Transcript: Maximize Innovation Through the Vested Way

The rational human would, you know, optimize for these deals, but unfortunately we're irrational. We go in and we want to optimize our side of the equation. So buyers want to lower the price, price, price, price, price, right? Two percent every year, three percent every year. Well, suppliers sit across the table and they want to increase the revenue.

No wonder you're not aligned, right? You are diametrically opposed when you think about a transaction based or even a performance based or GMP type of deal. You're sitting across the table from your supplier instead of sitting on the same side of the table and saying, golly gee, how can we collaborate to grow the pie? You have to think of it as a together approach, right? It's not just a supplier coming up and saying, hey, I've got this great idea.

The buyer has to approve those. The innovations have to be targeted to the individual buyer needs because what may be a great innovative or creative solution for one company is not a great solution for a different company. You're seeking a partner who is willing to make investments to drive innovation in your business, to create value, to co-create value that you will share. And not all suppliers want to make those investments. Not all suppliers are capable of making those investments.

Trust is a two way street. The supplier doesn't trust the buyer. You're certainly not making an investment on your behalf. Trust is such a key component and the relational contracting components are very, very key to the vested methodology. Hello and welcome to the Constructor Podcast, the best way to build it, episode number 53.

I'm your host, Brittany Campbell-Turner, and this podcast is dedicated to helping property owners have certainty in their decisions about their construction projects. We talk about fostering trusting relationships, help you understand how to lower risk, be under budget and on schedule, and most importantly, exceed your end user's desires. Last week, you heard the last of the LCI Congress recap episodes where you heard from Frank Barnes from Utica, Eric Alstrom from Amgen, and Rex Miller, speaker, futurist, author, and consultant from MindShift. So if you haven't listened to the Lean Construction Institute Congress recap series yet, check it out.

It starts at Constructor.com slash EP 49. This week's interview is with Kate Vytacek as she talks with me about buying services with long-term incentivized relationship building in mind. She lays out the three part secret sauce vested approach. Kate shares with us how companies and governments, similar to P&G, McDonald's and Microsoft, are redefining winning through expanding the pie and sharing the pie in outsourced relationships. Here is my interview with Kate Vytacek.

Welcome Kate. Welcome to the Constructor podcast. Thank you for having me. It's exciting to get to share a little bit about our research that we're doing at the University of Tennessee. You're a faculty over at the University of Tennessee College of Business and you're the lead researcher of the vested outsourcing business model.

Also you contribute regularly to Forbes, particularly on the topics of art, science, and practice of highly collaborative relationships. Could you tell us a little bit about your experiences and then how that drove you to working to develop the vested business model? Well, I'm real lucky. Our research was actually funded by the United States Air Force. Think about it.

They spend a lot of money on buying goods and services and about a little over half of what they spend their money on is on services. And so they had the University of Tennessee doing research to study how they can improve how they bought services. That's a big undertaking, to be honest, just because obviously the services, there's a lot of dollars put into that, not just materials, and there's a lot of ways you can do it. I wanted to just get a good understanding of what the components are of the vested sourcing model.

Could you explain to us a little bit about that? So when you look at really successful deals, and I'll use outsourcing, outsourcing is probably some of the most complex services acquisition. Construction, I call that outsourcing. So maybe that maybe you guys don't use that term in your industry, but the requirements vary. It's not like buying a pen, right, or a chair.

And so when you have these requirements that require brainpower, there are three kind of key concepts that fit together to create the sourcing business model. And they're all kind of big ideas, big theoretical concepts that are out there. So we didn't invent any of these, but when you think about a Venn diagram and they come together, all three of these concepts kind of create a foundational secret sauce for Vested. So let's go over each one. So the first one is shared value.

Michael Porter, he's very famous academic who wrote about the five forces, Porter's five forces. And so in his original work in the 1970s and 80s, talked about power and having power over your suppliers or over your customers. And that's how you created a competitive advantage. But just recently in the last couple of years, he's changed some of his philosophies to what he calls shared value was a really great Harvard Business Review article called The Big Idea. And it talked about shared value.

