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A paradigm shift for contracting

February 5, 2015

Every audience that I ask agrees that change is occurring at an ever-faster pace. Yet when it comes to the impact of change, most tend to see it in terms of greater complexity, additional workload or confused priorities. There are few who can express it in terms of longer-term implications to their job or its relevance and value.

Looking for a moment at the world of contracting, we can quickly see that recent years have driven more contracts, wider international use, some convergence between legal systems and practices and – in general – longer and more complicated terms. Right now, we see the growing influence of outcomes (as opposed to inputs) and efforts to develop more collaborative – or relational – approaches. The battles over risk allocations continue to rage, often made worse by regulation.

But these are all symptoms – and unless the issues at the heart of change are addressed, these symptoms will become worse and performance will decline. So what is the answer?

I believe the real point is that our world is shifting from an internal enterprise focus to an external market focus. For contracting, that means we must think less about control and more about enabling. Whether buying or selling, our contracts need to be aligned with generating targeted value. Control certainly remains important, but it is a consequence of good contracting, not its primary purpose.

An internal focus frustrates market alignment, it causes us to be driven by ‘wants’ rather than needs, it constrains innovation, sustains bureaucracy, strains relationships – and it underpins a compliance mentality. An external view is liberating – it demands a focus on understanding needs, assessing value, empowering others, enabling innovation and creating flexibility.

The big difference is a digital age. It is creating an environment where data is prolific and in-depth analysis possible, even when underlying information is unstructured. It is driving integrated communication and real-time reporting, as well as completely new methods in how we construct and disseminate information. For example, contracts can be graphic in form, or make use of videos, virtual reality – and technique that increases efficiency and understanding.

Rather than change being a problem, it allows us to re-think our role and purpose, together with the ways we perform. At a simple level, here are three ideas to consider for your work or business:

– what does it mean if our approach to negotiation became relational?

– what could I do to make my contract a business instrument, more visual and practical for users?

– how can technology capture and deliver contract-related data that would transform my knowledge and focus contracting as an external enabler?

 

 

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