“It is wiser to find out than to suppose”. – Mark Twain
Many organizations and capture leaders understand and appreciate the value of Price to Win analysis in enhancing Pwin. Unfortunately, some view Price to Win as a standalone activity that does not require Competitive Analysis to support it. For those who are not familiar with Price to Win, it is more than a number; it reflects the complex relationship between customer needs and budgets and bidder solutions and strategies. It represents a tradeoff between price and capability that forms the foundation for successful bid strategies.
Therefore, Price to Win is based on data and assumptions about the customer and the competitors. So where does that data come from if not from Competitive Analysis? Oftentimes, capture teams believe they already have all the answers thanks to their years of experience in a given market– but this often leads to a rude awakening when they lose to a surprise competitor or an unexpected strategy. There are questions that must be answered– questions as simple as:
Who is the customer (decision-makers AND influencers), and what are their hot buttons?
Who are the competitors?
What are the competitors’ capabilities? solutions? strategies? discriminators? strengths and weaknesses?
There are also more complex questions that are more specific to a Price to Win– questions such as:
How will the customer calculate the total evaluated price?
What are the competitors’ cost structures?
How do competitors plan to bid in terms of teammates, locations, and aggressiveness?
What component pricing data is publicly available to help develop the bottom-up cost estimate?
These are all questions that Competitive Analysis can help answer, and as Mark Twain said, “It is wiser to find out than to suppose.” Early engagement in the procurement process allows more time to gather competitive intelligence and identify additional questions that can further increase win probability.
Competitive Analysis allows an understanding of customer requirements and the ability to craft solutions that beat the competition. This allows for an independent assessment of the competitors’ capabilities, strategies, and potential solutions.
As organizations approach Price to Win, it is important to remember that price is NOT simply cost + profit, as most tend to think of it. More accurately, price = cost + strategy. This makes Competitive Analysis the other strategic half of a successful Price to Win process. It is nearly impossible to develop the optimum strategy to position your solution without both.
For more information about Competitive Analysis or Price to Win, contact Richter & Company, and we’ll be happy to help you take the guesswork out of a potentially winning solution.
Texas Hold ’em is a game of skill. Over the years, successful players like David Sklansky, have developed complex algorithms to guide their decision making when a particular hand is dealt. This mathematical approach helps improve their win probability – but it’s not the total answer. What does the raise from the player past the big blind position mean? Why did the person across from me scratch her head before bumping the bet again? What do I do now?
Winning players understand that “bankroll management” is every bit as important as being able to remember the cards that have been dealt. No player enters a game with unlimited funds, and once the once you have are gone, it’s “game over”. Successful players understand that folding a hand is not a sign of weakness; it merely reflects your understanding that your hand is not as strong as your opponent’s. There is no stigma attached to folding if this act lets you conserve your money for a better future hand.
It’s the same in our world – or at least it should be. Bid and proposal funds are never unlimited, and misuse of these scarce resources offer a quick path to the unemployment line. But capture managers HATE walking away from deals. They believe this will be seen as a sign of weakness – and this unhelpful approach is reinforced by way too many corporate executives who don’t understand the difference between a full pipeline, and a productive pipeline.
We have two clients that compete in the same general market. One is extremely satisfied with its 35% win rate; the other is horrified that it only wins 90% of the time. The first company approach to bid submittal is “if his has a pulse, bid it!”. Their capture process is undisciplined; gate reviews are opportunities to display pretty PowerPoint slides to an audience that always says “Yes!”. The second has a more organized, more disciplined approach. The criteria for passing a gate review are clearly defined, and lack of preparedness – lack of needed information for effective decision making – guarantees that a pursuit will be ended on the spot. Guess which organization spends less B&P dollars overall? Guess which organization is always looking for “successful” capture managers?
Conserve your resources. Effective Price To Win helps you identify opportunities that meet your business objectives that you truly can win. As for the rest? Well, poker legend Stu Unger puts it this way: “Fold and live to fold again.”
In barbecue contests, timing is everything. Each of your four entries (chicken, ribs, pork and brisket) have to be turned in within 5 minutes of a precisely defined time; late entries are disqualified. To meet this schedule – and to make sure the meat you offer the judges is at its tender, juicy, and flavorful best – requires careful planning and flawless execution at the contest itself. Butit’s the preparatory work done before the contest that separates winners from losers.
Losers buy their meats the day before they travel; winners order meat ahead of time so it can be properly aged (30 days or more for brisket!) and prepped. Losers wait until they arrive in the competition’s town and pick up consumer-grade charcoal from a big box store; winners buy specialized charcoal and wood to match their team’s desired flavor profile. Losers work without a plan; winners develop and test complex checklists, schedules, and procedures so that their work onsite is efficient. To put it simply, winning takes time, and teams that start too late are not likely to hear their name called during the awards ceremony.
