A Step-by-Step Guide to Turn Contracts into Data Points to Drive Your Enterprise

Innovation fever is gripping the law department and virtually everything is up for modernization, including the tried-and-true: contract. Contracts are an ideal target for innovation for good reason: the business is pressing legal to increase the visibility and accessibility of contract data to manage risk and drive value.

Legal departments are turning largely to technology to evolve their contracting practices, especially to Contract Lifecyle Management (CLM) systems. Although there are plenty of great CLMs to choose from, World Commerce and Contracting (WorldCC), the leading association dedicated to raising capabilities in contracting practices, suggests that only roughly 60% of CLM deployments meet the original expectations and fully deploy as intended. A survey by Onit’s Contract Works group found that 77% of customers had “experienced a failed technology implementation.”

As vital as CLMs are, they’re not quick on/off switches to automatically produce contracting improvements and unlock data-driven results. First, you must step back and complete the necessary groundwork to evolve foundational contracting practices that ultimately make contracts “ready” for digitization. Whether using a CLM or not, our industry must depart from outdated approaches to contracting that have prevented Legal’s full-blown entrance to the digital world that we now live in.

Current State of Contracting: Static Word Documents Full of Legalese

Contracting practices have not kept pace with digital adoption. We still think of contracts as highly formatted text in Microsoft Word or PDF documents. We use agreement templates of unknown origin that are amalgamations of numerous lawyers smashing together clauses from disparate sources to solve issues in isolation. Conflated issues lead to drafting errors and interpretation challenges. Deciphering contracts drafted from these templates is nearly impossible for anyone (human or artificial intelligence) except a highly experienced lawyer.

Rethinking Contracts as Data

We no longer need to accept the limitations of treating contracts as complex words in a document. Instead, we can shift the paradigm and open myriad possibilities to propel the business by thinking of contracts as a collection of data points or a data model.

A data model is a map or a blueprint that facilitates a deeper understanding of what it depicts. Data models come in different forms but ultimately share a common ability to connect and show relationships among the data they contain. They provide a consistent, predictable way to define and manage data resources across an organization or between multiple parties.

How to Create a Data Model for Your Contracts

Transforming your contracts into Data Models can be accomplished with the following five-step process:

1. Define concepts and sub-concepts

2. List objective positions for each sub-concept

3. Assign owners

4. Choose preferences for each position

5. Draft contract language for each position. 

A Data Model is not the end, but rather the starting point. It is a foundational framework intended to expand over time to include new data and structure to create additional sources of value across your legal department and to the enterprise. When contracts are transformed into standardized data models, organizations can drive uniformity in a way that allows everyone’s contract data, systems, and lawyers to speak to each other in equivalent terms and ultimately be able to focus on the business and legal terms that really matter to drive value.

For more information and detailed tips on how to build a modern framework for digitizing your contracts, click here to download the full report, Contract Data Models: A Framework for Digitization.