Category:
Terzo Conversations

Part 2 of 3 Terzo Conversations: Industry Leaders Talk Business Strategy

December 9, 2021
Eric Pritchett
President & COO
Ken Kanara, President and CEO of ECA Sits Down with Eric Pritchett, President and COO of Terzo on the value of Transforming Vendor Relationships in this engaging 3 part series

Ken Kanara, ECA President and CEO works with clients to fill permanent and project based roles for strategic initiatives across growth, transformation and organizational strategy formulation. Ken has extensive experience in management consulting, having spent more than a decade working with clients on various strategic and operational initiatives at Booz & Company prior to joining ECA and rising to his current position.


Eric Pritchett, Terzo President and COO, leads corporate strategy development and operations for Terzo, the world’s first VRM.  Terzo’s mission is to help businesses transform their vendors into strategic partners, to accelerate innovation and transform business performance.  Prior to Terzo, Eric led corporate investing and M&A for Asurion.  Eric has been a part of three founding startup leadership teams and started his career as a management consultant. 


Innovation


Whether the largest of the large or the mid-market, no company operates in a vacuum. Global value chains leave companies relying on inputs from all over the world to produce their products. Increasingly, popular management concepts like ‘agile’, ‘flexible’, ‘resilient’ and ‘responsive’ are the rage in today’s management lexicons.  Increasingly, these concepts expose reliance on suppliers and vendors in most situations.  In other words, leaders often rely on what they cannot control.  This is giving rise to a new type of thinking: people-centric supplier strategies.


Eric: At Terzo, we’re taking this message of innovation through relationships for vendors and supply chains to corporate and public sector leaders.  Does that message resonate with you? Are you seeing similar things when you're working with these private equity backed companies? Do you see this playing out in the talent game at all?


Ken: Yes. I think if we learned one thing [during the pandemic of 2020], it's how reliant we are on each other, both from a business perspective and a community perspective. I think the same messaging - looking for opportunities by getting closer to people you already do business with - rings true and is clearly one of the things that Terzo is trying to do with its platform. I talk about building a culture where your suppliers will ‘go the extra mile’ for you and how the magic happens in the results when people do that little bit extra for each other. In order for that to happen, you have to have the right organization system and processes set up to enable that. A lot of companies are realizing that they have big relationships, which are too transactional.  Companies are realizing that it pays to be really close to their most strategic suppliers and to be much more systematic about monitoring and managing those key relationships.  And so just like for an employee, you have metrics, have a job description, and might meet with them on a weekly basis to review that. But if you're not united behind a mission, then you're not going to be able to accomplish anything. I think one of the things I think that Terzo does really well, is it provides a process and structure and framework for results to happen between companies around goals.  Healthy relationships get better with accountability, goals, transparency with what’s working and what’s not.  Weak relationships don’t do well with accountability.  So having clear goals and building processes around regular reviews of performance - these are behaviors of healthy partners.  They evidence good relationships.

Transformation 


Transformation is a hot topic in both management consulting and in the academic business literature.  ECA provides transformation services and many corporate leaders profess to deliver “transformative” results and the like. Broadly, transformations typically occur in technology, business model, people or process.  All of these can be powerful transformational forces or catalysts for change.  Too many leaders focus only on their internal business processes and people.  The assumption is that they can control everything that needs to be transformed, but often the business ecosystem inclusive of vendors and suppliers is central to success, yet an afterthought in execution.  Ultimately, if you are going to “transform”, there’s a damn good chance you’re going to have to lean on a few key suppliers, who may have to transform a bit with you.  


Eric: When you see companies looking at either a technology, a business model, or a process transformation, do you see leaders really kind of focused internally on “hey, I want to go transform based on what I can control?” Or do they also say, “hey, for my organization to transform, it's going to implicate these suppliers outside of my direct range of control? I’m imagining that the degree of difficulty goes up when a critical strategic transformation initiative directly impinges on a relationship that I'm gonna have to somehow bring along with me.”  Is there that realization that transformation is internal and external? Or is it mostly internal?

 

Ken: Wow!  Big question.  Great question.  Honestly, I think when most transformation initiatives start, the focus is on a good framework, such as people, technology, and process.  The initial thinking is going to always be internal.  People are just wired that way.  We focus on what we can control and honestly, most people overestimate what they are in control of.  I would say that, more often than not, it's realized a little bit too late that transformation does impact external third party suppliers often in a very big way. What I've seen a lot of is you have - let’s take for example a middle market company transformation - where one of the initiatives in there is something related to services cost reduction specific to procurement of renewals and new purchases. It gets sponsored by a C-level as a big operational alpha initiative with a three year horizon. Initially, the team tackling this may be simplistic in approach about how they're going to address the change they want.  For instance, a team will take a category of spend and attach a simple metric like a savings target to their initiative. You would be shocked how late in these initiatives that teams actually go to have conversations with the implicated vendors, and the assumption is “okay, we can save 10 to 15%, or something like that.” The reality is, it's done in a very crude way, and not handled with care in many cases. Often I’ve seen that crude savings goals can be met, but often at the cost of relationship capital or other non-cash costs to the quality of the relationship, which are difficult to assess in the short term.  Going back to the impetus of this conversation, it’s unlikely that most companies would treat other divisions of their own company the way they treat even their strategic suppliers. Strategic suppliers - again - should almost be treated as if they are divisions of your own company.


Eric: Is this as simple as saying that, in most cases, “The hip bone's connected to the ass bone?” 


[Laughter]


Ken: Sure.  That’s certainly a way to put it.  Yes, essentially, most of what we want to accomplish strategically as an organization is going to impact or directly involve strategic vendors and stakeholders outside of our own enterprise.  This sounds simple and obvious, but it’s honestly missed all the time.


Eric: This is basically where we see Terzo’s long term differentiation.  Terzo allows companies to be connected very deeply, because the platform creates people mapping on the line right on up and across functional teams to all the tier 1 suppliers.  Not only that, but the platform allows teams to implement vendor goals, systematic vendor review and management programs and efficient interaction when it is time to transact.  But with Terzo, a lot of the action is away from transacting, it’s way deeper than that and allows for so much more.  This takes us in the direction of some of your thinking about where we’re headed with procurement, doesn’t it?


Stay tuned next week for Part 3, the final installment of Terzo Conversations: Industry Leaders Talk Business Strategy with Ken Kanara, President and CEO of ECA. Missed Part 1? Check it out here.