The customer will keep us – it’s too risky for them to change
There are risks for the customer in changing contractor.
The obvious (and much used) reasons why choosing the incumbent for the next contract is the lower risk option include:
- The customer already knows you can deliver the work;
- The customer already knows your culture and how you approach them and the delivery of the contract;
- Your staff and management team are experienced in delivering the work;
- You know the ins and outs of the contract so are less likely to put in a solution that doesn’t work or a price that’s too low to deliver the work;
- Your team, equipment, processes etc are already in place. So the time, cost and risks of a successful transition should be lower than a new contractor setting up from scratch.
A report on UK Government IT contract procurement cited procurers’ worries about the cost of change, the disruption to services that a change or failed transition could mean, and the issues of replacing bespoke or proprietary systems created or owned by the incumbent.
But the same report also highlighted the Government’s determination to overcome these issues. And break the hold on their contracts of the large IT suppliers, who were accused of non-cooperation in switching services, scaremongering about the risks of change and pushing buyers towards their own bespoke or proprietary solutions without regard to the benefits they may or may not deliver to the customer.
Customers may see the risks of change. But they don’t always accept them. And they will do all they can to overcome them and ensure they’re able to choose the best solution (and supplier) to meet their needs. Not just stick with the incumbent because it would be difficult or a risk to change, even though they’re not offering the best value.
But a lot of incumbents, either consciously or unconsciously, assume that the risks of changing supplier mean they don’t need to work as hard to win their rebid or offer a significant improvement to their existing delivery. They assume the customer is risk averse. And even if their solution isn’t quite as good as the competitors’, or a bit more expensive, the risk of change the customer sees will overcome this and they’ll retain the business.
Sometimes they even decide not to make improvement they could, because they believe it means they would need to make changes – weakening their argument about their low risk solution.
The problem is, your customer might have an awareness of the risk of change. But in the rebid they’ll be offered a range of alternatives by your competitors that could be lower cost, more innovative, and more suited to the future needs of the customer over the coming contract period.
The competition will be focusing on the benefits these offer to the customer. Especially compared to your offering of ‘more of the same’ where you aren’t offering new and better opportunities for the customer. But instead focusing your ‘win themes’ around the danger of changing these new ideas and lower costs will look attractive.
Competitors will also be aware the customer might be worried about the risk of change. And they’ll be doing all they can to show how their solution is also low risk; how they’ve got experience and case studies of successfully introducing change from incumbent delivery; and a solid implementation plan to show how they’ll deliver a ‘low risk’ transition.
And the customer will be thinking how they can reduce the risks you’re focusing on. Or perhaps they will decide that the short term risks are worth the improvements they’ll gain by changing. And then you’ll look back and realise you were complacent in relying on the customer being too afraid, risk averse or lazy to make a change. When in fact the biggest risk for the customer was in sticking with a contractor that wasn’t offering them the best possible service at the best possible price.
How to avoid the problem
There are a number of actions you can take to avoid losing your rebid due to complacency about the risk of change.
Ensure the team aren’t focused on risk of change
Make sure your team realise the customer won’t just stick with what they have now. And that you can’t just rely on their risk aversion. In fact, you might find when you test with the customer, they’re not as risk averse as you think. Or don’t see the risks of change as being as significant as your team believe. Make sure you check with those who are going to have the real decision making and influencing power in the rebid, not just the operational customer you might be closest to. Your operational customer, being the one who will need to deal with the changes and potential risks of change, might be more risk averse than those higher up in the organisation (i.e. those with greater decision making power over the rebid) who are more focused on cost and longer term benefits.
Focus on the future and the benefits you could bring with a better solution
Focus on looking at what the customer wants and needs for the future (rather than what they wanted last time around and what you are delivering now). And the changes this means to the solution, and making sure you focus your offering on these.
This takes more time and effort than relying on the customer not to change. But it’s a much surer way of winning. When you look at what you could do, unencumbered by the difficulties (for you and the customer) of transitioning from what you do now, you’re likely to see a lot more opportunities to improve.
And recognise that your price now is not the floor to the potential price for the future solution. To win you may need to offer the customer a lower price (and accept a lower margin) than you’re getting now at the end of your contract. If you aren’t willing to give the customer the absolute best value for the future that is just what you could be facing – the end of your contract.
Don’t use risk of change as a win theme – focus on the benefits your incumbency offers
When incumbents use risk of change as a win theme, they tend to focus on the problems the customer would face if they chose a competitor and their solution. That’s a negative way of looking at things. You aren’t offering the customer benefits, just warnings. Don’t focus on the disadvantages the customer would face with choosing a competitor. In most cases your competitor will be persuading the customer are not really issues. Or that they’ve mitigated the issues in how they’ll deliver the transition or solution. Focus on the benefits you are offering.
The list at the start of the article gives you some general areas where you might find advantages. But you need to be more than general in your submission. For instance if you can offer a lower risk, lower cost and faster transition to your new solution, don’t just say that – be specific:
How are you able to do this?
How much quicker could you put the new solution in place?
What specific benefits would this timing and having the new solution in place earlier offer the customer?
And if your experience of the contract means you’re more likely to be able to make a new idea fit into the customer’s processes, look at the detail. What experience specifically has led you to this conclusion? What will you do to exploit this in putting the new idea in place? What will the processes or areas in question look like once the idea is working? And what quantifiable benefits will this deliver the customer?
By avoiding using risk of change as a general win theme, and instead focusing on the specific areas where your incumbency offers advantages to the customer, you’re showing your customer a range of positive benefits. And, without you mentioning them specifically, you’re challenging your competitors to match these benefits in their submissions.
By using risk of change subtly, appropriately and intelligently as a part of your wider offering to the customer in your rebid you’re making the most of your position. Complacently relying on it as the main reason why the customer shouldn’t change is…risky.
