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Digitizing contracts

September 19, 2018

It’s 25 years since big corporations started to automate and streamline internal data flows and communications. Given the impact that these changes had, it doesn’t take a brilliant mind to recognize the scale of cost and inefficiency associated with today’s semi-automated external communications and the virtual absence of automatically shared data. Essentially, the success of an organization such as Amazon is in large part because it has automated commerce, stripping out cost and simplifying the  customer and supplier experience.

Streamlining performance between organizations 

At IACCM, we have designated these inter-organizational tie-ups ‘RRP’, or relationship resource planning. The concept is increasingly understood by technology developers and executive management, but progress is slow. The complexity of contracts is a major barrier; right now, they are defying efforts at digitization due to a lack of standards in content, structure and design.

It is more than 50 years since Thomas Watson, founder of IBM, observed:”Design must reflect the practical and aesthetic in business, but above all, good design must primarily serve people”. And that, of course, is where the vast majority of contracts fail. Not only are they unintelligible to large swathes of the population, they are also unprogrammable, which means we cannot readily extract and communicate the data within them.

But that too is changing fast. Not only is there growing pressure to ‘design for users’, but advanced systems are increasingly able to extract and disseminate the data from contracts. Such systems are starting to consolidate and distribute information about performance, providing dynamic reports about individual agreements, and also across multiple agreements.

A pre-requisite to survival

The momentum is increasing and the pace is sure to accelerate because automated commerce will soon be a prerequisite to survival. Managing contracts is, for many organizations, their primary driver of costs. Even in manufacturing, where a relatively high proportion of contracts are for commodities and components, it represents a significant overhead. IACCM conferences and meetings this year have been focused on offering our members these insights to the future and connecting them to the resources that can equip them for success. Our Americas conference will continue this process.

In my next few blogs, I plan to feature several successful commercial groups – buy and sell – grasping this digital age and the opportunities it represents.

 

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