So real simply, shared value is expanding the pie and sharing the pie. Right. So why fight over? Why compete and fight over the slice of the pie when we could collaborate and expand the pie and share that pie? So he's really trying to teach how you collaborate and share value in the new economy.

So that's kind of pillar number one, shared value. The second pillar is outcome based thinking. And that is something that you hear a lot of times, especially in people who do large outsourcing deals. You're trying to shift from transactional business models to outcome based business models. And if you think about that, I'll use an analogy of going to Mount Everest.

Right. So in a transactional business model, you'd show up at the base of the mountain as a climber and you would put out an RFP for your SERPA and you'd say, how many footsteps can you is this going to take? And what's your price per footstep and how many pounds can you carry? So you would measure the transactions. You would pay the supplier or your SERPA for a transaction, every footstep, every pound they carry.

And outcome based thinking kind of flips that on its head and said, you know what, I'm going to care about the end game, not necessarily all the transactions that will get me there. So I'm going to reward you when you get to the top of Mount Everest or you get to each of the camps along the way. So outcome based thinking is the second pillar. And the third pillar is really relational and behavior economics. And this is something that I find really fascinating.

Actually, don't know if you know, but October 9th, Richard Thaler, who's kind of the father of behavioral economics, won a Nobel Prize for his work in behavioral economics. So relational and behavioral economics really talk about the power of building a relationship, putting trust in those relationships and constructing a path, a model or a path approaches that optimize for rational human beings, because not everyone is really rational. And so we have, you know, people do things, they're opportunistic. So we have to take that in consideration. One of my favorite behavioral economists is actually out of the University of Chicago, Stephen Levitt, and he talks about Freakonomics and super Freakonomics and how the law of the universe is, you know, people do crazy things, right?

So they're going to do what's in their best interest. So we have to look at how you expand the pie, but understand that people are going to be opportunistic and are going to try to take more than their share of the pie. And how do you get away from these transactional based concepts to measuring and paying for the end in mind? And that's really these foundational theories that go into VESTED. And combined, what we have done is create a methodology that teaches people how to buy and sell goods and services to optimize for shared value, outcome based thinking, outcome based deals and behavioral economics.

Oh, that just, those concepts sound so foundational to how people really need to build relationships. And I think sometimes it's hard to think about that when you've been doing, I guess, this sort of transactional deal that you've been doing for such a long time. Given my experience with preparing requests for proposals, hiring architects, hiring general contractors, it is a service that you're ultimately buying. And that's the way it's termed, right? Because there are buyers who buy these services.

But in the end game, it is about trust building. It is about collaboration. It is about understanding how the impact is made and making sure that you guys have reached the milestones you're intending to reach, whatever they may be. In construction, we have our perspectives, right? It's the design, right?

The end of the design drawings or the built space. But there are different ways that you can kind of divvy that up and identify those components. So great perspective. And it's really interesting how these three pillars are coming together to create this vested way, this vested approach. Very cool.

Could you give us an example of how corporate real estate and facilities management were implemented? Do you have any specific examples that you could maybe call out for us and have us kind of connect to? Yeah, actually, we do. We've had a lot of traction in the corporate real estate and facilities management space to shift to a vested model. And that's because people have been outsourcing in the space for, gosh, you know, 100 years.

You look at Jones-Lingasol or ISS, they're both over 100 years old. So it's not like outsourcing is new in this industry. But what is new is a shift to outcome based thinking and bringing in kind of expand the pie, share the pie and relational contracting. I'll pick on a couple that are very public case studies that we have. The first one is Procter & Gamble and Jones-Lingasol.

And it's actually featured in a book that we have called Vested, how P&G, McDonald's and Microsoft are redefining winning and business relationships. And it profiles the P&G Jones-Lingasol relationship. And one of the things that you see not only in this relationship, but any of the deals that use the vested model is they follow five rules. And these rules really are the lifeblood of the vested methodology. So when we dissect and we dig into existing buyer-supplier relationships, what we find is that they're cheating on one or more of these rules.

And so so many of the deals that we see actually do what we call flips. They're taking existing buyer-supplier relationships and they're going in and saying, you know what, it's not that the supplier is a bad supplier. I've got a green scorecard. I just have red faces. Actually, we joke and kind of call that the watermelon scorecard.

