I think  Manuel “Matty” Moroun, the billionaire owner of Detroit’s Ambassador Bridge, might be wishing that he used the Vested approach for his Detroit bridge as he was sentenced to jail time for missing deadlines on a construction project.

The Moroun case involves a dispute between Michigan’s Department of Transportation and the Detroit International Bridge Co. The Department sued DIBC in 2009, alleging that Moroun’s company reneged on a contract to improve freeway connections to the Ambassador Bridge. Wayne County Circuit Court Judge Prentis Edwards recently ordered Moroun and Dan Stamper, an executive with DIBC, to jail for failing to comply with court ordered deadlines.

While an extreme example, the Moroun case underscores what many face in the construction industry: the difficulty of consistently completing projects on time and on budget.

A project that runs on court-ordered deadlines has some serious flaws in terms of planning, governance and collaboration. There is a better, more collaborative way to get the job done without people winding up in jail—the Vested way.

It so happens that there is a great example of a highly innovative and successful bridge project in a neighboring state that’s a perfect counterpoint to the Ambassador Bridge fiasco.

The St. Anthony Falls bridge replacement project in Minnesota is powerful proof that a collaborative, innovative—and incentive-laden—approach to solving difficult problems will most often result in huge success.

I wrote about the bridge project in late 2010 in this space, but in brief, the St. Anthony Falls Bridge in Minneapolis, the major Interstate I-35 artery across the Mississippi River, collapsed on August 1, 2007, killing 13 people and injuring 145. It was essential to rebuild the bridge quickly; the initial estimate was that a bridge rebuilding project of this magnitude would take three years to complete. When then-Gov. Tim Pawlenty said he wanted the bridge rebuilt within 17 months many experts asserted that was impossible.

As it turned out, the governor was wrong: it took less than 14 months to rebuild it; the 10-lane 504-foot bridge opened to traffic on September 18, 2008.

The Minnesota Department of Transportation teamed with Flatiron Constructors and Manson Construction, using a design by Figg Engineering, for the rebuild project.

Completing the $234 million project three months ahead of schedule would not have been possible without a high degree of innovation and teamwork in construction and project management techniques. The construction team cut more than three months off the December 24 deadline, earning performance incentive bonuses that totaled about $27 million.

The achievement was made possible by adhering to the collaborative, flexible and outcome-based contracting principles embodied in Vested Outsourcing.

You can read the details on the St. Anthony Falls project in a 56-page case study available here.

A Vested agreement forges the kind of partnerships that have the power to deliver transformational results and solve real problems—like aligning and collaborating with construction contractors to build a bridge in record time and turn tragedy into triumph.

And by the way, it can keep you out of the slammer!

Jobs was the mastermind behind revolutionary technology products just as the technology age we are currently living in got its start.

It is almost like the old chicken and egg question because it’s difficult to imagine where IT outsourcing and supply chains would be today and how productive we would all be at our jobs without Jobs’ ideas, innovations and massive influence.

One of Apple’s earliest catch-phrases was that it made a computer “for the rest of us.” For those of us who can remember the first MacIntosh – it was a small, almost nondescript machine that suddenly opened a universe of possibility on a small desktop because it was easy to understand and use by the “rest of us.” You did not have to be a computer whiz or master arcane programming languages and operating systems like Cobol or DOS to work effectively on a computer. He made computers personal.

While Jobs was not famed for his collaborative traits, which are a hallmark of Vested Outsourcing, he did bring some Vested ideals to the table including: innovation, flexibility, teamwork, communication and running the business with vision, foresight and insight.

The thing I like about Jobs is that he had vision and wanted to make that vision real while sharing it with the rest of the world.

When the first Mac was released in 1984, Jobs said, “We’re gambling on our vision, and we would rather do that than make ‘me too’ products. Let some other companies do that. For us it’s always the next dream.”

Here are few other pertinent and resonant words to consider from the wisdom of Steve Jobs:

- When he was recruiting John Sculley, then president of PepsiCo, to Apple, Jobs asked: “Do you want to spend the rest of life selling sugared water or do you want a chance to change the world?”

- “You can’t just ask customers what they want and then try to give it to them. By the time you get it built, they’ll want something new.”

- “Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.”

- “You have to trust in something – your gut, destiny, life karma, whatever. This approach has never let me down and it has made all the difference in my life.”

- “Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma – which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice.”

- “Most important, have the courage to follow your heart and intuition.”

- “You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in the future.”

Many of those quotes came from Jobs’ 2005 Stanford University commencement speech, which is well worth a listen.

