This October, the Future of Sourcing Awards will celebrate organizations and individuals that have shown innovation, leadership and transformation in categories that are critical to the sourcing industry. Interviews with the finalists provide helpful insight about their projects, the problem they sought to solve and the impact to their organizations. Gain insight into the award-winning research done by the University of Tennessee, that yielded successful supplier relationships ranging from Procter & Gamble, Microsoft, McDonald’s, and the US Department of Energy.
Can you outline why your team embarked on this project and the problem that needed to be solved?
In 2003 the University of Tennessee (UT) began a research project funded by the U.S. Air Force to answer this question: “Is there a better way to outsource?” They studied some of the world’s most successful supplier relationships to learn why some outsourcing deals were highly successful while others either failed to live up to their initial promise or simply failed outright. The research included successful (and often award winning) relationship ranging from Procter & Gamble, Microsoft, McDonald’s, and the US Department of Energy.
How were things done originally and what was the inspiration to innovate the process?
UT researchers saw common threads in those successful relationships. For example, all of the successful outsourcing relationships had a very different type of business relationship with their suppliers and service providers – relationships that transcended a traditional buy-sell transactional relationship to one based on a highly collaborative “win-win” relationship. These successful relationships worked jointly towards shared goals to drive innovation, create value, and reward success. They consciously laid the foundation of trust, most often with deep levels of transparency. Researchers described their observations as a “Vested” mind-set because of the true win-win nature of the relationships based on mutually defined desired outcomes. Simply put, a win for the buyer was a win for the service provider. The parties were vested in each other’s success. Thus was the Vested business model born.
What KPIs did you use to measure success for this project? (For example: performance, customer satisfaction, revenue, sales or relevant financial gains?)
There were no KPIs in the traditional sense of that term – but rather a shared vision that guiding UT researchers and a small group of advocates for our work (which we referred to a mavens (inspired by the term out of the book The Tipping Point in how to get ideas to spread). Our metrics were really the progress we had against our shared vision and our desired outcomes centered on education, dissemination and ultimately implementation of the Vested methodology. Success would be when real organization began to get real results from applying the learnings of our research – changing the world one deal at a time.
Our first major milestone was simply around dissemination of our research and started with the first Vested book published in 2010, Vested Outsourcing: Five Rules That Will Transform Outsourcing. Five more books followed, including The Vested Outsourcing Manual (2010), basically the Vested textbook, and Strategic Sourcing in the New Economy: Harnessing the Potential of Sourcing Business Models for Modern Procurement (2016). Other books explored real life case studies of Vested principles in action– Vested: How P&G, McDonald’s and Microsoft are Redefining Winning Business Relationships (2012) and the guiding principles that are the basis of Vested in Getting to We: Negotiating Agreements for Highly Collaborative Relationships (2013). The UT research library also now includes 18 white papers and 18 case studies. (See The Vested website for more information about the books and research library).
In addition to those publications, UT has developed comprehensive courseware programs – both online and classroom – for the study and implementation of Vested ideas and agreements that change the mindset and landscape of how organizations outsource Those programs have grown exponentially: Today more than 350 companies have sent nearly 1600 people to study Vested in one or more UT courses offered in its Certified Deal Architect program. We have taught courses across the globe including South Africa and Saudi Arabia all with the emphasize to change the world one deal at a time through educating people on the art, science and practice of how to create and sustain highly collaborative business relationships. To date, 57 companies have employed the Vested methodology in an effort to improve their outsourcing relationships.
How do you plan to ensure that the new model remains relevant and adapts to the future needs of the market?
We are continuously revising, refining and improving the UT courses. The first Vested book is now in its second edition. We add new white papers and case studies to the UT library on a regular basis and are planning on two new Vested book in the near future. Contracting in the New Economy will be a sister book to Strategic Sourcing in the New Economy and is being written with lawyers and is targeted to the legal and commercial managers who write contracts. In addition, the National Institute of Public Procurement has asked us to write a public procurement edition of the book Strategic Sourcing in the New Economy.
Our proudest moment is likely a seminal Harvard Business Review article co-written by myself, David Frydlinger and the Nobel laureate Oliver Hart which was recently published, in the Sept/October edition of the HBR – which is disseminated to 10 million follows through their print and online magazine. As part of our collaboration with Oliver Hart, he has linked our work to hard core economics/math and will be published by the academic paper by the National Bureau of Economic Research on Sept 9. HBER is a non-profit organization with the purpose to disseminate sound economic research to policy makers.
Lastly, we are having impact as more and more universities update their curriculum to include our work on Sourcing Business Models and the Vested sourcing business model. We are proud to say SIG was the first sourcing organization to adopt our teachings into their SIGU. Today, over two dozen universities have updated their sourcing curriculum and have professors that are teaching some (or a lot!) of aspects of our work.
What advice do you have for those who may want to implement this innovative approach in their own organizations?
Our advice is simple: If you are dissatisfied with your current contracting and procurement methods and want a better, more collaborative way of working with your most strategic partners, it is time to explore the Vested business model. We suggest you start by exploring the Vested website, including the blog, and reading the first Vested book. And of course for those wanting to simply get started to under how Vested fits in with the broader sourcing big picture – take the SIGU course which has embedded Sourcing Business Models into the core of their curriculum!
What can you share that other companies can take as a “lesson learned” about talent management from your project?
It is not so much about “management” as it is about finding the right people who are collaborative, open-minded and ready to learn and change. The big lesson is that this is a continuous process of education and refinement; Vested is a growing movement because it works for the twenty-first century.
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