Commando Consulting: March 2009 - Paraphrasing Hamlet: To Bid Or Not To Bid On RFPs, That Is The Question

Bby Tom "Bald Dog" Varjan, Organisational Provocateur

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When it comes to acquiring clients, for many consulting firms, often due to internal ineptness in marketing, it's become well-rehearsed routine to bid on projects. Buyers issue their cattle calls (RFPs), and these consulting firms gather at buyers' feet yelling, "Choose us, choose us!"

And now the overall dynamic of the process has gone apeshit, that is, there is much more supply than demand. And what happens when there is more supply than demand?

Exactly! Buyers start creating a level playing field, which really means is that they chip value components out of your solutions.

And once at solutions, are we talking about the right solutions? Usually not. The problem is that instead of proper diagnostic interactions with real buyers, we have merely responded to a vague interpretation of the problem presented by purchasing managers who usually are not experts in the area in which they present problems to solve or opportunities to seize.

Basically we're throwing darts in the dark. Hm.

And as we know from a McKinsey study...

• 75% of solutions don't return a profit to the selling company


• 50% of solutions don't deliver the expected value for the buying company

Considering that we've been talking about value-pricing and guaranteeing our work, but can we really do that is we don't even know what we're exactly expected to do?

The other problem with RFPs is that it's tactically defined in specific methodologies but fail to take strategies into consideration.

Imagine this RFP...

A world-class army is looking for a world-class tank driver. The person must be a graduate of an accredited Canadian tank driving school and must be certified by Canadian Tank Driver's Association. Also, he must have minimum 1,000 hours of tank battle experience, and must be able to handle fast-paced situations where he's outnumbered by the enemy.

And now imagine a candidate...

He's never driven a tank. He's never seen the inside of a tank. His speciality is to sneak into the enemies' camps the night before tank battles and kill the generals and all the tank commanders in their sleep. He makes it impossible for the enemy to engage in battles by taking out their key people. His approach is so unorthodox that no one expects it to happen, thus no one is prepared for it. So his track record is 100% success.

Now what do you say?

Imagine this argument between the purchasing agent and the real buyer, a general...

Hiring agent: Well, based on what he's told us, he's clearly not qualified for the job.

General: Wow! This is better than a tank commander. This is the guy we need. This guy can help us to avoid tank battles altogether, which are always high in causalities even for the winner. We could actually win all battles without firing one single shell. Tell him he's hired.

Hiring agent: But what about his resume. He has no tank experience.

General: But he can win battles, and that's what counts.

Hiring agent: But he doesn't fit the job description in the RFP.

General: The job description is to win battles and save our arse.

Hiring agent: No, the job description is to drive tanks.

General: You're a moron. We need someone who can get the job done.

Hiring agent: No! We need someone who fits the job description in the RFP.

And the same dynamic plays out in bidding wars. Even if you're 100% qualified to deliver the value the buyer is seeking, purchasing may well deselect you because you don't match the exact methodology purchasing has already wedded itself to.

And when, as an expert you mention that the selected methodology is ineffective and unnecessarily costly, then you shoot yourself in the foot from both barrels of your gun.

I still remember when, still during my engineering years, I responded to an opportunity to design software for a control system. The project was to collect position reading from some mechanical components and crunch the numbers into various graphs. Every programmer knows that a low-level language like Assembler is light years faster than the fastest high-level language, like C++.

Nevertheless, purchasing deselected me because I pointed out that reading external data in Pascal language was unstable and inaccurate. If the buyer had heard my message, I could have got the gig. But I was forced to communicate with a purchasing agent, a programming layman who was hell-bent on enforcing the selected methodology.

Just as a review, let's take...

