Adjusting to a digital age
IACCM undertakes regular capability assessments for its corporate members. We have data from hundreds of different organizations around the world, enabling individual results to be benchmarked against both global and industry standards.
Out of the nine areas that we test, one always stands out as a source of weakness – and that is the field of automation and knowledge management.
Given the focus by business and government on digitization, this is a serious weakness. It is certainly true that failure to invest in technology means that contract management remains highly inefficient and commercial policies and practices are too often based on instinct rather than facts.
However, on a positive note, the lack of past investment means that in general there are few embedded heritage systems, so for many, digitization is a green-field opportunity. This represents a real opportunity and a few leading companies (‘the dynamos’) are pushing ahead fast with transformation initiatives.
The possibilities are exciting because digital technologies revolutionize how we operate and the impacts we can have. There are four areas to consider:
- Operations and efficiency. This is largely about changing processes in ways that reduce cycle times and generate resource savings.
- Business model innovation. New commercial models are enabled by technology. There will also be impact from contract and negotiation analytics and understanding trends in required business capabilities.
- Technology innovation. Digital can reduce costs, change the nature and impact of risks and their management and enable simpler, more rapid integration across systems.
- Customer experience and engagement. Much deeper insight and understanding of purchasing methods and behaviors will create sources of competitive advantage through incremental value and ‘ease of doing business’.
It is essential to recognize that digitization is not a functional initiative; it transforms the approach to doing business. Since winning and awarding contracts lies at the heart of every business, the field of contracting and commercial management is a logical place to start. And that is exactly what happens during our capability workshops – the realization that the contracts and commercial function is transforming from a largely manual, operational role to a position of strategic leadership.