Does the RfP Process need a major Upgrade? - Episode 2: The Facts
Looking back in the history of the RfI/RfP process we see, that it’s source was developed in another time at the end of the 19th century. Of course the new channels like phone, email, web, etc. allowed new possibilities and increased efficiency. However the core of the process stayed nearly the same. Do we may be need a major upgrade after almost 120 years?
Lets have a look at some interesting facts and experiences from the field handling complex tenders with the classic RfP process.
Looking back in the history of the RfI/RfP process we see, that it’s source was developed in another time at the end of the 19th century. Of course the new channels like phone, email, web, etc. allowed new possibilities and increased efficiency. However the core of the process stayed nearly the same. Do we may be need a major upgrade after almost 120 years?
Lets have a look at some interesting facts and experiences from the field handling complex tenders with the classic RfP process.
<< Previous blog post: Does the RfP Process need a major Upgrade? - Episode 1: The History
Please note: This blog posts is focusing just on the RfP process. We are aware of the fact that modern procurement is much more than this. We hope you enjoy another perspective!
“It’s funny how hiring practices have changed dramatically over the years, but pitching remains comparatively stagnant”
In the previous blog post we’ve learned, that the RfP 1.0 was initially developed at the end of 19th Century and one of it’s main purpose was to overcome the distance between buyer and supplier. Furthermore it worked good for simple until complicated tenders, where experts could exactly define and estimate the scope. In this blog post we wanna focus to complex tenders handled with the RfP 2.0. An example for a complex tender could be the evaluation of a new software product and -provider or a new marketing agency.
Just 20% of all features shipped are really used by customers
No matter of how we’ve evaluated and/or built a product, or a service it's important to understand, that just 20% of all features shipped are often used by our customers (Source 2).
Do you e.g. remember this fancy, but useless paper-clip assistant in ms office?-We need to accept, that we are guessing for the useful features during specification and we are again guessing in interpretation of these specs while creating an offer. That means the RfP 2.0 allows no real validation with the end user and creates a distance between buyer and supplier.
Engineers love the solution, this prevents innovation
In software projects we usually have engineers, that support the tender, on both sides (buyer/supplier). Engineers love engineering solutions and so specs are often describing already the solution (features and functions). In my practice I saw RfPs with hundreds of lines with functional specs. Nobody could tell us any more, who requested what and why.
“The observer influences the system and the system influences the observer”
This results in prevention of creativity, so that suppliers just delivered the requested solution.
KCOM reports in his analyses, that 70% of RFPs for consumer-focused projects forget or didn't require suppliers to explain how the IT project would improve the experience for customers. (Source 3)
Estimation of a complex Problem doesn't work
As a next important thing we have to consider, that we all are extremely bad in absolute estimation of a complex problem (Absolute estimation means the time to resolve a problem in hours). NASA reported, that absolute estimation of a complex problem can vary by 400% in both directions (Source 6). Beside this fact we should accept, that while solving complex problems the scope gets variable, while on the other hand we could fix ressouces/costs, time and quality.
“scope = f(time, quality, ressources)”
Let me tell you a story about. Once we’ve got an RfI with just 5-10 rough bullets. The buyer asked us for a first guess. We roughly estimated based at our experience and the expected team size/cost per month multiplied by time and got CHF 1.7 Mio. As our engineers went through all the detailed specifications of the RfP 2.0 the total estimation was CHF 1.75 Mio. This happened a lot to us and we got the feeling, that we’ve lost 3 more months again. In this time we couldn’t deliver value towards the customer and may be lost the window of opportunity.
RfP 2.0 is expensive
Going through a complex tender is expensive for buyer and supplier. I know from my own experience, that we’ve invested e.g. in complex e-commerce tenders with a spent volume of several millions 5-6 FTE’s over a period of 2-3 months. This is equal to CHF 150-250k investment for a single pitch, expenses not included.
“Complex tenders e.g. in IT usually takes us 3-6 months and a lot of effort in the procurement as well as in the business”
Talking with several CPOs and procurement organizations we’ve found out, that preparation and execution of a complex tender needs a similar effort at buyer side. The thing is this costs and the even higher costs-of-delay usually are not calculated in TCO. But this is another story.
Are we hiring an agency’s past or future?
Forbes wrote about the RfP2.0 in context of hiring marketing agencies, that it might give a rough idea of an agency’s past accomplishments, and these can inform somewhat of what’s ahead. However, we’re not hiring an agency’s past, we’re hiring its future. And that future is more likely to be a reflection of an agency leadership’s vision, the people it hires, and their willingness to embrace what’s coming rather than preserve what’s been. (Source 4)
“You’re hiring for the future, you’d want to know that they are prepared for it.”
We’d want to know if they have a clear sense of the new consumer, and the technologies and platforms that make listening more important than talking. A forward thinking leadership should have a pretty good point of view about how social media, technology, and the migration away from interruptive messages are changing communications.
About that topic KCM’s report showed, that a fifth (21%) of RFPs were for projects to update restrictive, non-compliant or even failing legacy technology, but only half of these sought innovation from potential suppliers and only 17% requested a future-proof proposition (Source 3).
Do you participate in RfP’s, the agency perspective
From my own experience and the investment a RfP 2.0 needed we’ve rarely chosen where to pitch. In majority of the cases we declined as we didn’t saw chances to win, had no connections to the customer, or any other USP.
“We totally omitted public tenders, that have to follow RfP 2.0 and only looked for the lowest price by law.”
