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A twin-track networking approach to project marketing
EuropeanManagementJournalVol. 15, No. S, pp. 546--556, 1997
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A Twin-Track Networking Approach to Project Marketing BERNARD COVA, E A P - European School of Management, Paris
STEVEN HOSKINS, Independent Consultant, UK
The purpose of this article is to go far beyond competitive bidding strategies and consequently to highlight the fact that project marketing and system selling mainly consist in the management of a firm's relationships to a local network of business and nonbusiness actors, named the milieu. This networking action forms the basis of a twin-track approach aiming at maximizing the firm's chances of success on on-going projects by: *:. anticipating the competitive arena and the rules of the game (deterministic approach); o~" becoming actively involved in shaping the competitive arena and the rules of the game (constructivist approach). © 1997 Elsevier Science Ltd
Introduction Tendering is an approach largely associated with the award of contracts in areas such as defence, construction, engineering, telecommunications, aerospace and shipbuilding etc. However, manufacturers, management consultants, banks and a wide range of other product and service providers may be equally called upon to engage in this process. Organisations such as ABB, Alcatel, Alsthom, Bouygues, G6n6rale des Eaux, Bechtel, Siemens and GEC are attuned to managing the tendering process in the same way that companies such as Colgate-Palmolive, Danone, Kellogg, Lever, Nestle, Procter & Gamble and l'Or6al must develop and commercialise new products to ensure continued growth through the profitable deployment of organisational resources and expertise. However, project-based organisations, or contractors, must develop specific proposals meeting the requirements of individual customers, while producers of standard goods and services are aiming to satisfy the 5 46
collective demands of homogeneous gi'oups of consumers or, market segments. This distinction has a particular bearing upon the respective approaches to managing the sales and marketing function in such organisations. Whereas mass producers tend to focus upon the marketing mix to attract buyers and dictate the terms of exchange, contractors must manage a complex interaction process leading up to, and including, an invitation to tender in order to influence demand and negotiate the terms of each transaction.
Tendering and Project Marketing Each invitation to tender is a tangible sign of the customer's intention to implement a project and that a real business opportunity exists for the contractor. Hitherto, the term 'project marketing' has tended to be used in a generic sense to describe the activities and processes associated with developing a competitive response to such invitations. A project is a complex transaction involving products and services which must be integrated through work to deliver a facility or an enhanced organisational capability of some description. Its purpose is to enable a customer to obtain certain business benefits within the constraints of time, cost, and quality which are deemed to justify the investment (Turner, I993). Examples might include: a building, an operational production facility, a power station, a defence system, a limited series of aircraft landing gear assemblies, an IT system or, the development and implementation of management procedures to control complex distribution networks etc. Projects are conceived with the intention of disrupting the status quo within the customer organisation with the aim of delivering beneficial, one-off transformational changes, which cannot be achieved through improvements in the efficiency of existing operations. The corresponding 'uniqueness' of each transaction is therefore a principal characteristic associated with project business. EuropeanManagementJournalVol 15 No 5 October 1997
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
As such, external expertise in the form of consultants, contractors etc., which would ordinarily be too costly for any single organisation to maintain in-house, together with additional stakeholders such as government departments, trade unions, shareholders, action groups and regulatory bodies may be involved in the definition and implementation of a project. Bringing together the necessary skills and resources from within both the customer's and the contractor's network of external partners and functional specialists inevitably adds to the 'complexity' and risk associated with each transaction. This may be further complicated on international projects where due consideration must be given to language and cultural differences. The contractor, in particular, must also take account of the high cost and time involved in winning and implementing many projects. While it may require many months of speculative effort to develop and negotiate a contract (often including a complex trade finance package), subsequent implementation may represent a commitment spanning several years and an exposure to certain economic and political risks which may not have been readily apparent at the time an agreement was signed. A third characteristic of project business is the high level of 'discontinuity' in the economic relations between customers and their contractors, since it is rare, in a project context, for buyer/supplier relations to be strengthened over time though frequent transactions in the same way that repeated purchases of standard goods and services can lead to increased inter-dependence. Despite the increasing interest in partnering philosophies as a means of achieving better value for money, income stability and reduced confrontation, power stations, production facilities, laboratories, consulting services, IT systems, office buildings etc. are unlikely to be purchased by individual organisations