Management Information

By Jonathan Farrington

Extensive research recently completed by the Corporate Transformation Department at Luton University in England, confirms suspicions and beliefs that I have had for some time now.

In business terms, they claim that these findings represent a revolutionary breakthrough in understanding what makes a successful contract bidder.

Two key facts tell a worrying story:

1. 50% of them said it is important for them to win new business in order to fulfil their corporate plan.

2. And yet four out of five companies interviewed win less than half of the bids they pitch for.

Conclusion: Most companies are not winning enough new contracts to meet their business objectives.

Not unnaturally, this would cause some anxious looks around the boardroom table if it were not for another key finding from the report.

A small improvement in bidding techniques and tactics can lead to a disproportionately large increase in the number of contracts won.

Not surprisingly, the most effective bid winners prefer to draw a veil over those factors that make them successful but the research has pulled the veil aside and provides a glimpse of the critical success factors in winning major bids.

The companies answered a detailed questionnaire which focussed on two key areas – how successful they were at winning major bids and what they regard as the factors that made them most successful at winning the bids. Figures are rounded to the nearest decimal point. The companies in the survey represent a cross section of those British companies that compete in major bids either in the UK market or overseas.

The participants came from industries as diverse as information technology, construction, engineering, aerospace, media, consultancy and utilities.

The companies were candid about their success. Some 37 per cent admitted they won less than a quarter of the bids they pitched for. A further 40.1 per cent said they won between a quarter and half of their bids. Only 4.1 per cent of the companies claimed to win more than three-quarters of their bids.

But for these companies, what constitutes “success” at winning major bids? Among the companies 71 per cent “strongly agreed” that it was to win bids at “acceptable profit margins”, while an almost mirror image of 70.6 per cent “strongly disagreed” that it was to win a bid “at any cost”. Among other possible definitions of success 31 per cent strongly agreed that it was winning sufficient bids to achieve growth targets, and 19.2 per cent winning bids from blue-chip customers.

There was little disagreement that winning major bids was essential to achieving business plans – 52.8 per cent said it was very important to win bids from new customers and 64.5 per cent from existing customers.

Given that winning major bids is important for achieving business plans, just what is it that gets a company invited to bid in the first place? The companies were invited to rank a number of different factors on a scale running from “very important” to “not important at all”.

The top five factors are:

1. Perceived quality of your products/services (68.5 per cent say very important)

2. Relationships with existing or potential customers (54.4 per cent)

3. Position of the company in its market-place (52.2 per cent)

4. The company’s overall image (47.6 per cent)

5. Track record in similar projects (46.5 per cent)

However, as the survey shows, more than three-quarters (77.1 per cent) of companies win less than half the bids they pitch for.

What do the best quarter have that the other three-quarters lack?

A year-long research project undertaken by Mathew O’Connor, one of the co-authors of the report, identified 18 activities which seemed to contribute to success in winning major bids. These activities fall under four main categories – assessing the customer’s perception of products/service value, understanding the customer’s buying centre, contacting customer’s and communicating key messages about the company and it’s products/services (see below)

Eighteen Critical Activities in Major Bid Projects:

Assessing your customer’s perception of product/service value:

1. Understanding the value/benefits customers expect to gain from your products/services (25.6 per cent)

2. Understanding the cost of ownership issues that impact customer decisions about your products/services (17.9 per cent)

Understanding your customer’s buying centre - DMU:

3. Understanding the business environment in which your customers operate (25 per cent)

4. Understanding each customer’s mission, objectives and markets (15.1 per cent)

5. Understanding the decision-making process each customer uses (21.3 per cent)

6. Understanding the factors the customer considers when purchasing(24.6 per cent)

7. Understanding the roles played by those in the DMU (24.3 per cent)

8. Understanding your customer’s communication network (9.9 per cent)

Contacting customers:

9. Maintaining continuing visibility with customers through advertising,mail shots, etc (11 per cent)

10. Developing person-person relationships with potential customers (44.8 per cent)

Communicating key messages about your company and product/services:

11. Communicating key marketplace issues to customers (8.2 per cent)

12. Communicating generic benefits offered by your products (8.6 per cent)

13. Establishing the superiority of your products/services (18.1 per cent)

14. Building a distinctive and helpful image of your company (26.6 per cent)

15. Establishing an understanding of your market standing (20 per cent)

16. Communicating the value/benefits of your product/services (20.5 per cent)

17. Persuading potential customers to invite you to bid (34.1 per cent)

18. Ability to offer support or ancillary services (23.1 per cent)

In the survey each of the companies was asked to rank its performance on each of these 18 activities on a five point scale from “very effective” to “not effective at all”.

The research demonstrates a clear correlation between being effective at these activities and winning a higher proportion of major bids.

Companies that win less than a quarter of bids claim to perform an average of 2.9 of the activities very effectively. Among companies winning a quarter to half of bids, the number of very effective activities rises to 3.5; those who win half to three quarters of their bids perform 4.9 activities very effectively: among those companies winning more than three-quarters of major bids, the number of very effective activities climbs to 8.7.

What is perhaps surprising here is that even the most successful companies are accomplishing less than half of the critical 18 activities “very effectively”. It seems pretty clear that those companies prepared to focus on these activities and generate even a modest increase in the number of activities performed very effectively could reap significant improvements in the number of major bids they win.

Aside from these critical activities, the research has uncovered some important issues for managing effective bid teams. The companies in the survey were asked to rate 15 aspects of managing bid teams on a five-point scale from “very important” to “not important at all”.

The top five issues are:

1. Leadership from senior departmental managers (very important for 64.3 per cent)

2. Creating a team spirit (55.8 per cent)

3. Leadership from board of directors (49.5 per cent)

4. Including team members with specialised knowledge of the product (46.6 per cent)

5. Giving clear instructions to team members on how to handle the bid (46.3 per cent)

Once a pitch is under way there is a fresh range of issues to consider in order to win the bid. The survey companies were asked to rank 11 issues on the same five –point scale.

The top five issues for completing successful bid negotiations are:

1. Guaranteeing quality, delivery dates and after sales service,etc (very important for 59.9 per cent of companies)

2. Having a clear bottom line (56.7 per cent)

3. Developing clear objectives for the negotiations (54.7 per cent)

4. Preparing detailed bid documentation (48.8 per cent)

5. Making the first formal presentation of the bid (48.1 per cent)

Summary:

There is wide range of different issues that companies need to address more effectively if they are to win more of the bids they pitch for. Bidding relationships with the client is given a particularly high priority in the service sector.There are wide variations in the effectiveness of major bid management between organisations. With more companies increasingly finding themselves pitching against overseas competitors for business, the need to create more effective bid management is more urgent than ever”.

The moral right of the author, Jonathan Farrington, has been asserted.All rights reserved.This publication or any part thereof may not be reproduced or transmitted in any form or by any means electronic or mechanical including photocopying, recording, storage in an information retrieval system or otherwise, unless this notification of copyright is retained.

Jonathan Farrington is the Managing Partner of The jfa Group jf-assocs.

Since forming jfa in 1995 he has authored in excess of three hundred skills development programmes, including the Strategic Workshops series, Channel Programme, P4 Programme and the Vanguard suite In addition he has designed a range of unique and innovative process tools – Optimus+ and ASP Profile and written extensively on organisational and sales team development. To find out more about the author or to subscribe to his newsletter, visit:jonathanfarrington.com Or follow the link to source a jfa solution