigation
A large petro-chemical company with recurring litigation in the toxic tort arena was looking for a way to gain greater control over the costs associated with that litigation. Costs ranged from the mid-seven figures to the low eight-figures (excluding judgments and settlements) in any given year.
- The company’s general counsel started a dialog with the lead partner of a range of litigation matters for the company (across multiple sub-specialties – including some toxic tort work). He was open about his objectives: to save money overall; and to introduce some predictability in his budget for this recurring work.
- The relationship benefited from an established set of tools that provided access to documents (via a secure document management system) and to regular status reports on all open cases.
- The partner was well respected for his ability to understand the risks associated with complex litigation – and his ability to cut through complexity to put a value on cases. That included an ability to assign solid ranges to the potential outcomes for any given case, as well as an ability to develop litigation strategies to manage cases toward controllable outcomes. This provided a dual ability to better manage ongoing litigation costs and achieve agreed upon outcomes vis-à-vis judgments and settlements. Settlement decisions could be made more strategically as a result – better managing risk and reducing the company’s total cost of litigation (not just the cost of outside legal counsel).
- The relationship was characterized by a high level of trust (and transparency). Thus, when the company approached the partner looking for savings and predictability, he suggested putting all of the recurring work on a single fixed annual budget. Time would be tracked against the budget and the budget would be reset annually – some years up and some years down (a real reflection of mutual trust). As a means of saving the company significant legal fees, the partner suggested staffing routine, but labor intensive aspects of the ligation with low cost contract attorneys (rather than his firm’s higher priced associates). That took money out of the law firm’s hands, but created additional credibility and trust – as well as substantial cost savings.
Innovative Financial Services Products
One of the largest banking and financial services companies in the U.S. was searching for innovative product ideas to respond to the post-financial crisis banking environment (e.g., low interest rates, higher reserve requirements, more stringent regulatory oversight, etc.).
- General Counsel at the bank began a dialog with partners at one of its most forward thinking law firms. The bank and its competitors were responding to the low interest rate environment by adding a substantial quantity of government bonds (in particular municipal and other tax advantaged government bonds) to their balance sheets. However, the process through which those assets were traditionally created (e.g., underwriting and disclosure by investment bankers, public offerings and market making, etc.) was both cumbersome and costly. The bank was looking for a creative solution to simplify and streamline that process.
- That initial dialog led both the bank and the law firm to open access to the key stakeholders at the bank (e.g., investment bankers, commercial bankers, law department, etc.) and to subject matter experts at the law firm (e.g., securities, public finance, banking/bank regulatory, etc.). The combination of dialog and access led to the development of what amounted to a new product in both the banking and public finance world – direct purchase by the bank of newly created government bonds.
- The success of the product was strongly influenced by the ability of the bank and the law firm to effectively manage risk. That included strong risk assessment of the municipalities and other entities originating the bonds (i.e., no distressed municipal debt in this product mix). It required effective documentation of underlying disclosures by the issuing entities, as well as other regulatory compliance (another form of risk mitigation). And, to manage the longer run balance sheet risks, it required the creation of products with appropriate durations to protect both the borrower’s and the bank’s balance sheets.
- Creating what amounted to an entirely new product (both for borrowers and lenders) raised critical transparency questions. Should this product be considered highly proprietary (which in the world of financial services meant it would take a few quarters before other banks figured out their own way of offering the product) or should it be trumpeted as a new industry standard (enabling faster followers)? In addition, having created a product that was essentially a winner for all stakeholders (borrowers, the bank and the law firm), how repeatable and predictable could the process become? Direct purchase of municipal (and other public) debt has been moving rapidly toward industry standardization (answering the first question). There are tremendous efficiencies in the product/process, however the unique qualities of each asset (i.e., municipality/project/etc.) limit how entirely repeatable the process can be (partially answering the second).
Hopefully these three examples – across markedly different legal specialties and markets – help to provide some insight into how you might adopt and apply a co-creation strategy in your own firm and/or practice. At a minimum, co-creation ought to be in the “strategy toolbox” of every law firm of reasonable size and capability.
As always, we welcome your comments below and via telephone (312) 543-6616 and email (email@example.com).