Most of those in the business world speak of growing complexity. The speed of change, pressures to customize, increased competition, regulation, global operations, new technologies … there are multiple issues that we confront and must master.
Because complexity drives a need for change, many people view it negatively. It demands new skills, new knowledge, new processes and methods. Failure to respond is inevitably threatening, either personally, or to our organization, or both.
But complexity also represents opportunity. If we can master it better than others, we have discovered a source of competitive advantage. And this prospect should be a source of excitement for those in the world of commercial management because our discipline lies right at the heart of managing complexity.
Consider for a moment what it is that makes things complex. Essentially, it revolves around the number of moving parts and the interconnections between them. Success depends on successful coordination across ‘the system’. It is about coordinating, controlling and maintaining alignment – in fact, precisely the role that a good commercial manager plays in formulating, negotiating and managing a contract.
Complexity demands an adaptive system, ready to adjust to change. It requires people who can work across and reconcile the perspectives of ’hard disciplines’ such as law, finance or engineering. This means we must often challenge the rigidity that is inherent to many specialist views. We must be more inclusive of non-professional colleagues in delivering contractual and commercial solutions. For example, complex environments will not be managed through threats of unpleasant consequences from onerous terms and conditions by the Corporate lawyers. Nor will they be handled through attempts to impose rigid definitions of scope or performance criteria by the Contracts team.
However, this need for flexibility does not mean that there should be a reduction of discipline. On the contrary, it is just the nature of the discipline that changes. First, there must be increased rigor in selecting the right trading partner; we must share objectives and commitment, we must operate in harmony. Second, contracts and their negotiation are therefore far more focused on governance – how will the full team work together, how will we manage change across the organization, what will we do when circumstances alter? And this affects all of us in an organization: whether we are in Human Resources, or Accounts or Marketing or Production.
Now more than ever contracts are the language of business. Contracts are a straightforward means to organize the increasingly complex important information for a transaction. Contracts provide a framework or context to ensure that the right questions are being asked, answered and documented. They are not dry documents to be put away in a drawer but critical tools in the evolving transactional conversations that involve all of us in our constantly changing business environment. IACCM’s new book Fundamentals of Contract and Commercial Management brings to life the topic of contracts and commercial approaches for the non-practitioner. Accessible, fast and packed with fascinating case studies it shows how we can all make a real difference in our increasingly complex environments!