Vested Outsourcing And Spot Brief August 2011
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Transcript of Vested Outsourcing And Spot Brief August 2011
Copyright © 2010 SPOT Consulting LLC
Vested Outsourcing TM
Alton Mar*n, Founder and Chief Execu*ve Officer
Alton Martin - Background
• Program Faculty for the University of Tennessee Center for Execu*ve Educa*on – designated subject maEer expert on using Vested Outsourcing methodology in contact center and BPO opera*ons
• Founder of both SPOT Consul*ng LLC and COPC Inc • Involved in the contact center industry since 1993 • Worked in over 30 countries and with dozens of major firms in scores of industries
• Note: Vested Outsourcing TM is a trademarked term and is used with permission
2 Copyright © 2010 SPOT Consulting LLC
“The significant problems we face cannot be solved at the same level of thinking we were at when we created them.”
Keep This in Mind…… Vested Outsourcing Makes You Think!
Copyright © 2010 SPOT Consulting LLC 3
Genesis of the Idea
• USAF hired University of Tennessee Center for Execu*ve Educa*on to study services procurement in logis*cs and maintenance – Over 50% of the USAF spend is on services; logis*cs was one of
the top 5 spend areas – Concern was “is there a beEer way to buy services?”
• Dissa*sfied end users complained about poor service • Vendors complained the contracts were unprofitable or low margin • USAF not convinced they were ge^ng the best pricing
• UT researchers studied more than 20 government “deals” – What are the drivers that lead to success? – Is there a process for buying services that can be replicated? – How could the USAF ensure they were ge^ng “best value”
4 Copyright © 2010 SPOT Consulting LLC
Genesis, con’t.
• USAF wanted to ensure they were compe**ve with private industry, so they extended the study – Added another 30 private sector outsourcing deals – Expanded the study to other service areas
• The SAME best prac*ces were found; researchers codified the “Best Prac*ces” into a defined methodology – USAF calls it “Performance Based Services Acquisi*on”
– UT researchers coined the approach “Vested Outsourcing” • UT faculty created courseware now taught by the Defense
Acquisi*on University • UT and faculty launched a formal agreement that encourages faculty
members to consult with companies and help ins*tu*onalize the Vested Outsourcing concept
5 Copyright © 2010 SPOT Consulting LLC
Vested Outsourcing Research Reveals Bad Process is why Outsourcing Fails
* Source: Outsourcing Center Survey. Outsourcing Center
The top 5 reasons outsourcing fails are not due to a bad supplier – but due to bad outsourcing process
Copyright © 2010 SPOT Consulting LLC 6
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5
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0 5 10 15 20 25
Unclear expectations
Misaligned interest over time
Poor governance
Poor communication
Not mutually beneficial
Poor performance
Poor cultural fit
Buyers multi-supplier environment
Percent of Respondents
Note: 11% in “Other”
What is Vested Outsourcing?
Copyright © 2010 SPOT Consulting LLC 7
• A game changing approach to outsourcing that – Is a hybrid business model for buying services – Leverages “win-‐win” thinking associated with Game Theory / Behavioral
Economics – Is centered around buying results instead of tasks and/or ac:vi:es with the
conscious effort to use incen*ves to drive process innova*on, which prevents many perverse incen*ves of conven*onal outsourcing
– Creates a contract that follows “Five Rules” – Uses incen:ves to transform the work to achieve “trade-‐ups” versus
conven*onal cost/service tradeoffs
• Transforma:onal when applied – Endorsed by the Outsourcing Ins*tute, Sourcing Interest Group, Center for
Outsourcing Research, and the Interna*onal Associa*on for Contract and Commercial Management
– Regarded as the “business concept of the decade” similar to Lean and Six Sigma
Commercial Companies Benchmarked1
Logistics / Supply Chain
Property / Facility Mgmt
Admin/Advisory/BPO
Other
Companies Outsourcing
• Dell • JetBlue • Southwest
Airlines • Lockheed Martin • Boeing • UPS • Jaquar
• Microsoft • Edward
Jones • H&R Block • Philips • P&G
• Microsoft • Oracle • Honeywell • Boeing
• McDonald’s • Johnson
Diversey • Dept of Energy • Minn Dept of
Transportation
Service Providers
• InSource • Caterpillar
Logistics • CEVA • Unipart
• Grubb & Ellis • Jones Lang
LaSalle • Colliers
• Xerox • AFMS • Accenture
• CH2M Hill • Flatiron-Manson • Wipro
Consultants • Expense Management Solutions
Vested Outsourcing is Research Based and Fact Driven
1. Partial list; over 50 contracts studied
Copyright © 2010 SPOT Consulting LLC 8
Vested Outsourcing’s 5 Key Rules
Copyright © 2010 SPOT Consulting LLC
© 2010 Vested Outsourcing
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Command Cooperate
Cooperate Lose Much-Win Much
Win-Win
Command Lose-Lose Win Much-Lose Much
Based on Game Theory … Cooperative Games Win!