on a sufficiently frequent basis to enable such long term, co-operative relationships to develop. Contractors are therefore faced with the problem of maintaining purposeful contacts with potential customers during extended periods of economic inactivity with the aim of being called in for discussions if and when a future business opportunity materialises (Hadjikhani, 1996). Given, their unique characteristics, each project might be regarded as an isolated market for goods and services, providing a framework for competition between contractors against a specific hierarchy of customer demands. This makes the task of undertaking market research, in the traditional sense, to predict or, 'anticipate' opportunities and customer requirements virtually impossible. There will inevitably remain a good deal of uncertainty surrounding potential customers (who?), their requirements (what?), the timing (when?) and the manner in which goods and services will be procured (how?). Faced with these dilemmas concerning the competitive arena (who?, what?) and the rules of the game (when?, how?) contractors have developed marketing practices designed to position the company in the demand environment and enable them EuropeanManagementJournalVo115 No 5 October 1997
to react effectively to project opportunities well in advance of any invitation to tender by: o:o anticipating the competitive arena and the rules of the game (deterministic approach) o:o becoming actively involved in shaping the competitive arena and the rules of the game (constructivist approach). By combining these two approaches contractors will aim to avoid, whenever possible, being required to respond to tender invitations which they have neither been able to anticipate or influence to some extent. The deterministic approach is based upon the principle that the project will be defined entirely by the future customer, together with any advisors, and that every effort must be made to anticipate such a requirement in order to better identify and prepare to win the business. The effectiveness of this approach is very much dependent upon the contractor's ability to gather, consolidate and disseminate intelligence since, 'a company stands little chance of securing a contract if it only becomes aware of the opportunity at the time when invitations to tender are issued' (Roland Berth616m& ex Marketing Director of Alsthom). On the other hand, the constructivist approach is based upon the assumption that the customer and various stakeholders in the project should work together to define the optimum solution and that the contractor is one of the key players in this process. This is succinctly put into context by Robert Galvin, President of Motorola, in his statement 'the first step in any defined strategy is writing the rules of the game ... We have incidentally found that in many quarters of the world, our offer to constructively define the rules is reasonably welcomed'. This approach to project marketing is based on using 'creative offers' to initiate a project. Although it can take many forms, a creative offer might be best described in terms of a speculative proposal which is presented to a potential customer who has yet to establish clearly defined requirements or, possibly even a need. The intention is not to sell an inappropriate solution but to reinforce the contractor's credibility and encourage the customer to become engaged in an interactive dialogue at an early stage in the definition process. The catalyst for this approach is a 'pseudo project'. This is a well defined, but not customised, proposal incorporating the corresponding technical, commercial, financial and relational (partners, suppliers etc.) components of a potential project. Although such a project is unlikely to ever be implemented, it can be used to provide a flexible framework for constructing the components of a final solution, based upon the contractor's own technology and working practices, which is perfectly adapted to the business needs and requirements of the customer. It can therefore be seen that project marketing (Figure 1), in terms of responding to invitations to tender, extends well beyond the tactical considerations associated with 54'7
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
Stage of Project
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Figure 1 The Twin-track Approach to Project Marketing
'competitive bidding' to an activity which might be illustrated in terms of the strategy options available to a contractor at three key stages of project development (Cova, Mazet and Salle, 1994):
olo Independent of any project: when a specific requirement has yet to be firmly established, requiring the contractor to anticipate and/or create the competitive arena in conjunction with other potential participants. o:o Pre-tender: when the contractor aims to anticipate and/or write the rules of the game in conjunction with the customer and other influential actors. °:o Tender preparation: when the contractor accepts the established rules of the game or seeks to have these re-written in order to compete on more favourable terms. In pursuing a deterministic approach, the contractor is aiming to anticipate a potential project requirement in order to prepare the ground and place the organisation in a position to tender for the work under the most advantageous conditions. A constructivist approach, on the other hand, requires the contractor to lead the development process by initiating, or 'creating' the project. Alternatively, at a later stage, the contractor might introduce new evidence or arguments to encourage a customer to re-evaluate the suitability of a chosen approach and thereby attempt to influence the revision of pertinent technical, commercial or relationship (partners, suppliers etc.) issues within the tender documents. By following this twin-track approach to securing project business, with the option to change from one to the other, a contractor can seek to optimise its competitive position at each stage of the project development cycle. For instance, a contractor might identify a project requirement as a result of an anticipatory effort, but may be concerned that the customer's thinking at the time was erring towards the adoption of a less favourable solution. Rather than accept the situation and attempt to adapt its technology and service provision accordingly, it may be more 548
