Complexity in Business Relationships
Your company has critical business relationships with its customers, suppliers, investors, partners, and others. Large parts of your organization—including sales, contracts administration, customer support, and purchasing—serve to build and maintain these relationships. How well your organization manages them determines revenue growth, profitability, and enterprise value. Your people need to understand the company's business relationships—in all their variety and complexity—in order to grow the business. In many organizations, people can’t answer important questions, such as:
Answering questions like these is hard, because your relationships are complex. Different customers have bought different products, at different prices, and in different circumstances. Likewise, your suppliers and other business partners are continually changing their relationships with you.
Complex relationships have complex contracts
Contracts are the most tangible manifestation of your business relationships. Key contract terms—such as products, prices, support committments, and important dates—are what matter most, and although these may seem to be simple concepts, in practice the details are often quite complex. Gaining insight into this information is vital to the job of understanding, managing, and profiting from good relationships.
Contracts are numerous and varied. As your business grows, you have more customers, more suppliers, and more partners. Since your business relationships are complex, so too are your contracts. Even for a single relationship, contracts are renewed, amended, and augmented. This is especially true of your oldest, biggest, and most potentially profitable relationships.
Without ready access to the detailed information buried in contracts and related documents, people in your organization who are entrusted with managing important business relationships cannot do their jobs. They may miss deadlines, fail to meet important committments, not notice revenue or cost saving opportunities, and become frustrated with inefficiencies.
Read the Sources of Complexity
Embrace the complexity; gain competitive advantage
The business world is ever more complex, and there’s a complex world written into your contracts. This world is real; the forces causing variation and complexity in business relationships are likewise real. Denying or fighting these forces is like swimming against the tide. You’re going against the way business is really done—attempting to impose order and uniformity on the real world, when the real world is complex. Instead of fighting these forces, accept them and use them to advantage. Rather than trying to eliminate (or ignore) the inherent complexity of business relationships, embrace this complexity and learn to master it.
A new approach is clearly needed: a way to embrace the complexity in business relationships, to master it, and to use it to drive value across your organization. The philosophy does not advocate actively seeking more risk. You need not lower your standards, defy policies, or abandon normal review and approval processes. You needn’t try to change the nature of business relationships or how contracts are written.
Your ability to drive business value from your mastery of relationship complexity comes from having all contract information in one centralized place, having it well organized especially for this purpose, ensuring it’s accurate and up to date, and making it available to users who need it. Most importantly, it must be in a form that supports action—that enables rather than prevents innovation and responsiveness. It’s this combination of all these attributes that we call "Contracts Intelligence."
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