In a difficult, complex, and highly volatile economic context, protecting income, assets, and employees is more important than ever for organizations. To prosper in this more challenging business climate, effective management of contractual commitments is even more vital. The rise of new technologies offers opportunities for automation, simplification of processes, and leveraging of contract data. Legal departments often play a pivotal role in these projects, which also involve other business departments. However, it is important to know how to implement these technologies and master the changes they entail to fully benefit from them.
We support our clients, from framing business needs to implementing technological solutions, for the digitizing of the contract life cycle. Drawing on this experience, we share our insights on 4 pitfalls to avoid in order to succeed in this transformation.
Pitfall #1: Wanting to digitize "from bottom to top" all your contracts
Our finding: Companies that undertake projects to digitize contracts are often multinationals with complex organizations and diverse business areas. Yet, contracts are everywhere, and they formalize the relationship between these companies and their business stakeholders: customers, suppliers, business partners, intermediaries, etc. Depending on the company and its business model, the issues and value of each of these contracts vary greatly.
Pitfall: Digitizing all contracts, without prioritizing those with the most important and relevant issues for the business, leads to diluting some of the benefits brought by the transformation.
Our advice: Focus on contracts with major business issues, validated with members of the management team. For example, in the luxury sector, intellectual property and management of real estate leases will be major issues, while in the hotel industry, franchise contracts and purchases will be prioritized. In regulated industries like Lifescience, intellectual property and collaboration agreements are key.
Pitfall #2: "Bypassing business staff" during the collection of needs
Our finding: The full life cycle of contracts is rarely explained and structured, with business staff and lawyers often working in silos.
Pitfall: Limiting the scope of the project to the collection and archiving of documents, while the value lies in the fluidification of the entire cycle and in the exploitation of data. Too often, workshops on specifications are held between a solution provider and the legal department, with limited involvement of business staff who initiate the contract lifecycle and eventually manage the contractual commitments, after signature.
Our advice: Thoroughly evaluating the life cycle of each contract, involving operational staff, and with all the stakeholders of the company (Legal Services, Purchasing, Finance, Sales, Marketing, IT, etc.), to understand the end-to-end process and identify the steps to be integrated into the platform.
Pitfall #3: "Biting off more than you can chew" on the data to be transferred
Our finding: During its development, a group may find itself overwhelmed by scattered contracts, in several storage systems. Contract management sometimes simply results in the archiving of documents. However, the value of contracts lies in the information (metadata) they contain, which can be used by the various business lines. For example, during the Covid pandemic, quickly finding contracts containing "Force majeure" clauses was critical.
Pitfall: Trying to capture "as much" metadata as possible from a contract without targeting the business can clog up the project schedule and lose the business value proposition. For example, the management of a franchise contract may be limited to fifty or so essential metadata out of more than two hundred possible metadata to accelerate extraction of contract data.
Our advice: Target the priority metadata according to business needs (for example: automation of contract creation or a regulatory reporting obligation). Artificial Intelligence can be useful to accelerate the recovery of historical contract data and the capture of key information for new contracts.
Pitfall #4: "Having blinders on" focused exclusively on the tool
Our finding: With the proliferation of contract management solutions, choosing the one that best suits and is most adapted to its future users is a crucial issue in the project. Due to insufficient adoption levels, too many projects still die a slow death, without delivering the promised benefits.
Pitfall: Selecting a solution without first defining the users' needs in terms of processes, metadata and interface does not allow the right tool to be chosen. Similarly, not including future users in tool demonstrations (POCs) potentially hinders widespread adoption of the solution.
Our advice: Engaging in strong change management from the beginning of the project by closely involving operational staff, especially during the selection process to test their user experience. Then by defining a progressive transformation roadmap, along with robust adoption KPIs.