Day 1 1505 - 1550 - maple - chakradhar purohith

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Uncertainty analysis of Proposals via Milieu Analysis

Chakradhar Iyyunni, Ph.D. , Faculty L&T Institute of Project Management

Monika S. Purohith, PGPEM Student, NICMAR, Pune

27 September 2013

2Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry

Agenda

Plan for the talk

Motivation – 1 slide

Background – 5 slides

Proposal : Role and Characterization of – 5 slides

An Illustration – 4 slides

Results, Conclusion, Future Work – 6 slides

Summary – 2 slides

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Motivation

• With the induction of “Stakeholder Management” knowledge

area into PMBOK 5th Edition, we explore its influence on Project

Proposals.

Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry

• The premise in the work relates to the important role given to the

project proposal – address the needs of the customer milieu – determine business viability ( read as: competitive advantage)– Ensure delivery excellence

• The “service provider” / “EPC contractor” should develop

flexible, adaptive and innovative ways to market project

capabilities and operate beyond transactional (logic) response.

4

Background (1 / 5)

Industry in India: • Historical success and “optimistic” growth scenarios is not

enough

• Customer focus without technological competence is short-

sighted-ness

• Diversifying capabilities (to include industry-specific expertise

and consulting) as opposed to differentiating them

• Global “Plays” (by leveraging their competencies, breadth of

industry exposure and project execution capabilities) without

inclusiveness (segmented exposure)


Level 3 behaviour – Leadership in Managing Uncertainty needed !

5

Background: Current State of ESO (2 / 5)

• Teams are:– small in size, moderately skilled– relegated to a support function in the minds of the customer's

engineering teams, – use of the bottom of the talent pyramid (0-3years experience)


• Projects are– of short duration, needs to be delivered rapidly, – lacks customer & industry big picture– unable to absorb product liabilities. – diffused scope statements which are lacking in specific work

expectation guidelines• Customer Organizations:

– lack of clear engineering services outsourcing budgets– emerging industry trends (low cost, specific functionality) create

over-optimistic expectations

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Background: Current State of ESO (2 / 5)

• Teams are:– small in size, moderately skilled– relegated to a support function in the minds of the customer's

engineering teams, – use of the bottom of the talent pyramid (0-3years experience)


• Projects are– of short duration, needs to be delivered rapidly, – lacks customer & industry big picture– unable to absorb product liabilities. – diffused scope statements which are lacking in specific work

expectation guidelines• Customer Organizations:

– lack of clear engineering services outsourcing budgets– emerging industry trends (low cost, specific functionality) create

over-optimistic expectations

Reflects need for new project m

anagement paradigms

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Background: Current State (3 / 5)

• Account / Customer-specific teams fall prey – to discontinuous usage of engineer's skill, knowledge and

continuity in the type of work performed – lacking both in maturity and value even though increased skill level– un-clear role among the various actors in the Proposal and

Delivery milieu– significant effort for proposal creation – not billable


The underlying uncertainties become risks and problem situations

• Organizational influence on poor proposals – Undue impact of personality of the project account manager, – Lack of synergy between sales and delivery teams, – intense competition and attrition of account managers. – unable to address the multiple levels of accountability in the

customer organization,

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Background: Uncertainty Description (4 / 5)


Category Type Uncertainty Description

MarketI

Business-specific (ESO is either an Imitator or Innovator)

EMarket risk (Consumer specific, related to dynamic aspects from PES(T)LE analysis)

TechnologyI Novel to Organization not to the marketE Current work by your competitor (unknown to you)

People Interaction & Processes

I Motivation, Professional pride, organizational culture

E Technical competence aligned to project requirements

Customer Relationship & Information

IStatus of Sales-delivery synergy or internal milieu, Tension from cultural dimensions mismatch

EStatus of Trust, Recognition/matching of requirement to expectation between organization and customer

I – Internal ; E – External

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Background: Literature (5 / 5)

• Cova (2002) : reactive to pro-active approach to proposals

• Holstius (2xxx) : relational dimensions of proposals important

• Tikkanen (2007): two levels of relational dimensions– (1)project level relations (2)firm-level relations

• Combined scope-schedule risks be managed at Proposal

level (Iyyunni 2013)– address uncertainties: Market, Technology, – role definition in the Milieu


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Proposal Dimensions (1 / 5)

• The interaction between actors in the Milieu that increases the

fitness of the proposal

• Two classes– Functional class : Technical, Financial– Relational class : Social, Political


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• Technical:– meet the technical specifications– provide technical training to employees– use of latest technology and offer customizations– technology and domain knowledge availability– technical resource availability– alignment of technology with the scope of work– certifications and accreditation– access to and availability of infrastructure– access to engineering consultants– R&D activities in the sector


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• Financial:– favorable financial terms and conditions– payment schedule and flexibility– insurance against delivery problems– Using right type of contract (fixed price, time and material,

profit-sharing etc.), – financial risk assessment plan


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• Social:– extent of networking– past customer feedback– relationship with the end-user– alignment with the vision, mission and goals with customer– trust and reputation among customer's milieu – articulation of the customer's need– collaborative orientation of the customer


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• Political:– consideration of customer market position, – market share of the product/service by customer organization, – ESO's market presence specific to service/solution– local partners, referrals, influence on customer's milieu, – understand and maintain clients reputation in industry-

segment and market– customer's influence on peer-group in industry segment– association with standard and professional bodies– supply chain relationship, – alignment to government regulations


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Why is a “Proposal” key to the organization?


