Realise Growth by Getting Left of the Deal

In the competitive world of infrastructure services, contract retention rates are remarkably high, often ranging betw

een 90% to 95%. For new players aiming to penetrate this market or work with new clients, responding to requests for proposals (RFPs) might seem like a logical step. However, with only a slim chance, often just 5%, of securing these deals, it raises a critical question: How Do You Grow in an 'Incumbent' Biased Infrastructure Service Market?

The Context

Infrastructure services contracts, whether with telcos, utilities, miners, defence sectors, roads, hospitals, or schools, are typically large in scale and long in duration. Contract values are often measured in billions, and durations of 5-10 years are the norm. Multiple cycles of RFPs and re-tenders over the years have commoditised many of these services and driven prices down. This makes price-based movement between vendors less common as asset owners find that the incentive or benefit to change vendors is typically outweighed by the risk. As major players proudly state, they maintain over 90% retention rates.

The Question: How Do You Grow in an 'Incumbent' Biased Infrastructure Service Market?

Our Strategy: Get ‘Left of the Deal’

To grow, businesses must get 'left of the deal.' This strategy involves taking proactive strategic actions well before an RFP is even on the horizon, even when there is no RFP, to flip the benefit-risk equation. Here’s how it can be done:

1. Target Strategic Relationships: When an RFP is anticipated but not yet released, developing strong relationships with key decision-makers within target organisations becomes crucial. Engaging in meaningful discussions and introducing novel service models can plant seeds for change.
   

2. Co-Design Solutions: Collaborating directly with executives from prospective client organisations allows for co-designing tailored solutions that address specific needs unmet by current providers. This doesn’t mean approaching prospective clients with a blank sheet; significant thought must go into engaging clients through a co-design approach.

   We have partnered with organisations to facilitate co-design workshops with their clients that bring to life potential new ideas, operating model changes and digital ways of working. This not only shows clients that you are willing to invest in the relationship but also provides a first-hand demonstration of the working relationship with wish to establish. In our experience, this helps with de-risking the vendor change concerns.
   

3. Inform Future RFPs: Through early engagement and idea sharing (or potentially co-design), businesses can influence the content and questions included in upcoming RFPs, thereby levelling the playing field when formal bidding begins.

   On behalf of our infrastructure service clients, we have undertaken global benchmarking and best practice studies to identify areas for improvement. We have then used this as a trigger for discussions with their client to explore collaborative improvement opportunities that have worked their way into RFPs. In this example, our client has used this study across the sector to facilitate discussions with new clients, build new relationships with existing clients. They see this as an asset that continues to drive growth for their business
   

4. Make Unsolicited Offers: By understanding current and potential clients' needs, companies can craft differentiated offers that prompt clients to reconsider their existing vendor relationships. Incumbent vendors often become complacent or wedded to their current commercial model over time, providing an opportunity for innovative solutions that offer significant value or cost savings. We observe that incumbents frequently have more to lose from changing models than new entrants do.

   We have worked with clients on large-scale disruptive offers that completely negate the need to go to market due to the significant value on the table – from ideation, to co-design and ultimately commercials. We have also worked through smaller innovative commercial or green field models that shift the model from capex to opex and/or move to ‘As a Service' styles of models.
   

The Real-World Impact

This approach has proven successful in Australia’s infrastructure services sector. We have partnered with businesses, leading to securing two large contracts, each exceeding $2 billion over five years, in addition to smaller contracts valued at around $100 million won using similar tactics.

Our Learnings

Success in this domain requires a long-term commitment to proactive engagement and innovation. By challenging traditional thinking and exploring new avenues for collaboration with both existing and potential clients, businesses can significantly enhance their competitive edge.

If you find this approach intriguing and wish to explore its potential further within your organisation, feel free to reach out for a conversation on transforming your business development strategies.