Connecting the dots, courage, innovation, trust and breaking away from dogma – fine qualities to implement in life and in business.

Wayne Dyer

In a very real sense this highly aphoristic spiritual guru and author of more than 30 books has a lot to say about the business and outsourcing mindset.

Much of what Dyer says boils down to knowing and trusting yourself, accepting yourself and in his words, making yourself “available for success.” Those are important guideposts in the business arena as well.

One of his most famous books, The Power of Intention (2005) is used by students and workers to further their careers and businesses. Dyer holds a Doctorate in Educational Counseling from Wayne State University and was an associate professor at St. John’s University in New York.

Intention is often described as a fierce determination propelling one to succeed at all costs by never giving up on an inner picture. In this view, an attitude that combines hard work with an indefatigable drive toward excellence is the way to succeed.

Dyer says there’s more to it than that. For him intention is a force that allows the act of creation to take place. His book explores intention—not necessarily as something you do, but as a form of energy that’s actualized and controlled through creativity, expansion, receptivity and kindness.

Well, I did mention that there’s a lot of the spiritual and metaphysical in Dyer’s teaching! But to bring this back to Earth and Vested Outsourcing, the Vested approach is based on creative collaboration and trust, receptiveness to change, expansion through innovation and incentives, and kindness by “playing nice.”

And one of the first things that outsourcing teams do as they establish a Vested relationship is to jointly draft a Shared Vision and then distill that vision in a joint Statement of Intent. These are the necessary building blocks of a Vested agreement, setting the larger guiding principles for the relationship.

The parties at this point understand the business at hand and align their objectives for the work ahead. But sharing intentions is not easy and requires a flexible and receptive mindset. The Statement of Intent builds the foundation for the agreement to go forward by defining how the parties will work together under the agreement and how they will behave once the agreement is documented.

The elements that go into crafting the Shared Vision and Statement of Intent are detailed in The Vested Outsourcing Manual.

It’s not quite a spiritual or metaphysical process, but the Vested approach and Statement of Intent does create the spirit and energy that drives the Vested partnership and makes it “available for success,” or as I call it, “getting to we” for the win-win.

Exiting the PC market is especially huge, because spinning-off its Personal Systems Group means HP will part with a long-standing investment that made it the biggest PC maker in the world after acquiring Compaq for $25 billion in 2002.

What does it all mean? Pundits are going wild: An acknowledgement of a failed strategy? PSG is bleeding money? New management and thus a new direction?

Based on what I have read, HP fell into what Clayton Christensen describes in his book The Innovator’s Dilemma, where “well-managed companies that have their competitive antennae up, listen to their customers, and invest aggressively in new technologies still lose market dominance.”

“HP is fleeing upmarket, away from a core that it will abandon to device makers,” writes Horace Dediu, an independent analyst and founder of Asymco.com in a piece he wrote both for his Asymco blog and the HBR Blog Network. “HP management conceded that the disruptive impact of the iPad forced their hand but that hand was already quite weak from a decade of over-serving the market. The last decade offered plenty of opportunities for incumbent PC companies to adjust to the realities of mobility. However only one computer maker made the transition.” Dediu was referring to Apple’s grasp of the PDA market in 2001.

While HP’s exit from the PC business is a tough “business happens” lesson – but I herald their ability to make a tough call and exit a business they no longer see as core. In fact, I am not surprised that HP wants to shift their “core” focus to providing IT solutions.  HP has long been a leader in IT outsourcing – landing huge deals with GM last year and P&G in 2004.

Focusing upmarket is what Christensen calls “skating to where the money is.”

I appreciate the guts it takes for a company to recognize it no longer has a competitive advantage and then to refocus efforts where it can have significant competitive advantages. As the IT space matures, HP will be in a good position to convert traditional outsourcing deals to highly strategic Vested deals. In fact, I have long been a fan of HP’s George Kimball who moved from Baker & McKenzie to HP. Kimball wrote the highly influential Outsourcing Agreements: A Practical Guide.

I hope the folks at HP will use this reaffirmation of their core competencies to focus their attention and help take IT outsourcing to new heights. In particular – I hope they realize much of the industry has hit a plateau with what I refer to as watermelon scorecards where service providers are hitting their SLAs yet not helping their clients achieve much-sought-after Desired Outcomes.

In Vested Outsourcing, the essence of Business Happens is the ability to react flexibly, innovatively and efficiently to the vagaries of the marketplace. HP learned the lesson the hard way as business happened to the PC side of the business.

