Corporate legal departments have a critical role to play in advancing innovation in the industry, panellists from the law firm and in-house counsel worlds said this Tuesday during a discussion at ALM's Legalweek conference.

Meanwhile, law firms that adopt new approaches to delivering legal services – whether through technology or through other efforts to increase efficiency and lower costs – can position themselves ahead of their peers, panellists said.

During a discussion on innovation in the legal industry at Legalweek's Business of Law Forum, Linda Novosel, who serves as Blank Rome's chief innovation and value officer, likened innovation to other areas, such as diversity, in which in-house law departments have pushed their outside counsel for change.

If law firm clients demand innovative approaches from their outside counsel – and threaten to strip business from those firms that don't innovate – it would force the industry as a whole to find ways to provide better value to clients. As for her firm, Novosel said her role in part comes down to focusing Blank Rome's efforts on areas that further its clients' business goals.

"We're engaging with clients on a regular basis to figure out what their goals are, what their needs are," she said. "It's so important to understand the underlying objectives of the client. How do they define success or performing well?"

A sophisticated approach to technology, panellists said, can also make a difference in reducing spending on legal services. DHL Supply Chain Americas general counsel and chief compliance officer Mark Smolik explained that while he can't control the ever-increasing hourly rates at outside law firms, his department can require its outside firms to rely on certain e-discovery vendors, for instance.

Smolik also noted that the current state of innovation in the legal services space means that there are opportunities for outside law firms to stand out by proactively taking steps to show they're committed to finding new ways to help their clients.

Later on Tuesday afternoon, a similar idea emerged during a separate panel discussion on globalisation, with TPG Global general counsel Bradford Berenson suggesting that law firms have a wealth of data on their clients' legal needs that could be leveraged.

"An area that gets less focus, but is even harder," Berenson said, is "knowledge management – where a law firm is aggregating data, on a confidential basis, from across its clients in an industry, and using data analytics to develop actual insights for its clients."

At DHL, one of Smolik's key focuses has been providing evaluations to the company's outside firms, in which the legal department ideally partners with those firms to improve performance. He said that effort has both helped the legal department contain its costs and has strengthened the company's relationship with its outside firms.

"Our relationship is as strong as it is because we communicate," Smolik said. "The bottom-line message I have for you is there is nothing magic to innovation."

Deborah Read, managing partner of US law firm Thompson Hine, noted that her firm has implemented a mandatory budgeting policy within the firm, in which partners have a certain length of time – 60 days for litigation matters, 45 days for transactions – to craft a budget for the matter. If they don't complete the budget by that deadline, the matter is temporarily shut down and sent out for billing until the budget comes in.

Read said the budgeting requirements have helped keep partners on task and created consistency across the firm. But it's also signalled to clients and prospective clients that Thompson Hine is taking a cost-conscious approach to delivering legal services that's different from other firms. When the programme first rolled out in 2014, she said, the firm had budgets for some $14m worth of business. But now that figure has increased to some $68.5m.

"What ended up happening in our case is that we started getting real work from this," Read said.