The Five Pillars of Commercial Management

During the past year, there has been a significant uptick in interest regarding Commercial Management.  More practitioners are being granted titles such as Commercial Officer and Director of Commercial Management.  Dialogue and debates around the internet have been common.  The inquiries received by Commercial Officers Group, and others, have led to some interesting and insightful discussions.  Through all of this, one significant development has emerged – there seems to be confusion over, “What is Commercial Management?”

The answer, as with beauty, is in the eye of the beholder.  While there is an emerging taxonomy covering the body of knowledge and a minimum skill set has been defined.  The structure is taking shape.  Value is being generated.  But the question remains, “What is Commercial Management?”  Some have asked, “Does Commercial Management include approaches such as Collaborative Contracting, Cognitive Contracting, High-Yield Contracting and other innovative approaches?”  Yes.  Others have inquired, “Does the Commercial Manager need to demonstrate Emotional Intelligence and Cognitive Flexibility?”  Yes.  But the question, “What is Commercial Management?” is not being addressed.

In order to start an answer to the question, perhaps it would be beneficial to identify the five key pillars of Commercial Management, allowing a high-level understanding to take root.

  1. Commercial Strategy – Commercial Management needs to understand corporate strategies and determine how commercial approaches will enable those corporate strategies with the greatest effect
  2. Commercial Processes – Commercial Management must embrace governance and compliance, ensuring that proven processes are followed in order to enable highly-effective commercial outcomes
  3. Commercial Contracts and Tools – Commercial Management must ensure that the tools, from contracts to software and other systems and documents, are fit for purpose and flexible enough to optimize the commercial results
  4. Commercial Relationships – Commercial Management should rely upon more than the contract document to deliver results; using the relationship to fill in the holes and gaps which inevitably exist with any contract
  5. Commercial Talent – Commercial Management must ensure a portfolio of skills are in place, with many of one’s new skills being those which are needed in the Fourth Industrial Revolution

Commercial Management is a bidirectional discipline.  Ambidexterity is required.  It involves suppliers and customers, or contractors and clients, alike.  Except for the ultimate consumer, a firm’s Commercial Management discipline needs to focus on both selling and buying.  So, Sourcing Strategies and Sales Strategies are elements of Commercial Management, but not effective synonyms.  Sourcing Strategies and Sales Strategies, unless they are integrated, coordinated and cohesive, do not represent Commercial Strategies.  Commercial processes, including governance and compliance, should be consistent regardless of the buy- or sell-side orientation.  Contract Management systems need to cover both Sales Agreements and Purchase Agreements.  Negotiations should be taught and equipped in a similar manner, regardless of whether the negotiator is working for the buy-side or sell-side.  Commercial Relationship Management should be the focal point, rather than Supplier Relationship Management and Customer Relationship Management.

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