Embracing Digital Contracting

When I talk to technology leaders about their priorities as they build and deploy solutions for their organizations, I’ll usually hear a long list. In the age of digital transformation, IT is asked to support just about every part of the business. They are enabling product development, accelerating go-to-market teams in sales, service, and marketing, and equipping executive strategists with new data insights and capabilities.

They are focused on making just about every part of the company faster, smarter, and more connected. With one big exception: legal.

Why?

A Silo No Longer

Legal has traditionally been treated as the ultimate silo, seemingly operating on its own. Legal technology has been seen as specialized and limited, with little relevance to the rest of the company.  A typical business value model wouldn’t even consider the legal dimension, focusing exclusively on processes in the rest of the business that impact top-line and bottom-line metrics.

If this was ever a valid approach, it certainly isn’t now. Continuing to isolate so-called “legal technology” in this way has serious implications for your overall digital transformation strategy.

This is because every operational process across a modern organization involves legal agreements of some kind – agreements to sell, to buy, to provide services, to protect information. Applying technology to improve and innovate there seems an obvious foundational consideration that impacts business value across the board.

The bottom line: If a process affects virtually every user at your company and is a necessary precondition to getting work done at scale, it stops being a “legal problem.” It becomes a critical area that you need to invest in and optimize. Saving even a little time and cost from all of those agreements can add up to a potentially large impact. So figuring out a better, faster, and smarter way to enter into and manage contracts and agreements needs to become a priority.

And yet, contract lifecycle management (CLM) has historically been marginalized or ignored, pigeon-holed into the domain of the legal team as a local solution for local challenges. Organizations have viewed CLM as either wholly unnecessary, or as a “necessary evil” imposed by risk considerations, regulatory compliance, or the perception that the legal process is largely disconnected from “the business.”

It hasn’t helped that CLM solutions have for many years been complex, hard to work with, and frustratingly difficult to implement. Rigid and limited, they are typically unfriendly and intimidating for non-experts to use.

A New Approach

Until now! Because in just the last few years, we have seen a sea change in CLM innovation. A new wave of digital contracting solutions has emerged that is changing the very nature of contracting.

Digital contracting is a concept that takes a broader, more holistic perspective than traditional CLM. It recognizes that what matters most isn’t the contract itself, but rather the rights and obligations that it specifies, and the people that interact with it and around it. In other words, what is most important isn’t the document, but the agreement and expectations that it represents and how it helps guide and support the human beings that depend on it, both inside and outside of your organization.

Starting from this perspective, true digital contracting platforms put the focus on people, offering truly user-centric experiences built around their context and needs. So instead of requiring everyone to have legal skills and understanding, for example, the platform should be capable of enabling occasional users to create and execute simple agreements on their own. And business partners and counterparties should be able to collaborate seamlessly in the digital contracting process.

Another key difference that digital contracting offers versus CLM: it allows companies to tap the priceless data stored in their agreements. While traditional CLM essentially keeps the data tied up in the documents, making it difficult to spot trends and opportunities across your contracts, digital contracting mines that data for valuable insights on your organization’s purchasing behavior, selling patterns, and risk exposure.

Contracting, Digitally

Technology leaders are using digital contracting platforms to add critical scale, impact, and capability to their organizations. Don’t be left behind. If you are ready to get started in your digital contracting journey, you will need to build the right team and pick the right solution.

Assemble your team.

Launching a CLM solution used to mean working primarily with legal.  Launching a true digital contracting platform in the right way requires that you bring stakeholders from across the business to the table. This represents both an opportunity and a challenge.

You will need to manage digital contracting as an enterprise initiative. The questions you ask will need to go far beyond, “Hey legal team, how do you want to manage redlines?” You’ll need to explore questions like, “Hey sales rep, when in the deal cycle do you need to kickoff agreement type X? Agreement type Y?”, “Hey buyer, do you trigger POs during or after vendor onboarding?”, “Hey account manager, where and how do you need insights into the overall obligation footprint with a global account?”

Effective, impactful approaches in these areas will require both business leads and legal teams to act as stakeholders in the digital contracting initiative. If you are planning a comprehensive transformation program, then sales, procurement, HR, and legal need to rally together to align on high-level process goals, governance questions, and value metrics that will be used to drive priorities and measure success. But, typical of an enterprise-wide initiative, you’ll need to balance the cost and time of this analysis with the importance of realizing value quickly in order to sustain momentum.

Sustaining the focus and investment from these stakeholders will require an executive champion (or champions). Ideally a COO or CIO or equivalent will take up this mantle in recognition of the foundational nature of digital contracting across the business. A champion from legal will only demonstrate legal’s commitment and may not sustain the imperative for other business units.

Choose your weapons.

Not all contracting solutions have truly aligned themselves to this digital contracting perspective. Some have taken a legacy model and slapped new marketing labels on the package. Some are still stuck in the world of transactional legal models without regard for broader process concerns. Some present a customization-heavy approach that places the vendor or IT or both as bottlenecks for enhancement and innovation.

Assessing a digital contracting solution involves the usual partnership questions about the vendor – are they viable, do they have a healthy customer and partner community, are their pricing and support models aligned to your needs, etc. But digital contracting solutions in particular need to be assessed in light of their role as foundational, horizontal platforms.

One approach that I’ve found efficient as a “sniff test” for digital contracting platforms is a flavor of the “80-20” rule. A solid digital contracting platform should enable the commodity “80%” use cases with out-of-the-box, self-service capabilities. The platform tools should be generalized to support the spectrum of common contracting scenarios – from click-to-accept NDAs to basic e-signed order forms to highly negotiated agreements with multiple approvals and signers. These capabilities need to be accessible enough that your users can configure and execute these contracting scenarios without needing special skills from IT or anywhere else.

At the same time, the platform has to provide viable and effective means to support the more complex “20%” use cases that will require more sophisticated, specialized solution paths and skills. Can it scale to support complex contract processes with rich templates, metadata attributes, conditionality, and approval rules? Does it provide pragmatic AI capabilities to address use cases where smart automated analysis and insights can be accelerants? Does the platform support data and process integration to other enterprise systems in your organization?

An important principle that cuts through all of this is the ability for the platform to directly enable participation in the contracting process across the organization wherever it makes sense. Sales and procurement users have their native “panes of glass” (CRMs, vendor management systems, etc.), and it’s important for digital contracting to meet them where they live, in those systems. So for your common collaboration scenarios between legal and these business users, the platform ideally provides out-of-the-box or easily configurable integration with the systems in question, in support of intake/initiation of agreement processes, data and process synchronization across systems, integration with collaboration tools, and accessibility of the data and insights embedded in your digital contracts.

Where these integrations are not out-of-the-box, the platform should provide a means for you to invest in custom integrations where that makes business-value sense, in a way that keeps you in control of your solution without losing speed or innovation.

What’s Next?

Obviously, my next recommendation is going to be “Check out Ironclad!” But putting that blatant plug to the side, you need to assess where your organization sits on the readiness curve for digital contracting.

Are there recognized gaps and friction points that resonate with both legal and their business partners to motivate a digital contracting initiative? Do you have a champion or champions that will stand with you, as the technology lead, to make this happen? Has your organization gone through a prior attempt at a digital contracting solution that has been less than stellar (or a total failure)? How healthy is the current dynamic between legal, business and technology leaders, and teams?

Navigate these factors to determine a starting point for your digital contracting journey, recruit your team and find the digital contracting platform that will get you there!