Renegotiating a contract so both sides got what they needed
The contract was being met, and the customer was still unhappy. New metrics built around what the customer actually needed, and what the client could actually control, fixed both sides of the deal.
This is follow-on support StatusNext delivered as a continuation of a previous engagement.
The situation
StatusNext was asked to help the client renegotiate their performance-based agreement with its main customer, who was a primary growth driver for the business.
The client’s customer was unhappy, despite the client’s successful delivery to the previous agreement. The client successfully delivered to the obligations of the previous performance-based agreement, but both parties captured a lesson learned in the initial period of performance: a disconnect existed between the outcome delivered and the outcome desired by the end customer. The end customer was frustrated because they were obligated to pay the client, but they did not get what they really wanted.
What was at stake
The client forecasted 30% year-over-year growth of their service business for the next 5 years.
What StatusNext did
StatusNext’s task included 1) continued assessment of the client’s ability to meet the performance levels demanded in this new agreement, 2) recommendations of “better” metrics that were likely to mutually satisfy the client and their customer, and 3) real-time negotiation support.
Research StatusNext conducted through problem discovery sessions, end-customer feedback sessions, and client stakeholder interviews provided a robust understanding of the desire to evolve the performance-based agreement. StatusNext then conducted a deep quantitative analysis to assess the client’s ability to perform on the original metrics and new metrics. This step included analysis of historical performance, statistical and simulation modeling of the client’s service process, and developing a model to translate performance metric outcomes into financial terms, including incentives and margin. StatusNext then identified a set of industry-standard performance metrics that aligned to end-customer requirements and the client’s ability to successfully deliver.
From there, StatusNext helped the client understand the story that the data was telling. StatusNext was again asked by the client to tell the same story to their customer at the negotiation.
What changed
StatusNext fostered a collaborative negotiation that led to a satisfied end customer while the client achieved financial success on the contract.
- Expectations grounded in data. During the negotiation preparation phase, StatusNext helped the client understand the value of each new metric, both to the client and to the end customer.
- Data-driven negotiation. During the negotiation and with StatusNext’s real-time support, the client successfully negotiated service levels in the agreement that were achievable and fully controlled by the client.
- Financial success. During contract execution, the client achieved the desired financial outcomes of the contract.