Business Magazine | BABM | Sales

Years ago in a former life, when I was employed by a major defense company as a program manager within their Advanced Programs Division I learned a valuable lesson about the need to know in advance exactly who the customer is.

We had developed prototypes of sophisticated, autonomous weapon systems to seek and destroy hostile high-value targets of varying types using state-of-the art sensor technologies to deliver extremely energetic warheads that were programmable to the threat. These sensors were based on unique laser-radar technologies that provided high-resolution, three-dimensional images of the target and its environment. We had been cultivating researchers in the U.S. Army’s weapons laboratories for several years and had convinced them of the utility and discriminatory power of our sensor technologies. After five years of intense marketing, the Army issued a Request for Proposal (RFP) for an R&D program aimed at demonstrating enhanced capability for defeating heavily armored targets, like tanks and bunkers. The technologists to whom we had been marketing were responsible for writing the technical requirements for the RFP and structured them to match the capabilities of our system. Simply put, the Army technologist wanted our technologies. To satisfy Department of Defense requirements, the Army issued the RFP on a competitive basis. Correspondingly, our company required that all competitive bids be approved by a committee composed of eight Vice Presidents, headed by a Senior Vice President, and dubbed the “Pricing Board.”

As program manager for the system to be proposed, it was my job to convince the Pricing Board of the merits of our bid. I formed a proposal team with representatives from all major functions (technical and non-technical) within the company, formulated the bid strategy, assimilated the bids from all elements of the proposal team and presented our case to the Board. My presentation included solid technical analyses of all aspects of our proposed system as well as a thorough set of financial analyses (resource requirements, returns and profits) throughout all phases of the program from development through production and subsequent spinoff business. The presentation package also included standard qualitative inputs from our marketing department on our relative strength compared to all competing teams. At the conclusion of this meeting the Board chairman surprisingly asked for a “quantitative analysis” of the competition.

While the request was a bit unusual, our team responded by dissecting the RFP into all its critical elements, developing weights for each of these elements based upon the scoring criteria stated in the RFP, and evaluating all the competing teams using those criteria-weighted scores. Composite scores were developed for each team and summarized in a brief report. The report showed that we had a 15-20% advantage over all competitors using this weighted-score methodology. When these results were presented to the Pricing Board, all members except the chairman seemed satisfied. He concluded the meeting with the statement that he was on the verge of a “no-bid” decision and indicated that he would never bid any program unless we had a 2-to-1 advantage over the competition. I left the second Board meeting completely stunned. I could not imagine any quantitative measure by which a 2-to-1 advantage was meaningful.

After many sleepless nights I awoke one morning with a unique strategy. My program team developed a set of pre-proposal tasks we could execute to enhance our competitive position, as well as their associated costs. I then visited each member of the Pricing Board and, using a method popularly known as the “Delphi Method,” developed a consensus for a probability-of-win curve, given progressively larger (and more costly) sets of the pre-proposal tasks. In essence, we developed the organization’s “utility curve” for probability of win. Armed with this “Board-assisted curve,” I made a third presentation to the Board, and recommended that the company invest in the set of pre-proposal tasks which yielded a probability of win of 0.7. My summary statement to the Board chairman was, “This commitment of resources by our company would give us a win probability of 0.7, which means that the probability of win for all our competitors combined is only 0.3. Hence, we have at least a 2-to-1 advantage over all competitors.” I left the meeting with unanimous approval to bid the program.

So what was the lesson learned? In our academic business programs we are constantly reminded of the importance of knowing our customer. The lesson here is that in most business situations we have multiple customers, both external to the organization and internal. In this case, although we were in the good graces of our external customer, the Army, we had yet another customer to satisfy, our internal customer, the Pricing Board chairman. In summary, it is important to identify “who’s the customer?”

About the Author
Dr. Kitahara is an Assistant Professor in Troy University’s Sorrell College of Business. He holds a Ph.D. in Electrical Engineering (Automatic Control), a Masters of Business Administration and a Master of Science in Systems Management. He is currently the Florida Area Business Programs Coordinator/Chair for Troy’s Global Campus – Southeast Region.

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Who’s the Customer?