I also hope HP will apply the lessons in The Vested Outsourcing Manual on how to structure relationships with its partners and clients that embrace change. If it can, HP might just be able to reinvent itself as it focuses on its newly defined “core” of IT services, and bring much-needed innovation to the IT outsourcing sector as well.

Innovation is easier said than done however, and a recent article by Stephanie Overby in CIO magazine underscores this. A survey of European CIOs found that 67 percent of IT leaders rely on outsource providers to turn ideas into new and improved processes, but only one-third of those same CIOs measure the impact of innovation delivered by service providers.

Overby writes, “Two-thirds of the CIOs said they would benefit from a framework for innovation, and half would be willing to pay more for an outsourcer that could help them formalize and maintain a successful innovation process, according to the research conducted by the United Kingdom’s Warwick Business School (WBS) and sponsored by offshore outsourcing provider Cognizant.”

Researchers interviewed 125 CIOs and 125 CFOs for the study and found that less than half of CFOs expected service providers to help turn ideas into new and improved processes and only 39 percent of them would be willing to pay higher rates for an outsourcer that could deliver proven innovation on a regular basis. Another case of getting what you pay for and not necessarily getting what you wish for.

As outsourcing activity picks up, the CIO article continues, moving beyond business-as-usual deals could benefit customers and providers, according to Ilan Oshri, WBS associate fellow and associate professor at Rotterdam School of Management and co-author of the study.

“Many client firms are still occupied with sourcing operations—trying hard to make outsourcing deals work, constantly monitoring SLAs and doing everything possible to avoid failure,” Oshri says.

That doesn’t leave much time or energy to nurture and implement innovative ideas.

While many CIOs hold onto the traditional notion that IT should outsource commodity work in order to focus on higher-value tasks such as innovation internally, Oshri says mature IT leaders approach outsourcing differently. “More sophisticated outsourcing clients seek innovation from their vendors,” he continues, “while newcomers to outsourcing hope that by outsourcing a function they will be able to free up in-house talent to focus on higher value activities.”

Oshri points to Shell as a company that has partnered with outsourcers to build a solid internal innovation function.

Vested Outsourcing’s Rule 5 says the governance structure between company and service provider should provide insight, not merely oversight. Innovation–and its cultivation–is a basic ingredient of a Vested agreement’s governance framework.

The Vested Outsourcing Manual, which Palgrave Macmillan will publish next month, focuses on creating and operating a collaborative ecosystem that rewards innovation and a mutual culture of continuous improvement.

Innovation is more than a wish or suggestion box hung outside the CEO’s office. In the Vested model it’s about nourishing and encouraging ideas and creating the conditions for innovation to flourish.

Given the history of compensation over the several decades, the answer from the executive suite would of course be “Never!”

But another view is emerging, as highlighted by Vivek Wadhwa in a viewpoint column last week for Bloomberg Businessweek, “How to Fix Oversize Executive Compensation.”

Wadhwa is a visiting scholar at University of California-Berkeley, senior research associate at Harvard Law School, and director of research at the Center for Entrepreneurship and Research Commercialization at Duke University.

He notes that over the past 30 years the earnings of American workers has not kept pace with U.S. productivity growth. Meanwhile the earnings of corporate executives exploded.

Those who defend the explosion in executive compensation—and you know who you are—argue that executives deserve their princely salaries, stock options and bonuses because they make the most significant contributions to their companies’ success. Recent economic and financial history has shaken that idea, and now there’s evidence that the justification was hot air.

Wadhwa writes about a study from the National Bureau of Economic Research, a part of its Shared Capitalism Research Project, showing that “distributing rewards across the corporation—sharing them with workers—is the most efficient way of making businesses more successful. Motivated employees are more productive and spur innovation in products and processes.”

The Shared Capitalism Project has been around for about 10 years. According to Wadhwa, Harvard economist Richard Freeman, Rutgers sociologist Joseph Blasi, and Rutgers economist Douglas Kruse analyzed data from surveys of 41,206 employees at 323 work sites. They found that nearly half the employees of American corporations participate in some form of profit-sharing or stock-option plans, or what they call “shared capitalism.” The researchers found that shared capitalism improves company performance, improves worker well-being and complements other policies.

Incentives are an integral and necessary part of the Vested Outsourcing business model. It’s impossible to have a shared vision and collaborative framework without loyalty, trust and reward for hard work, innovation and participation in decision-making.

“It is no surprise that when workers share in the rewards, they are more likely to be committed to a company’s success,” Wadhwa says. “You would also expect workers to be happier when they have more responsibility and less supervision, as the researchers found.”