Green on the outside, red on the inside. And so they're choosing to restructure these relationships to a vested business model. The P&G example is a great one. Another one that was a really good case study, Novartis and Jones-Lingasol. We actually have a government deal and that is Vancouver Coastal Health.

So if you're familiar with Canadian healthcare, it's a government-run healthcare. And so outsourcing of their facilities and cleaning environmental services for the hospitals on the West Coast. And that deal is actually with Compass. And then most recently, Accenture and ISS just did a flip of their existing relationship. And the reason why they're shifting to a vested model is because there's a lot of inherent perverse incentives.

As I mentioned earlier, the rational human would optimize for these deals. But unfortunately, we're irrational. We go in and we want to optimize our side of the equation. So buyers want to lower the price. Price, price, price, price, price.

2% every year, 3% every year. Well, suppliers sit across the table and they want to increase their revenue. No wonder you're not aligned. You are diametrically opposed when you think about a transaction-based or even a performance-based or GMP type of deal. You're sitting across the table from your supplier instead of sitting on the same side of the table and saying, golly gee, how can we collaborate to grow the pie?

What are the outcomes that we want to achieve? So when your supplier, i.e. your surfer, gets you to your top of your Mount Everest, how do you share that value? Let's go back a little bit. I mean, you talked about the rules and how they're broken.

Can you dig into a little bit about what the rules are that tend to get broken so we can identify what those are when you're kind of talking through the example? Yeah. And can you hear the clock dinging in the background? I might use that, actually. The five dings for the rules.

There you go. So you asked me about the five rules. And as I mentioned, this is really the lifeblood of the Vestib methodology is helping people understand these rules, why these rules are important and restructuring their deals or even structuring out of the gate like Vancouver Coastal Health did their deal around these rules. So rule number one is outcome-based business model. Obviously, if outcome-based approaches are a pillar, we need to anchor our entire contract between our buyer and supplier with outcomes.

So outcome-based business model. Rule number two is focus on the what not the hell. So this is moving away from very prescriptive statement of works to statement of works that are more flexible, but aligned to allow the supplier to be creative and drive innovations to get you to your outcome or your Mount Everest. Rule number three is clearly defined and measurable desired outcome. So if I'm going to buy outcomes, how am I going to measure those outcomes?

Because I need to not bicker over all the detailed things that we can do. I need to be really crystal clear on how I measure success against these outcomes. Rule number four as a pricing model with incentives. So notice I use the word model, a pricing model, and I use the word incentives. If I'm going to grow the pie, how do I figure out the economics of sharing that pie?

And then lastly, rule number five is insight versus oversight governance structure. Instead of managing the vendor, managing the supplier, we're going to manage the business with the supplier. Very much about insight analytics, root cause analysis. So a different approach than oversight, which is what you see a lot of companies really focusing on is, how am I going to manage or micromanage that supplier? And instead, it's working together and there's a lot of design features that we would teach in structuring those governance mechanisms.

Yeah, I'm just making sure I'm taking my notes super clearly. So I really like the aspect of insight versus oversight governance. And I think that's certainly a cultural shift that sometimes needs to take place in organizations. I'm wondering if you can give us an example of what that looks like. Yeah, there's actually some design principles that we teach in governance.

And unfortunately, a lot of companies leave in shadow organizations. So they outsource to the expert, they're giving you a very prescriptive statement of work. So they're cheating on rule number two. And then you've left in the shadow organization who's there to micromanage against that prescriptive statement of work. So let's use a great example of cleaning.

So you need to clean the toilets every hour or once a day or three times a day. How many times have you gone into a public restroom? Think about the airport and there's a little sign on the door or close to the door and it's got the signature of whoever cleaned. How many times is that bathroom really not clean? And you know what, they showed up and they got paid per hour per cleaning to clean that bathroom.

And so what we really care is that our bathrooms are clean. Having the supplier maybe invest in technologies that trigger how many flushes do we have so that every 10th flush or every 50th flush, depending on how messy your population is in your workspace, they're going to come and actually trigger or put a little smiley face button at the end as you exit. And if the bathrooms need to be cleaned, it's going to trigger someone on demand to come and take care of that. So there's better ways to approach getting to the end game.

