In April 2026, the New York Times profiled the founder of Medvi, a new AI-enabled telehealth company selling weight-loss drugs. So far, Medvi is on track to do $1.8 billion in revenue this year with just two employees. Like every fast-growing company operating in a highly regulated industry, Medvi has significant and growing legal exposure. And like most companies at that stage, its founder is not looking to become the quarterback of a complex legal function.
Every company needs a legal partner who understands its business and takes ownership of that exposure as it grows. Unfortunately, the legal market has never built that.
This market gap is not AI-driven. Companies have always sought to focus on their core business. As legal needs grow and regulatory complexity increases, companies have been forced to build internal legal expertise—not because they wanted to, but because the market never offered a better option.
The Model Was Never Built for Clients
The prevailing legal model is the billable hour, which doesn’t just misalign incentives: It structurally prevents firms from delivering what clients want. Compensation structures reward hours, not outcomes. Origination credit belongs to someone who may no longer provide any value to the client. Referring a client to a colleague inside the firm often carries more personal financial risk than reward for the lawyer doing the referring. The result is that firms with dozens of practice areas may serve the same client as a series of disconnected engagements, while the client bears the cost of coordinating across teams that have no formal incentive to work together.
The model doesn’t fail just clients. It fails the lawyers who execute it. The lawyer who solves a problem quickly is penalized. The lawyer who bills endless hours is rewarded. Law firm partners are expected to be deep subject matter experts who bill substantial hours, originate new business, manage client relationships, mentor junior lawyers, and now drive technology adoption, all within a compensation model that rewards none of those activities as much as it rewards billing hours. That structural impossibility is part of the problem. Good lawyers know that this dynamic creates a fundamentally flawed structure. It is part of why capable lawyers have been leaving Big Law in meaningful numbers—not because they don’t want to do excellent work, but because the model and resulting culture prevent them from doing it in a way that feels aligned with real client value.
Corporate and institutional clients are growing their internal legal departments and bringing more work in-house because there is no compelling alternative. Thomson Reuters’ 2026 State of the Corporate Law Department Report confirms what the in-house trend has obscured: Companies do not want to be in the business of managing legal services. Despite years of insourcing, nearly half of general counsel cite resource and staffing constraints as their top barrier to delivering value, and only 17 percent of C-suite executives view their legal department as a significant organizational contributor.
General counsel have been handed an impossible job. They are expected to be strategic legal partners to the C-suite while managing outside counsel relationships, coordinating legal work across multiple firms, and serving as the quarterback of a function that their organization has never fully resourced. Thus, the burden of identifying, sourcing, and coordinating legal services sits entirely with the client.
The overriding issue with this situation is that most legal risk is invisible until it becomes a crisis, and the current model offers no mechanism to change that.
AI Has Not Changed the Fundamental Dynamic
Generative AI has not created a crisis in the legal market; it has revealed one that was already there. And it is arriving at exactly the moment when legal complexity is accelerating.
Law firms are responding by investing in AI to protect and extend the existing model. They are offering faster research, smarter document review, and more efficient billing, all at higher rates. The goal is for their lawyers to do more of the same work in about the same way with the same economics intact. Separately, AI-native companies are going directly to clients, bypassing law firms entirely for commoditized work. Sequoia Capital has mapped $20–25 billion in legal transactional work, contract drafting, nondisclosure agreements, and regulatory filings—all work that AI can now deliver directly to the client.
What these two responses have in common is that neither changes the fundamental dynamic. The client is still responsible for knowing what it needs, assembling the solution, and managing the outcome. That is not a legal partner. That is a client managing its own legal exposure with better software.
Consider a fast-growing healthcare company operating across multiple states. Under the current model, the company may separately retain employment counsel, regulatory counsel, privacy counsel, litigation counsel, and commercial contract counsel, while its internal legal department coordinates the risks and communication between them. The client remains responsible for connecting issues across the business, identifying emerging exposure, and determining when legal intervention is needed.
A different model would reverse that burden. A law firm built specifically around healthcare companies would proactively monitor regulatory developments, coordinate legal strategy across disciplines, identify patterns before they become disputes, and manage recurring operational legal needs through integrated workflows and technology-enabled systems. Instead of paying multiple disconnected providers to react to problems after they emerge, clients would operate within a coordinated system designed to identify risk earlier, reduce duplication, accelerate response times, and lower the overall cost of managing legal exposure. The client would no longer be assembling fragmented legal services. The legal partner would own the coordination of the legal function itself.
The Model That Has to Be Built from Scratch
The client shouldn’t have to diagnose its own legal exposure. That responsibility should belong to a legal partner whose primary business is understanding the law, anticipating risk, and getting ahead of risk before the client ever has to ask.
A full-service law firm built around a specific industry vertical and using AI where it makes the most sense starts from a blank page. The model is designed around a complete understanding of what clients in a specific industry actually need across their full legal function, then built up from there using best practices from business and professional services firms. That is a different exercise than redlining a traditional law firm model. The compensation structures, workflow systems, client service layers, and technology decisions are all made fresh with client experience and outcomes in mind. Lawyers focus on what only lawyers can do. Dedicated professionals manage workflow, track obligations, and anticipate what clients will need next. Generative AI is deployed where it drives the most value for the client, eliminating the friction that inflates cost, slows delivery, and prevents proactivity in legacy models. Compensation is tied to outcomes and collaboration. The firm’s team sees the full picture and takes the work off the client’s plate entirely.
That model cannot be built from within a traditional law firm. The compensation structures, origination credit systems, and partner economics make this structurally impossible to build within most existing firms—not because the desire doesn’t exist, but because the incentives prevent it. Generative AI is making the economics of the traditional model less and less viable, and creating room for a model that law firms never had a financial incentive to build.
The structure of legal practice has been built on the same foundation since the Cravath System took hold in the twentieth century. The billable hour reinforced it, but it seems inevitable that the profession will fragment, and multiple models will emerge.
Building a legal services operation that actually delivers what full-service law firms have always promised is what corporate clients want, but what the market has never produced. The ability to build it exists and that makes this a race. The people who move first will be the ones who finally give the market an option that it has been asking for.
