According to reports authored by the International Association of Contract and Commercial Management, the Aberdeen Group, and the International Association of Outsourcing Professionals, the average contract loses approximately 17% to 40% of its value from the time of execution through to close-out. Value leakage can range from things like low adoption rates, non-value-added change orders, lack of innovation, poor governance, etc. This blog post will help contract professionals understand how customer-supplier relationships lose value and three best practices to preserve value.
Move Beyond Deal Points
Typically, negotiators think in terms of “getting the best deal”, meaning, financial and legal Terms that are favorable to the negotiator’s organization. Here is the problem: if businesspeople accept this premise, they are negotiating short-term “deals” in a complex, long-term business environment.
Focusing on the “deal” often leads to losing focus on the larger business goal(s) that a customer-supplier relationship seeks to address. For example, an overemphasis on “getting the best deal” often results in failing to fully document costly aspects of the work in the Statement of Work, failing to include adequate inspection, testing and cure processes, and failing to document and control common risk events.
Furthermore, focusing on the “deal” also precludes the inclusion of innovation in the delivery of goods and services. Buying emerging technologies like artificial intelligence, robotic process automation, cloud computing, or cognitive automation is the new norm, yet only 21% of respondents in Deloitte’s 2016 Global Outsourcing Survey reported that innovation was a key part of their contracts.