A Quick Look At The Dynamics Of The Request For Proposal (RFP) Process

1. Buyer searches for possible solutions and service providers on the web using Google


2. Buyer settles with a specific company


3. Buyer gathers info on the selected company


4. Buyer and seller agrees on price and terms


5. Buyer issues RFP to find some competitive(ly low) bidders


6. Some buyers use low bids to pressurise the selected firm to drop its fees (Truly good firms tell buyers to shove their opportunities up their arses)


7. Some poor suckers actually respond to the RFP and submit their proposals, hoping that it's a real opportunity


8. Buyer makes a shortlist of some of these poor bastards for further brain-picking, called the sales presentation


9. Buyer invites some firms to present their solutions. The audience of these presentations are usually mid-level opinion-makers and lower-level flunkies with exalted titles, bloated egos but without decision-making authority and budgetary power


10. Anticipating manipulative presentations, audience members put on their "sales filters" designed to separate value from bullshit


11. Audience members passively watch and listen to the free "entertainment" and carefully filter the message


12. The buyer grades the presentation and the presenter


13. The buyer's decision is based on criteria the buyer established days or weeks before the presentation in the absence of salespeople!

When salespeople submit proposals in response to RFPs, they are not exactly selling anything. They are merely begging for attention. It's a kind of reverse auction: The auctioneer shouts, "Who can do it cheaper?" And frenzied consultants try to out-scream each other, "Me! Me! Me!"

Then one winner, more often than not, the lowest bidder is selected.

And for the rest of the engagement, this poor bastard suffers from the winner's curse: In their frenzied zeal, bidders underestimate the cost of rendering their services. In order to win the bid, consultants underbid each other so badly, that even if they win the contract, they end up losing money on it. So, eventually, the winner ends up being the biggest loser.

Why? Because as we all know, RFP bidding wars are about low price not high value.

On the seller's side, responding to RFPs is a retarded approach to acquire high-calibre clients with high-margin, sexy projects because these buyers don't buy consulting services by the pounds, like potatoes. Premium buyers simply don't issue RFPs.

They are smart enough to understand that consulting is a relationship business, and to find the best service provider, they ask around among their friends and, an increasingly more often, buyers go to the Internet and punch some keywords in Google.

Yes, the Google search outweighs word of mouth referrals.

93% of business prospects go online to research upcoming purchases and 69% of business prospects turn to search engines as a first step.

Forbes magazine has asked corporate executives what they consider to be their number 1 source for information. 85% of all respondents said the Internet and the search engines.

And these three facts alone are enough to refute the validity wasting time on RFPs.

And on the buyer's side issuing RFPs is a disaster because it leads to hiring someone from the mediocre lot that can do the project at a competitive(ly low) price but the quality, budget and deadline are likely to suffer.

So, here we have to change our mindsets from chasing RFPs to market positioning that allows consulting firms to attract buyers who have already qualified themselves using the consulting firm's automated "stay in touch system".

Why is this important?

Neck-and-neck with cold-calling, responding to RFPs is probably the least effective way of acquiring clients. So, why do so many consulting firms do it then?

Because it's cheap, easy, traditional and doesn't require serious thinking. It's just a matter of repeating what we did yesterday, and doing it again and again till the end of time.

And not even the pathetic response rate and the relentless price objection can motivate many consulting firms to search for a more effective approach.

And though these firms end up like the hamster in the wheel, they rather keep running than changing their approach. But this endless running comes with some grave consequences...

• Average salespeople spend some 71% of their time prospecting because their marketing departments fail to provide them with qualified leads. The remaining 29% is split between selling, attending company meetings, handling paperwork, travelling to and from appointments and advancing their skills


• Some 90% of prospects are not intending to buy now. Actually most of them are tyre-kickers and bargain hunters


• One face-to-face sales meeting costs some $350. An out-of-town meeting costs over $1,000

So, everyone is chaotically busy and gets busier by the day. Nevertheless, in this shuffling sales madness, between 40% and 80% of new sales leads are lost, not followed up upon, or otherwise mishandled.

Yet, most consulting firms' response to this problem is doing the same again and again, but doing it harder and longer... More feet to pound pavements, more knuckles to knock on doors and more fingers on dialling pads.

Paraphrasing Thomas D. Dee Professor of Organisational Behaviour, Stanford Graduate School of Business, Jeffrey Pfeffer's quotation...

"What kind of doctor would you be if your patient was bleeding faster and faster, and your only response was to increase the speed of the transfusion?"

...

"What kind of firm leader would you be if your profits were eroding faster and faster, and your only response were to bid on more RFPs?