appropriate to try to influence key elements of the tender documentation, and thereby participate in defining the rules of the game. If successful, a compliant offer can be prepared at the tender stage which more closely reflects the contractor's strengths and adaptation capabilities. Prior to the tender stage of a project, marketing action will reflect a choice between strategies based upon either anticipation or definition whereupon, either adaptation or re-definition become the effective options. In addition to the contractor's own strategic preferences, the choice of which track to follow at any stage will be equally dependent upon a number of external variables including, not least: *:" The approach adopted by the customer and thereby the extent to which he/she is prepared to accept an interactive dialogue with the contractor. While much will depend upon the individuals concerned, company or departmental procurement procedures, the level of expertise available within the customer organisation and the point at which the contractor has identified the opportunity can each be assumed to influence this question. *:* Norms of behaviour within the project context can equally be a determining factor where differing objectives, cultures, ethics, position privileges, loyalties and the such like are concerned. .:. The contractor's position within the project hierarchy and, consequently, the level of influence which can be realistically exerted over the various project stakeholders and the chosen solution.
Project Independent Strategies: Anticipation and/or Definition of the Demand Network Positioning The focus of a contractor's marketing activity, when faced with irregular customer purchasing patterns, is to try to overcome the effects of economic discontinuity by developing strong non-economic, or social, bonds. This can give rise to an impression of collusion, or a lack of transparency in certain tendering situations. However, project marketing relies to a great extent on being able to maintain purposeful relationships, either directly with the customer organisation or, indirectly with the various stakeholders who might influence or have an interest in future projects. These relationships can enable the contractor to: o:° gain the intelligence required to anticipate the competitive arena, establish its credibility within the project context and thus begin to build a platform of support among a number of influential players. o:° become directly involved in determining the rules of the game including the roles and responsibilities of EuropeanManagementJournalVol 15 No 5 October 1997
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
the parties, technical specifications, conditions of contract etc. By identifying and positioning themselves (Jansson, 1989) in key relationship networks, contractors are therefore able to anticipate demand conditions and develop a competitive position on individual projects which most closely reflects their distinctive competencies. The following example can be used to illustrate how a contractor can use its position within a local relationship network to anticipate specific projects. Antolini is a subsidiary of a major French construction group and operates predominantly in the central region of the country. While traditionally undertaking public works contracts, the company has become more interested in establishing a stronger position in the industrial sector and, more particularly, with overseas investors who intend to establish a presence in the region. It is fairly evident that potential customers of this nature can rarely be identified, except at the last moment, when a final decision has been made to locate in an area and development enquiries are underway. If Antolini followed a marketing logic to anticipate such opportunities, it would be required to carry out research on a global basis into all manner of organisations which might eventually be interested in establishing a presence in the region. This would clearly be unrealistic and counter-productive where deployment of the company's limited resources was concerned. However, a number of other bodies including, the Conseil G6n6ral, the responsible Mayor, local government departments, Regional Economic Development Authorities, Chambers of Commerce and Industry, various property agents and Electricit6 de France would normally be implicated in decisions of this type. These individuals and organisations can be said to constitute the central actors in the 'industrial development network for the central region'. As such, once an overseas investor had initiated enquiries as to the possibility of establishing a presence in the locality one, or more, of them would be contacted at an early stage for advice, assistance or information. By investing in the development of relationships with these actors, Antolini could be considered to have already established a strong position among some of the key external stakeholders in any industrial development project and will therefore be much better placed to detect and react effectively to related opportunities. This brief case study illustrates the difficulty of using the concept of the market, as homogeneous groups of customers, to guide project marketing action, and promotes the development of relationships within priority networks as a fundamental condition of all project anticipation. The term 'network', in this context, refers to a relatively stable group of socio-economic actors involved in, or influencing, a particular activity, and its boundaries are usually defined in geographical and functional terms. Further network examples might include food production in the UK, power distribution in Poland, air transport in Europe or, forex dealing in New York. European Management JournalVo115 No 5 October 1997
