In one of my sessions at the recent IACCM EMEA conference which looked at contracting skills I posed the question that whilst we would rarely let a product get to market without some form of testing or prototyping, how many commercial or contract management professionals consider testing their contracting structures or agreements?
If we look at product development then often prototyping has multiple aims: firstly, it will likely test the product against various regulations from a compliance perspective, checking that it is fit for purpose, safe for use, and perhaps gains appropriate certifications; secondly, it will almost certainly be tested for performance, which is more about application, and will likely involve market testing with users or consumers for desirability, ease of use, or perception, and performance testing against the competition.
If we look at commercial innovation then it’s likely that service innovation will include some form of prototyping, whilst today the depth of testing may not be comparable to that carried out in relation to product innovation, but the trend is that is being seen with increasing importance.
In the context of my presentation, “New Business Models – Contracting Challenges & Skills Required” the opportunity we discussed related to the area of relational contracting, the agreements that we use to articulate relationships, and the terms and conditions within them. In the connected world we live and work in, where even the humble cup of coffee has a multi-tier, cross border supply chain, the relationships and agreements that we need to develop in order to deliver to our customers and users are equally complex. So why is it that we don’t spend more time consciously testing them?
If we look back at the approaches taken to product prototyping, then in relation to terms and conditions we often spend time testing them from a compliance perspective by taking advice from lawyers, tax advisers, and the like. However, when you look at the second type of prototyping around application or performance we rarely see any of this happening in relation to contracting.
Discussing the challenge with a number of people, the reasons given perhaps as to why the contracting profession doesn’t prototype include:
- we’re brought in too late to have any impact
- how would we measure performance?
- we don’t have the time, we’re under pressure to sign the deal
- we just don’t think about it
- perhaps we don’t have access to the right contracting skills
They’re all understandable answers, however, if you start from the IACCM figure that on average organisations leak 9.15% of turnover through poor contract management, then it’s possible that prototyping could help to understand and then reduce this figure.
From another perspective, we all probably remember the outcry recently when Instagram changed their T&Cs in a way that could have been interpreted as Instagram giving itself sweeping usage rights of users’ materials. If only they’d prototyped the new clauses they probably could have avoided the negative press and reputational impact.
One of the regular questions that comes up in discussions on this topic is how the profession could adopt such prototyping. In short, there are examples where it has been successfully adopted, and often we just need to look to product development, science, or our even how we were taught to carry out experiments at school.
What we really need to do in order to unlock this opportunity is to challenge our own mindsets and those of our organisations in order to create time and resource to look at prototyping as a way of understanding and reducing the 9.15% figure. From experience it is likely that we do have access to the right contracting skills if we set the right environment and then unlock them.