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The Three Little Pigs

We all know the story of “the three little pigs” and the houses that they build to try and stop the wolf eating them up!

As I was considering some business tenders recently, it got me to thinking how suppliers are really like the three little pigs and the purchasers are like the big bad wolf. It must have been the cheese I ate at bedtime 🙂

But let me be serious for a moment. As a supplier tendering for business, the initial proposal is written with the best of intentions. Quality, ability to deliver and confidence in the offering are ripe. The proposal is designed to make the business money while delivering the best that can be delivered to the client.

It’s the house made of bricks and mortar

Ah, but we are in a tendering process so….

Before the tender document even leaves the building, the cost to the purchaser has been reduced. Conversations in hurried meetings prior to submission produce cries of concern about “over-pricing” or not being “cost competitive”.

The house gives in and the price is reduced. We’ll manage is the general concensus. A tweak here, a tweak there – sure no-one will notice.

The house is now made of wood. It’s ok – just not as good as it could be.

Then the “wolf” gets his hands (or is that paws) on the proposal.

Assuming the wolf is licking his lips at the offering, the tenderer is told – we like what you have to offer, it’s just too expensive. Can you work on the numbers?

Which is what happens.

More corners cut in the cost base. Some may talk about “descoping” but are so afraid to lose the race that they cut the baseline to the quick. No contingency. No real understanding of the longer term implications of the decision.

The house is now made of straw. Nothing will be as good as the either the tenderer would have liked or the purchaser is expecting.

While the wolf can’t eat the pigs in this instance, the chances are he can make their lives pretty miserable.

What bemuses me is that business has operated like this for years. No-one seems to learn.

Suppliers don’t hold their ground. Purchasers expect too much.

At the end of the day, the supplier generally ends up having to look for more cash or absorbing a loss, the purchaser displeased with a poor result or having to spend more money than expected.

While I do think that suppliers have to give good value and purchasers should push on price, no-one wins in a race to the bottom.

Not sure what the solution is though. Thoughts anyone?

Photo: Enokson

Budding entrepeneur working on software product solutions for business. My background is mainly operational and senior management roles in mobile telecoms and software houses. Areas of expertise include professional services, out-sourcing, team management and general operations management. I've made the conscious decision to create my own company having spent the last 20 years learning in the corporate world. In my contributions to this forum, I will share some insights and learnings that I've picked up along the way and hopefully they will be useful to some or all!

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  • Anonymous

    Brilliant post Barney. Great analogy.nHere’s a great line from John Jantsch: “there’s always someone willing to go out of business faster than you”.nBusinesses that constantly find themselves fighting to defend price, might have two problems:1) The business value is not being sold in a way prospects/customers can understandn2) The business might be constantly talking to the wrong target audience

  • Nice analogy Barney, price cutting hurts everyone and businesses need to start learning how to sell based on the value they bring, time to put up a fight?

  • Great post Barney. More businesses could do with learning how to Show The Value of what they are selling/proposing and that can’t be done unless you know exactly what the people buying want exactly. Unfortunately a lot of people don’t want to spend the time in the beginning finding this out as too many consider it wasted time. n

  • It is so difficult to predict what information exactly to put into a tender. In recent eTenders, I lost marks for saying I worked with multinationals. In the last one I wasn’t successful with, the feedback was that I didn’t specify I worked with multinationals so was not deemed a good fit.nnnIt’s hard to win with eTenders, but proposals are easier – once the correct information has been supplied by the purchaser.nnnBut remember the 3 Little pigs began with a house of straw and ended up with a house of bricks. So perhaps there is a lesson right there. I would rarely quote to devalue my services, but I understand the fear and panic that can escalate when a large contract is at stake and overheads and employees need to be paid.nnnSo the debate continues… (great post btw)n

  • HinnnMaybe I should have called it “3 Little Pigs go backwards” :). e-Tenders that I have dealt with are very difficult to win and the smallest semantics can go against you totally. Proposals are generally easier and you have also had (in most cases) some insight into the company or met the key people so understand what needs to be contained within it. The great price debate is always the one that comes to the fore!nnnThanks for the comments.nnBarneyn

  • Hi Mairead. I think you are correct. Understanding the value proposition and what differentiates you needs to be clearly understood within the business so that it is correctly highlighted and demonstrated to potential clients. It helps move the focus from being purely on price to being one of an overall value (of which price is just one component)n

  • Hi. Put up the fight indeed Niall. The key is for all members of the team to put up the same fight though so there is no detraction from its impact.n

  • Hi. Like Mairead, you have picked up the value proposition. I believe this is the only way that the fight can be won! nnJohn Jantsch comes up with some great ones!nn

  • Nice one Barney. You can’t win ’em all, and, in retrospect, some tenders one might be glad to lose. You could end up working with another purchaser instead, who understands and pays for value delivered. If you have a chance to be interviewed as part of the tender process, this is where you can win out, as you can explain what value is in your proposal. nI once got turned down for a large project with a ridiculous 3 week deadline, (I was too expensive). The spec was very poor and it was apparent to me that the project could not be completed in the way suggested or within the timeframe. However, the purchaser was adamant that the 3 week deadline was immovable. In the end, it took 7 months to complete that project and I’ll bet the supplier had difficulty getting paid for all the work out of scope that they had to do to make that project a success. Meanwhile, I did other stress-free projects in that 7 months, and got paid reasonable fees.Sometimes, not winning is a win!

  • Cmcquest

    Interesting aspect from the view of a supplier however as a purchaser not necessarily the whole story.u00a0 I am frequently surprised by the quality of proposals received in the first instance with little effort by some suppliers to understand both the scope of services required and the type of organisation I’m buying for.u00a0 Tweaking both the service requirements and the costs following the tender process would be perfectly accepable given that in some instances the service may be over or under scoped by the buyer or the supplier may provide new solutions which may affect the scope of service.u00a0 In my experience, we are not looking for the cheapest provider and recognise that any supplier who delivers the service at the lowest price does not necessary provide our organisation with the best value of service.u00a0 Therefore it is not beneficial to the buyer.u00a0 And finally, it is my experience that every supplier is able to reduce their initial pricing proposed. This is all part of the cat and mouse game of negotiation to reach the best position between the two parties.u00a0 Also I never cease to be amazed to be offered substantially reduced pricing from the incumbant who has been included the tendering process which was never offered any cost reduction solutions (despite being asked) during the term of the contract!u00a0

  • I’m with you on this one Niall, only the Wal-Marts of the world can compete on price.u00a0

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