SDCE: When a company first comes to you—or to the University of Tennessee’s Center for Education—to learn more about vested outsourcing, no matter what size business they have, what is the key takeaway they walk away with at the end of the day?
KV: Simply put, they will leave a first meeting with an understanding that collaborating to share and create value works—no matter the size of the enterprise. I usually start by describing the 10 ailments that can plague outsourcing relationships and even destroy a promising partnership before it has a chance to develop. These ailments run the gamut from micromanaging the relationship to measuring too much, too little or ignoring the results of the fancy (and expensive) metrics put in play.
At some point the light bulb goes on in the room—they come to an uncomfortable realization that “yeah we are guilty of several of those things.” Understanding the problems in the relationship is the first step to resolving them—they begin to see the value of working together to get to the win-win.
The Vested business model works no matter the size or type of company or organization, be it a small engineering service and contract manufacturer such as Mega Tech of Oregon or the non-profit NGO Water for People, which helps people in developing countries improve their quality of life by supporting the development of locally sustainable drinking water resources, sanitation facilities and hygiene education programs.
SDCE: Your latest publication, “Vested: How P&G, McDonald's and Microsoft are Redefining Winning in Business Relationships” describes the actual processes each of these companies went through in applying the vested outsourcing concept and the details of their success as a result of that. In working with them, did the question of ‘will the vested concept apply to all the services and processes I outsource’ ever come up? And if so, how was that company able to overcome such questions and other challenges with this business model?
KV: That’s a great question and one that occurs with some frequency. A company hears about Vested and wonders whether it’s right for them. I often say the Vested business model—which in a nutshell buys outcomes rather than paying for transactions—is not necessarily suited for every outsourcing arrangement. Deciding to shift to a Vested relationship depends greatly on two factors: ‘Is there a need and potential to create value and drive innovation?’ Another factor is the level of dependency that is required in the relationship (for example, the high cost of switching suppliers). A company that is simply buying a pure commodity where there is not potential to create value should use a transaction-based business model. A whitepaper we did with the Sourcing Interests Group, “Unpacking Sourcing Business Models - 21st Century Solutions for Sourcing Services” is a free download and is a great resource for deciding which sourcing business model is the best fit.
SDCE: Once a company(s) decides that they want to apply the ‘Vested’ model to how they operate their business, what’s the next step? A written plan? An RFP? What do they need to invest? And is there a set timeframe that they can see concrete ROI?
KV: There’s no set time period or dollar amount that creates a Vested partnership. Every relationship is different; every arrangement brings its own unique culture and needs to the table. That said, adopting a Vested mindset in a serious way requires time and a top-down commitment to changing old mindsets. It’s not a “snap-your-fingers and voila!” process. Actually it’s hard work, but worth it.
The University of Tennessee’s Center for Executive Education developed a comprehensive set of publications, programs, workshops, courseware (both in-class and online), resources and tools that educate, enlighten and provide insight into the Vested process.