Illustration (1 / 4)

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Illustration: Organizational Snap-shot (2 / 4)

• An ESO organization's account strategy is crucial to maintain a

sustained growth.


Account Size

Time-stamp 1 Time-stamp 2

Number Contribution Number Contribution

A 159 29% 207 18%

B 18 46% 35 39%

C 1 11% 3 10%

D 1 14% 2 13%

E 0 0% 2 20%

• Account growth depends on success (size and volume )at

proposals

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Illustration: Account snap-shot (3 / 4)

– Account Management is a complex process ~ market influences and industry trends,

– customer organization's strategy and – ESO‘s sales team priorities, technical team capabilities– Age and Health of the accounts (mentioned in paper)


Account Number

Ratio of Current year to Previous Year Revenues

YoY-1 YoY-2 YoY-3 YoY-41 1.55 1.45 1.30 1.493 3.21 1.59 1.16 1.184 2.89 1.50 0.92 0.936 2.74 1.37 1.97 1.377 0.75 1.59 4.01 1.108 1.77 2.61 4.82 1.7311 1.09 1.31 1.15 1.0612 1.90 1.29 0.99 1.27

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Illustration: Proposal Snap-shot (4 / 4)

• Proposals should be analyzed by industry type, market

conditions, customer profile, customer relationship parameters


No. Proposal Description Win / Loss

Reason for Win / Loss

1Large scale data (in PDM system) Win

Social, political, Financial

2 Passenger bus for India launch Win Social, Political3 Asset Management Win Technical4 Large engineering engagement Win Social, Political5

Engineering “Program” WinTechnical, Social, Political

6New PLM implementation program Loss

Social, Political, Financial

7 Large Automotive design project Loss Technical8 Medical device development Loss Political

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Results: Proposal Characterization on T,F,S,P dimensions (1 / 6)


Proposal No. Rating on these aspects of Proposal

Technical Financial Social Political1 4 4 3 32 4 4 3 33 4 4 4 34 3 4 3 35 4 3 3 46 4 4 2 27 2 4 3 38 3 4 1 1

• Customer profile is also a key determinant of proposal quality –

geography, market segment, R&D spend etc.

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Results: Assessment (2 / 6)


Dimension Scheme-1 Scheme-2 Scheme-3Functional Technical 0.46 0.4 0.34

Financial 0.18 0.2 0.22Relational Political 0.18 0.2 0.22

Social 0.18 0.2 0.22

Proposal No. Weighted assessmentScheme-1 Scheme-2 Scheme-3

1 3.6 3.7 3.62 3.6 3.7 3.63 3.8 3.85 3.824 3.2 3.15 3.255 3.6 3.7 3.66 3.3 3.4 3.167 2.7 2.6 2.98 2.5 2.55 2.37

• cut-off score: (1) overall- 3.0 (2) technical dimension - 4.0

• 3.0 to 3.3 to be in the grey area (either a win or a loss)

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Results: Milieu Characterization (3 / 6)

Internal Milieu

External Milieu


Use for managing the appropriate dimensions

Milieu Engagement plans by Proposal Project Manager.

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Results: Conclusion ( 4 / 6)


Category Type Stakeholder ResponsibleProposal

dimension

MarketI Senior Marketing team Political

ESales person, Vertical Head Social,

Political

TechnologyI Subject Matter Expert Technical

E Discipline Team Technical

People Interaction & Processes

IProject Manager/ Account manager ; Delivery Team Social

E Resource Management Team Social

Customer Relationship & information

IAccount Manager Social,

Political

EProject Lead/ Project Manager Social,

Technical

I – Internal ; E – External

• Every stakeholder has a key role to play for ensuring proposal quality!

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Results: Conclusion ( 5 / 6)


• Invest to Build robust project/ program pipeline

• Stakeholder / Milieu role clarity is vital and crucial

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Results: Future Work (6 / 6)


What else? Translating our understanding of customer needs to functional and relational dimensions

How?2nd level of parameters listed here.

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Summary ( 1/ 2)

• Relational dimensions play an important role in winning

proposals.

• Pre-sales practices facilitating intense action ‘upstream' of

project by anticipating, defining and constructing of project

scopes have to be developed and refined.

• Managing relationships and networks, during a proposal life-

cycle, and good decision making methodologies (like AHP) are

crucial. (PMBOK 5th Edition, Stakeholder engagement process

group)


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Summary: Directions and Good News (2 / 2)


The Good news • Engineering Service Organizations have understood the need

for relational dimensions. A rough guess that 40-60% revenues

come without the need to bid.

Directions• Strategy dimensions: (1) Articulation of Customer need (2)

organization’s ability to differentiate technology for meeting the need

• Measurement on the Social, Political dimensions and maturity (a la

CMM) is yet a distant goal.

• Correct excessive Customer focus with technological competence”

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Thank You.

Presentation Title