One day when I was a young environmental law associate at a law firm in Austin, Texas, my managing partner asked what I thought was going to be “hot” in five years. He asked me to write up a short presentation on whatever I dreamed up and we and a few other lawyers in the office would present our ideas to a gathering of real estate industry representatives at a luncheon (our treat). My prediction was that the Endangered Species Act, which was not even on the radar screen in that part of Texas and hadn’t accounted for more than a few billable hours for me at the time, was going to become a major regulatory hammer throughout Central Texas and that some of the compliance approaches being tried in California could be adapted to our area. It turns out I was right, and the ESA consumed the following eight years of my law practice and for twenty years after that has remained at the center of my academic work and occasional consulting.

Law firms hosting luncheons for business development is nothing new. What was different about the one my managing partner threw together was that none of the topics we presented that day was generating any billable hours at the time. Rather, we were telling those gathered in the room something like: We think this set of issues is going to become a problem for you in a few years, and we are working on the solutions now so that if those problems do in fact surface, we are ready to help you navigate them. We were, in other words, engaging in research and development.

BusinessDictionary.com defines R&D as “systematic activity combining both basic and applied research, and aimed at discovering solutions to problems or creating new goods and knowledge. R&D may result in ownership of intellectual property such as patents. In accounting for R&D costs, the development costs may be carried forward but the basic and applied research costs are often written-off as incurred.” What we did that day almost perfectly fits this description–we deployed lawyers in the firm to discover solutions to anticipated legal problems, we demonstrated ownership of that problem-solving knowledge, and we wrote off the costs of developing and marketing that knowledge. It paid off in the form of clients and revenue not only for me but for several other lawyers in the office. We got the work when the problems materialized because clients knew we had already thought about the solutions.

What was missing, however, was that nothing about that process was the result of a systematic activity.  (more…)