Using AI for Contract Negotiations

Nothing mentioned about 'smart contracts', but surely you can see the possibilities linking from this. ?   They say that Walmart has been a user of the idea. 

How Companies Use AI for Contract Negotiations

For foodies traveling the Baltics, you’ll find Lithuania has some of the best food hands down – kugelis, kapusta, and bundookie buns should be on your to-do list. In second place would be Latvia. Look no further than buffet food chain Lido for some seriously good Baltic fare. Then there’s the black sheep of the bunch, Estonia. Whoever thought putting peaches on pizza was a good idea should be taken out behind the kitchen and shot. This culinary faux pas could be because Estonians spend all their time honing their tech skills instead of messing around in the kitchen.

Another Estonian Startup Making Headlines

Prior to The Rona, our MBAs were scouting tech startups across the globe from Saudi Arabia to Russia. One country we visited last year was Estonia where we met with Skeleton Technologies (ultracapacitors) and Veriff (global identity verification). Recently, both companies raised sizable funding rounds – Veriff raised $65 million a few weeks ago and Skeleton $61 million last month. We also looked at 9 Artificial Intelligence Startups in Estonia, and one company not on that list was Pactum, an AI startup that’s been garnering some attention lately with their AI algorithms that negotiate contracts.

About Pactum AI:     https://pactum.com/

Estonia is often said to be one of the most digitally advanced countries in the world, and her e-residency program attracts tech talent from across the globe. The Founding Managing Director of that program, Kaspar Korjus, is renowned in Estonia for his technical prowess. He was one of three people that founded Pactum AI in 2019 to help companies “unlock value from thousands of suppliers by automatically negotiating contracts on a massive scale.” This foreign fintech firm has quietly snuck into the Silicon Valley Vatican and now sports a Mountain View address along with $15.2 million in funding and the best reference customer you could ask for – dividend growth champion Walmart (WMT) – the largest corporation by revenue globally, and one of Pactum’s most supportive customers.

Pactum’s most recent round of funding was an $11 million Series A which closed just days ago, putting them on the radar of investors and potential customers as they look to offer contract negotiation services to companies with $1 billion of revenues or more. The process starts with two weeks of discovery, after which the algorithms take over and start negotiating tail spend contracts. For most companies, around 80% of their commercial agreements are high volume and low value – tail spend. Pactum can unlock a significant amount of hidden value in tail-spend contracts, reducing spend by 2% to 11% per $100m of tail spend. As for pricing, they only charge for successful deals that add value, essentially guaranteeing an ROI for every project they’re working on. They also offer a “gain share” pricing model which takes 25% of the gain a renegotiation generates. We love AI companies that are so confident in their product they simply take a cut of all the money they’re saving their clients.  ... " 

When Bots Negotiate, Will Humans Deceive?

Interesting piece that approaches the meaning of 'cooperation'.   

When bots do the negotiating, humans more likely to engage in deceptive techniques  by University of Southern California

 Recently computer scientists at USC Institute of Technologies (ICT) set out to assess under what conditions humans would employ deceptive negotiating tactics. Through a series of studies, they found that whether humans would embrace a range of deceptive and sneaky techniques was dependent both on the humans' prior negotiating experience in negotiating as well as whether virtual agents where employed to negotiate on their behalf. The findings stand in contrast to prior studies and show that when humans use intermediaries in the form of virtual agents, they feel more comfortable employing more deceptive techniques than they would normally use when negotiating for themselves

Lead author of the paper on these studies, Johnathan Mell, says, "We want to understand the conditions under which people act deceptively, in some cases purely by giving them an artificial intelligence agent that can do their dirty work for them."

Nowadays, virtual agents are employed nearly everywhere, from automated bidders on sites like eBay to virtual assistants on smart phones. One day, these agents could work on our behalf to negotiate the sale of a car, argue for a raise, or even resolve a legal dispute.

