Aug 24, 2017

After beating humans at various games (chess in 1996, Jeopardy in 2011, Go in 2016 and again in 2017, and poker very recently), computers and artificial intelligence (AI) are now entering the workplace. Things are getting serious. The future of work is still being written.

At AI’s current stage of development, both in general and in business applications, machines have what specialists call “narrow intelligence,” which means that they are good at performing specific tasks, where they sometimes even surpass humans. However, they are not yet at the level of humans, who can perform a wide range of complex physical and cognitive tasks.

It is important to keep this in mind because many people seem to believe that AI is surpassing humans in every aspect. The super-intelligence described in science fiction movies or literature is not a reality yet. Specialists estimate that the singularity (exponential technological growth brought about by AI) is still a long way off.

In today’s business world, AI’s value proposition is clear. It introduces a new kind of cooperation between people and technology; it is about much more than just replacing people.

“A more valuable approach may be to view machine and human intelligence as complementary, with each bringing its own strengths to the table. […] With intelligence augmentation, the ultimate goal is not building machines that think like humans, but designing machines that help humans think better”. Cognitive collaboration, Deloitte University Press, January 2017

In other words, to quote Tim O’Reilly, a publisher, writer, and speaker on new technologies: Don’t Replace People. Augment Them.

In the context of contract management, I have already highlighted the transformative impact that AI can have in a previous post. In light of the “people + machine” philosophy I mentioned earlier, it is important to include human abilities and strengths. Even if computers can analyze, classify and process contracts, the content of a contract is more than just words.

Contracts must reflect the nature of the business.

As Kate Vitasek wrote in her recent article, Ten Steps to a Successful Supplier Contract, “Contracts are [often] rooted in the classical approach to contract law, and thus focus mainly on transactions and strictly defined legal protections such as pricing and price changes, service levels, limitation of liability, indemnification and liquidated damages”.

Transactions are part of business, but there is more to it than that:

“Suppliers are fundamental to business success, yet are often treated as if they are hostile aliens. Distrust generates anti-behaviors that in turn justify the distrust. A narrow focus on functional goals can often lead to the wrong requirements, the wrong incentives and, sadly, the wrong supplier. And once appointed, that supplier is passed on to the business, where lack of skills, ownership and discipline combine to undermine results”. –Tim Cummins, CEO of the IACCM (Association for Contract Management) in “Procurement – it’s time for a re-birth

Contracts should reflect the purpose of the relationship they describe. This is where human abilities—such as preparing , drafting, and discussing contracts—are especially important. Translating text and contract terms into the substance of relationships creates transparency and trust between:

  • Procurement and suppliers,
  • Procurement and stakeholders.

This reflects the special position and role of Procurement in SRM² that I described.

Contract management offers many prime opportunities for a more intimate collaboration between humans and machinesIn contract management, to quote Tim Cummins again,

[t]here can be little question that the relatively mundane, repetitive jobs in today’s Procurement functions will disappear.” AI can process, analyze and extract information that was previously locked in. This leads to obvious gains:

  • Reduction of process costs via automation,
  • Identification of missed or new opportunities,
  • Increase in compliance with legal and internal rules or policies.

Based on the massive quantity of information that machines have access to and thanks to their ability to learn, it is realistic to imagine machines making recommendations to procurement teams about terms and conditions they should use based on factors linked to the category, the objective of the contract, the supplier and more.

But organizations should not forget that they have the final say in creating contracts. Contracts are more than just a collection of legal terms; they describe a two-way relationship to ensure that both parties are clear about their respective and mutual expectations.

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