And unfortunately, when we leave in a shadow organization, we tend to want to manage when those people were already in those jobs. I love to use the P&G example because they didn't buy the way it was in the past. They bought better, faster, cheaper. They actually called it the power of the and. I want lower cost and higher service.

The only way you're going to get there is through innovation. So as you embed innovation into the governance structure, you have to think of it as a together approach. It's not just a supplier coming up and saying, hey, I've got this great idea. The buyer has to approve those. The innovations have to be targeted to the individual buyer needs, because what may be a great innovative or creative solution for one company is not a great solution for a different company, even in, say, the banking industry.

So I've seen three banks and they all outsource facilities management, all have the same type of service. But what's good is for one bank is not same for another because they have different strategies on where they're trying to go. Think about TD Bank. They want to be the better banks, sustainability. Got other banks where it's really more about basic services and more of a cost focus.

So you're going to bring different types of solutions. So we have four components to governance. And the first one is relationship management. How are you just managing that relationship? It really is a together mindset.

And there's mechanisms that we would teach to actually manage the relationship. The second component to governance, and this is where I see a ton of people missing the boat, it's how are you going to manage change? So there's little change, contractual change, and there's big change, which is transformation and innovation. Because if I bought the future, I bought this Mount Everest and the climb to do something different, I'm going to have to jointly figure out how to manage that change. So it's the second big component.

The third big component is exit management. How are you going to exit this relationship if it isn't working? And we should design in an intent to have a positive, strong working relationship and not just to be done at the end of three years and I'm going to bid it out. So we would actually teach invested to have an evergreen contract. So at the end of year one, the supplier earns year four.

At the end of year two, they're earning year five. And so the intent is for them to always be investing in innovation and driving up value, creating that value so that you can share it. But we need to understand that if value is not being created, how would we properly exit that? How will we manage escalations? We don't want things to get fester and build.

Instead, are we proactively getting on top of our escalations in a timely manner? I love the Microsoft example they have in our book. They have a five day escalation. If you don't solve something in five days, it goes up to the next level. I bring you an idea, we either implement it or it's going up because all too often we're letting things fester or letting good ideas die.

And then the last component of governance is, I think, what most people think about is compliance. Compliance is table stakes. So we need to understand and manage compliance. But in a vested approach, compliance is actually managed together with the supplier. It's not I'm going to micromanage you to your compliance, but are we working together to de-risk?

Because a lot of times, violating a compliance concern actually increases your risk. And so what we want to do is actually put in proactive ways to de-risk the deal to drive improvements against compliance to create value. Certainly like that approach. And I can see how it works with the other rules. One thing that I am really focused on right now is the measurable, desirable outcomes.

And if you could tell us how that now links to, well, obviously, it's also really related to the incentives part. Pricing, model and incentives. And it's kind of hard to separate them, right? You know, Brittany, you're talking yourself into it. The rules are all interrelated, right?

If you remove one rule, it actually is a three-legged stool, but instead we have five. You remove one, it weakens your whole system. And so the rules work together to create a system. And removing any one of the rules actually creates friction. So when I cheat, when you're not following the rules, in essence you're cheating, right?

It creates friction in your system. Just like you would have an engine or an HVAC system, if you get crud in your HVAC system, it's going to create friction and it's not going to operate efficiently. And that's what's happening to our outsourcing contracts, is we're not designing them as a system and we're not following these rules and we get this friction in our system. And all five rules work together or you're going to get an unhealthy relationship. You know what?

Let's talk through this example that I observed and I want to hear what your opinion is on it. And just maybe give me an idea of how you would recommend for someone to now shift into a vested approach. So for instance, you're hiring at someone who's going to be outsourcing. You've actually worked with them for three years prior and you're now in this, you're in the position where you have something coming up that you're like, okay, I want to approach this differently. So I'm going to RFP and bid it out to a number of people, a number of companies.

But you do want to enhance the innovation that's taking place. You want their expertise, but you're bidding it out and you have this, you know, relational partnership with this company. Now, how would you approach bidding out to a few different companies after having already established a relationship with one and then maybe even prior, maybe another company out of the few that you're bidding out to? Brittany, one of the things that I think really want to stress is you can absolutely get to a vested agreement using a bid process, but what we find is the vast majority don't.

