Incumbency is the holy grail for government vendors. So how do you take on the current incumbent supplier and supplant them?
Incumbency is where every vendor wants to be. If you are the incumbent supplier, you can start to generate strong profits as your cost of delivery falls and your cost of sales bears a greater return.
Relying upon an incumbent supplier can also be good for the customer. An incumbent supplier better understands the customer and their needs, and can accordingly fine-tune service offerings to deliver greater customer value.
So how do you reach this holy grail of incumbency, particularly in government? In other words, how do you take on the current incumbent supplier and supplant them?
In many instances, tactics by aspiring vendors fail because they don’t focus on the real reason the client is unwilling to switch: risk.
The big concern of the client is rarely price; it’s about the risk to delivery. In government settings the risk factor is heightened, particularly where delivery is public facing.
Put simply, the incumbent supplier is a safe pair of hands – as opposed to you, who are the unknown, even if you are better than the incumbent. To consider switching, the client needs to be convinced that you are much, much better and this is hard to demonstrate, particularly in a meeting. The difference between your service and the incumbent’s service has to be more than incrementally greater, and it also must be differentiated.
How to effect the switch
There are two strategies to achieve this ‘switch’, both involving patience and homework.
The first is a safe switch, where you focus on delivering one small service or part of a service that you can deliver. This lowers risk. During your delivery you then demonstrate greater levels of delivery, customer service and value adds, with the aiming of growing into a larger role.
The second strategy is to be ‘ever present’, while playing the waiting game, so that you are in the right position when the time comes. And change will happen, whether it’s through apathy, or the result of government competitive tendering requirements. So your strategy is to keep in touch, send them useful information, provide helpful insights, etc. This gradually lowers the buyer’s risk of engaging you as you have been building your credibility over time.
To influence both these strategies you must do your homework. Influence will be achieved when you:
a) create a compelling reason (for the buyer) to act – by demonstrating you understand their needs
b) demonstrate your unique business value in delivering the solution
c) lower the buyer’s risk profile for delivery, and
d) give the buyer a return on their investment through the value you demonstrate in a proposal or bid.
A compelling reason to act
You can only build a compelling reason to act if you understand client drivers. And this is where government is a great customer, because all of its strategy and policy drivers, and high level budgets, are in the public domain. I have so many examples of clients that have influenced a government buyer by starting with the policy or strategy outcome.
“We understand that you need to achieve this policy, which delivers these types of outcomes.”
If you don’t start by demonstrating an understanding of their drivers and outcomes your email may not even be read.
Your unique business value
One of the reasons that decision-making around a bid can come down to price, or that a buyer doesn’t move away from an incumbent supplier, is because the buyer is unable to perceive any real difference between the product or service delivered by multiple vendors.
Businesses do not typically differentiate themselves well on paper — but they do differentiate themselves every day in delivering a service… Customer service, innovation, the little value-adds, knowledge transfer, quality systems, environmental management, and on and on.
These are all ways that we differentiate our businesses and these aspects of your service must come through when you are engaging with government. However, don’t just provide a statement around your differentiation; link it to how your point of difference will better support the government to achieve their policy aims.
To lower the risk of appointing your business, you not only describe how you do something, but why you do it — why your methodology delivers longer-term value and outputs relevant to the strategy objective. You can also lower risk through your approach to internal quality management and continuous improvement.
The more informed you can be on methodology, feedback and improvement, the more comfortable the client will be that you have done the job before, and can deliver it to government. Other ways of lowering risk include by offering proof of concepts, or smaller pieces of delivery.
Value is not about price. Value is the complete outcome the buyer gets against their requirement.
With the incumbent supplier, they may (for example) be getting a standard service without customer service. How many buyers complain that their software vendor never passes through software upgrades?
Discuss value in terms of value to the person buying your service and to the people using your service or benefitting from it. The more customer service and value-adds you can offer, the greater the value envelope.
Value is also demonstrated by expert advice and knowledge. Government wants to deal with the best of the best and knowledge is highly valued.
The greater the value envelope, the lower the gap becomes between you and the incumbent. It also makes it harder for a vendor to topple you when you become the incumbent!
A Mia case study
In 2010 I decided that I wanted to deliver winning government business workshops to industry on behalf of Small Business Victoria. Having sat through a vast number of them as a government employee, I had insights into what was well received by industry and what could be improved.
My biggest hurdle to overcome was the business that had been running them for all the time that I was in government – at least 15 years (and probably more).
So I put together a strategy to win this work, and followed the four points above. Patience was also part of the strategy. I first approached Business Victoria in June 2010 and didn’t sign a contract until June 2011. However, even now Mia is running up to five winning government business workshops for Small Business Victoria per quarter.
This is what happened.
a) I created a compelling reason (for the buyer) to act
- I researched the buyer – Small Business Victoria – and their needs around local industry development and engagement.
- I researched the existing course materials.
- I created a gap analysis between desired outcomes for industry and actual outcomes for industry.
- This analysis was written into a short brief.
b) I demonstrated our unique business value in delivering the solution
- I contacted the targeted buyer by email and sent them the brief, along with a statement on my points of differentiation – ex public servant with an understanding of government procurement, tenders and business.
- Supporting my points of differentiation, I attached the eBook “10 Tips for Winning Government Business”.
- I followed up two days later, then a week later, then a fortnight later…
- I got a meeting (yay!)
c) I lowered the buyer’s risk profile of delivery
- Despite the department understanding the compelling reason to act, there was hesitance in bringing on a new vendor and paying for this. However, they were 85% convinced… So I offered two pilot workshops. These were delivered in November 2010 to 100 businesses.
d) I gave the buyer a return on investment through value demonstrated in the proposal.
- After the pilot program, I put together an unsolicited bid for Small Business Victoria. This contained feedback from participants. This also contained my value statement that wasn’t just price but my value-adds and customer service. For example, a value-add was to update the Business Victoria website with information for businesses wanting to win government tenders – using information already prepared for the workshops. This was an easy value-add for me to offer and something highly valued by government.
- Then came Christmas, new year, new budgets, a lot of waiting and a lot of follow up… But finally a contract was signed and six years later we are a very strong incumbent.
Image: ‘The Power of the Rail,’ political cartoon depicting ‘rail-splitter’ Abraham Lincoln unseating incumbant President James Buchanan, 1860