Effective competitive analysis and Price To Win efforts start early – well before formal solicitation requirements are known. They follow consistent processes for gathering and analyzing competitive information. They rely on proven models for projecting solution costs and prices. They provide actionable intelligence that you can use to shape the opportunity, moving the competition away from lowest cost.
Start early, keep working until the final turn-in.
From an economic standpoint, competitive barbecue makes no sense. In a Kansas City Barbecue Society event, teams turn in six individual portions of four meats: 6 (chicken, ribs, pork, and brisket). A typical entry fee is $300; travel and transportation costs for pulling your big rig total $200 or more; charcoal, wood, ice, rubs, sauces, and incidentals add another $200.
And meat – oh, the cost of meat: most teams cook 36 to 50 pounds of incredibly-expensive Wagyu brisket to turn in six perfect slices. Meat costs can easily top $500. When all is said and done, the cost of a typical contest easily tops $1,000. And sad to say, prize money when (if!) you win may not cover those costs. And we haven’t even talked about the costs of beer and other “adult beverages”…
As a result, pitmasters limit the competitions they enter to those which will help them achieve their goals. In my case, I focus on competitions within driving distance of my home which have (a) decent prize money, (b) a relatively small number of competitors, (c) a high proportion of certified (vs amateur) judges, and (d) good public attendance (i.e., good marketing) potential. I’d love to compete in a contest near my daughter’s home in Nebraska, but that wouldn’t help me increase my catering business’ name recognition in the central Maryland area I can reasonably serve.
In the business world, similar constraints apply. Winning companies pursue opportunities that will help them achieve business goals. Notice I did not say “perform profitably.” In today’s hyper-competitive world, businesses commonly pursue money-losing efforts because they achieve longer term objectives like improving name recognition or supporting growth into adjacent markets. They ruthlessly discard pursuits where they have limited customer intimacy, poor knowledge of potential competitors and solutions, or have no discriminating solution.
Like winning pitmasters, they pick and choose their competitions – and believe that they will win every bid they submit.
Amateur chefs tend to have a pretty short attention span. They watch Bobby Flay toss something on a grill, say to themselves “Man, I could do that!”, then run to the store, assemble ingredients, light a fire, and make up a mess of something good. Their goal is to recreate a recipe; their objective is to make it edible. Their measure of success is, well, nobody barfs when they taste it. Backyard chefs like to cook.
Pitmasters, on the other hand, have a much longer view of their world. They have more at stake; they compete against well-prepared competitors for significant prize money, or against restaurants (and other barbecue teams) for lucrative catering gigs.
As a result, winning pitmasters set larger goals (“cook an award-winning whole hog”) and develop objectives to measure their path toward achieving those goals (for example, “Buy a big pit.” “Learn how to control temperature across the entire cooking surface.” “Find a reliable source of high quality butchered hogs.” “Learn how to dress and prep a raw hog.” “Build a winning rub and injection.”). Their measure of success is tangible: awards, prize money, and – thanks to the exposure barbecue enjoys on TV – lucrative deals for packing and selling their “secret” rubs and sauces.
Pitmasters like to win.
In the business world, far too many companies rely on the “mushroom theory of management.” They perform minimal planning; they operate in an ad-hoc environment that results in scarce resources being spread across many unsuccessful pursuits. Like backyard chefs, they are happy with a win, but shrug off losses, figuring “oh, better luck next time.”
Winning companies take the time to develop corporate goals and objectives. They develop high-level strategies for achieving their goals within a defined window of time. They communicate these items across the company, so that business units – and business developers – can help the company win by putting together – and executing – their own sub-goals, objectives, strategies, tactics, and plans. They are ruthless in rejecting pursuits of opportunities that do not support corporate goals, reserving finite resources and funds for those which do.
Like pitmasters, they love to win – and burn with the white-hot fires of hate when they lose. In business, be the Pitmaster.
From early market research to Price to Win positioning, Richter & Company’s goal is to help you win business. Here are five of our top recommendations for consistently winning federal dollars:
Plan your work; work your plan. Get involved in the program early. If you’re an incumbent contractor, even earlier than that. Preparation for the re-bid begins on day 1 of the contract. Build relationships with the buying and end user customers. Influence the RFP, so that discriminators rule in your favor. Prove the benefit of your solution. Build a value added team, build a plan, and then follow the plan, making necessary changes as you go.
Proofread. Don’t finish your proposal two hours before it’s due; there’s just no time to proofread if you’re making changes last minute. Make sure pricing in your proposal matches pricing in your cost volume. Don’t leave internal comments in your final document. Obvious, but it happens all the time. You don’t want your outbrief to be a rundown of your glaring mistakes.
Examine and assess your own company. Many companies don’t examine their own structures to target cost reductions. Look at your salary percentiles: consider the labor needed in the contract against the labor you’re offering. Build cost pools to bill direct costs to your customer, and leave out those unnecessary to the contract. Reduce cost. And be aware of where the costs you do have are coming from.
