The Price/Capability Tradeoff


Fact: every capability you offer has an associated cost, and generally the more you offer, the more it costs.  So understanding what the customer needs – and what the customer wants – is crucial to defining a winning solution.

In our world, an RFP defines the customer’s minimum set of requirements.  These requirements are explicit – they’re in black and white, and known to all bidders.  There’s a general term for a bidder that offers a solution that does not meet these minimal requirements: loser.

On the other hand, customers typically hope for – most of us would say “demand” – solutions that go beyond these minimums. These implicit requirements will never appear in an RFP; if you think of an iceberg, these are the below-the-waterline chunks of ice.  If you know where they are, you’re safe – but if not, they will sink your bid every time. And if you go too far past, well, there be dragons.

A similar situation exists with funding.  Every market, every opportunity has a maximum budget – but don’t think that this represents the highest price you can bid.  Every budget includes deductions – for program management or reserve, for example – which reduce the amount of money that’s actually available to bidders – resulting in what we call the “addressable budget”.  Beneath this number is a floor value that represents the lowest price the customer would consider reasonable. Above the maximum, below the minimum – more dragons.  It should be an obvious point, bit we see people missing it all the time: winning solutions must reflect understanding of the customer’s sources and uses of funding.

Some call the space in the middle the competitive range, but I’m a bit less subtle. I call it the Win Zone, because if you can’t get your solution in it, you can’t win.  This is the ballpark that you have to find for every opportunity – and Price To Win gets you there.

Texas Hold ’em is Price To Win in action.  You enter the game with strategies based on your understanding of how your opponents have played in the past.  As the game progresses, you watch for tells that show how their historical behavior may be different.  You calculate the odds of winning based on probability – and on every hand, you decide to play or fold.