Wednesday, April 18, 2018

Taming the Proposal Monster

Leadership always involves a tug-of-war between the things you can control and the things that control you. Successful leaders win that battle more often than not. Many others succumb to a haphazard existence often described as "fighting fires."

Certainly, there are many stress-inducers that we exercise little direct control over—client demands, project surprises, shifting market forces, employee misbehavior—to name a few. But there are others we control. Like which proposals we pursue. Yet many A/E firm leaders find it difficult to pass on virtually any opportunity where their firm is qualified to do the work, even in the face of long odds. They push aside less-urgent priorities and add another task to overloaded schedules, all for the sake of producing still another proposal with very little chance of winning.

I call it the Proposal Monster. This beast lures us into a trap. It causes us to mistake illegitimate proposal activity for legitimate business development effort. It diverts attention away from more important matters. It gobbles up valuable resources that could have been more productively spent elsewhere—like on marketing or sales calls. It wrests control away from many of its unwitting victims.

So many firms spend the bulk of their business development time on writing proposals. Invariably these firms have low win rates. They would be wiser to (1) push more time upstream to the tasks of building relationships and positioning the firm in advance of the RFP and (2) invest more time on the proposals where they have a genuine shot at winning.

So how can you tame the Proposal Monster? Let me illustrate my recommendations with the example of an engineering firm that largely succeeded at doing it. This 100-person firm hired me as their business development manager on a part-time contract basis over a couple years. They had struggled for some time, with little growth, poor profitability, and high business development costs (12% of net revenue) that produced mediocre results.

When I stepped into the role, they had submitted 136 competitive proposals over the previous 12 months and won 26% of them, well below the industry median of about 40%. I suggested setting a goal of cutting the number of submittals in half for the coming 12 months, while increasing their win rate to 45%. After the initial shock wore off, the management team agreed with my suggestion.

Over the following year, the firm submitted 80 proposals, short of our goal but a substantial improvement (there was one rogue office that refused to get with the program; they accounted for half of all submittals while winning only 13%!). The overall company win rate improved to 46% and sales increased by 31%. Profitability improved from -0.1% to 7.5%. Better still, the improvements continued into subsequent years.

Could your firm benefit from similar improvement? Let me recommend the following steps:

Shift the focus from chasing projects to building relationships. This is a critical first step. Most A/E firms take more of a transactional approach to business development than a relational one. Since writing a proposal is in the latter stages of the sales process, many are prone to shortcutting the preliminary relationship building in favor of seemingly starting closer to the finish line. This is particularly a problem for firms that pursue public sector work where there's little to no upfront investment required to receive an RFP.

To facilitate this shift in focus with the aforementioned firm, I started with our weekly BD conference calls. I noticed initially that the branch managers on the call spent most of their time talking about the proposals they were working on. It seemed a source of pride to report that there were multiple proposals underway in a given office. I asked that future calls include no discussion about proposals unless (1) they needed the help or advice of someone on the call or (2) they had learned the outcome of a specific proposal.

With this deliberate shift to talking more about sales than proposals, branch managers realized they needed something to talk about. I think that simply changing the content of our conversations helped encourage more sales activity. There were other steps we took to promote the shift, such as changing the metrics we tracked, but I think that redirecting our BD conversations played the biggest role.

Establish a "no know, no go" policy. If a firm decides to submit proposals only when they've been talking to the client in advance of the RFP, that one step alone will eliminate most wasted efforts and increase the win rate. I've never seen any data on this, but my estimate is that for most firms there's roughly a 5% or less chance of winning if you submit a proposal without client contact prior to the RFP. Of course, every firm can recount an exception or two, and that's what entices us to keep trying despite long odds.

We established this policy in the scenario described earlier. Exceptions required executive approval, in this case meaning either the president or myself. As I mentioned earlier, there wasn't full compliance, but the policy made a huge difference. Besides reducing the number of long-shot submittals, it encouraged people to contact clients earlier in the process—if for no other reason, so that they wouldn't fall victim to the policy in the future.

Control behavior by limiting access to the marketing department. Perhaps your firm has attempted various policies like the one above, or a formal go/no go process, only to find it ignored by a significant number of key players. I don't advocate forced compliance with such policies. It's hard to tell seasoned professionals what sales opportunities they can or cannot pursue.

So what to do? Limit access to corporate marketing staff to only those proposals where the team adheres to your policies and follows the process. I mentioned the one rogue office in the example above. They didn't use any corporate support, except on rare occasion. When they did, they had to comply with what everyone else had agreed to. If someone in another office chose to pursue a proposal where they hadn't been talking to the client and didn't get approval, or where they didn't go through the established go/no go process, they did the proposal on their own. Thankfully, there were few such situations.

One of the mistakes that firms make that hampers their BD efforts is giving open access to corporate resources. Why should marketing staff be made available at the beck and call of their technical colleagues? This commonly is a disservice not only to marketing staff, but to the corporate interests. Business development costs are substantial, but opportunity costs are often even greater. Exercise restraint in how you allocate these precious resources.

Obviously, this tactic is dependent on your organizational structure. If marketers report directly to technical managers who lack discipline in their proposal pursuits, you've got a problem. It might be worth tweaking the organization to gain better corporate control over marketing staff access.

