Business Case, Reality Modeling and the Art and Science of Gaming
Many, if not most, multi-year competitive bids are won or lost on the differences of view among the competitors of bid purchasing "reality". The business case exercise, immensely varied from company to company, in most instances requires the development of some view of executable reality by product and service and year (minimally). What can be sold and when during the contract life-cycle. In addition to the effects of a view of reality on business case, there is often an associated view of unreality. The degree to which the evaluation quantities, that which the customer says it is evaluating and when, deviate from your expected reality (which is supported by a sales plan). By exploiting the differences between what is evaluated and what one believes will be actually be sold, a competitor can either lower their evaluated price to improve their probability of a win or increase their program profitability with little or no impairment of their competitive position. The choice between these alternative courses is most often dictated by the competitive situation, current economic climate and contemporary imperatives of your business.
The process of developing a business case and reality model requires establishing three key elements of price:
- realistic initial contract price-points and a view of initial sales
- future price-points and expected quantities for services sold
- expected margin and quantities for unevaluated items
Future pricing is often one of the most difficult elements to develop of all bid price activities. Praxis has developed sophisticated and proven approaches to supporting internal business case needs. Our reality demand modeling techniques coupled to a proven approach to developing out-year bid prices with gaming that anticipate competitor behavior. In addition, through competitive analysis we will attribute to competitors particularly reality modeling and unreality exploitation tolerances, both to assist our clients in gauging their comparative position as well as to present "alternative" to gaming strategies for revealing to the evaluating customer the degree of risk that they will assume if they accept a bid based on reality assumptions. In other words, we assist our clients in developing "ghosts" that highlight probable competitor behaviors and therefore illuminate for the evaluator the probable strategies employed by competitors. Business case based decisions are a fact of bidding reality (as they should be), reality modeling of a sort is practiced by even the most conservative of companies, gaming as Praxis uses the term is simply the exploitation of evaluated unreality - defined herein as the deltas between what is evaluated and what you believe the customer is likely to buy over the long-term.