Henry conceded the preparation time with the players had probably not been long enough after naming his team to take on Brian O'Driscoll's men.
"We haven't been together very much," he said.
"We had three training runs before the Fiji Test and a couple last week so we're still putting things together and there are still areas we need to work on and making sure that everyone is on the same page.
"That takes some time at Test-match level. When you're in a Super 12 side you've got a couple of months before the first game. When you play a Test match you have only got a couple of weeks so there is a bit of pressure to get all those things right."
The All Blacks' only match leading into the three-Test series against the Lions, which kicks off on Saturday in Christchurch, was a run-out against Fiji earlier this month.
That encounter at North Harbour Stadium turned out to be little more than a training run as the New Zealanders trounced the visitors 91-0 with debutant wing Sitiveni Sivivatu running in four of the 15 tries scored.
Henry, the 2001 Lions coach, admitted it had been far from ideal but was not unduly worried given the lack of matches before their 36-3 victory over world champions England this time last year.
"The Fiji game was not as big a challenge as we expected so you could say we are under-cooked," the All Blacks coach said.
"But we had no warm-up game before England last summer and that didn't seem to be a problem."
Henry however, is expecting greater things from the Lions.
"I think on paper this will be the best team we will play against. It should be too. You're playing against four countries all in the top eight or 10 in the world and one is the world champions.
"On paper they will be the strongest side we play. It's just a matter of whether they can put it together and I'm sure they will by Saturday."
The team to take on the Lions shows five changes to the starting team that faced Fiji with Leon MacDonald making his All Blacks return after a two-year absence, and lock Chris Jack, prop Carl Hayman, hooker Keven Mealamu and Justin Marshall all returning to the starting line-up.
MacDonald quit New Zealand after the 2003 World Cup for a spell in Japan but his form during this season's Super 12 and his performance in the New Zealand Maori win over the Lions earned him a recall.
It was one of a number of tough decisions that faced Henry and his selectors, Sir Brian Lochore and assistant coaches Wayne Smith and Steve Hansen.
MacDonald's inclusion meant full-back Mils Muliaina was dropped to the bench while Marshall again got the nod over his rival Byron Kelleher.
Aaron Mauger and Tana Umaga will line up in the midfield meaning Umaga's Wellington team-mate Conrad Smith, who had an excellent Super 12 season with the Hurricanes, missed out altogether.
In-form winger of the Super 12 Rico Gear will also start from the bench with Doug Howlett's experience earning him selection, while the impressive Sivivatu starts on the other flank.
"At full-back I think Leon is just a wee bit ahead of Mils at the moment in form. He's had an exceptional Super 12 and had a great game for the Maori against the Lions and Mils has had a couple of little injury problems," Henry explained.
"Mils Muliaina was the star player of the tour at the end of last year and it's disappointing for him I'm sure. But we had to make that call.
"On the wing between Doug and Rico it's an experience call and at half-back, well we're playing in Christchurch and Justin Marshall has been brought up here as a rugby player and it's his home turf.
"He will play very well on his home turf I'm sure and that was a consideration.
"In the centres we could have gone for a number of combinations but we've gone for a guy who will give us a right kicking boot in Aaron Mauger and obviously the skipper (Umaga) had to be there.
"It's probably the most difficult Test selection we've been involved in with particularly in the backs. It was very difficult but that's a good problem. If we didn't have competition for places we wouldn't be as strong."
All Blacks team to face British & Irish Lions: L MacDonald; D Howlett, T Umaga (c), A Mauger, S Sivivatu; D Carter, J Marshall; T Woodcock, K Mealamu, C Hayman, C Jack, A Williams, J Collins, R McCaw, R So'oialo.
Replacements: D Witcombe, G Somerville, J Gibbes, S Lauaki, B Kelleher, M Muliaina, R Gear.