If you feel like the proverbial hamster in the wheel with regards to your business development, running, running and still running to hunt down new business, using brutal pavement pounding and telephone dial pad banging grunt work, then maybe this white paper is exactly what the doctor has ordered.

All right, not really the doctor but the embalmer that I was many years ago. Well close enough. Both are - sort of - medical professionals.

So, Instead Of Bidding In Crowded Beauty Parades, Let's Choose Education

What all beauty parades, a.k.a. pageants have in common is that they hardly ever include the real most attractive women. They include the women who are reasonably attractive and have the money to compete.

For the same reason you hardly ever find truly spectacularly talented people at most companies. Why? HR screens them out and make sure these talented people can never penetrate the walls of the company.

Highly talented people think and act, thus apply for positions differently from ordinary folks.

So, after having looked at the bidding process, let's look at the education/diagnosis process...

Your success depends on at what phase you join in the buying cycle. Before every buying decision and issuing RFPs, there is a pretty long period of self-diagnosis and scanning the horizon for potential solutions.

The table below summarises the buyer's thinking process. It's based on the behavioural change model developed by change experts Dr. James Prochaska and Dr. Carlo DiClemente, and it's broadly recognised and applied to how human beings change. So, let's see the stages of change...

The inherent problem with the RFP approach is that it focuses on Step 6, and by this time buyers have developed their criteria for solutions in their heads, and all they are looking for is a pair of hands to do the heavy lifting on what they've thought up. So, this is why at this stage the work is price-sensitive commodity.

So, in order to come into the equation as trusted advisors, as opposed to fungible vendors, we have to go back to the beginning of this continuum, and start business development there, as shown on the drawing below.

Using farmer's parlance, you plant and nurture on autopilot but harvest in person.

Educational Phase On Autopilot

In this phase buyers are not ready to meet you yet because they don't realise they have problems.

But you know they have issues because you've heard about it or read about it in trade publications. So, you can start initiating contact with these buyers and gently start disturbing the status quo.

But what buyers are willing to do is to read your materials on what problems their industries by and large suffer from.

And this is the interesting part...

In your presence, buyers rather die than admit they have problems. But in their privacy, as they read your stuff, they nod along with you as you present various problems and say to themselves...

"If only half of this is true, we're in deep shit."

And they know that your stuff is 100% true because everything you say is supported by references from credible research institutions like Gallup, Gartner Group, SiriusDecisions or Yankee Group. Why are these institutions credible? Because most probably, your buyers get their industrial intel from the same sources.

And the good news is that basically 100% of this educational phase can be pre-created and automatically dispensed to buyers who have raised their hands that they're interested in learning more. It's like a buffet restaurant. You put out your stuff, and buyers pick up whatever they're interested in.

But not learning more about your services, but learning more about addressing their issues.

Using the Prochaska-DiClemente model, we can take buyers from the pre-contemplation stage through contemplation all the way to preparation. The synergy of education and automated qualification qualify buyers even before in-person time and effort is invested.

Then when buyers reach the action stage, that's when we click over to manual mode, that is, human interaction which starts with the...

Diagnostic Phase In Person

After sufficient incubation, prospects in your sales funnel sell themselves on the idea that you're the expert they want to get help from once they are ready for the change they have in mind.

There is no begging, no wasting days on end to craft proposals, no typical antagonism between buyer and seller. At this point buyers and sellers now can sit down on the same side of the negotiation table and discus the possibilities of working together.

All, right, and here is one more change from conventional wisdom...

Tradition has taught us that once we're face-to-face with buyers, we can start doing the needs analysis.

But there is a world of difference between a needs analysis and a diagnosis. And at this point what we want to do is not needs analysis but diagnosis.

So, what is the difference?

In a needs analysis we ask buyers what they (think they) need, we buy that presented need hook, line and sinker, and then discuss the parameters of delivering a solution based on that expressed need. The problem is that what buyers think the problem is, that's usually a symptom. It's merely a manifestation of the root problem.

In a diagnostic discussion, we take what buyers say and use those self-diagnosed needs as starting points to dig deeper. Just the way doctors do. How would you feel if your doctor accepted your self-diagnosis and gave you a prescription based on that? I reckon, you would run away, just as I would.