Give some proposals special priority. This should go without saying, but I've seen too many major proposal efforts shortchanged by poor resource allocation to avoid mentioning it. For several years, I served as the corporate proposal manager for a national firm. I worked on perhaps 10-12 proposals a year. In other words, I and the corporate resources assigned to me were only engaged on our highest priority submittals.

When your best proposals draw from the same resource pool as the ones you shouldn't even be pursuing, there's a good chance that you won't be giving your best efforts to your best opportunities. If you're not already, determine how to reserve your best assets for your really important proposals. Don't let them be overwhelmed by the Proposal Monster.

Wednesday, April 4, 2018

The Critical Step of Translating Client Value

I recently purchased some music software because it was cheap. I wasn't looking to buy an automated chord generator. But when I stumbled upon this one, deeply discounted at $15, I thought why not? I might have a little fun with it in my home recording studio. Then I later watched a video that showed me how to use it to easily create melodies like bass lines and synth leads. All of a sudden, it was steal at that price—something I could envision being a very useful tool.

That's how value works. There's a tangible aspect (price and product) and an intangible aspect (perceived benefits). There's potential value (such as buying an insurance policy) and realized value (when you need to use that insurance to avoid financial disaster). In the final analysis, value is largely a perception. Any attempt to measure it in objective terms falls short. A $100 bill has an objective value, but it's true value is only realized in how it is spent.

That intangible, subjective dimension of value is troublesome for many technical professionals. In my last post, I pondered why the subject of value creation is largely ignored in the A/E industry. I think that oversight has been costly. Clients don't fully appreciate the real value of our services, which contributes to them becoming increasingly commoditized. But you can hardly blame clients; the inability to fully realize the value of what we do starts with us.

If you doubt me, read some of your firm's project descriptions—particularly if you work for an engineering or environmental consulting firm (architects do a little better job understanding subjective value). Do your write-ups point out the value of your work? That's highly unlikely, based on the thousands of project descriptions I've read over the years. Most provide little more substance than a task list—here's what we did. There's usually no description of why the project was necessary, what problem it was supposed to solve. And it's uncommon for project outcomes to be mentioned. What results did your firm deliver?

Our project descriptions are symptomatic of a deeper issue. We see technical problems and solutions. We don't usually think in terms of business solutions. Yet business solutions are more valued by clients than technical solutions because they deliver bottom-line results.

Now wait a minute, you might protest, our work does deliver business value! No argument from me. The design and consulting services we provide enable business functions, strengthen balance sheets, boost shareholder value, help create vital infrastructure, improve operational efficiency, convert sites into productive use, create customer experiences, build public goodwill, improve the client's brand, etc.

So why don't we get credit for the business value we provide? Because we fail to translate our technical solutions into business value. We can't expect clients to make a connection that we don't make ourselves. What are some steps we can take to better translate the true value of our work?

Work harder at seeing projects from the client's perspective. Value is defined by the recipient. So the first step of translating value is to understand the "language" of the ones receiving it. One technique I've found helpful for doing this is to explore client needs at three levels—strategic, technical, and personal. Of course, clients aren't thinking in terms of three levels of needs. But this approach helps push us out of our common myopia regarding technical matters and better aligns our problem definition with their more comprehensive perspective.

Identify the desired business outcomes. We need to position ourselves as business solution providers with a technical emphasis. That won't be easy; we've long painted ourselves into a corner. Thus clients don't usually volunteer insights for us regarding their nontechnical issues. We have to take the initiative. Exploring with clients the business needs, priorities, and outcomes associated with their projects is a good starting point. These are the "strategic drivers" that are the impetus behind the projects we are hired to perform, thus we should plan and execute our projects accordingly.

Use the integrated solution design process. This is an approach I developed years ago as a proposal manager to increase our win rate, and I'm now helping firms apply it to their project planning. As illustrated below, this process starts by characterizing client needs at the strategic, technical, and personal levels, as mentioned earlier. Then it considers the desired outcomes at each level, leading to development of a solution that delivers those multifaceted outcomes. The process is simple in concept, but takes time to master. We're working against a long tradition of reducing projects to their technical scopes.

Don't overlook the value of the client experience. Our services aren't just received, they're participated in. Therefore the quality of the working relationship constitutes a substantial part of the value we provide. The best companies in delivering great customer experiences have a process—they're intentional, not just aspirational. A good start to defining such a process is to (1) "benchmark expectations" about the working relationship in advance of doing the work, so you know how the client defines a great experience, and (2) solicit regular feedback from the client how your firm is doing in meeting those expectations.

Make delivering results the central message of your business development and marketing. There are plenty of A/E firms that are proficient in performing technical scopes of work. That's not a compelling sales pitch. But shift the focus to how you deliver business results and watch clients take notice. A good place to start this transformation would be to revisit those project descriptions. Get project teams together to review their understanding of the nontechnical needs and outcomes associated with those projects. You might even try to retrospectively apply the integrated solution design process. Perhaps this exercise will bring to light issues that were previously neglected or underemphasized. Or more likely, it will help you realize what you didn't know, because you never asked.

Ultimately, we need to pursue these conversations with clients, seeking to understand the strategic drivers behind their projects and their expectations about the working relationship. Then we're better positioned to translate the true value of our work—business results, technical mastery, and outstanding client experiences all packaged in high-value, integrated strategies. I think that turning our focus to value creation is a largely untapped opportunity for differentiating our firms. Of course, most will stay the course. That's your opening.