The Incumbent’s Dilemma in B2B Services

Why incumbent service contractors should worry and what they can do about it.

It’s a fact of life (FOL) that B2B incumbents have it rough from their customers. Customers know when their incumbents failed and where the bodies are buried. And service failures are inevitable, that’s just another FOL.

As a result, incumbents look like this to their customers when contracts are out to bid:

But that’s not the case for untried competitors. When customers haven’t experienced other suppliers, the grandiose claims and over-statements (aka lies) in proposals make competitors look like this:

 

Incumbent, Reinvent Thyself

Since customers know their incumbents’ past, it’s time for a “new you,” time for incumbents to reinvent themselves.

But how?

By proposing innovations and major improvements in their solutions to rebid RFPs. And proposed innovations are just that, “proposed.” For rebid RFPs incumbents can propose new ideas they plan to implement or launch – if the proposal language is clear and unambiguous saying incumbents “will do this,” not saying they are already.

Yet some incumbents stop themselves from getting creative in their solutions. They refrain from adding innovations or improvements because they fear customers may say:

“Hey incumbent, why didn’t you do this cool, new stuff before the RFP?”

But incumbents don’t have to worry about that question or try and answer it. Why?

Because customers were the ones who put contracts out to rebid. Customers could avoid disruptive rebids and keep current suppliers — but only if customers really wanted to. Customers changed the relationship by considering competitive proposals. Game on.

So, incumbents must look at rebid RFPs as entirely new opportunities, as clean slates with a requirement to present innovative new solutions in their proposals. It’s time for incumbents’ reinvention.

One small but dangerous warning: Incumbents should never make their entire rebid proposal about past performance. No matter how much value delivered to customers – no matter if incumbents took a financial hit during customers’ tough times. That doesn’t matter because if customers put an RFP out, they’re thinking:

“Hey incumbent, forget about yesterday – you were paid! What’ll you do for us tomorrow?”

When to Propose the Right Innovations

Rebid RFPs are not the time for incumbents to freeze and propose the same-old, same-old. It’s a big mistake for incumbents to wait until the RFP is out before trying to charm customers with improvements and innovations.

However, if incumbents are caught flat footed when RFPs come out, there’s still the competitive proposal game that must be played. And that raises questions about which innovations to propose and when. Should incumbents:

  • Implement something new just before the RFP proposal is due?
  • Propose innovations only in the proposal?
  • Test potential innovations before proposing?

Not all innovation ideas are equal. The effort for incumbents to launch – and the overall value to customers are two critical factors to decide which innovations get proposed and when.

Incumbents must get the RFP cadence right by first analyzing the rebid before designing their custom solution. That custom solution is where innovations are presented. Yet without analysis, solutions are shotgun sprays of hail marys.

Here’s a simplistic guide for choosing which innovation ideas to include in rebid RFPs or table (there will always be exceptions).


Propose FULL Version in RFP

When an innovation clearly adds a great deal of value to customers and doesn’t take a lot of effort in either cost, time, or ability – incumbents should go for it.

A full version can be proposed covering all customers’ locations or shifts or whatever. The full Monty should have all costs accounted for as well as a timeline with phases and milestones.

The potential for innovation ideas here is limited only by incumbents’ creativity and industry smarts. Consider new equipment, products, staffing or shift change/add/delete, customer experience (CX) events, quality programs, financing, reporting, etc.

Propose PILOT Version in RFP

When innovation ideas are in uncharted territory for complexity or cost but still add lots of value for customers — incumbents can propose a pilot version as a limited test.

This is often occurs with technological disruptions where the business case can be evaluated on a trial size. Quality improvements, cost reductions, and customer satisfaction can be checked before customers sign off substantial investments for later implementations.

Again, in RFP proposals it’s critical for incumbents to clearly define the limits of where, when, how long, and who’s paying for what in the pilot. Depending on the innovation, incumbents in their proposals can propose:

  • Paying for all pilot costs
  • Customers picking up all costs
  • Some combination of cost sharing between incumbents & customers

Incumbents can propose once the pilot’s results have been approved by customers, costs can be picked up by the customer or some part shared with the incumbent.

Start FULL Version Before RFP

When a proposed innovation is an easy-peasy softball for incumbents to launch, and it adds some small value to customers — incumbents, if possible, should start it before the RFP deadline and mention it in their proposal responses.

This won’t be a game changer for incumbents, but it will be a response to customers asking, “Hey incumbent, why didn’t you do this cool, new stuff before the RFP?” during short-list interviews.

Drop

Not all innovation ideas from white boarding are keepers. When the idea is costly or tough to implement and brings little value to customers — incumbents should forget about it. For this rebid RFP at least. Maybe it’ll be worthwhile to monitor separately for some other RFP down the road.

Summary

Incumbents in B2B services:

  • Get a tougher time from customers than untried competitors
  • Need to change customers’ beliefs during the rebid RFP
  • Must reinvent themselves in proposals by adding innovations
  • Should choose innovation ideas by their Effort to incumbents & Impact to customers
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Competitive Proposal Game