Given the difficulty of maintaining close contact with potential customers, who may not only have infrequent purchasing patterns but may also be geographically distant, it follows that network management and positioning, among rigorously selected central actors, would appear to be an effective means for contractors to keep informed as to the existence of possible project opportunities, and to influence the field of play at an early stage of project definition. These 'central actors', namely the individuals and institutions around which network interaction is most highly concentrated, can be identified and positioned using analysis and mapping techniques, as illustrated in Figure 2. By providing a focus for the gathering of intelligence and third-party support, these central actors enable relational investments to be kept at manageable levels and may therefore be described as 'poles of continuity' between the contractor and all potential customers in a chosen sphere of business. Poles of continuity can come in a variety of forms and to illustrate this point, one needs only to consider the different administrative and political bodies which may be concerned, to a greater or lesser extent, with the contractor's activities: govemment and local authority departments both at home and overseas, regulatory authorities, consultants, project finance providers (World Bank, Asian Development Bank, commercial banks, venture capitalists, insurance companies, export credit agencies), trade unions, professional institutions and even alumni associations having a strong representation within a given network. Developing and implementing network positioning strategies in areas of strategic interest is a fundamental aspect of the project marketing process which requires the networking capabilities of the organisation as a whole to be harnessed. It is not sufficient to devolve responsibility for developing and maintaining external relations to sales and marketing personnel. Departmental managers, functional specialists and, indeed, all members of staff should be actively encouraged to embrace a 'part-time' marketing role, and establish purposeful relationships which extend well beyond individual project boundaries (Hoskins, 1995).
Network Construction Relationship networks become established over time through a gradual process of learning and experience effects within a given sphere of business activity. Projects are clearly a catalyst for this process by which the frequency of interaction between individual actors is increased to the point where the position of the central figures is consolidated and the relationship structure as a whole begins to resemble a collective network. However, in emerging or innovative sectors where the impact of new technology or a low transaction frequency prevents the establishment of a stable relational environment, the marketing approach must shift from network positioning to network construction. 549
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
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To give a current example, it is difficult to determine any stable network associated with 'highway toll systems in Europe' which interested contractors and equipment suppliers can use as a basis for developing positioning strategies. Although numerous private and public entities with an existing or potential involvement in this section can be identified, like pieces of lego, they could be brought together in a variety of ways since the only characteristic that can presently be determined is 5 50
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the 'national' colour of the pieces. Moreover, we cannot even be sure at this stage whether all the pieces required to build a viable structure are available, and that some are not still hidden at the bottom of the box. Nevertheless, a brief glance at the various working groups and the committee dealing with this matter can provide some indication as to
composition of the technical standards at a European level the identity of the
EuropeanManagementJournalVot 15 No 5 0 c t o ber 1997
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
actors most likely to have a major influence on the shape of future projects, including: °~" Ministries of transport in each country (particularly northern Europe), °~" Motorway concession owners and operators, •;" Consultants in road planning and construction, IT etc., •~" Manufacturers with the appropriate technology (high frequency, transmission, infra-red, telephone, fibre optics, field induction), °~° Universities and research establishments, •:° Banks (for payment systems), •~" Automotive manufacturers and component suppliers, °:" Traffic management specialists, °:- National transport federations. Despite the number and diversity of the above entities a company could hypothesise as to the likelihood of a strong correlation between the members of the technical standards committee and the evolutionary path of a sector network. In choosing to follow a constructivist marketing approach under such circumstances the contractor might begin by seeking an appointment to one of the working groups, or even the technical standards committee, as a means of becoming better acquainted with the strategies and expectations of the various actors. A stronger competitive position and a more influential role in the wider environment could then be secured by advocating the adoption of standards and specifications which were closely aligned with the contractors' own core competencies and also by building alliances, establishing consortia, promoting new ventures and developing creative offers.
