As AI reshapes legal work, forward-thinking law firms must simultaneously rethink their future business models, which likely includes some combination of the billable-hour, value-based, or frontier model and align their talent strategies accordingly
Key highlights:
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Three emerging business models, one unresolved tension — AI is compressing time, which directly threatens the logic of billing by the hour, but the smartest law firms are not waiting for a winner to emerge before building their strategic foundation.
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Technology strategy and talent strategy are the same conversation — The talent model must be designed in tandem with the business model, even amid uncertainty, because many of the structural conditions of legal work are changing all at once.
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The next great lawyer will lead with human skills, not tool proficiency — Forward-thinking firms are doubling down on their lawyers’ curiosity, judgment, client skills, and relationship-building as these capabilities are those that AI cannot replicate.
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Every law firm is asking how AI will change the way legal work gets done; but Norah Olson Bluvshtein, Chief Legal Operations Officer at Fredrikson & Byron, P.A., is asking a more consequential question: How will AI change the way legal work gets paid for?
Planning around 3 law firm business models in the AI era
AI is making law firms more efficient, of course, but efficiency alone does not answer the harder question of how to capture value and how AI-enabled legal services get priced. Olson Bluvshtein sees three paths emerging in law firms:
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- Billable-hour (still) — The first is the path of least resistance. Firms stay anchored to the billable hour, raise rates, and use AI to move faster and handle more volume, with the idea that more volume will make up the revenue losses of faster work. With this model, however, the client-firm incentive misalignment remains intact, and the fundamental tension between billing for time and AI compressing that time never gets resolved.
- Value-based pricing — The fixed fee pathway also is likely to gain further traction, as it’s one that many AI-native law firms are pursuing. In this model, value-based pricing creates a natural meeting point between firm and client interests because when incentives align, everyone wins, Olson Bluvshtein explains.
- Frontier models rule — The third scenario is more speculative but worth watching. As foundational models improve, the need for expensive legal-specific tools may diminish. “I could see a scenario in the future in which we don’t necessarily need all the legal-specific tools that are out there,” she says. Even though technology costs historically come down, cheaper tools do not make the business model question disappear, Olson Bluvshtein notes.
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Candidly, Olson Bluvshtein admits that “the truth is probably somewhere in the middle,” and the firms best positioned for any of these futures are the ones building the strategic and operational foundation now rather than waiting for the answer to become obvious.
Indeed, the most thoughtfully designed business model will fall short without the right talent foundation to support it. “Technology strategy and people strategy are not separate conversations,” Olson Bluvshtein says, adding that they are key parts of the same strategy.
Legal innovation consultant Anastasia Boyko reinforces this point in a recent podcast, noting that many aspects of the structural foundation under which the legal profession has operated are changing all at once. This means that addressing the technology strategy separately from the human side, slice by slice, does not make sense.
Boyko says she encourages law firms to take a step back and approach the problem by identifying what the firm will need first in the future and then plan the talent and tech part for that reality.
Aligning the talent model to the future business model
Not surprisingly, a key challenge for law firms right now is that the future is uncertain. Therefore, it is difficult to design a talent model for an uncertain future and an unknown business model. At the same time, there are some known facts, but the unknown aspect is when these certainties will occur.
More specifically, what is known is that there is mounting pressure on the three possible law firm business models because AI is automating the tasks of past junior associates, clients do not want to pay for tasks completed by junior associates, and clients are bringing more legal work in-house, often until the time when the almost final deliverable is handed over to outside counsel for final review.
To explore the right talent model, one experiment that Boyko suggests is to expand the junior associate experience to include rotations through back-office functions, such as knowledge management, professional development, and technology functions.
At law firm Fredrikson & Byron, Olson Bluvshtein says its associate development program is evolving to prepare for the uncertain future based on three current tactics:
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- Building AI fluency — This is a near-term imperative that will soon become table stakes. The goal is to move past basic adoption into something more sophisticated and durable. To enable this, the litigation and M&A practices at Fredrikson are actively working with a variety of tools to test prompts that they can then share more broadly with other teams, while also identifying how AI policy guidance will evolve.
- Accelerating the development of legal judgment — Shortening the learning curve for developing legal judgment, which includes the ability to supervise and efficiently validate AI-produced work, is the second essential part of the firm’s talent development framework. Olson Bluvshtein is candid about where things stand. “It has not fully happened yet,” she says. “But building the training infrastructure to operationalize this is a stated goal for the year ahead, including formalized curriculum around effectively and efficiently supervising AI output.”
- Being hyper-focused on the development and recruiting of human skills — Doubling down on the human skills — including client development, negotiation, relationship-building, and sound judgment — that technology cannot replicate are the capabilities that will define the next generation of great lawyers, regardless of which law firm business model ultimately prevails.
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This same philosophy is shaping how Fredrikson recruits. Rather than screening candidates for a checklist of AI tools, the firm is prioritizing curiosity, openness, and the ability to demonstrate human skills. Indeed, the firm is looking for lawyers “who are really good at those human skills” and who bring the kind of judgment and adaptability that compounds over time, explains Olson Bluvshtein.
Boyko underscores a similar approach to skills. “Right now, the skills needed to be a good lawyer are no longer those rote skills that AI can automate,” she explains. “Instead, they are the people skills, the operational skills, and the client skills.”
Of course, moving from broad experimentation to disciplined, firm-wide maturity takes time, and the gap between early movers and late adopters is already widening. Those firms that will define the next era of legal services already are asking how AI changes the way it delivers value and what skills its lawyers will most need — and not just looking for the next tool to buy.
You can learn more about the challenges facing legal talent here
