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Commercial Update: 3 major questions for commercial teams

July 3, 2018

In this edition:

  • Keeping pace with change – 3 major questions for commercial teams.
  • AI is struggling to make inroads within corporate legal departments.
  • Is outsourcing in trouble?
  • California introduces its own GDPR.

Keeping pace with change – 3 major questions for commercial teams. McKinsey, the management consultants, highlight three core challenges:

  • Digital globalization: data and information now generate greater economic value than the global trade in goods. This creates two big questions for commercial teams – are we generating and using this new global currency of data and information; and do we have the commercial models and contractual vehicles to develop and sustain the right external relationships?
  • Automation: machines will steadily replace some jobs, augment others and make new ones possible. The impact on commercial roles – contract management, legal, procurement – will be massive. Are we planning for that future or will we let it overwhelm us?
  • Skill shift: McKinsey – and others – highlight the growing importance of technological, social and emotional skills. Examples are in areas such as relationship management, influencing, empathy and behavioral analysis. These are not currently critical attributes for the commercial community – so what steps are we taking to acquire them?

AI is struggling to make inroads within corporate legal departments. According to an HBR Consulting survey, just 6% have or are piloting AI tools – and many of those are in fact business tools to which Legal contributes. IACCM research suggests that the impact of AI on Legal is in fact more likely to come from outside the function, either through new enterprise applications or through external service providers.

Is outsourcing in trouble? The Economist (June 28th) quotes Serco CEO Rupert Soames who recently depicted the world of outsourcing as being a mix of ‘the good, the dumb and the desperate’. While there is no question that outsourcing drove major cost reductions and efficiency improvements in the past, those benefits may be drying up. In the public sector especially, questions are growing over future outsourcing. Public procurement policies that constrain supplier selection criteria and limit post-award innovation and change are driving a culture of low cost, with inevitable impact on quality and supplier integrity. The big question: is private sector experience actually very different; will we see an erosion of outsourcing, or does its future simply depend on developing improved commercial models and terms?

California introduces its own GDPR. Effective January 1st, 2020 the state of California will introduce its own version of GDPR, drawing on many of the same principles as the legislation introduced by the European Union in May this year. The new law aims to protect the privacy of consumers and has met with mixed reactions from industry. Already some – for example Microsoft – have indicated that they plan global compliance with GDPR. Others are more resistant – for example, just last week, Facebook moved 1.5 billion records from its European headquarters in Dublin.

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