Incumbent vs. challenger: who has the edge?

The Curse of the Incumbent …to lie down … Lying, leaning, or resting on something else (like your laurels!)

To Defend an Incumbency Showcase performance Prove you can continue to meet client needs Demonstrate innovation and a path forward Set an aggressive price target Treat every re-compete as a new opportunity

How you can lose an incumbency How to Mitigate Weaknesses known by the client Closely monitor customer satisfaction Inertia of current processes; cost-efficient to keep status quo Propose cost-neutral (or reducing) innovations and efficiency gains Competitor offers “pretty new toy” “Ghost” those new toys we anticipate will be proposed Long-term staffing model creates increased labor costs Selectively mix deep experience with “fresh blood” and push work downward Complacency – can’t see blind spots Get independent assessment; don’t rely strictly on project team’s perspective We know too damn much and our proposed LOE reflects what we KNOW they want rather than SOW states Build costs exclusively on RFP specifications. Use negotiation rounds to add costs as needed.

The Time to Start is NOW! It’s often early in the project, whether it’s a new project or a transition from another vendor, where the significant lessons are learned. Capture these issues and how you resolved them in a lessons learned database that you can build on and pull from as needed. This information will be critical during a re-compete.

Take Advantage of Access 7 Take Advantage of Access Don’t lose the incumbent’s advantage and fall prey to the incumbent’s curse! You have access to the customer that most challengers will not have. Use your project staff as critical eyes and ears within the customer environment from day one!

8 Build Relationships Some research shows that when an incumbent doesn’t take advantage of their position to influence the competition, their chances of winning plummet to just over 40%. Knowing the politics and players, understanding customer hot buttons at an individual level and knowing the WHY behind what the customer values puts incumbents at a distinct advantage. It takes time to build and strengthen those relationships.

9 Project Staff If an incumbent is doing well, it can often be attributed to the project staff. As those team members become more senior– and more indispensable– their salaries usually rise. This can mean that the incumbent’s biggest advantage can also be very costly. Do you pass those higher salaries on to your customer in a re-compete? Planning for this throughout the initial contract, bringing in more junior staff and ensuring they are up-to-speed on customer priorities without any disruption to service, can help alleviate this cost concern before it’s an issue but it needs to be done throughout the contract life.

10 Test Innovative Ideas Don’t assume that what you bid to win the contract initially will be enough during a re-bid. Test innovative ideas with the customer during the current contract to ensure that the value to the customer is in line with your costs.

Identify areas of high costs 11 Identify areas of high costs There’s a common misconception that customers will do anything to avoid the hassle of a transition. But this is becoming less and less true. Not only can incumbents be seen as stagnant (vs. innovative) but because they have 1st hand knowledge of the true costs, their prices are often higher than challengers seeking to win/buy new business.

12 Begin at the Beginning Tracking those costs from contract inception, building strong relationships, testing innovative ideas and capturing cost-saving value-adds can mean the difference between winning and losing.

Mitigate Client’s Transition Concerns Schedule Risk Costs Relationships

Strategies to Exploit Incumbent Weaknesses Long-Term Positioning: Identify vulnerable incumbents Penetrate the customer organization Build customer dissatisfaction Qualification/Assessment: Increase knowledge of customer and incumbent’s performance Develop potential solutions; evaluate their feasibility

Strategies to Exploit Incumbent Weaknesses Capture Strategy: Estimate P-win and Price-to-Win; can you win/perform? Infiltrate incumbent’s team members (both staff and companies) Vet potential solutions Proposal Strategy: Focus on solution benefits You must underbid incumbent

Proposing Improved Performance Must identify HOW things work under the current contract (Neutralize incumbent advantage) Must also know HOW a better solution will benefit the customer without disruption or added costs Benefits must be what the customer wants: Faster Cheaper Higher Quality Lower Risk Contract Requirements/ Customer Hot Buttons Incumbent Performance Score (1-5) Incumbent Deficiencies Our Improved Solution Gaps in Solution Actions Required to Mitigate Gaps

Determine PTW/Pricing Strategy Learn the customer’s budget and cost expectations Study the incumbent’s resourcing and apparent pricing Develop a bottom-up cost estimate: Fresh, objective look at resource requirements Take advantage of innovative pricing opportunities that the incumbent won’t consider: Standalone cost structures Fixed or unit prices for portions of the contract Reductions in annual costs as objectives are met

Additional ways to ensure objectivity Include non-project staff on team, especially to lead price/cost strategy, areas of technical or managerial vulnerability. Maintain written action plans with what, when, who and how; prioritize key issues requiring resolution.

Recap: To win, incumbents must Maintain excellent project performance. Begin preparing for the recompete soon after you win the contract. Bid to the specs to keep costs down. Innovate without introducing risk during the current project; bid innovations in recompete. Avoid complacency.

To win, challengers must Solve the incumbent’s performance problems Bid innovation without introducing risk. Influence the solicitation in your favor. Price aggressively. Eliminate client’s concerns regarding transition.