And instead what they're doing is they're reflecting on their existing relationship and they can do that in a couple of ways. One is using some of our self-assessments. So we have free self-assessments on our website and you can go in and look at the 10 ailments of outsourcing, how much friction, how healthy is your relationship with them. And are you sensing or seeing some of these unhealthy behaviors as well as looking at your contract. So we have what's called the 10 elements of a contract.

So you can actually do a self-assessment to gauge how your contract is structured and if it's designed properly. But a lot of times people are actually using our centers of excellence that are certified in the VESTM methodology to come in and do a deep dive deal review. So they're looking at and providing a neutral third-party perspective of that relationship. So when they get that feedback of the relationship and the contract, what you start to see is that people look at it and they're like, dang, the supplier isn't really doing a bad job.

I got what I paid for. So do I want to go through the cost and expense of bidding this out when I actually do have a good supplier? And part of a deal review is an assessment we call the compatibility and trust assessment. It was designed by a couple of PhDs and we absolutely love it. Sparrowed it into the VESTM methodology.

But the cat looks at the levels of trust and compatibility in these relationships. So if you start to look that you've got an unhealthy relationship because you're cheating on the rules, but you have a strong foundation of trust and compatibility with that supplier, do you want to take it to bid? When you already know you've got a capable supplier that you trust, you just structured a deal wrong. So I think as we do all these deal reviews, and we've done many, many, many of them now, they basically come back with the buyer and the supplier going, gosh, especially the buyer saying, gosh, I got what I paid for.

Maybe just maybe I need to ask a different question. And yes, they could do a bid, but they're choosing not to because they have a capable supplier that they trust. And the issue isn't with the supplier, but with the structure, the architecture of the deal. Now, having said that, the vast majority do what we call these flips. You can actually go through a bid process if you don't have a trusted supplier.

If you don't have a capable supplier, you can still get there. That makes a lot of sense. Yeah. Thanks for that feedback. You've mentioned in a couple of senses that you can develop a request for partnership or request for solutions versus request for proposal or request for qualifications.

And I wanted to understand a little bit of what that might look like. Yeah. And this is actually a result of the British Columbia government. The Canadian government came to us and said, we really love what you're doing with Vested and we want to use the methodology, but we must go through a bid process. We're a government entity.

We can't do a flip. So we actually worked with them and developed a process. And we've called it a request for partner process. But how do you take the rules, the Vested Five Rules and the 10 contractual components, how do you bring them into a more collaborative bidding process? And we get the term request for partner because you really are seeking not just a supplier that has the capabilities, but you're seeking a partner who is willing to make investments to drive innovation in your business, to create value, to co-create value that you will share.

And not all suppliers want to make those investments. Not all suppliers are capable of making those investments. Trust is a two-way street. The supplier doesn't trust the buyer. They're certainly not making an investment on your behalf.

If the buyer isn't willing to do things differently, such as have a longer-term contract, eliminating terminations for convenience, why would a supplier invest in innovation if you can just terminate with 30-day convenience? That's very, very risky. So we really tried to work with the Canadian government to educate them how their contract would need to change to support a Vesta deal and how their bid process would need to be modified to create a vested agreement. And the good news is the laws allow them to do this.

So they were using a request for proposal very standard way. And when you looked at their laws, their laws didn't prevent them at all from having more collaborative dialogues, from creating an outcome-based deal, from putting in incentives. They had just never done it before. And so that's a great case study that we have, and I'm happy to share it. If anyone wants it, like I said, it's a government deal.

The government can do vested, anybody can. Absolutely. And I think that a lot of companies are concerned about their auditing process. Obviously, when it's a government deal, you need to have your public money. You need to have your funding.

You have to pretty much explain clearly to the public exactly what you're doing with your funds. So absolutely, it makes sense. And I think that's a big concern for a lot of companies who are transitioning or considering something to transition to. It makes a lot of sense to look at models like that. The next thing I want to ask you about is shared risk, shared reward.