Build a compliant solution. (Read: Don’t sell your existing solution.) Build a notional bottoms-up solution based solely on the requirements of the RFP: where does this solution leave your Total Evaluated Price? Be sure all your additional capabilities are ones that matter to the government. Prove the benefit of your solution. Make sure the value you’re adding outweighs higher price. Know your customer, and cater your solution to their needs. Even “COTS based” solutions should be tailored to the needs of your customer.
Don’t go status quo. Today’s current hypercompetitive environment is not what it was five years ago. Ten percent fee and gold plated benefits packages won’t pass muster before evaluation committees. Make sure your bid is both reasonable and realistic. Know what your competition looks like before the final stages of capture, and position accordingly. Employ consultants like Richter & Company to help you find your position to win!
Often times, clients want to hire us to perform a Price to Win analysis late in the game. You know… when the RFP is out, the proposal is due in 28 days and their hair is on fire.
They tell us they don’t need a Competitive Analysis, but are looking for Price to Win support for the program. And while we’re happy to help our customers in any way we can, this is not an ideal situation.
Competitive Analysis and Price to Win Analysis go together like peanut butter and jelly. We don’t want to separate them!
Competitive Analysis defines the solutions and strategies your competitors are likely to employ in approaching an opportunity. At Richter & Company, we define Price to Win as Cost + Strategy, so it’s pretty difficult to come up with a Price to Win number with only half of an equation.
The ideal time to hire consultants (and start your own internal efforts) is early on in the procurement process. Your Competitive Analysis should first cast a wide net, before targeting specific competitors and identifying specific solutions. The Price to Win should also go through multiple iterations for best possible results.
Contact Richter & Company today for more on our winning services!
As I said before, the other most common mistake that deprives SWOT analyses of their value is the failure to take the essential next step, after it has been completed. “What is that next step?” you may ask. The answer lies in the fundamental intent behind the SWOT analysis. The purpose of a SWOT is to help analyze and assess the competition. And what is analysis, other than simply deriving meaning from data? There is a big difference between observation and analysis. Simply put, observation provides the “what,” while analysis provides the “so what.”
Herein lies the reason why many deride and dismiss the SWOT chart as useless. In its standard form, it is data with no analysis. It includes nothing more than four lists of characteristics or factors about the company, none of which articulate any kind of strategy or action on the part of the company. Therefore in the eyes of the savvy decision-maker, it fails to answer the critical “so what?” question. You can imagine your executives saying “So… the company is strong in these areas, and weak in these areas … so what? And… the company is affected by these external opportunities and threats… so what??”
It is my assertion, therefore, that the true value of any SWOT analysis appears only after completely (and correctly) populating all four quadrants, and THENdeveloping key strategic implications based on those factors.
Competitive analysis of any company must include a predictive element, which attempts to answer the question “What is the company most likely to do next?” The four elements of a SWOT chart, if accurate, can be extremely useful in developing these predictions – but they do not explicitly provide the answers in and of themselves.
So how does one take this next step? There are several different ways of deriving implications from a traditional SWOT chart – one of the more effective (albeit labor intensive) methodologies I have come across involves examining the intersections of the various factors two by two, in an attempt to discern the most likely action on the part of the company. For example: if the company has [Strength #1] and [Opportunity #1], therefore they would most likely do [Implication #1]; if the company has [Weakness #1] and [Opportunity #1], therefore they would most likely do [Implication #2], etc.
There are two downsides to adopting this “extra step.” First, it adds a layer of complexity to a process that is otherwise very simple and user-friendly (which I would argue is one of the reasons SWOT is so popular). Second, prediction is a dangerous game. Those who attempt to predict the future invariably expose themselves to personal risk – risk to their reputations. Success will earn them great respect and even reverence – but failure may cost them the trust of their customers.
But analysis is not for the faint of heart! In my judgment, the benefits far outweigh the costs. So be bold. Be fearless. Be ruthless in your zeal to add real value in the form of that elusive treasure – the life-blood of our profession: actionable intelligence.
Price to Win is both a process and a result. Price to Win as more than a number, but could be best defined as the cost-capability tradeoff that embodies your company’s strategy.
Price to Win, the process, identifies the position your company needs to achieve to meet your company’s business goals and objectives. It does not necessarily mean winning. You may want to position with your customers, but not actually win a program. You may need to bid on a program that you don’t actually want to win because it doesn’t fit your corporate objectives. The Price to Win process is designed to respond to the government’s needs, and applies several factors (such as gaming strategy, aggressiveness, fee and corporate interest) to best identify Price to Win, the position.
The Price to Win position is the actual cost-capability tradeoff that your team will present to the government in your proposal response. It is a carefully deliberated position that includes “cost + strategy” to represent your overall business strategy. Remember, your company’s corporate strategy is the biggest driver in making business decisions, and the biggest factor in determining price to win, the position.Not cost plus fee.
For more on Richter & Company’s Price to Win services, contact us today.