Welcome to the third blog on the subject of the 10 ten essential elements of powerful commercial proposals that win new business. In this blog we explore two elements of a proposal that speak specifically to innovation, business development and new technology. Namely Strategic Fit and Contributions.
Other proposals that are more easily understood can dispense with some of this language. However, if you are needing to demonstrate joining with others to deliver that crucial new venture or the unknown quantities of a bright idea yet to be scoped, then you may need to do more. Showing externally to your potential client and internally to your own Exec Board/C suite that the strategy and contributions are matched and reference the venture appropriately.
Strategic Fit – Why Bother?
“If this proposal is what we do, why then do we need to speak to our strategy in the first place? Surely that’s why the customer came to us in the first place isn’t it? Isn’t it obvious?
Yes, it most probably is but let’s consider the fact that both your Exec Board (C suite) and the client are looking at the proposal. Don’t make it hard for your Exec Board to sign off on the proposal by having them pick through the minutia of the proposal to find the strategic links. Your language also may not be clearly speaking to the strategy either and when your Exec Board ask for clarity and delay the approval process it may be because you did not demonstrate the strategic links.
They won’t have time to read your entire proposal so a section on it or in the exec summary will help them see it, judge it and sign off on it. Why bother? Because you just may get a smoother ride through your approval systems. One less thing to hold up your throughput of the proposal. Its worth it.
Digesting the Strategy – Again, in line with getting a good ride through your approval systems breaking the strategy down into easy to digest chunks help with digestion. Wikipedia describes strategy as “a high level plan to achieve one or more goals under conditions of uncertainty.” Trying to use that thinking it might be wise to consider strategy firstly as less of a completely high level and distant mythology owned by the Executive (C Suite) level and more of the Wikipedia plan for uncertainty. In that case it should be more straight forward to describe the organisation’s strategy in plan terms or indeed business plan and business model terms. In other words; break it down to something simple and express it in terms everyone can digest. Strategy is not as high level as those who write them would want you to think it is.
If strategy is a high level myth in your organisation, discussed at your Executive (C Suite) level then It shouldn’t be. Your BD leads and sales teams should know the strategy in real terms. Enough certainly to draft how it relates to the proposal at hand. If they don’t then teach them how to. A wise customer in the innovation field, particularly relating to digital services, data innovation and new technologies will know quickly when your BD and Sales teams are ‘shifting boxes’ and giving them the ‘same old same old’. A tell-tale sign for them will be when the proposal doesn’t show the referencing back to strategy.
Reference Point – Expressing strategy in this way via the proposal will always be a reference point back and a sense check to the objectives, deliverables and benefits. Expressed strategy should be maintained throughout the proposal and project through to delivery. If its not correct when you right it down and look at it, its unlikely to be a successful project when you try to implement it so get your respective strategies expressed in the processes of agreeing the proposal and very early on you will see what does and does not fit. Rest assured that senior directors on both supplier and buyer side will look first to that as test of the proposal’s viability.
Strategy Shift – Firstly, there is always a false pressure to ensure a proposal fits with your organisation. By false I mean over-expected. There is of course a clear need to demonstrate that the reason this proposal is being written at all is because at some level this is ‘what we do’. However, don’t be afraid to suggest a proposal that may change the strategy. After all isn’t that how we grow as businesses anyway?
Who is, and what is being contributed
Most business are usually providing services and products they have developed on their own or paid contributors for parts of, or development to complete the product. However, the area of innovation and all things new provides opportunities to collaborate on many levels.
Some companies want to work in quite loose terms with nothing more than conversations to hold together a broad shared understanding of working together. Nothing more than a non-disclosure agreement can hold this type of relationship together. Nothing is ‘really’ contributed that would cause cost or intellectual property rights to be an issue. The collaboration is informal with little in the way of tangible contribution being made.
When innovating however the contributions can often be time, expertise or consultancy that will include your clients input. How do you quantify that piece? The most important thing is to not ignore it. By ignoring the contributions of your clients in the areas of new technology, innovation in service design or prototyping you will be hit hard when you finally price it to the customer. Its vital you manage expectations and ensure the legal elements are clear to all parties.
Customer Contributions – From a cost perspective though where do you value the contribution from your potential customers? How much is it worth to the development? There are few hard and fast rules and rarely does an algorithm or equation deliver the answer. In this climate you can look at the contribution from potential customers in a number of ways.