Pre-tender Stage: Anticipation and/or Definition of the Demand Conditions Project Identification Relational investments are the cornerstone of a contractor's intelligence system, which must be capable of being continuously updated in order to distinguish project opportunities and their relational context at an early stage in the definition process. This calls for information concerning the general structure of each network (corporate and individual entities, their profiles and attitudes and, any affinities between them), corresponding power structures (roles and levels of influence, the degree of co-operation or conflict between the actors) and the 'network code' (the implicit standards and norms of behaviour accepted by the parties) to be stored, consolidated and disseminated within the organisation. A contractor's intelligence system must be able to function at two levels: The strategic level: to identify project opportunities in priority networks which may be of interest to the company. EuropeanManagementJournalVol 15 No 5 October 1997
The project level: to secure relevant project information (decision makers, user groups, influencers, gate-keepers, customer business objectives, budgetary and programme constraints, scope for contractor participation in setting specifications etc.) in support of efforts to anticipate or make up the rules of the game with the actors concerned. Network analysis and mapping at the project level is very similar to that carried out at the sector level with the exception that the customer now becomes the dominant central figure and each actor becomes a stakeholder with a particular interest and a potential role in the project. It is only through correctly interpreting the soundness of its relational position, relative to that of competitors, that a contractor can judge what partnerships or alliances may be necessary to ensure it can effectively influence or adapt to the rules of the game.
Pre-tender Project Screening Having identified a possible project requirement, the contractor must evaluate its potential value to the organisation and thereby, to what extent further effort should be expended to develop the opportunity. The pre-tender screening, or selection, process is the intermediate stage between the anticipatory work that has already been carried out and the intense effort required, at all levels, to either participate in defining the rules of the game or, complying with those already established from a position of strength. The main criteria used to assess project opportunities are: °l° Attractiveness to the contractor in terms of: the alignment with company goals and objectives, the anticipated resource and expertise requirements, the importance of the project to the customer, security of funding, customer attitudes towards the company, risk/reward judgements, likelihood of follow on projects, opportunity costs etc. °~o The relational and competitive strengths of the contractor in terms of its credibility and past experience, the level of influence among key project stakeholders, the ability to satisfy customer business objectives and/or generate innovative solutions, the availability of knowledgeable staff and strong partners, readiness to proceed etc.
The principle aims of the screening process are twofold: olo to enable project opportunities to be prioritised and informed decisions made as to the allocation of internal resources; and o:° to determine the optimum mode of entry into the project system and any corresponding external resource requirements (Figure 3). Projects are dynamic processes which evolve over a determinable life-cycle with changing management 55!
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
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requirements and demand conditions. This gives rise to a multitude of options by which to enter the project system ranging from strategic alliances to deliver fully integrated 'turnkey' solutions to straightforward, single discipline sub-contractor roles.
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It will be fairly evident that a contractor's position in the project hierarchy will reflect the degree of responsibility for delivering stage-specific objectives and, consequently, the extent to which it is prepared to accept such risk will relate to both its capability to perform the defined scope of work (competitive position) and the attractiveness of the project.
Screening decisions at the pre-tender stage are usually highly sensitive to a contractor's attitude towards the customer. For example, where a particularly attractive project customer is faced with a high risk venture which is critical to the organisation, personnel changes, disruptions in the business environment, aggressive competitor action or any other factors which increase its vulnerability, a contractor is more likely to expend a great deal of effort and resources to maximise its influence on the project and shape the rules of the game to its advantage.
The screening process has become much more flexible than in the past and has moved beyond a simple decision to bid or not to bid. For many years some contractors had become conditioned to a single mode of entry (or role) whatever their comparative strengths. The culture in one French aerospace group dictated that they would only accept a leadership role on any project. Since 1980, many companies, faced with increasingly intensive global competition (relaxation of tariff and non-tariff barriers and the general growth of international trade), have been forced to consider the implications of this approach and begin to think about varying the mode of entry in order to address the diversity and the competitive environment associated with individual projects. As such screening has become much more closely associated with the process of choosing a mode of entry into the project system. Some of the more usual roles are listed below, illustrated diagramatically in the project attractiveness/competitive position matrix (Figure 3): o:* sole prime contractor, °:° prime contractor in joint venture, 552
work package contractor, trade contractor, sub-contractor, supplier to a contractor, sub-contractor to a supplier etc.
