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The Importance of Artificial Intelligence in Contract Management
Artificial Intelligence (AI) has become a buzzword across industries, and its applications in commercial contracting are gaining significant attention. Lucy Bassli, Founder and Principal at InnoLaw Group, and Jason Smith, Sr Principal of Strategy and Transformation at Conga, both seasoned professionals with extensive experience in the legal and technology sectors, bring their industry expertise to shed light on the transformative potential of AI in contract management. We’ll walk you through insights Lucy and Jason have through their years of experience around AI and legal while examining the latest research to provide a comprehensive view of the AI landscape in contract management.
Lucy emphasizes that "AI is not just a technology buzzword; it's a core piece of a holistic technology solution for tackling the complexities of contract management." Her statement underscores the transformative potential of AI in commercial contracting. As AI continues to evolve and mature, it is emerging as a pragmatic tool to address the intricate challenges associated with contract management. The sheer volume and complexity of these legal agreements can overwhelm even the most experienced legal professionals. This is where AI steps in to revolutionize the process.
Lucy and Jason, leveraging their extensive industry experience, emphasize the profound impact of AI on the legal sector. Lucy, drawing from her legal expertise, explains how AI in contract management is not just about automating routine tasks; it goes far beyond that. It's about improving efficiency, creating consistency, and enhancing decision-making through intelligent analysis. Jason and Lucy explore some of the key aspects of how recent advancements in AI are reshaping the landscape of contract management technology.
For one, legal departments can leverage the power of AI to enhance contract management by automating routine tasks and extracting valuable insights from contracts and agreements. For example, with Conga Contract Intelligence, users can extract commercial terms and transform them into verified data that drives business performance.
As Lucy aptly puts it, "AI is no longer a luxury in the CLM tech stack; it's a core part of it."
One pivotal moment in the evolution of AI in contract management was when organizations began addressing the challenge of managing vast volumes of contracts. Jason recalls a project where the team had to figure out how to bring thousands of contracts into a manageable system. This experience led him to apply the principles of eDiscovery to unstructured contract data.
Electronic Discovery, or eDiscovery, is a systematic process of identifying, collecting, and analyzing electronically stored information (ESI) for legal proceedings. Contracts can be sprawling documents with complex language, making it difficult to pinpoint key clauses, obligations, or potential risks. This unstructured data can hide valuable insights and expose organizations to undue risks. eDiscovery starts with identifying and collecting relevant data. In contract management, this means pinpointing the contracts that need attention, whether for compliance, risk assessment, or renewal.
Once identified, contracts must be collected and organized for analysis. Legal professionals can then review the analyzed data, focusing on the critical sections of the contract. This is where decisions are made, and potential risks are addressed.
As organizations continued to accumulate contract data, a parallel development was the rise of data-driven legal departments and legal operations. Jason emphasized the need for legal departments to treat their operations more like a business unit and leverage data analytics for forecasting and decision-making.
The Legal Operations function has gained prominence in recent years. According to a study by the Corporate Legal Operations Consortium (CLOC), legal operations roles in corporate legal departments increased by 38% between 2019 and 2020. This highlights the growing significance of data-driven approaches in legal management.
In recent years, the emergence of cutting-edge AI tools like Chat GPT has brought about a profound transformation in the realm of contract management, as Jason passionately emphasized. These advanced AI-driven solutions have transcended the boundaries of traditional contract analysis, making it more accessible, efficient, and user-friendly than ever before. Here, we delve deeper into the evolution of Chat GPT and its far-reaching implications.
Chat GPT's revolutionary impact lies in its ability to democratize contract management. In essence, it breaks down the barriers that previously restricted the utilization of contract data to those with specialized technical expertise. This accessibility has opened doors for professionals from various backgrounds to harness the power of AI in their daily workflows.
One of the most remarkable aspects of Chat GPT is its intuitive and user-friendly interface. This user-centric design has redefined the way individuals interact with their contract portfolios. Users no longer need to be well-versed in complex legal jargon or possess extensive technical skills to extract valuable insights from contracts. As Lucy herself expressed, "Chat GPT has put the power of contract analysis in the hands of everyone."
The implications of Chat GPT's emergence are far-reaching. It signifies a shift towards a more inclusive and efficient approach to contract management, where legal professionals and business leaders alike can harness AI's analytical prowess without cumbersome barriers. This shift is not merely a technological trend; it's a fundamental transformation in how organizations manage their contracts and legal documentation.
Lucy, drawing from her extensive experience in CLM systems implementation, imparted valuable insights on the pragmatic approaches organizations should consider when venturing into AI adoption for contract management. Let's delve deeper into these pragmatic approaches, aligning them with research findings.
Research by the Boston Consulting Group (BCG) has shown that organizations that start with a clear and specific use case for AI tend to realize tangible benefits sooner. In the context of contract management, this could mean targeting a particular pain point, such as contract review or risk assessment, and tailoring AI adoption accordingly.
Insights also extend to the concept of scalability in AI adoption. Starting small doesn't mean staying small. Rather, it's a strategic stepping stone. This aligns with findings from a McKinsey study, which demonstrated that organizations that began with modest AI initiatives were more likely to scale up successfully. It's about building confidence and expertise gradually, much like savoring a favorite dish before exploring the entire menu.
Furthermore, the pragmatic approach aligns with the principles of AI ethics and transparency. As organizations embark on their AI journeys, it's crucial to maintain transparency and accountability. This is underscored by research from the AI Now Institute, emphasizing that responsible AI adoption involves clear communication about the capabilities and limitations of AI systems. The advice to start small and grow aligns with this ethical imperative, allowing organizations to carefully manage the impact of AI on their operations while maintaining transparency with stakeholders.
When considering where AI can have the most significant impact in the contracting lifecycle, both Lucy Bassli and Jason Smith point to two primary areas: the look back and the look forward.
The "look back" involves using AI to analyze historical contract data, extract structured information, and provide insights for reporting and compliance.
Research Insight: According to Gartner, by 2025, organizations that leverage AI in contract analysis will experience a 50% reduction in the time spent reviewing and approving contracts.
The "look forward" represents the newer, more innovative aspect of AI, where generative AI is used not only to analyze existing data but also to create new data and documents based on patterns and historical information.
AI is rapidly transforming the landscape of contract management technologies, offering immense potential for efficiency, consistency, and improved decision-making. Organizations are at various stages of AI adoption in this field, from using AI to extract insights from existing contracts to harnessing generative AI for content creation. However, it's crucial to approach AI implementation pragmatically, starting with a clear understanding of specific needs and objectives.
Staying informed about the latest developments and best practices is key to maximizing the benefits of this transformative technology in contract management. With the right foundation, data-driven approach, and practical use cases in mind, organizations can navigate the AI landscape effectively and position themselves for success in the evolving world of contract management.
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