The first part of this four-part series on key issues related to your business development (BD) pipeline focused on validating opportunities in your pipeline. In this post, I turn to your company’s internal perspective, specifically the role of internal gates.
By Kyle Green
Most BD professionals use some form of quantitative assessment to define the merit of pursuing a particular opportunity. The baseline for this assessment is related in almost all cases to your company’s ability to successfully secure the opportunity and the impact of a win or loss on corporate revenue projections. This quantitative assessment is often referred to as probability of win (PWIN). Bottom line, PWIN is your best judgment on how likely it is your company will win this opportunity.
Unfortunately, many BD professionals rely solely on qualitative “guess work” to determine their PWIN (e.g. “the customer hates the incumbent” or “incumbent’s workforce is dissatisfied”). I am going to suggest a more calculated approach to determining PWIN. (This post deals only in broad brushes. For more on a precise PWIN calculation methodology, stay tuned for the fourth part of this series.) A critical first step is to set a confidence ceiling. The competitive landscape and complexity of modern capture activities requires a measure of caution is success estimations. Unless you are tracking a made-to-order sole source opportunity, PWIN confidence should be capped at 85% confidence. Of course, you must also set a pursuit floor to ensure efficient resource allocation. If an opportunity begins to fall below 40% confidence, it is time to re-evaluate the business sense of continued pursuit.
With that framework in place, let’s begin the internal gates review. The first question to answer: Does the opportunity fit within your company’s strategic goals? Just because your company has done that particular activity in the past does not mean you should add the opportunity to your pipeline. The previous award may have been a one-off pursuit based on a skillset the company has since lost, or the company may have decided to simply drop that line of operation in order to bolster other capabilities. Make sure you know where the company is going so that you can identify and track the right opportunities.
A closely related question: Does the opportunity fit your company’s operating model? If 90% of your work is services-based and the opportunity requires prepositioned product deployment, it makes little sense for you to prime the response. Instead you should assess the opportunity based on whether you can subcontract, develop an in-house development process, or outsource the fabrication while still making a profit.
The next question to answer: Does the opportunity fit your company for size and scope? It would strain most 50-person companies to pursue a $50 million per year revenue opportunity. Back of the napkin math suggests that such an opportunity would require a workforce of 200 ($50 million annual revenue / $250,000 annual revenue requirement per employee = 200 employees). To simply perform the contract, your company would have to drop all existing efforts and expand by a factor of four upon award. The work-around to this is to create a performance team, and this often works very well. One note of caution about small business set asides is to remember that the customer only gets credit for (and is therefore highly inclined to accept) proposals where the small business prime performs at least 51% of the work (usually calculated by either labor hours or cost).
Finally, a key ingredient to the PWIN analysis is your competition. You should be able to answer: Given the competitive landscape, is the opportunity financially viable for your company? As a small-to-medium business, you probably do not have the flexibility to significantly cut your margins (or even go profit negative) to win. The very large companies have a myriad of structural, contractual, and financial mechanisms that allow them to work at lower margins than many small-to-medium businesses. It is your responsibility to evaluate the competitive landscape and determine if your company has either the technical or cost strength (or both) to withstand an undercut bid by one of “the bigs.”
If you can answer “yes” to all of these general questions, or at least explain how you would structure the bid to increase company revenue, and it fits your company’s business model; then you have passed the internal gate for qualifying the opportunity in your pipeline. I suggest rating the opportunity at a 50% PWIN. My next post will make or break the opportunities PWIN as I look at customer relations.
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