And the beauty of the diagnosis is that you don't need to do a dog-and-pony show to prove that you're worth of the project. It's your diagnosis that proves your capability and credibility. Buyers can judge you not based on your words of what you've in the past and what you can do in the future, but on your actions right here and right now during the diagnosis.

While needs analysis accepts self-diagnosis, proper diagnosis does not. It's like a medical diagnosis: Doctor and patient work together in a collaborative manner but it's the doctor who is facilitating the diagnostic process not the patient.

This is the same. You work with several people on the buyer's side but you're facilitating the diagnosis.

And after the diagnosis, just as doctors do, you ask prospects what they want to do. And the good thing is that these are already committed buyers not merely lookers. They are decision-makers not opinion-makers.

They have sufficient resources, both human and financial, to pull off the in imitative. Yet, they are also aware of the possible constraints that can compromise the project.

And of course, they make a go/no go decision on their own volition not as a result of slimy sales tactics.

I often get this question regarding this diagnostic approach...

"But what about the proposal?"

Exactly. What about it? The name can remain "proposal", but technically you're no longer proposing something to be considered in your absence. All key people get together, and together buyers and seller craft a document that briefly outlines the current situation, the new situation the buyers are seeking and some logistical bits and bobs. Using this method, my "proposals" are maximum three pages long and the acceptance rate is basically 100%.

You can learn more about this kind of proposals from a knowledge product I've created, called How to Master the Proposal Process.

And since you develop everything in concert with the buyers, it's a lot easier to accept than something that you develop in isolation and then "present" to buyers.

On Summary

So, we've compared to pitching/presentation to diagnosis. In my experience, pitching is all about trying to turn every prospect into a client. It can work but you incur huge "opportunity-chasing" costs and the quality of the clients is not exactly top notch.

The diagnosis process demonstrates nvestable opportunities to buyers, and then they can decide what they want to do. But in this approach, prospects are heavily screened for appropriateness before the appointment. You invest in-person diagnostic time if and only if there is a 99% chance that the prospect becomes a client.

And the beauty of this system is that since it was the prospect who asked you for the appointment, you have a better chance to get the engagement. And this is a drastically different dynamics from RFP-prospecting that leads to rigid dog-and-pony show type presentations.

So, look at your own client acquisition process and see the lead generation, lead nurturing and lead conversion processes. How automated are they? How consistent are they. How rigidly does your firm adhere to a Perfect Client Profile? Does your firm properly reject less than Perfect Clients.

Yes, I know there is a recession out there. This is why it's even more important to work with Perfect Clients only. Less than Perfect Clients can waste a lot of your time, energy and money.

When you look at your client list, you may even decide to abandon some. Well, do that, and work only with Perfect Clients who are likely to brag about you and your expertise when they get great service from you.

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Recommended Reading

Secrets of Special OPS Leadership:

"Dare the Impossible Achieve the Extraordinary"

By William A. Cohen

I've always believed that while traditional industrial companies can be compared to the traditional army, that is, tight compartments of specialists working in isolation and usually with minimum communication under tight command and control, consulting firms can be best compared to Special Forces units where small cross-trained specialists work in a non-compartmentalised environment with a wide degree of creativity and latitude.

And for this reason many leadership and management practices miserably flop in consulting firms.

Based on the six principles Special OPS units are built upon, the author introduces us to a new way of leading organisations. Instead of trying to manage the whole, it's better to break down the company to smaller chunks and manage it in small teams or organisational commandos.

And then based on the six principles, we learn 14 strategies that can lead teams to superior performance both in the Special Forces commandos and business teams.

Yes, there are many leadership books out there. But most are written for leaders of large, multinational industrial corporations that sell "things", not consulting firms and their knowledge workers that sell "air" called knowledge. And I think this makes this book so important to led small units.

And most are written by the same leaders of large, multinational industrial corporations (or academic theorists with triple Ph.D.s, many of whom can't practise enough leadership at home to keep their teenage kids away from smoke, drugs and alcohol).

And this is why this book is so important. It focuses on leading small units and flexible and rapidly changing environments.

Place your order with Amazon.com for Secrets of Special OPS Leadership. You'll be glad you did.