A great example of this collaborative, shared reward approach occurred with the closure and cleanup of the contaminated nuclear waste site at Rocky Flats, where plutonium triggers were manufactured for nearly 50 years. In an early and highly successful example of incentive-driven and performance-based contracting with the Department of Energy, CH2M Hill earned three times the average margins of usual DOE deals—all based on bonus money—by exceeding performance and reducing costs to DOE. CH2M Hill gave 20 percent of the incentive bonuses directly to the workforce. The result was that  CH2M Hill saved the DOE $30 billion and cleaned up Rocky Flats some 60 years ahead of the original cleanup schedule estimate.

Wadhwa says there is zero evidence that awarding grandiose executive incentives have caused the U.S. economy to perform better. “Instead, as we have seen with the demise of Enron and other companies—and the near collapse of our economic system—enormous payouts encourage risky behavior and lead managers to game the system.”

Freeman, Blasi, and Kruse suggest that tweaking the tax code can stop that type of game: allow executives to deduct incentive pay as a cost of business only if they offer the same incentive program to all workers.

“In other words, don’t give tax breaks to companies that provide stock options and bonuses to only a few executives. This would correct a major loophole in the tax system with which corporate executives have been enriching themselves at the expense of their stockholders and taxpayers.”

This is not an extreme idea; the same approach applies to pension and health-care plans, which are deductible as a cost of business only when they cover every employee.

So yes close that loophole, but more importantly discover the benefits of sharing value, rewards and innovation by fostering a Vested, “What’s in it for We” mind-set throughout the organization.

The short answer is to forge a Vested Outsourcing relationship with a service provider that will add innovation and value over the long haul.

That thought came to mind as I read an article in last month’s Harvard Business Review by Ndubuisi Ekekwe titled, “Beyond Core Competence.”

In the article, Ekekwe—who is the founder of the African Institution of Technology—writes about how some companies can get “stuck” in their core competence with no easy way to advance if conditions get, well, sticky. For example, for decades Eastman Kodak Company was synonymous with photography – “but it got stuck in its core competence of traditional film products and missed the rise of digital photography and printing.” It was late to the digital party and to survive it had to stop selling film cameras.

Another iconic company, IBM, sold its PC division to a competitor, Lenovo in 2005 after losing almost $1 billion on the PC business in less than four years. That move put IBM back in the game as a technology competitor.

“With crowdsourcing services, lower wages, and improving designers in most emerging nations, multinational corporations must evaluate how to retool products to make them relevant to new markets,” Ekekwe writes.

Sometimes help is needed to reinvent a company or reposition itself in a dynamic, changing global market. This is especially true in the electronics market where competition is intense and product designs and advances change constantly. “The ways companies make products, especially electronics, have been disrupted and redesigned,” Ekekwe says.

That’s why looking outside to a service provider for new insights and innovation through a flexible, collaborative and innovative Vested framework is a great way to deal with marketplace disruptions and surprises, while also creating value.

Even Procter & Gamble, which operates one of the greatest research and development operations around, has had to adapt. After its stock collapsed in 2000, the company decided it needed to look at external sources for innovation. P&G’s “connect and develop” strategy uses technology and networks to seek out new ideas for future products.

According to P&G executives, the invent-it-ourselves model is simply a path to diminishing returns.

“The [connect and develop] model works,” P&G says. “Today, more than 35 percent of our new products in market have elements that originated from outside P&G, up from about 15 percent in 2000. And 45 percent of the initiatives in our product development portfolio have key elements that were discovered externally.”

Similar value creation occurred when P&G outsourced its global real estate facilities management services to Jones Lang Lasalle in 2004. Under the agreement, P&G transitioned about 600 people to Jones Lang Lasalle, avoiding layoffs and keeping an experienced and talented pool of people working within the service provider family.

William Reeves, one of the P&G executives behind the deal noted, “From a real estate standpoint, this is clearly the largest relationship that we have ever established with a single supplier in our history as a company. They [Jones Lang Lasalle] have met or exceeded our expectations and the objectives we had in place.” Jones Lang Lasalle has since gone on to win P&G’s supplier of the year award for two straight years.

“While core competence remains vital — differentiation offers a competitive advantage — firms must examine their organizational ambidexterity,” Ekekwe says. “They must be ready to let go … they must be ready to go beyond their core competence and its associated core products and markets of today, which may be irrelevant tomorrow, to evolve and prosper. And the ability to do that may become a new core competence.”

You just might find a new and lasting core competence, and a valuable, lasting partner.