Creating the Project From a constructivist perspective, the aim at the pretender stage is to create the project. In so doing the contractor induces a demand by recognising a project idea corresponding to a problem which remains to be clearly defined by a customer or which might represent an opportunity for an, as yet, unknown customer. Where the contractor undertakes a speculative commitment to develop the scheme, find or create a customer (e.g. by bringing together a group of individual investors), this approach can involve a significant amount of cost and risk. Alternatively, an offer is made to carry out a feasibility study on behalf of a potential customer for such a project solution. In either case, the contractor creates and evaluates the concept, possibly puts together appropriate funding arrangements and assembles a team to implement the project. EuropeanManagementJournalVo115 No 5 October 1997
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
This approach, which is also referred to in terms of a 'creative offer', is relatively common practice in the engineering and construction industry as a means of achieving, not least, greater influence, higher margins and more favourable contractual terms. The corporate creed of the North American construction giant, Bechtel, illustrates the point as well as any: 'if there is no project, we will create one; if there is no client, we will assemble one, if there is no money, we will get them some'.
Customer Risk Analysis Where the option to follow a creative offer strategy is unavailable, an analysis of the individual and corporate risks associated with a project can provide a marketing platform upon which to write the rules of the game. This approach is based upon the notion that all buying decisions involve taking risks, to a greater or lesser extent, by the organisations and individuals involved (Michel, Salle and Valla, 1996). Consequently, buying behaviour tends to be driven by these risk perceptions. The importance attached to individual risks reflects, on the one hand, the influence on project feasibility (costs, timing, technical feasibility, impact on customer business activity etc.) and, on the other, the characteristics of the buying centre (willingness to innovate, culture, the overt and covert aims of individuals, power and influence, vulnerability of decision makers etc.). The attitude towards certain risks can be identified during contact with members of the buying centre (what they say, what they do), whose behaviour should indicate a willingness or otherwise to consider ways of reducing individual or organisational exposure to any potentially adverse technical, financial, commercial and political implications of project decisions. However, perceived risks in the buying centre may differ significantly from a contractor's assessment of the actual (incurred) risk, based upon an evaluation of the customer's objectives and the consequences of following a particular project strategy. Not surprisingly, this can arise where both parties do not have access to the same information, conduct a similar degree of analysis or, recognise certain key factors and their importance from the same standpoint. Given an appropriate level of expert credibility, a contractor is perfectly placed to exploit the gap between perceived and incurred risk by presenting a solid case for the re-evaluation of a chosen approach. If accepted, the customer may then be encouraged to invite the contractor to participate in defining the rules of the game associated with a more effective solution. In this instance, we could describe the marketing action in terms of 'up-dating a latent demand'. That is to say, the contractor has not simply accepted the expressed requirements, but has taken steps to understand the underlying uncertainty on the project and subsequently compel the customer to re-evaluate the demand criteria. European ManagementJournalVo115 No 5 October 1997
Tender Stage: Compliance With or, Redefinition of the Demand Conditions Compliant Offer Strategies Once the rules of the game are set, the contractor can carry out an evaluation of the tendering opportunity. Screening at the tender stage is the intermediate step between the anticipatory effort the company has already made to establish the optimum mode of entry and the process of adapting its core service offering to comply with the terms of an invitation to tender. The principal criteria used in this evaluation are: •I° the estimated costs of preparing an offer (hundreds of thousands of dollars in many instances), •~o the availability of the necessary resources, •I° the attractiveness of the tendering opportunity (scope of work, specifications, conditions of contract, project programme, security of funding, acceptance criteria, availability of personnel etc.), and °,'* the company's relative competitive strengths (extent of competition, relative strength of relational position, experience on similar projects, commitment of key suppliers to company, price etc.). The tender stage culminates in the submission of an offer. Traditionally, this has been divided into technical and commercial components corresponding to the principal sections of the tender document. However, experienced contractors will often attach equal importance to a third component which is usually unstated or 'hidden' namely, the 'political' offer. Although