In this article we explore elements of the Strategy & Governance pillar of the Target Operating Model as introduced in our series launch: "AI for in-house legal teams: five pillars for success".
The focus of this article is how AI can fundamentally change how in-house legal functions operate but only when applied within a clear strategic framework.
It is important to recognise that strategic decisions inevitably shape and influence the other pillars of the Target Operating Model. Everything is connected, so in this article we will touch on related components, reflecting the integrated nature of legal transformation.
Introduction
From AI hype to the productivity trap: why most legal teams miss the real opportunity
Legal leaders are drowning in AI demos and vendor pitches as they address the need to show "AI progress." Yet even those that have run pilots and proof-of-concepts, are stuck in what could be called the "productivity trap"; deploying AI tools that deliver marginal efficiency gains against the existing service delivery model while missing the transformational opportunity that separates leaders from followers.
The reason? Traditional operating models built for paper, hierarchy and information scarcity are misaligned with how value is created in today's technological age. AI can change that but only when applied within a clear strategic framework.
The formula is simple: Strategy → Service Design → AI Use Cases. Get the order wrong and AI can become a costly distraction. Get it right and it becomes a competitive advantage.
The strategy-first imperative
Start with legal strategy: why AI must serve the bigger picture
Legal strategy must guide the conversation on AI; not as an afterthought or back-office concern but as the driver of business transformation. This means aligning legal strategy to business strategy and ensuring AI initiatives support broader commercial goals. It also requires moving beyond the traditional in-house legal role of risk gatekeeper to become a true strategic partner that shapes how the business grows, competes and adapts. Every day lost in the process for executing a customer contract is lost revenue for the business and impacts customer relationships. The most effective in-house legal teams do not just respond to business needs; they anticipate them, designing their operating model to reflect commercial ambition, risk appetite and market dynamics.
Too often in-house legal teams jump straight to developing an “AI strategy” in isolation, focusing on which tools to buy or which use cases to implement. This approach reduces AI to a productivity hack rather than a strategic enabler, and that is why results often disappoint. When strategy sets the direction, AI can be deployed in ways that drive meaningful business outcomes that impact the bottom line.
Contrast two in-house legal teams implementing AI for contract review. One frames success as 'making lawyers 30% faster at red-lining.' The other asks, 'how do we redesign the process to close (compliant) contracts faster?' The first achieves incremental efficiency for one set of contributors. The second reimagines the experience, accelerates revenue cycles and positions legal as a source of competitive advantage. The difference is intent: using AI not to do old work faster, but to enable entirely new ways of working.
In a world where technology is abundant, clarity of purpose is the true differentiator.
The service design revolution
From custom craft to scalable solutions: creating a tiered legal service model
A clear legal strategy, aligned to the business strategy, sets the destination; service design builds the pathway. It defines how legal services are structured and delivered so the business gets the right support (including expertise), at the right time, at the right price point. Done well, it channels work intelligently - optimising cost, speed and quality.
Historically, legal work resembled a medieval guild; highly skilled artisans working in isolation, knowledge locked in individual heads, with every matter treated as bespoke. In-house legal teams have evolved, but there is still some way to go to become truly connected, system-driven functions, built for quality and speed. The focus must be on standardising what can be standardised, leveraging AI and other technologies to enhance and scale where possible, and applying human expertise (the 'human in the loop') where it creates unique value and enables good governance. This is not about replacing lawyers, but instead about multiplying their impact.
Service design is where this shift becomes tangible. Leading teams are building tiered service delivery models aligned to their strategy and asking themselves:
- What work should the business deliver themselves, supported by AI, approved and overseen by the in-house legal function?
- What work should a lawyer deliver with a combination of human judgment and AI?
- What work needs to remain the domain of pure human expertise?
Of those last two categories, there is a decision as to whether the lawyer in question is in-house or an external provider, which is another key element of the legal function strategy.
With clear governance, the right technology and a culture that embraces new ways of working, what is the outcome? An in-house legal function that delivers faster, smarter and more predictably, with resources concentrated on what truly differentiates the business. We’ll explore the mechanics of this in more detail in our upcoming article on Sourcing & Delivery.
In service design, clarity of purpose is what transforms good intentions into lasting impact.
The AI use cases that deliver real value
Beyond efficiency: choosing AI applications that align with business outcomes
Having set the foundation through strategy and service design, it is now possible to identify AI opportunities aligned with business priorities and operational realities, and to define success upfront with measurable outcomes.
Those outcomes must go beyond simple efficiency metrics. Yes, cost reduction and time savings matter, but they are not enough. Leading legal teams track a broader set of indicators including accuracy, risk reduction, revenue enablement, user experience and business satisfaction. Measurement frameworks should combine hard data with qualitative insights on how AI is improving collaboration and decision-making. Some of the data required to demonstrate success may well sit in other teams (for example, earlier revenue from contracts closed faster), but there's no reason this cannot be leveraged. Importantly, metrics must evolve as capabilities mature and use cases expand.
This alignment of AI opportunities, business priorities and operational realities starts with an honest assessment of where the in-house legal function is at today and where it needs to be. That gap analysis should shape which AI applications deserve investment and how success will be measured. Without this discipline, AI initiatives risk becoming expensive distractions that deliver activity but not real impact.
The differentiator is not the technology itself; it is the clarity of purpose behind its deployment.
The sequence that shapes success
Get the order right: Strategy → Service Design → AI Use Cases
Winning with AI is about getting the sequence right. Start with strategy, design services deliberately and choose use cases that deliver measurable outcomes for the business. Those who take this approach are building compounding advantages in performance beyond productivity. The question therefore is not whether to adopt AI but whether you will use it to tweak yesterday’s model or to design tomorrow’s. That choice will define whether your in-house legal function becomes a strategic advantage or remains a necessary cost.
How we can help
Legal Optimisation Consulting works with in-house legal teams to:
- Develop their strategy and supporting roadmap of initiatives
- Redesign their service delivery models to align them with their strategy
- Identify and prioritise AI use cases that deliver measurable value
- Establish governance, guardrails and change plans for sustainable adoption
- And much more.
Let us help you decide the right path, protect what matters, and evolve your function to deliver lasting impact.
Contact us to learn more.
