By Kaspar Korjus, CPO and Co-Founder, Pactum

In 20 years’ time, Artificial Intelligence (AI) and Machine Learning will be fully implemented across a variety of sectors, automating a vast majority of business processes. This will enable human workers to dedicate more of their time to creative thinking and problem solving, skills where automation just can’t compete with the human touch. This will likely lead to an overhaul in the way companies train their employees, with many firms potentially investing more money into education and training programmes.

AI promises an exciting new era of digital disruption that will see human ingenuity further augmented by speed and efficiency. Work conducted by humans will no longer consist of mundane and time-consuming tasks as this will all be automated, therefore enabling them to focus on more strategic and client-based tasks. The corporate world today isn’t a stranger to digital disruption as the industry has already seen the meteoric rise of Fintech in recent times. As markets continue to become increasingly saturated with new and disruptive challengers, emerging tech such as AI and big data could be the critical difference between corporate success and failure.

The corporate world as we know it

C-suite executives in many major corporations today have AI and machine learning at the top of the business agenda. Business leaders’ priorities are in turning AI into tangible ROI, especially when it comes choosing the right business process or striking the best client or partnership deal. For many centuries now, the latter has been the cornerstone of modern-day trading. Being able to negotiate an excellent business contract is a key skill in the world of business. Simply put, negotiating a valuable deal increases the likelihood of generating more revenue and increasing profits margins.

Currently, a large portion of business contract negotiations involve a number of experts who each specialise in different disciplines. Each of these experts are drafted in to review and assess the relevant terms within different stages in contract negotiations, with a view to securing the best deal possible. In essence, each party is attempting to negotiate the terms that they deem most valuable to them. This involves assessing the risks, benefits, and costs of each of the terms. Despite how efficient humans may be at negotiating, there is always room for improvement. Humans are naturally prone to errors and confirmation bias, which can further add to the obstacles that come with striking a valuable contract deal. Inherently, this leads to one side potentially gaining an advantage over another, as one side of the negotiation table may appear stronger than the other which could lead to a deal being more beneficial to one party than another. This much needed room for improvement can certainly be addressed by technology such as AI.

A new era in business negotiations

AI technology is used by companies to further augment and speed up business processes to achieve the desired results. Contract negotiations are the perfect candidate for AI automation – speed, precision and quality are just some of the many benefits that AI can bring to the negotiation table. But besides this, why should AI take over the negotiation process? The truth is that people are unable to keep up with the pace of modern business deals.

KPMG shows that inefficient supplier contract management causes firms to lose up to 40 per cent of the value in a given deal. The issue isn’t often due to bad contract negotiations, but simply the sheer volume of contracts that need to be negotiated that are often neglected. AI, on the other hand, can replicate human-like negotiation behaviour without the unwanted human characteristics that often emerge during key stages in the negotiation process such as pride, embarrassment, bias and pressure. Furthermore, from a more technical standpoint, AI solutions can achieve faster and more superior results than human negotiators in a way that delivers equal value to both supplier and customer. Time, volume, and value are the key factors that separate AI powered negotiation tools from human negotiators, irrespective of their skillset. The AI tool can find valuable trade-off combinations between unlimited negotiation items that maximise value for both sides of the negotiation. What’s more, this can be scaled at such a level that can easily accommodate 10,000 simultaneous negotiations, whilst doing complex tasks like dynamic pricing across all negotiations. It would be extremely difficult for people to match this level of efficiency. It would also be difficult for humans to reach valuable contract agreements that benefit both sides equally.

Currently, 80 per cent of negotiation deals are not Pareto optimal as one party simply cannot get the better end of the deal without negatively impacting its counterpart. AI negotiation tools can achieve some form of Pareto optimal in the majority of contract negotiations as the technology can increase value for both parties substantially. It will be too difficult for humans to achieve this on their own as their emotions, biases and business agendas ultimately get in the way of this. However, all of this is not to say that the AI program will effectively replace contract negotiators, but rather provide as much support to human negotiators as possible. For example, it could give human negotiation representatives the opportunity to focus on other business activities that require more critical thinking and skill in the process. It goes without saying that human negotiators will still have the last say on any deal. The retail industry is one of the main sectors that could benefit from AI. The sector had the worst possible year in 2019 as sales figures dropped to their lowest in 24 years, and major cuts and store closures hit big chains such as Mothercare and Thomas Cook. AI could help these corporations to streamline their negotiation processes to get the best deals from their partners and suppliers, and achieve business resilience.

AI technology is set to continue changing the face of the corporate world as we know it and one aspect of business that is set for a major revolution is contract negotiations. Given the importance of business contract negotiations, it is now time for major corporations to think carefully and act accordingly with regards to how they utilise AI. The technology is only as good as its user, which means that business leaders need to pick out and automate the right processes to increase their operational efficiencies and therefore their value in the market. AI is an ally not a foe, and its capability can massively augment what we do best and take it to the next level.