agileEducation marketplace family businesses running SAFe with large teams often struggle with external service providers. This company operates an online marketplace connecting tutors with students. It has been around for fourteen years and has thirty eight employees. The founding family still owns it. (1/34)
The product development organization for the new AI-powered tutoring matching engine has twenty nine people. They run SAFe as one large team. The problem is that three outside vendors are not managed well. Vendor one is a cloud hosting provider. Vendor two handles payment processing. Vendor three provides video conferencing. (2/34)
When any of these vendors has an issue, the tutoring matching engine goes down. Students cannot find tutors. They leave. Last quarter, this cost the company one hundred and forty three thousand dollars. That was forty one percent of the quarterly revenue from the matching engine. (3/34)
Ingvar Kamprad built IKEA on what he called the F-Factor philosophy. His insight was straightforward. The biggest problem in running a business is the tendency to accept waste. When you accept waste, costs stay high. High costs mean high prices. High prices mean customers cannot afford your products. When customers cannot buy, the business fails. (4/34)
Kamprad attacked waste directly. His principle was simple: find the waste, fix the waste, never accept waste. He examined every process. When he found inefficiency, he eliminated it. Low costs meant low prices. Low prices meant everyone could afford IKEA products. That is what built the company. (5/34)
When Kamprad designed the IKEA supply chain, he found that shipping costs were too high. High shipping costs made furniture expensive. His fix was flat pack furniture. Flat packs meant low shipping costs. Low shipping costs meant cheap furniture. Cheap furniture meant everyone could afford it. (6/34)
For this education marketplace, the external service provider problem is the same. The company accepts waste. Vendor management is inefficient. Vendors underperform. The matching engine goes down. That costs one hundred and forty three thousand dollars.
Kamprad's F-Factor philosophy says: find the waste, fix the waste, never accept waste. Doing all three manages external service providers better. Managing them better saves the company.
## The Core Principle (8/34)
The best way to manage external service providers is to stop accepting the waste that comes from ad hoc vendor management, unclear expectations, and inconsistent monitoring. Start systematically finding the waste in how vendors are managed. Fix it by creating clear performance standards, regular review cycles, and structured escalation paths. (9/34)
Every vendor should know exactly what is expected. The team should know exactly how each vendor is performing. Problems should be caught early, before they cause outages.
Kamprad did not build IKEA by accepting waste and hoping costs would stay low. He built it by finding waste, fixing it, and never accepting it again. Every process was examined. Inefficiency was eliminated. Costs stayed low. That built IKEA. (10/34)
For this education marketplace, accepting waste costs one hundred and forty three thousand dollars. The answer is the same: find the waste, fix the waste, never accept waste.
## Four Steps to Apply the F-Factor Philosophy
1. Find the Waste with a Vendor Waste Audit
Kamprad found waste at IKEA. Finding it meant he could fix it. Fixing it built the company. You should do the same by conducting a vendor waste audit that examines every aspect of how each vendor is managed. (11/34)
For this company, the SAFe coach conducts the audit over two weeks. The audit covers three vendors. Take the cloud hosting provider, CloudHost, as an example. The audit examines five aspects.
First, contract clarity. The contract does not specify uptime requirements. CloudHost has no uptime obligation. That means downtime is allowed. Downtime means the matching engine goes down. Waste identified: unclear contract. (12/34)
Second, performance monitoring. The team checks performance by hand. Manual monitoring means things get missed. Missed issues become outages. Waste identified: manual monitoring.
Third, escalation process. The process is undefined. The team does not know who to contact. Unescalated issues do not get resolved. Unresolved issues become outages. Waste identified: undefined escalation. (13/34)
Fourth, cost tracking. Tracking is inconsistent. The team does not know what CloudHost costs. Without that knowledge, they cannot budget. Unbudgeted costs mean lost money. Waste identified: inconsistent cost tracking.
Fifth, communication cadence. Communication is ad hoc. The team only talks to CloudHost when there is a problem. No regular communication means the team does not know about upcoming changes. Surprises mean outages. Waste identified: ad hoc communication. (14/34)
The audit found five wastes for CloudHost. It found four for the payment processing provider and three for the video conferencing provider. Twelve wastes total. All twelve were documented. Having a list means the team can fix them.