“Brands are not hiring agencies to create perfect RFP responses that dazzle the brand managers. Rather, brands (should) want to hire an agency that will create unique communications that dazzle audiences. So, judging an agency by its ability to fill out an RFP is testing for the wrong talent. 5)”
“We rarely participate in agency-search RFPs. We’re against spec pitches but might respond to a request for information about Velocity. Our process depends on a lot of pretty intensive input. Pitches that ask for our ideas based on very little information are unlikely to generate great work. And they take a lot of time and effort that our current clients are essentially paying for. 5)”
If you’d google RfP you’ll find much more similar statements like this. We believe it’s a pity, that a process prevents us from more innovation and good partnership.
Conclusion
Applying RfP 2.0 for complex tenders doesn’t work. We can’t predict the unknown and so we can’t specify the scope without creating waste. We would need so much time for investigation that we already could start probing iteratively. If we don’t accept this we will loose a lot of time, effort and loose may be the window of oppertiunity. This extra costs we need to balance with the more trust we get and add this costs to our calculations of TCO. In complex tenders we should focus to the end user/customer needs and look for a future-proof partner instead of the solution only. This can only happen if we include all stakeholders like e.g. the end customer, the business and the potential partner and bring them together. If the process fosters collaboration and innovation more suppliers might get interested to participate in competition again.
All this leads us to the conclusion, that we need a major upgrade of the RfP, the RfP 3.0!
In the next Episode
Stay tuned, in the next blog post we present you a summary how the RfP 3.0 -the Request-for-Participation- could look like!
>> Next Blog Post: Does the RfP need a MAJOR Upgrade - Episode 3: RfP 3.0 -the Request-for-Participation
Author
Sources:
- Title Image source: Cat
- Standish Group, 2013
- KCOM, a communications and IT services provider, has carried out a detailed examination of RFPs it received over the past 18 months for strategic IT projects.
- Forbes.com
- 6 New Reasons to Kill the RFP: Find Innovators, Not Commodities
- Cone of uncertainty, NASA's Software Engineering Lab 1990
- Image Source paper-clip
- Huffington Post - is the RfP Dead?
- The suppliers perspective
Does the RfP Process need a major Upgrade? - Episode 1: The History
Looking back in the history of the RfI/RfP process we see, that it’s source was developed in another time at the end of the 19th century. Of course the new channels like phone, email, web, etc. allowed new possibilities and increased efficiency. However the core of the process stayed nearly the same and struggles with increased demands of complex orders. Do we may be need a major upgrade after almost 120 years?
Lets first look back in history, how it come to the todays RfP Process.
Looking back in the history of the RfI/RfP process we see, that it’s source was developed in another time at the end of the 19th century. Of course the new channels like phone, email, web, etc. allowed new possibilities and increased efficiency. However the core of the process stayed nearly the same and struggles with increased demands of complex orders. Do we may be need a major upgrade after almost 120 years?
Lets first look back in history, how it come to the todays RfP Process.
Please note: This blog posts is focusing just on the RfP process. We are aware of the fact that modern procurement is much more than this. We hope you enjoy another perspective!
History
Despite that people have been trading since ancient times procurement is a relatively new discipline and was unknown before 1800. One of the first mentions is from 1832 in Charles Babage’s Book On the Economy of Machinery and Manufactures. He points to the need for a ‘materials man’ in the mining sector, who selects, purchases and tracks goods and services required. Before, there were just local markets with low competition. Everybody knew each other and came e.g. to the local blacksmith and made his order for a new pick in person. The products were highly individual and hand made.
During the Industrial Revolution, procurement solidified its importance. Marshall Kirkman’s 1887 book The Handling of Railway Supplies - Their Purchase and Disposition, detailed procurement’s strategic contributions to the railroad industry, specifically in acquiring goods from developed parts of the country and bringing them south and west. In other words the markets developed further across a country, there were some first bigger players, but still low competition. Focus of the industry was on standardization and mass production of simple to complicated products. The suppliers were not known any more in person, so that the tenders were published in news papers (Request for information) and the suppliers sent there proposals by post. The RfI/RfP process was born (let's call this the RfP Version 1.0, or short RfP 1.0).
Grafic about historic development of procurement inspired by the graphic Komplexitoden from Nils Pflägin, 2017
Today, in the age of information, new technologies continuously evolve procurement. The digital revolution started with the internet, email and the web in the late 20th Century. This development was continued with E-procurement solutions, reverse-auctions, etc. to this day. Everything underlies the goal to make the RfP process more and more efficient and lean (RfP 2.0). This is necessary, then in the mean while the markets got globalized, the competitors are in a high competition and the customer demands got highly complex.
Conclusion
RfP 1.0 was developed in a time without internet, where the buyer and the supplier didn’t know each other and a direct collaboration was hard, or too expensive. It worked fine for simple and complicated orders. As those requirements could be described, understood and estimated by an expert. With RfP 2.0 we still follow the same basic approach from the 19th century to this day. We just applied modern, digital tools to it and got more efficient. However complex tenders, like e.g. in IT, are still taking us months and with RfP2.0 we loose the opportunity for creative solutions and innovation.
Is the sole focus on efficiency enough to cope with the current and future complexity of market and customer requirements?
In the next Episode
Stay tuned, in the next blog post we'll present you some facts. We will talk about some statistics and experiences from the field handling complex customer requirements with the classic RfP process.
>> Next blog post: Does the RfP Process need a major Upgrade? - Episode 2: The Facts
Author
Sources:
- Historie summarized from blog post by Mike Nolan | SourceSuite.com
- Grafic about historic development in from Komplexitoden by Nils Pflägin
- Cat image Image source: https://awritersden.files.wordpress.com/