Mell, who conducted the research during his doctoral studies in computer science at USC, says, "Knowing how to design experiences and artificial agents which can act like some of the most devious among us is useful in learning how to combat those techniques in real life."

The researchers are eager to understand how these virtual agents or bots might do our bidding and to understand how humans behave when deploying these agents on their behalf.  ... '

Paper is here:  https://www.jair.org/index.php/jair/article/view/11924

Wal-Mart Automates Supplier Negotiations

Procurement and related supplier contracts and negotiations addressed with AI type methods:

Walmart automates supplier negotiations
By Dan Berthiaume - 03/26/2020 in ChainstoreAge

Walmart is leveraging artificial intelligence (AI) to negotiate more valuable supplier contracts at lower cost.

The discount giant is deploying the AI-based commercial negotiations platform from Pactum to automate negotiations with part of its global supplier network. 

Walmart is set to pilot the Pactum platform with some of the company’s long tail vendors who provide low-volume, niche products. 

Pactum’s team of analysts begins each project by mapping what they call the “value function” in a given set of negotiations. This is combined by the vendor’s negotiation chatbot, which is capable of autonomously conducting best practice negotiations. Once a negotiation is complete, all information will be updated automatically in Walmart’s relevant systems, such as ERP and CRM.  ... " 

Negotiating Mistakes

In Fast Company: Good points, but not not quite enough about how to achieve them.  A particular sales mistake I remember well:   

" ... Talking too much is a sure-fire way to kill a deal. In fact, Lewis-Fernandez says it’s not unusual for a salesperson to talk so much about a product or service that they talk you right out of the purchase. ... “Never underestimate the power of silence,” she says. “There’s an old adage: ‘He or she who speaks next loses.’ When discussing a deal, if you simply stop talking and get comfortable with the awkwardness of silence, your ability to win your argument, sell the product, or a get concession in the negotiation increases significantly.” ... " 

Charting Global Negotiation Styles

Some charted visual examples of cultural negotiation styles ...

The charts sometimes seem like caricatures, interesting, but I would not bet on them.     They do perhaps at most demonstrate that countries and  cultures are different, sometimes considerably. Good to remember.   They do remind me of a lengthy and detailed Japanese culture course I took. Then in my first serious interaction with Japanese employees, they acted more like American youth culture.  My course had apparently been based on studies of the fathers and mothers of these people.   It's a moving target, consider that too.

When Customers Negotiate

Attended a most interesting talk at UC this past week on negotiation models. Readers will recall that I previously covered auction analysis here. A simplified model, but great work. I will post a link to paper or slides here when I get them.

Update:Paper on dynamic pricing and negotiation, paper on channel implications of negotiation.

When Customers Negotiate: Implications for Dynamic Pricing and Supply Chain Management
Goker Aydin, Kelley School of Business, Indiana University
Haggling has become increasingly popular in recent years: 72% of American consumers haggled during the holiday season in 2008 compared to 56% a year earlier. Beyond the usual suspects such as auto dealerships and furniture stores, customers successfully bargained at stores such as Best Buy, Home Depot, Polo Ralph Lauren, and Nordstrom. This landscape presents a new challenge for retailers: whether or not to engage in bargaining. We study this question in two separate contexts: a retailer dynamically adjusting the price of a product with a short lifecycle; and a distribution channel, where both the retailer and the manufacturer have a stake in the decision to bargain.

Many retailers that were reported to discreetly allow negotiation sell short lifecycle products such as high-tech consumer electronics (e.g., Best Buy) or style goods (e.g., Nordstrom). For such products, retailers frequently change the posted price over time. In such a retail environment, the outcome of the negotiation depends on the inventory level, the remaining selling season, the retailer's bargaining power, and the posted price. We characterize the optimal posted price and the negotiation outcome as a function of inventory and time. We show that negotiation is particularly effective when the inventory level is high and/or the remaining selling season is short ... '