A scourge …
‘But I’m offering a Ferrari and they are comparing me to a horse and cart’. A common sentiment expressed by front line sales and business development professionals in their daily battles at the tender box. From one perspective, the tender box may feel like a scourge to any business trying to compete on a competitive advantage other than lowest cost. The constraints of submitting a number on an excel sheet taking away the ability to add value to customers through differentiated services, quality, capability, or technology. We must find another way to compete is their wish.
.. or a truth teller of competitive advantage
However, from another perspective the tender box can be the cleanest feedback loop on a company’s relative competitive advantage. More successful companies eagerly embrace and analyse tender outcomes to ensure the business actually has a meaningful differentiated capability and an effective means of communicating this difference at the tender box. They are activists in embracing the tender box as a truth teller of competitive advantage; absorbing lessons and insights to shape actively both the tender box process and the positioning of their responses.
Four key practices of leading companies
There are four key practices that more successful companies follow to enhance the probability that non-price competitive differentiators play a meaningful role in tender outcomes.
Firstly, is the self-evident need to build a relationship with the customer. If all the customer sees and feels is the numbers on an excel sheet then you shouldn’t reasonably expect them to assign value to other factors that are not best represented by these numbers. However, key to customer relationship building is the intelligence gathered that enables you to clearly articulate the customer needs and gather customer perceptions of your relative strengths and weaknesses compared to competitors. This is often the richest source of relevant feedback in relation to your competitive advantage.
Secondly, is the drive to refine and enhance tender specifications. While a horse and cart can transport from A to B, it does so in a very different manner than a Ferrari. So often tenders are released that are either short of meaningful performance criteria or the criteria are very broad that allow the horse and cart provider to be the price setter for the Ferrari. It is the role of the Ferrari owner to influence tender output or performance specifications to their benefit. This is often achieved by warranting output performance with meaningful penalties and incentives.
Thirdly, is the courage to submit conforming and non-conforming tenders. It is no accident that most consumer product markets broadly align around a good, better, best approach with bundling of specifications forcing customers to make choices and trade-offs between price and performance. Centering a conforming tender to the specification positioning of the industry ‘price setter’ is important. However, based on intelligence gleaned around customer needs there remains a less frequently used instrument of submitting non-conforming tenders. This can be the best way to educate your customer on the importance of performance specifications by clearly articulating the difference in performance between the conforming and non-conforming options. Like the consumer products provider you are forcing the customer to make choices and value those choices versus ‘having their cake and eating it’.
Fourthly, is the openness to partnerships. Strong customer relationships deliver important intelligence around perceived strengths and weaknesses of you relative to your competitors. In some instances you can adjust perceptions with improved communication, but in many cases the customer insights are invaluable insights into relative competitive advantage. Joining up with partners where strengths and weaknesses are complementary is an often overlooked strategy.
Clear metrics of success
While the outcome of winning or losing a tender is unambiguous feedback, it is a lagging metric. Companies tend to spend less time collecting and monitoring some leading metrics that provide immense insight in relation to both competitive advantage and effective communication of it. Metrics such as; the trend in the number of tender bidders, bid success rates, tender success when not the lowest bidder, margins relative to industry norms, and % of work sourced outside of tender can be invaluable leading insights. Interrogation of the tender win/loss books remains as one of the most underutilized sources of intelligence in business today.