I talked recently with one of the biggest losers among service providers. They had just been through a competitive RFP process as the incumbent provider. They worked tirelessly to martial the firm’s resources to get both the external and internal sale and get executives lined up. Their sales team was engaged. There were a lot of hidden costs, plus significant travel costs and deals to be brokered. And there was some relationship strain from the customer forcing them to be more competitive in their bid.
Then came the news that they came in second — the biggest loser.
Unlike the TV program where the biggest loser is a winner and receives a reward for huge weight loss, all there is for a bidding provider that comes in second place is a chest wound in the form of several million dollars in pursuit costs with no return.
What can be done to avoid being the biggest loser? That’s a question service providers ask us, and we work with them on becoming more competitive. I think there are several ways to approach this.
1. Is your company qualified?
First of all, if you want to win, don’t pursue situations where your company is not likely to win. That sounds like a no-brainer. But how do you know if it’s qualified? Here are some of the main aspects to consider:
- Does your company have a preferred relationship with the customer? Does the customer already know you? Are they unhappy with the incumbent provider? (Don’t kid yourself; there’s always an incumbent.)
- Did you help shape the problem? Or are you responding to someone else’s shaping of the problem?
- Do you know if your bid will be compelling? Do you know if you’re high priced? So many providers bid, knowing that others have a lower price, and go through the process of trying to persuade the customer that the higher price is because they’re better. That’s hard to do. There’s a higher probability of losing in that scenario.
- Is your company distinctive? Are your capabilities and offerings differentiated? Will the customer recognize your company’s difference and care about it? Is your company’s specialness worth a premium?
2. Do you have a surplus of opportunities?
It’s tempting to run to every RFP or opportunity, but my advice is not to do this. Your company must be very disciplined not to run toward all opportunities, no matter how much they sparkle. It’s hard to pass them up, particularly in the face of an industry experiencing slow growth.
Marvin Bower, who was the guiding influence at McKinsey from 1933 – 2003, counseled that you can’t be selective about customers unless you have a surplus of opportunities.
If you’re not sitting in the midst of a surplus, then you won’t benefit by reading the rest of this blog. Basically, your company must compete on every opportunity, so you may as well resign yourself to the fact that for an uncomfortable amount of time your company will be the biggest loser and come in second.
But if you can generate a surplus of opportunities, my advice is first to categorize your opportunities and then rig the playing field.
3. Categorize your opportunities
You need to sort your opportunities into two categories: those that you’re not likely to win and those where you realistically have a good chance to win. From the first day you begin talking with the potential or existing customer, you must be ruthless in qualifying how serious the chances of winning are. Once you recognize the opportunity is one your company is not likely to win, you need to step away.
You have to be ruthless in being willing to do this. And the sooner you make this decision the better off you’ll be.
4. Rig the playing field
My observation is that the majority of the work for the best providers comes from privileged environments where they either don’t compete or they “cheat” — that is, they make sure they compete on an unfair playing field where they get to run downhill and downwind against the competitors trying to dislodge them from opportunities.
There’s a famous sports adage attributed to several famous athletes: If you ain’t cheating, you ain’t trying. In the case of opportunity bids, the cheating isn’t bad. You simply rig the playing field so that your company appears to be special among the competitors. Perhaps you own IP, for instance. Or perhaps you have an existing relationship with the customer. The best way to cheat is to make sure the work never goes to the open market for bids. How do you do that? Make sure the customer sole sources it.
So here’s the formula for not being the biggest loser: make sure your company is distinctive and that the customer can recognize it, make sure you have a surplus of opportunities, qualify the opportunities all the way through the discussions and be disciplined in walking away from those where you don’t have a clear chance of winning and then rig the playing field.