Balance Risk and Reward to Gain Value from Technical Support Vendors
July 24, 2014
July 24, 2014
Procurement professionals are being pressured to drive down costs. But at what expense? A singular focus on cost savings can have the unintended consequence of diluting the total value of the supplier relationship. In order to meet your priorities, a better approach may be to match risk with reward to encourage your technical support vendor to proactively be more creative, inventive and innovative in their quest to deliver better service if they can earn compensation for doing so.
Today’s constant fluctuations in supply and demand require that your technical support vendor possess the agility and flexibility to deliver increasing value while minimizing risk. Relationships that promise mutual rewards based on achievement can unlock unforeseen value that can bring increased savings, improved quality, new revenues, and efficiency gains. This approach is actually more valuable than cost reduction, alone.
Shift Your Vendor Orientation
Many companies perceive that risk is unequally weighted toward them when entering into a vendor relationship. It’s important to realize that risk exists on both sides. There is a law of diminishing returns that comes into play when the company asks for more and more value, but offers no additional rewards for the vendor that takes on additional risks and costs for providing it.
Avoiding unnecessary costs is something every procurement manager must manage. But overlooking the potential gains a vendor’s expertise can bring through creative approaches that may not be available internally, can be akin to throwing the baby out with the bath water.
This is not to say that all vendors are created equally, but that with the appropriate risk assessment in place when evaluating new technical support services, the rewards from improved business outcomes may substantially outweigh the perceived risks. Companies that make the best of both internal and external ideas are the ones who will establish unrivaled competitive advantages in the marketplace.
Create a Partnership Based on Trust
Companies looking to gain innovations and competitive advantage based on outsourced vendor expertise must acknowledge that a trusted environment is required to support a successful and productive outcome. Trust between two companies is determined by the reciprocal behaviors and business approaches take by each company.
One approach to creating trust, presented in the CAPS Research paper, Innovation Sourcing: Contributing to Company Competitiveness, includes three basic elements:
Rather than sourcing vendor partnerships based solely on price, the benefits of a relationship built on trust provoke higher commitment and motivate creative innovation to improve the service delivered. This reality gives even more credence to the old adage that states, you get what you pay for.
Procurement managers must develop a strategic approach to assessing how a proposed service from a technical support vendor will improve their business and how they’ll measure that impact. Further, the vendor must be able to demonstrate and explain how the associated costs will be a worthwhile investment for your company.
The biggest benefit from the establishment of a partnership based on trust is that the company now has the right to expect more from the vendor because the risk-to-reward structure has been put in place. This structure motivates the vendor to proactively establish process improvements to technical support that will put the company ahead of competing brands.
Use Voice of the Customer (VOC) to Drive Innovation
Your technical support provider is in a primary position to help your company harness VOC in a holistic manner to develop services and product extensions seen as innovations by your market. Their continuous exposure to customer reactions, thoughts, and preferences about your products can be cultivated and assessed to improve on service methodologies and delivering excellence in support case resolution.
Rather than funding extensive focus groups or global customer interviews as standalone and expensive processes for research and development, why not incorporate the discovery and analysis within an existing process that already commands a captive audience? The efficiency and economy of scale available is unprecedented. By ensuring that your technical support vendor understands your business model, a VOC effort can help to identify the requirements needed to support innovation projects that meet new customer demands and preferences.
The Advantages of Matching Risk to Reward
Creating an environment that inspires technical support vendors to progressively seek innovations on your behalf will result in a self-funded business model. Intelligent creativity in technical support delivery leads to the improvement of service, support and measurable performance. Without the constraints of cost reduction for the sake of cost reduction, vendors can rise to the challenge to deliver more profitability and competitive advantage because their ability to earn rewards for taking risks to benefit your business will be realized. It’s a win-win situation for both sides.
Learn more about call center risk management.