Time and materials – A crude but effective way of internally measuring the contribution from clients. It is, if nothing else accurate. Simply calculate a daily rate for client input similar to yours. Say £850 per day. But then deduct your margin contribution (profit) from that rate. Let’s say its usually 25%. Don’t mess with the overhead as that is still theirs to absorb. You are left therefore with a simple estimate of daily client daily rate of cost plus overhead. £637.50 per day. Multiply that by the days/time provided by a client and their staff. Don’t try to rate it per role or you will their all day.
End product credit – End product credit can develop a few useful methods for calculating client contribution. Firstly, and most straight forwardly there is the simple price reduction discount. That is, simply discounting the eventual price to the collaborative client in percentage terms. Here though you need firstly not to guess the discount and secondly ensure your discount eats only into your margin and not your overhead and cost. Too many businesses guess the collaborative contribution percentile for price discount without the controls that such joint developments need to reduce financial losses.
Some businesses loss lead to the point where the development requirements from collaborating clients becomes a one-way street and they years to recoup the investment. You need strong commercial project management from your product managers to succeed with this.
I have seen a business agree a percentage discount for software development where mutual benefit was set at 50% discount for eventual price to the client for their contribution. No one at the time set any formal expectations of time to develop with the client. The development took 4 times the expected (as stated by the lead developer) development time and with the business operating a low margin contribution with high overhead in its early years, the up-front quoted discount of 50% for collaborative contribution ate away the margin and overhead completely. The process lost the company money and the software never fully developed because someone had to have the difficult conversation with the client to tell them that the project was unaffordable. A business relationship and reputation credibility on both sides was lost.
The lesson here is. If you are going to develop collaboratively with clients and want to discount on eventual price, firstly try to avoid upfront percentile discounts at all. If you need to, then make sure you manage the process with full expectations on both sides and keep tight project/product management at all times. Put it into a development contract.
Reference Client – This type of approach can often provide some up front discounts as with the above ‘end product credit’ method but factors in more for the long term. Typically, this method provides a lower up front percentile price discount but considers the maintenance, support and licensing options together with further long term collaboration of a ‘beta’ client profile as discounted. This approach considers that the collaborative contributing client is providing valued insight in to the behaviour of the product or service over time and therefore the journey is longer. Key to a service or product success is its adoption so the behaviour or the customers or customer’s staff in an organisation can provide much to the development. Therefore, you would be wise to set a long term strategy for this option. Suited best where innovation is difficult to value initially and also where possibilities may seem endless.
Remember your modus operandi (MO). You are looking here to develop the product or service potential over a long period with continual collaborative contribution from your client over time. Don’t rush it but do think about the support required from your teams in this process. Your contribution may require developers for long periods so ensure the client contributes equally or in a way that helps you to make the product easier to support and maintain long term. There is no point expending developer time or service design time for little behaviour driven development (BDD) intelligence.
The main piece to remember is that the client has a product, they are using it, they are gaining dedicated expertise from you and your teams to develop it and they are likely not being charged support and maintenance. In this climate the contribution from them should be viewed as already being far more beneficial to them than other models. They will in some circumstances gain quite niche functional developments or service lines as they are you reference client. You will spar over the merits of some of these and the overhead to manage such as relationship will always cost you more.
It is therefore wise to view the reference client as a less financially rewarding contribution discount for clients. They are getting a lot of time and attention from you. You are expending the lions share here and they need to know that in some positive way. Whilst key to the service or product development, what you have jointly developed is live, it works, is supported and managed closely with your staff on hand regularly. Bear this in mind when you consider the discount. The contribution discount here could be as little as the free maintenance and support.
Assigning Intellectual Property Rights (IP) – Not being an expert in this I will leave it to others to add and comment. Clearly though the process of logging of IP will inevitably seek information in order to value the IP. Some of the methods mentioned above can contribute to that logging process for valuation but I leave it to the experts in IP to expand on that.
A great deal of this article focuses on the less easy to discern at first glance. Strategy and contribution can be very subjective and sometimes difficult to quantify. However, I hope the article demonstrates that if you think about it in smaller pieces and in quite common sense terms, neither have to be that complicated to administer.