I mean, we already talked a little bit about shared value, right? And I'm particularly interested in the integrated project delivery model. We actually have a contract type now called the integrated form of agreement that owners, architects, contractors, major trade suppliers are taking part in to execute a construction project. And I know that's a sort of a multi-layered, multi-party contract type that people are entering into. But I wanted to just talk a little bit about how to step into a shared risk, shared reward model.

And if you are seeing any of those multi-party scenarios, will you have or you recommend a vested approach? Yeah, we do see multi-party vested deals. But for a lot of organizations, they're just applying vested for the first time. And we would actually recommend a one-to-one relationship between a buyer and a supplier. So if you aren't willing to create, say, for example, a global deal because it just seems too risky or you don't think you have a supplier that can manage things globally, you're starting to see people take a regional approach.

But it is possible, but it is actually harder because now the suppliers have to work together. Trust is such a key component and the relational contracting components are very, very key to the vested methodology. And it's hard enough to build that trusting relationship between the buyer and one supplier that you start to bring in competitors and they don't like to necessarily work together. And how do you actually do that? So we have seen it.

Our favorite example is actually in the book Vested, how P&G, McDonald's, and Microsoft are redefining winning and business relationships. And it's the case study of McDonald's because in many cases, McDonald's doesn't have a sole source. They have multiple suppliers. And in, for example, the beef category, it's not services, right? But beef is very strategic to McDonald's.

They have five suppliers. And how do they work with the suppliers in a very collaborative way? And how do you extend that governance? If it's managing with insight versus oversight, how do you manage the entire beef for across all of McDonald's for five suppliers? It can be done.

It's following the exact same rules, but it is much harder when you have competitors. And so we always try to counsel people to, if it's your first time to do a vested deal, get the methodology right with one supplier and then try to expand it. So in the facilities and real estate space, for example, start with just cleaning and maintenance or just dining. If you don't feel like you can have one huge supplier like Procter & Gamble did with Jones-Lingasol, right? In the P&G case study, it was huge, right?

So it was a worldwide deal, 130 facilities, 60 countries. And they put all their eggs in one basket with Jones-Lingasol for all their corporate facilities needs. And many people would say, gosh, that's super risky. But that's a beauty of vested because you're actually highly transparent. You're focusing on the same end game, right?

So if Jones-Lingasol can help reduce the risk, they actually create value. So risk reduction is a form of value creation. So how can you actually grow the pie and share the pie when you're thinking about risk? But far too many companies, that's too big of a leap. Many are just doing a regional pilot.

Let's just pilot this in one region. Let's just pilot this in one aspect of facilities management. And that's okay. Start small and get it right and then expand. Very cool to understand the recommendations.

So we're talking about reduction of risk, right? I mean, we talk a lot about reducing uncertainty on this podcast. And I think overarching concept here, how do we do that for owner type companies? Anyone who's buying out a service or product, right? You talked a little bit already about just reducing that risk, working with a partner in order to reduce the risk.

But the shared risk, shared reward, and I'm calling it shared value approach. Could you tell us a little bit about what types of things a company would be looking for? And you can give us like a specific example if one comes to mind. As to how the company that's being hired on or the outsourcing company, how would they be providing their expertise so that the company feels they're receiving that value? Yeah, that actually is not just about the money, but it really hits up to rule number three, clearly defined and measurable desired outcomes.

So the buyer and the supplier have to mutually agree on the desired outcomes. And then once they have done that, then you link the money, the pricing model with incentives to those desired outcomes. I'm going to give an example, a real example. And again, I'll point to the book, Vested How P&G, McDonald's, and Microsoft are Redefining Winning in Business Relationships. And this example is from Rocky Flats, which is environmental services.

So not quite corporate real estate, but it is, right? So the Department of Energy had this location where they manufactured plutonium triggers, and they needed to decommission all of the buildings and decontaminate all the buildings. So there were 800 buildings spanning about 6,200 acres outside of Denver, Colorado. Decommissioning, tearing them down, but these have nuclear waste inside of them. So high end, very technical operations.

In that, they said, all right, one of my outcomes is closed because they had 800 buildings and this working site, right? So think about it, they had guards all around here because it's nuclear material, right? So there was a huge amount of costs running. It was actually costing about $800 million a year to run this facility. So every day that it was open was costing money, right?

