Winning a Rebid as an Incumbent
What do Margaret Thatcher, Barack Obama and Yitzhak Rabin all have in common? The answer is that all were once the incumbent leaders of their respective countries. Thatcher was ousted in November 1990 after 11 years as Prime Minister and fifteen years as leader of the Conservative Party. Obama stepped down in January 2017 after finishing his second term of office. Rabin served as Israeli Prime Minister from 1974 to 1977, and 1992 to 1995. His second term ended in tragedy as he was assassinated in Tel Aviv by an extremist who opposed to Oslo Accords.
If you’re reading this you’ll more than likely remember the awful Bryan Adams song “(Everything I Do) I do it For You” that spent 16 consecutive weeks at the top of the UK singles chart in 1991. You may also remember Sir Alex Ferguson’s ridiculously successful 26 year spell at the helm of Manchester United.
It should be obvious where I’m going with this. The common theme of these examples is that nothing lasts forever, or in the words of George Harrison “All Things Must Pass” as George himself did in 2001.
Likewise you more than likely won’t hang on to all the nice contracts you’ve painstakingly built up over the years through your flawless approach to tendering. The flip side of the coin is that neither will your competitors!
A recent study found that in the federal sector in the United States incumbents win approximately 60% of contract renewals, whereas in Ireland less than a third do so. These figures are remarkable. As an incumbent you have a greater insight into the needs, unmet or otherwise, of the customer. You also should have a greater understanding of their financial appetites and what is acceptable to them regarding price.
Why do so many incumbents fail to win their rebids? What often happens is that after doing all the hard work of winning and transitioning they get complacent and lose their hunger. Incumbents tend to be risk averse, and reluctant to look at ways of innovating mid-contract. Though they usually have good relationships with their customer they tend to shy away from probing for any deeper concerns that the client may have and opt to preserve the status quo. By the time the contract renewal comes around they think that it’s fine to offer the same old service as nothing appears to have changed. What happens is that one of their hungrier competitors steals their lunch with a more novel and price competitive approach that addresses the buyer’s unmet needs.
The incumbent is in a better position to build even more intelligence in order to defend their position but decides on a conservative approach while placating the client. It’s a similar situation to that of the boiling frog – i.e. when the frog is plunged into boiling water it jumps out immediately, whereas if it is placed into lukewarm water which is brought to the boil slowly it will not perceive the danger and will be cooked to death.
There will be occasions when a client’s agenda does not fall in the incumbent’s favour and it’s impossible to win regardless of the quality of the submission. However, it makes sense for the incumbent to draw up a strategy to defend their position. Like any strategy the incumbent first needs to “look forward and reason backwards” and ask the following questions.
- What could the service potentially look like in three years’ time?
- Will the same buyer be in situ, and if so what may he or she want? Who are their potential successors, and what are their particular sweet spots?
- What developments are expected in the market and how could it impact on the service?
- What new processes and systems are being developed in-house? Are they going to help the business with its overall strategy and how could they positively impact on this renewal?
- What price point is the buyer potentially looking at and what work does the incumbent need to do to ensure that the cost structure and target margin can accommodate it?
I’ll deal with defensive rebid strategies in more detail in a later post.
Hopefully, you’ve enjoyed this piece and that you now have a better understanding on the dangers of complacency if you’re an incumbent.
For more information about our Public Sector bid consulting services please contact us on the form below.