So while that memory and momentum is still fresh, another oft-used term for this occasional series is “agility.” While most every company prides itself on its agility in reacting to the vagaries of the marketplace and economic cycles, how many are truly agile in the face of the unexpected? Not very many, I’d submit.

It so happens that Tim Cummins, writing in his Commitment Matters blog this month also has agility in mind. In fact he says right out that “today’s contracts are not agile.” Rather, they tend to stifle agility and flexibility. Cummins continues that agility matters “because of the need to innovate.” And innovation “comes not only from our own ability to innovate, but also the ability to take advantage of the innovations generated by our business partners.”

This is really essential in the contracting world “because contracts and the way we define and allocate risks have fundamental effects on the extent to which innovation occurs. If we allocate risks – rather than creating relationships that seek to manage them – then we stifle innovation – because the innovation itself becomes a source of risk.”

This is spot-on, and precisely where Vested model’s built-in collaborative process for articulating, measuring and achieving desired outcomes, and for creating agreement structures with insight, rather than oversight as the hallmark of the relationship translates into an agile mind-set.

Because “business happens” and it’s impossible to game-plan for every event and risk, especially when companies and service providers are locked into conventional short-term, least-common-denominator, low-cost, transaction-based deals, the idea of agility is just that, an idea not a reality. If a contract or agreement is strictly an exercise in risk-avoidance and risk-transference, then agility goes out the window. Simply put, it’s difficult if not impossible to react quickly to changing conditions when that kind of relationship prevails.

In my mind while flexibility in thinking and outlook is necessary, it is not necessarily equal to agility. Agility is proactive in translating or implementing that flexible outlook in a way that has an impact quickly and with real world results.

In a Vested relationship the Five Rules encourage and implement agility in the day-to-day management of the outsourcing deal.

Indeed just as it’s hard to imagine a Vested relationship without collaboration, one without agility as a natural by-product is equally hard to fathom.

The Minnesota bridge project case is a powerful example showing that a collaborative, innovative—and incentivized!—approach to solving difficult problems will most often result in huge success.

By way of a little background, the St. Anthony Falls Bridge in Minneapolis, the major Interstate I-35 artery across the Mississippi River, collapsed on August 1, 2007, killing 13 people. At the time, it was expected that a bridge rebuilding project of this nature would take three years to complete. When Gov. Tim Pawlenty said he wanted the bridge rebuilt within 17 months many experts laughed, asserting that this was impossible.

As it turned out, the Governor was slightly off – it took less than 14 months to rebuild it; the 10-lane 504-foot bridge opened to traffic in September, 2008. The Minnesota Department of Transportation had set December 24, 2008 as the completion date, which was considered unrealistic at the time. It took competitive bids for the reconstruction of the bridge, and offered incentives for on-time and early completion. The team of Flatiron Constructors and Manson Construction, using a design by Figg Engineering, submitted the winning bid. The contract stipulated an incentive payment of $7 million if the bridge opened on time, with earlier opening bonuses of $2 million for every 10 days before December 24th if the bridge opened early. But if the bridge opened late, the construction team would lose $200,000 per day.

Cars were rolling across the rebuilt bridge on September 15, 2008. It was a most impressive infrastructure construction feat. By using a high degree of innovation and teamwork in construction and project management techniques, the construction team cut more than three months off the December 24 deadline, thereby earning healthy performance incentive bonuses that were expected to total $27 million. The project has received numerous awards and has been lauded as “representing the best in innovative management, accountability and timeliness.”

Jim Groton, a long-time construction lawyer and student of the construction industry, commented: “This is just another fine example of how smart people can design an incentive system for a contract that is designed to exactly match the needs and goals of a project. On the St. Anthony Falls project, by agreeing in advance what the goals of the project were, and then setting the standards by which performance and superior performance would be rewarded, the parties to the contract achieved project success and a win-win solution for everyone involved, including especially the thousands of Twin City commuters who drive over that bridge every day.”

The construction companies created an innovative, collaborative framework that enabled them to exercise the contract’s performance  incentives, but it wasn’t easy: They often worked 12-hour shifts and drilled three shafts at a time instead of one in subzero temperatures.

Whether they knew it or not they implemented a Vested Outsourcing approach to the project, especially by optimizing pricing model incentives (Rule 4) for the best cost and service tradeoff.

Whether they knew it or not the bridge constructors implemented a Vested Outsourcing approach to the project, especially by optimizing pricing model incentives (Rule 4) for the best cost and service tradeoff.

On a much smaller scale their effort was similar to the Rocky Flats closure and environmental cleanup project, a ground-breaking early instance of performance-based collaboration.

Incentives go hand-in-hand with innovation and collaboration.