And so they couldn't close it without having it decontaminate. So how quickly can I close this? How cheap can I do it? Because at the rate it was going, it was going to cost about $37 billion to do this decommissioning and decontamination. $37 billion at the rate they were going.

So clean was another one. So you could put a Geiger counter in and know how contaminated these buildings were and the grounds were so they could measure how clean it was and safe, right? So they knew the worker safety. And so if you think about those four desired outcomes, those are big ticket items and you could benchmark each one of them. How long it was taking, how much it was costing, how safe it was, right?

And how clean it was. So if you think about those four desired outcomes as being your ultimate Mount Everest, you climb there and you know you're successful. How can I beat that baseline? And so when the supplier, and it was actually CH2M Hill and Kaiser Engineering, they created a joint venture called Kaiser Hill. So when they beat the budget, beat the time, they beat safety ratings.

By the way, safety, 800% increase in safety. You can measure that. When they beat the baseline, it actually triggered value-based payments. And so there were incentives for how well the supplier did. And it's pretty simple.

It's really as easy as that. You've got to identify your outcomes. You've got to figure out how you're going to measure them. What is your baseline? And so if I think about being at the bottom of Mount Everest and I'm buying the future, I'm buying climbing Mount Everest, how do I link the money to it?

And you know, Brittany, sometimes it snows on Mount Everest. There are risks. And so how are we going to share the risks? How are we going to share the rewards? And so your pricing model is really that.

It's a model to share risk and share reward. I think that was an excellent example. Thanks for sharing that. I think that lays it out clearly as to how the companies can work together to determine the specific outcomes they want to reach and reduce the risks. So if someone is interested in utilizing the vested sourcing model, what would you recommend that they do right now?

Obviously, go to your website, but could you just lay out maybe the next couple of steps? Yeah, all organizations kind of go through four phases. So the first phase is awareness. And thank you so much for allowing us to share some of our research here and just about the best methodology, because without awareness, people aren't going to move forward. And they can get a ton of information from our website.

We have chosen, especially because our original research was funded by the United States Air Force, a lot of our research available is open source. So you can go to our research library, download our case studies, download that Rocky Flats case study, download that P&G case study, download that Novartis case study and learn about how those organizations have had success using vested, how they followed the rules. So each one of our case studies takes the rules and shows how they challenged what they were doing to follow the rules.

You talked about how you move from just Quest for Proposal to a more collaborative request for partner. You've got two great white papers on that. One of them and a case study from the Canadian government. So go download those, go look at our tools that we have, our open source tools, and just begin to read and learn and ask yourself, is this something that could work for us? Do I have a Mount Everest in corporate real estate and facilities management?

Or am I happy, you know, if you've got a green scorecard and green faces, vested is probably not for you. Where it's a sweet spot, you may not have a capable supplier, but you know there's capable suppliers out there, right? So when you know you've got capable suppliers in the marketplace and you have red faces, why aren't you getting innovation? Why aren't you getting transformation? Why aren't you getting all these things that you want?

And it's probably because you've structured your contract poorly. You're cheating on these rules. So first step, become aware. Second step is understanding. And this is where we start to see people coming and taking our courses, spending three days with us in Knoxville or, you know, we went, for example, we've been in Europe and this is where Accenture and ISS got exposed.

We did a course over in Vienna, Austria, and Accenture and ISS came and they spent three days going, wow, vested is kind of an interesting model because they'd heard about it. They wanted to learn more about it. In that, they began to go from just awareness to understanding and they decided to come back and pilot it, right? And that's where you get to the implementation phase. We do have a course called the Creating a Vested Agreement class.

It's an online course. Buyers and suppliers take the course together and their homework is their contract. And often they will actually engage a coach. So as the University of Tennessee, we train people in the vested methodology. So think of a Six Sigma Black Belt, right?

I don't know if you're familiar with Black Belt program, but you know, the Black Belts are kind of the teachers. So we teach coaches how to help companies use the vested methodology. And so they actually hired a center of excellence that's authorized to use and teach the vested methodology. They hired a Navy, which is the Dutch Association for Purchasing Management, to be a coach for them. And they wound up implementing Vested.