• In non-zero-sum games, a gain by one player does not necessarily correspond with a loss by another
• Win-win game theory emphasizes the importance of cooperation, sharing and over-all group success in contrast to domination and personal gain
• All players are treated as equally important and valuable
• When both parties cooperate they both win! When they don’t, they end up with less or both lose!
“The best result will come from everyone in the group doing what is good for himself and the group. It is the only way we all win”
John Forbes Nash-Nobel Prize Winner
VO gets both Parties to the Win-Win Quadrant
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Vested Outsourcing A Hybrid Business Model Approach
Copyright © 2010 SPOT Consulting LLC 11
• The core purpose of outsourcing is to enable the most efficient delivery of business outcomes
• Vested Outsourcing – focus a1en2on on
outcomes and not transac+ons
– encourage the service provider to innovate
– ensure that the selected business model rewards posi2ve outcomes
– carefully crag collabora2ve agreements
• Share Value
Overview of Outsourcing Models Sourcing Relationship Focus Interaction Characterized by
Transaction Based Business Model Simple Transaction
Provider Cost and Efficiency
Standard Terms, Fixed Pricing,
Automated Procurement
Abundant and easy to resource, no need for a relationship, no trust
Approved Provider Economies of Scale, Ease of transactions
Blanket Agreement Negotiated Terms
Pricing Agreements
Managed by category locally and cross business sector, bundled for economies of
scale, common terms
Preferred Provider Capability, Capacity and
Technology Simplified Transactions
Contract with SLAs Pricing Agreement/Discounts
Possible Gain Sharing Longer Term Contract
Integral supply across business units, delivering added value and capability, not so abundant, a pain to re-source, limited
trust
Outcome Based Business Model Performance-Based
Relationship Performance
SRM Governance Performance Incentives
Fees at Risk
Longer term relationship, integrated communication, metrics focused,
cooperative relationship
Vested Outsourcing Relationship
Mutual Gain, Shared Outcomes
Vested Governance Framework,
Performance Incentives Margin Matching
Vested Agreement
Interdependent outcomes, aligned goals and objectives, mutual gain, managed
performance, long term relationship, Win- Win relationship
Investment Based Business Model
Equity Partner Equity Sharing Joint Venture Asset Based
Governance Framework
Legally bound, formal strategic partnerships, mergers and acquisitions,
asset sharing/ holding
Benefits of a Vested Outsourcing Approach
Copyright © 2010 SPOT Consulting LLC 13
• BeEer compe**on: not just suppliers, but solu*ons – Supplier buy-‐in and shared interests – Variety of solu*ons from which to choose – Supplier flexibility in proposing solu*ons
• Focus on intended results, not ac*vi*es – Increased likelihood of mee*ng corporate goals and objec*ves
– Mutually beneficial, shared incen*ves drive innova*on and cost effec*veness
– Par*es have a vested interest in other’s success; shared risk and reward
SPOT and Vested Outsourcing
• SPOT is the designated Center of Excellence firm for using the Vested Methodology for contact center and BPO opera*ons
• Offerings include – Deal Review. Assess current “deals” against the Vested Outsourcing criteria and provide detailed gap analysis
– Cer2fied Deal Architects. Assist a buying organiza*on on how to structure a Vested deal with one or more suppliers
– Training. Provide seminars, speeches, and structured classes to teach the methodology and expand awareness
14 Copyright © 2010 SPOT Consulting LLC
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For addi*onal informa*on info@spotconsul*ng.biz
or go to our web site – www.spotconsul*ng.biz
Copyright © 2010 SPOT Consulting LLC