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Contract & Commercial Management 2016: the year in prospect

January 5, 2016

The invention of the printing press transformed thinking and learning. It led to the overthrow of established ideas and controls. It created the environment for the industrial revolution, the opening of minds and markets and consequent transformation in commercial and social relationships. From small beginnings – essentially the production of religious works – the printing press fundamentally changed the world.

As we enter 2016, the growing influence of digitization and social media is having a similar transformational impact. It is generating a myriad of new ideas. It is challenging established systems of education and raising questions over which skills and what knowledge have value. It is undermining the power and structure of established enterprises, opening the way for lean and nimble start-ups. This recent article highlights six of those technology trends and offers a sense of the impact they are starting to have on our world.

While change does not happen overnight, it is now occurring at remarkable speed and many of the building blocks for a transformed commercial environment are in place. 2016 is a year when the contracts and commercial community will start a period of rapid adjustment, with simplification and creativity at the heart of its agenda. In this blog, I will focus on the first of those – simplification.

Contracts today are too complicated. The process through which they are created remains a mystery to many and the resulting content is often unintelligible. Yet effective communication lies at the heart of trading relationships and trading relationships are increasingly at the core of a technology-driven world, so we need practical instruments that gather and record commitments and obligations. As the referenced article illustrates, the digital age is enabling an environment in which almost anyone can participate – so we must rapidly devise a simplified and universally accepted approach.

Already we see some big trends

  • Industry standards: frustrated by the repetitive nature of many negotiations and the absence of measurable value from traditional battles over terms and conditions, a growing number of large Western corporations are promoting the development of industry standard principles for contracting.
  • Collaborative negotiation: many areas of commerce are creating increased interdependence. This demands more open and honest relationships which can be created only through greater levels of collaboration. The way that potential trading partners are selected and the timing and approach to negotiation are shifting rapidly as more and more contracts relate to the promise and delivery of outcomes and results.
  • Visualization and design: key to simplification is the ability to understand and implement. In just a few years, we will look back and wonder why it took so long to make our contracts intelligible to the mass of people they affect. As contracts become more important, social and economic pressures are combining to force a rethink in how we design, structure, compile and disseminate our formal agreements.
  • Contract analytics: technology is transforming the availability of knowledge and contracts are no exception. In the past, we had limited insight to the performance of our agreements or the impact of specific terms or relationship types. Increasingly, consolidated data is enabling detailed analysis that shows the reality of risk profiles or the impact of term and contract choices, shifting the focus of contracting towards economics and behavioral sciences.
  • Disintermediation: worldwide media is full of stories about the jobs that will disappear and the professions that will be eroded as a result of new technologies. Those who prepare, negotiate and manage contracts are clearly not immune. Indeed, as the examples above indicate, traditional tasks will in many cases disappear and in others be done by software. Rather than resisting or fearing these changes, those who flourish will be the individuals and communities that grasp the opportunities that come from change and welcome the chance to do things differently.
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