Last quarter, the audit took two weeks and identified twelve wastes. Knowing where the waste was meant the team could fix it. That saved thirty six thousand dollars. (15/34)
For a SAFe team of sixteen to fifty, the audit should examine at least five aspects per vendor: contract clarity, performance monitoring, escalation process, cost tracking, and communication cadence. Identify at least one waste per aspect. Make the audit part of the team's vendor management practice.
2. Fix the Waste with Vendor Performance Standards (16/34)
Kamprad fixed waste at IKEA. Fixing it meant low costs. Low costs built the company. You should fix the waste by creating a vendor performance standard for each vendor that specifies clear expectations for uptime, response time, communication, and cost.
For this company, the SAFe coach creates a two-page document with four sections. (17/34)
Section one covers uptime expectations. CloudHost must deliver ninety nine point nine percent uptime, meaning no more than eight point eight hours of downtime per year. The payment processing provider must deliver ninety nine point nine five percent, or no more than four point four hours. The video conferencing provider must deliver ninety nine point five percent, or no more than forty three point eight hours. (18/34)
Section two covers response time expectations. CloudHost must respond to issues within fifteen minutes. The payment processing provider must respond within ten minutes. The video conferencing provider must respond within thirty minutes.
Section three covers communication expectations. Vendors must send a weekly status update. They must attend a monthly review meeting. They must participate in a quarterly business review. (19/34)
Section four covers cost expectations. Costs should include a fixed monthly component for budgeting. Variable costs should have a cap so they do not spiral. An annual cost review should happen every year.
Both parties sign the document. Signing means agreement. Agreement means commitment. Commitment means vendors perform. (20/34)
Last quarter, creating the standard took one week. The two-page document had four sections. Both parties signed it. Vendor performance improved. That saved thirty four thousand dollars.
For a SAFe team of sixteen to fifty, the standard should have at least four sections: uptime, response time, communication, and cost. Both parties should sign it. Make it a vendor management artifact.
3. Never Accept Waste with a Weekly Vendor Scorecard (21/34)
Kamprad never accepted waste at IKEA. Never accepting it meant costs stayed low. Low costs built the company. You should never accept waste by setting up a weekly vendor scorecard that tracks each vendor against the performance standard and flags any vendor that falls below it.
For this company, the SAFe coach sets up a spreadsheet with three tabs, one per vendor. (22/34)
The CloudHost tab shows four metrics. Uptime is ninety nine point two percent against a target of ninety nine point nine percent. That is flagged. Response time is twenty two minutes against a target of fifteen. That is flagged. Communication is one status update, which meets the target. That is not flagged. Cost is four thousand two hundred dollars against a target of four thousand. That is flagged. Three flagged metrics mean CloudHost is underperforming. The team must act. (23/34)
The payment processing provider tab has one flagged metric. That vendor is slightly underperforming. The video conferencing provider tab has zero flagged metrics. That vendor is performing.
The scorecard is reviewed every week. Weekly review means the team sees status every week. Seeing status every week means problems are caught early. Early problems do not become outages. No outages means the matching engine stays up. (24/34)
Last quarter, setting up the scorecard took three days. The spreadsheet had three tabs. Weekly reviews caught problems early and prevented three potential outages. That saved thirty eight thousand dollars.
For a SAFe team of sixteen to fifty, the scorecard should have at least one tab per vendor. Each tab should show at least four metrics. Review it every week. Make it a vendor management tool.
4. Iterate with a Monthly Feedback Loop (25/34)
Kamprad iterated at IKEA. Iterating meant IKEA got better. Getting better built the company. You should iterate by running a feedback loop every month that reviews the performance standards, the scorecard, and the escalation process based on what is working and what is not.
For this company, the SAFe coach runs a forty five minute meeting every month. The meeting has three parts. (26/34)
Part one, fifteen minutes, reviews the vendor performance standards. The team checks whether the standards are realistic. If they are not, the team adjusts them.
Part two, fifteen minutes, reviews the scorecard. The team checks whether the metrics are useful. If they are not, the team adjusts them.
Part three, fifteen minutes, reviews the escalation process. The team checks whether the process works. If it does not, the team adjusts it. (27/34)
Last quarter, the feedback loop ran three times. It reviewed the performance standards three times and made two updates. First, the uptime expectation for CloudHost was lowered to a realistic level. Second, a new metric called customer impact was added to the scorecard. Measuring customer impact meant the team could prioritize better. Two updates meant better vendor management. That saved thirty five thousand dollars. (28/34)