From Paper to Digital: Key Steps to Prepare Your Organisation for Implementation of Contract Life-Cycle Management (CLM) Technology

Whilst contracts are a focal point of commercial value realisation and they govern all organisations’ relations with external parties, most companies do not yet take advantage of the existing technology to turn them into agile assets. The authors’ experience shows that most companies are not ready for CLM transformation and too many of these projects fail.

It is important to recognise that the introduction of a CLM tool is not just a technology implementation, but a transformation journey involving people and processes. It is important to start with vision, process and organisation. Technology is important, but an enabler. Change management is a key driver to ensure successful integration and adoption within the organisation. Communication is essential, starting at the executive level. It is always very helpful to have a passionate and visionary leader high in the ranks to whom executives listen.

Investing in comprehensive training and ensuring that all users understand and can easily navigate the tool’s functionality is critical to mitigating resistance. As an example, a large aircraft manufacturer dedicated three employees as the core team for CLM implementation, who also served as change agents. In some projects the authors have even noticed that individuals can progress their careers with CLM implementation.

Too often the authors see clients trying to “save” on change management and typical discussions with them include the cost of not doing it right the first time.

A cornerstone of effective CLM implementation lies in the quality and accessibility of data that drives the entire contract life cycle, from creation through to negotiation, execution and analysis.

Let us start by demystifying content, by which the authors mean all types of data needed to make efficient use of the technology and provide insights to improve the decision-making process. Legacy contracts, standardised contract templates, playbooks, clause libraries, contract metadata and more. All of these components need to be prepared in advance (in an ideal world) in order not to start with a system as an “empty shell”.

Gathering the data can be a very complex and time-consuming process. Most organisation struggle with data accessibility and quality. Here, AI can be very useful to, eg, extract contract metadata or build a clause library. CLM is also seen as a way to improve the quality of data, because after a successful implementation, rich pools of new data from contracts become available and people want to make use of them. And the more people use the data, the higher the appetite to have it in the right shape and form.

To succeed in CLM transformation, organisations must begin with a strategic foundation that includes setting clear goals, securing the sponsorship at the executive level and building a cross-functional, collaborative team.

Clear objectives, aligned with the overarching business strategy – often focused in cost reduction and margin enhancement – provide a roadmap for the implementation process and ensure that each step of it contributes to tangible results. The authors always advise the clients to be ambitious but pragmatic. Also, CLM capability maturity grows gradually – it is a process and also depends on an organisation’s ability to absorb change (which is typically linear and not exponential).

In addition, securing executive sponsorship is critical to driving the initiative forwards. Management support not only validates the importance of CLM, but also ensures budget and resource allocation, as well as top-down commitment.

At the same time, forming a cross-functional project team that includes representatives from legal, procurement, finance, IT (for a procurement-focused transformation) and other relevant departments involved in the CLM process breaks down silos and ensures diverse perspectives. Such a holistic approach to contract management ensures that the CLM tool is designed and configured to meet the needs of all stakeholders, rather than just one group.

Before selecting and implementing CLM technology, the organisation needs to understand how the contract management process is currently performed.

By interviewing the stakeholders involved in the contract management processes, the key pain points, bottlenecks and requirements can be identified and used as a basis for improvement.

The results of the comprehensive assessment of all activities help to shape the future state process, which will serve as a standard core global model to ensure consistency across regions and departments. It is worth mentioning that a CLM initiative should be used as a chance to do things differently rather than moving old ways of working onto a new platform. Here, it is critical that your adviser understands your business, your industry and the “art-of-the-possible” with the technology and who can provide you with best practice so that you can leapfrog, building your CLM capability.

There are two main issues with the right technology selection:

It is an activity very similar to choosing a new car to buy.

Organisations should evaluate potential tools based on a number of factors, such as the vendor’s reputation, the services and support offered by the technology provider, ease of configuration and maintenance, key features that address specific needs, ease of use and ability to integrate with the organisation’s technology landscape.

Importantly, you do not need to invite, eg, ten vendors. Identifying 3–5 vendors would be sufficient, 1–2 of which might be “disruptors” with their technology as opposed to established “usual suspect” solutions. This method will make the selection process much more efficient.

Shortlisted technology vendors should be asked to follow the demo scripts, tailored to the organisation’s unique requirements and covering the results of the process assessment, to enable easy comparison and evaluation. An important aspect of the technology is, for example, CLM vendor integration capabilities which the authors advise clients to showcase during the demos. You do not need 100s of scripts, just the most relevant ones that will cover most of your needs.

The selected CLM tool should not only meet near-term needs (you do not want to replicate vendor selection activity in two years’ time), but also have the flexibility to accommodate future business growth, evolving business requirements and helping future-proof the organisation.

As organisations strive for operational excellence, the journey from paper to digital in contract life-cycle management is becoming strategically imperative and can have a significant impact on cost efficiency and overall margin. By focusing on change management, data quality and addressing key preparatory steps, organisations can pave the way for a successful CLM implementation.