Maximizing Contract Value: The Power of Outcome-Based Contracting and CLM Automation

Maximizing Contract Value: The Power of Outcome-Based Contracting and CLM Automation

Understanding the Power of Outcome-Based Contracting
Outcome-based contracting focuses on results rather than inputs, ensuring you pay for success and encouraging consistent, high-quality outcomes. By prioritizing results, innovation and efficiency thrive, while costs and supplier oversight are reduced. Anna and Phil emphasized the importance of end-to-end contract management even in outcome-based contracts, highlighting the need for alignment, risk management, and stakeholder engagement throughout the contract lifecycle.

Industries Embracing Outcome-Based Contracts

Various industries benefit from outcome-based contracting. Government agencies utilize it to achieve social impact, such as job placement programs. Defense platforms seek practical solutions and availability, while healthcare focuses on treatment efficacy. Aviation has seen success with outcome-based contracts, like Rolls-Royce’s “Power by the Hour” model, which guarantees product reliability by paying for usage.

Leveraging CLM for Efficient Contract Management

Manual data tracking and management become cumbersome without a CLM tool. Organizations face labor-intensive tasks using spreadsheets and tally sheets. CLM platforms provide centralized repositories for data collection, automated tracking, and performance assessment. They streamline contract processes, enable efficient obligation tracking, and facilitate joint understanding between trading partners.

Steps to Implement Outcome-Based Contracts

Setting up outcome-based contracts involves crucial steps:

  1. Determine how you’ll track obligations and commitments.
  2. Centralize your contracts in a repository for streamlined management.
  3. Identify critical integrations for automation, focusing on high-priority calculations.
  4. Establish a joint understanding of success criteria, align interests, and define consequences for failure.

Empowering Automation with CLM

Prior to automation, organizations must decompose success into measurable data points and ensure data availability from undisputed sources. CLM platforms powered by AI simplify complex contracts, such as healthcare outcome-based agreements, by automating outcome tracking at individual and multi-organizational levels. This enables scalability, brings in new clients, and ensures consistency in supplier performance.

Realizing Value and Benefits

With CLM, customers can start realizing value within three months, depending on the complexity of the use case. Improved contract performance leads to cost savings, greater control, transparency, consistency, and operational excellence. For companies managing a large contract portfolio, CLM guarantees supplier performance consistency across all contracts.

Embrace outcome-based contracting and leverage the power of CLM to drive efficiency, cost savings, and successful business outcomes. By prioritizing results, utilizing the right CLM platform, and establishing joint understanding with trading partners, you can unlock the full potential of your contracts. With CLM, automation and data tracking become effortless, ensuring success in outcome-based contracting. Take the first steps today and transform your contract management practices to achieve tangible results.

Published by Steven A Nichols

I am the founder of Banyan Business Outcomes LLC. I've spent my career helping technology companies get closer to their clients, and helping clients leverage technology companies to create value.

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