Submitted their contract for review. And so it's a course that we take where we sit one-on-one with them and give them feedback about how they've structured their deal. And it did fantastic. So they were able to apply the vested methodology. And that was a classic example of a restructure.

So before existing suppliers, same people, same service, same capabilities, restructuring your contract before and after. Those are the ones that make me most excited because when we track them, you can see the before and after successes against their baselines. I think those are some clear, concise steps. I mean, I think obviously building that awareness and then assessing how you guys are doing things as a baseline and figuring out where you want to go makes a lot of sense. So that self-assessment tool is hugely valuable.

And I'd love to include it in the show notes to make that available, to put all the links. Yeah, absolutely. And so you've talked about the collaborative bidding stuff, two great white papers, a case study. I've mentioned some of the case studies. So if you summarize those, I'll make sure I can give them and they can just download them from your site.

If they want to come to our site, that's fine too. So with that, I would love to just thank you first of all, Kate. I really appreciate you coming onto the podcast and talking with us about the Vested Way and giving people another way, a more positive way, more collaborative way, more integrated way of doing things, which is what we love to talk about here on the Constructor podcast. So yeah, thanks for joining us today. Well, thanks for having us.

And hopefully we've inspired some listeners to maybe pilot, maybe try something different. Like I said, you don't have to jump off the cliff, put a toe in and do a little pilot. Because almost all the deals we've seen have been examples of where they said, you know what, I'm going to pilot this. I'm going to do something different in one area. Maybe it's one region, maybe one area, challenging yourself to think differently.

Well, with that, is there any particular way that you'd like people to reach out to you? What's the website? Tell us how we can get in contact. The university does have a dedicated website to Vested. It's vestedway.com.

We have a research library, open source tools, even one of our courses. We have an online course called Vested Orientation. It is open source. You can go on and all you need is an email address. And I promise we don't bug you.

I have way too many things to do to bug all the people that come to our website to learn. But if you are interested in any of our courses, if you have questions, we love questions. I'm obsessed over questions because it actually helped me better teachers. So send me an email directly. And so my email address is kvitasic at UTK, as in University of Tennessee, Knoxville.edu.

So send an email with your questions. Go peruse the site. Like I said, you have to learn on your own before you're willing to come and take the next step. And so we get lots of people, that's how they learn about it. And one day I'll get a call and said, we've read your books, we've been sharing this.

We jump on a webinar with this where you come down and visit our company. And we love to do that because it really helps people to go from awareness to that understanding and ultimately hopefully implementation and mastery. And it's really exciting that companies like Accenture and ISS have done that. They now have, ISS has two certified architects. Accenture has two certified architects.

Just this past week, we graduated a certified architect from Jones-Ling-Sol, from our Knoxville class. So we love it when people are out there, not just understanding the theory, but putting it to practice and actually mastering it. With that, thanks again. This was a lovely time speaking with you, Kate. Well, thank you.

Kate and I had such a good time during this interview. If you did too and learned something valuable, share this episode with your friends and colleagues. You can also let me know if you enjoyed it by connecting with me on Twitter at Brittany underscore CT or find me on LinkedIn, or you can just email me at britney at constructor.com. That's B-R-I-T-T-A-N-I-E at construct double R dot com. In our next episode, we'll be speaking with Peter Anchor-Sternie, chief marketing officer at ISS.

He'll actually be talking about how they've used the vested approach and how they've partnered with Accenture. But first, we'll be talking about the change that's happening in facilities management and how that's affecting the focus on recruiting and retention. We'll be talking about research into technology like Internet of Things and the importance of service management. Peter also talks with us about how ISS is launching the sixth and final book with the Copenhagen Institute of Future Studies and talks about the future of work. Lots of interesting things coming up in this next interview, but I think that you'll get a sense that Peter genuinely loves what he does.

He's passionate and invested in providing quality experiences for all of the 500,000 employees at ISS, but also to their clients. So don't forget to subscribe at constructor.com to get email updates from me. If you haven't already subscribed to the podcast, you can do so at iTunes or Stitcher or wherever you listened to podcasts. Please leave a review to show you support and let me know you're enjoying the podcast. I look forward to talking with you guys next week.