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Impacts Of The Networked World On Contracts & Procurement

September 2, 2010

The impacts of the networked world have been signifcant for most of the world’s population, but perhaps more so for those in the world of contracts and procurement than many others. And for all of us, the maority of those impacts are not yet fully apparent.

This morning I heard a brief radio interview with two authors who have written about the efffect of the  networked world on the way that people think. One of them was claiming that the human brain is rapidly becoming  ‘rewired’, genetically adapted to the massive flows of information and the ease with which communication is undertaken. He asserts that the emerging generations are ‘no longer capable of deep thought’ and that this will have a long-term and negative impact on innovation.

The other interviewee agreed that we are faced with very real challenges in dealing with the volume and speed of information made accessible by globally networked technologies. But in his view, this means we just need to do things differently. We must adapt to our new circumstances and sort the good from the bad. For example, he cited positive aspects such as the greater ease with which people can now collaborate and the dramatically reduced time and costs of undertaking research. On the other hand, he recognized that the pressure to make decisions faster, to generate results more quickly and to adapt rapidly to the streams of new information that hit us is not just demanding, but can overwhelm our analytical capabilities.

How does this relate to the activities of a procurement or commercial group, making new market or acquisition decisions, or contemplating major bids or contracts, or perhaps undertaking investments in new process or organization? In the old world, we tended to spend a long time gathering information. It took time to research and it was often costly to obtain good data (e.g. we needed consultants, research firms and analysts to gather data for us, at significant expense). Once we had the data, we would progress to analysis and decision-making; we would develop a plan and launch into our project or initiaitve, based upon an appropriate funding or investment plan.

Today, there is a rapidly declining need to turn to traditional market researchers or analysts. Much data is free; and if we want validation or new research, it is far smarter to turn to web-based networks or analysts such as IACCM or others that I have mentioned in previous blogs, which charge a fraction of traditional fees and offer a wider perspective. But it is not just the sources of information that are changing; it is the impact of information flows and access on the way that problems are addressed. For example, the interview suggested that ‘we needd to break big concepts into smaller concepts, big problems into smaller problems’.

This thinking aligns directly with the trend we are seeing in ‘best practice’ contracting. Rather than trying to define long-term, fixed solutions, we are instead needing to develop relationship structures that are far more agile and adaptable to changing circumstances, capabilities and needs. That means much greater use of staged forms of contracting, with more gateway reviews or planned break-points. These approaches in turn demand improved methods to contain development costs – which can best be done through greater use of the networked tools that are themselves underlying the revolution in our thinking.

In truth, the world has always had more ‘gatherers’ than it has had ‘deep thinkers’. That is unlikely to change. But we are certainly at a point where leaders in our community must give active thought to the way we should deliver our services and model our tools and instruments to achieve greatest effect and benefit.

  1. For related even deeper thinking I would suggest picking up a copy of “The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion” by John Hagel III, John Seely Brown, and Lang Davison. While it is fraught with “consultant speak” there is plenty of thought protein to apply to the professional disciplines of Contracts and Procurement.

  2. Tim – I too am concerned about the negative impacts on the brain, especially for my children whose brains are still developing. However, an upside of our networked world is the massive improvements in productivity for the middle manager/knowledge worker that are enabled. I spoke with Geoffrey Moore, the author of the famed tech book “Crossing the Chasm”, a few weeks ago on this topic. He mentioned that many middle managers are dealing with the conundrum of how do I make myself more productive, especially when there is ambiguity in decision making. Video conferencing, facebook, skype, twitter – these new technologies are turning the consumer world on fire. Now, knowledge workers want to use them at work to open up channels of info not available in the traditional ERP transaction systems. The goal according to him is to reduce the time to closure of a bottleneck issue. Geoffrey will be keynoting our user conference in just a few weeks – – talking specifically on this topic. I believe Katherine is representing IACCM. I hope she finds it valuable, Tim.

    Kevin Potts
    VP Product Management and Marketing

    • Kevin, thanks for this input – and I know Katherine is looking forward to another excellent event – we always gain a lot from the Empower conference.

      I know we both have concerns about the rigidity that ERP has imposed on the corporate world – especially in the ability to cope with change and, of course, the ability to interact with the outside world. However, ‘the networked world’ often seems to have similar debilitating effects and, far from speeding decisions, often leads to either a) information overload or b) fear that just one more day, or one more search, will yield a better solution. So initself, I don’t think I agree that ‘speed’ is the answer, at least not within traditional expected outsomes. We are observing a growing fear about ‘making mistakes’, so we have to think about ways to a)reduce the likelihood and b) reduce the consequence (ie traditional risk management). To do that, the scope of decisions may need to be smaller and the analysis of problems more modular. That way, it is easier to change directions, up-front investments are lower, and the scale of loss when things go wrong is reduced. Many ‘bottleneck isssues’ will not be addressed by speed of decision-making – indeed, speed will frequently make them worse if based only on the information available today. The question is not speed; it is phasing and constant update and validation. The beauty of the networked world is tht it enables that validation to be undertaken rapidly and at low cost – so it becomes far more practical for mistakes to be identified or direction changed.

  3. Syed Khan permalink

    Hi Tim thanks for this interesting topic of the “Impacts Of The Networked World On Contracts & Procurement”. While internet has definately brought us advantage of information on fingertips, and same time superficial “google” intellegence to many.

    Now the challenge and demand has moved from creation to analysing the document,and global standards much possible through comparative and collaborative work.
    Atleast now we donot have to recreate the wheel on basic or standard terms, but concentrate of more specific , unique requirements of local or regional nature.

    Personally I donot think this will impact innovation, but surely can improve productivity through faster processing, tracking and sharing of information and documentation.

    Remember SAAS or hosted software are all part of the continuous innovation, that has made systems availability at most affordable and efficient way.

    Standardization and technological innovation has also led to increased global trade, the only draw back I see is that in future the research and innovation will be more centralized using the power of shared information.

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