Can Federal Contractors Create Disruption Within Their Industry?

Photo on 5-8-13 at 1.08 PM #3With the recent shutdown of the federal government, and possibly more to come in the coming months.  I began to consider how or if federal contractors, in this volatile environment, can create a disruptive technology mindset that permits them to sustain a competitive advantage.  It is no secret that disruptive innovation works, and generally catches other participants within the industry, off guard. However, the question is can contractors really sustain a competitive advantage using disruption, as a tool,  in the public sector.

Yet we typically see the greatest impact of disruptive technology within industries that generate some type of product, like the computer industry.  One great innovator that comes to mind is Apple and its introduction of the iPod.  Steve Jobs created a market that defied the long time companies like Sony. Or if you think about the airlines industry Southwest would be another example from a services side.

However, federal contractor’s that are heavy on the services side of the business sometimes feel trapped between a rock and a hard place.  The reason for this, is there are only a few levers that can be pulled to maintain a competitive posture (sometimes). With the federal government seeking to make award decisions based upon the lowest price technically acceptable (LPTA) method, sustaining a competitive advantage is unlikely, nor is this factor a contributor towards disruption.

However, disruptive technology in a services industry is not just something that happens haphazardly.  Yes, I am aware of the impact of indirect costs become a part of the final price objective to the customer inclusive of some measure of profit.  Yet in many large companies the internal structure of the company is pretty much the same from contractor to contractor, direct labor, overhead, general & administrative costs.  There may be a couple of other cost centers as well.

In smaller companies, the costs are generally in one cost bucket.  In larger companies the costs are pigeon-holed into multiple cost centers to allow for more reasonableness in the overall price.  So if a company is service centric, and there are very little differences from company to company within the industry is it possible a company can be known as a disruptive innovator in a low cost environment?  The answer is, it depends.

From my corner of the world the services industry must generate a specific niche that wreaks of a top notch, credible solution advisor, to the federal government.  Meaning, the government customer, must feel compelled to use a different acquisition method, such as best value.  Best value is a great evaluation method your federal client can use to garner bids for services and goods that are not dependent on the low cost evaluation proess, but rather the customer’s ability to provide funding.

Know thy customer

The key decision maker and advocate for your company will always be your customer.  Unlike a tangible product, that you demonstrate to your client, there is a need to really understand the challenges of your customer.  Those challenges may be funding, legislative in nature, perhaps the old tried and true procurement method of LPTA, that has always been conducted, and as such live by that motto of using LPTA as a key evaluation factor.

You, as the believer in the services you provide, must shape the opportunity.  It may take a long time, but it is a necessary process step to generate enough interest in your services, that encourages your customer to believe in your solution.  All too often I hear from my customers, how they have it in the bag, only to find out they didn’t really get the decision maker on board early in the acquisition phase, and lost a prime opportunity.

Show them your stuff

Landing a federal client as a customer is challenging, to say the least.  This is the time to really understand the culture of your client and how your solution makes them look like a rock star.  This is where your innovative solutioning comes into play.  There are real problems in the public sector, that challenge the law makers and those in charge of finding the right solutions.  Provide enough insight into your approach of how to solve and or manage the problem and be sure to incorporate a solution into each of the challenges the customer faces.  You need to feel their pain and make it less intense or go away completely.

More importantly, there has to be much consensus building around innovation and your customer.  Keep in mind, you are working in a challenging environment, perhaps where innovation has been stifled, or innovation is just the latest buzz word with no value.  You are not selling a product, but rather a service that will, eventually, over time begin to change the way your customer thinks.

Don’t be afraid to ask for the money

Being an innovator is not easy.  Reinventing government is not easy.  Yet if you really want to be a disruptor in a services industry, it isn’t always the cheapest alternative.  Typically, we see companies leverage products to market as a low cost generator, and create profit based on volume.  The professional services industry does not necessarily work that way.

Do not be afraid to ask for the money.  People pay for what they really want and so does your federal customer.  You must tell a compelling story, and why your solution is worth the money.  Remember not to leave money on the table.

So the question still hanging in the air is can federal contractors create disruption within their industry?  As I indicated earlier in this blog, it depends.  However, it seems to me that until we change processes and refine our approach of helping our client think differently, disruption is difficult, to say the least, to achieve in the public sector, albeit, not impossible. As consultants, we need to educate our customer and influence their behavior.





Renee Sanders is a PhD candidate in business at Capella University, where her specialization is strategy and innovation. Renee holds an BBA and MBA from the University of Maryland University College. Renee currently works in for a defense contractor as the Director of Strategic Pricing and Price to Win.

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