difficult to describe, its importance cannot be under-estimated, as the numerous contractors who have submitted highly competitive, compliant offers on many occasions and not qualified for the first round of negotiations will testify. The political component only rarely corresponds with something explicitly requested by the customer (except in cases where commissions or technology transfer are involved) and it is never expressed in writing. As such, it addresses an implicit requirement which the customer is usually able to identify between the lines of a proposal. It describes the position of the company within the project environment and, more particularly, its relationship with a variety of influential political actors. In this sense it is readily apparent that many contractors are victims of political myopia. In associating politics with politicians many are unable to take societal considerations into account. With the increasing illegitimacy of politicians and their parties and the growth of wide ranging, non-political, interest groups, contractors must often address the requirements of individuals and organisations outside the conventional sphere of politics. In such circumstances we might refer to a socio-political offer. Although appearing in every sense to be an intangible concept, one needs only to ,553
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
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consider how many road or bridge projects have been halted or disrupted by protest groups. Similarly, when awarding local utility concessions or major construction contracts, how many elected officials are influenced by the vote catching potential of any anti-pollution measures or investments in other areas of the economy promised by the bidders? And the list goes on. In consequence, we might distinguish between three components of an offer: o:o The technical offer, incorporating the products/ services to be provided (including any technical assistance, after sales service, training) and the scope of work to be undertaken. o:o The commercial offer, addressing the financial terms (price, conditions of payment, variation formulae), contract conditions (guarantees, roles and responsibilities, liabilities), details of any project finance proposals (senior and secondary debt, export guarantees, countertrade, bond issues, build/own/ operate and other concession arrangements) and organisation structures (strategic alliances, subcontractors, suppliers). °:° The socio-political offer, which consolidates any formal and informal collaboration with local partners, provides details of any local investments and, more generally, describes the contractor's investments in the customer's network of relationships to improve its political position, together with any actions taken to improve its societal position within the wider stakeholder community (interest groups, shareholders, the community, user groups etc.) In all tendering situations the contractor's aim is to distinguish its offer from those of competitors and thereby achieve recognition by the customer as being the most suitable business partner. Where a compliant offer is being prepared in accordance with the established rules of the game, successful differentiation is dependent upon a careful analysis of the relative competitive position corresponding to each of the offer components. We therefore need to ascertain, for each competitor: o:o strengths (AHA's in North American jargon) to be countered, o:o weaknesses (OHO's) to be exploited, and °:° probable aggressive actions (GHOSTS) to be neutralised. 554
Competitors Weaknesses exploit!
The results of such an analysis can then be illustrated diagramatically, as shown in Figure 4. This type of analysis can be re-inforced by the ACE - Attribute Categorization and Evaluation - - approach, developed by MacMillan and Gunther McGrath (1996). ACE is a simple way to track and evaluate attributes that are salient to the customer. It is based on the premise that not all attributes are created equal - - they can be 'basic', 'discriminatory' or 'energizing'-- and that such attributes can provoke positive, negative or neutral reactions. Thus, we need to ascertain for our company and for each competitor, positive attributes that can be classed as 'non negotiable', 'differentiators' or 'excitors', negative attributes that can be 'tolerable', 'dissatisfiers' or 'enragers', and neutral attributes. However, a differential advantage can sometimes be achieved by focusing upon one attribute which may have been given less attention by competitors. In fact, anything goes in the differentiation stakes and it is not unusually for a contractor to mobilise public opinion against the polluting or, aesthetic consequences of a competing proposal so as to appear on the scene as a 'White Knight' with the perfect solution.
Re-defining the Project Tender strategies will differ fundamentally in accordance with the customer's willingness, or otherwise, to enter into a constructive dialogue with the contractor. Where a customer is receptive to such interaction, the exchange of information enables an offer to be adapted during a negotiated or restricted tendering process, and it is therefore possible to try and change the rules of the game. Alternatively, where a customer refuses to enter into a dialogue of this nature, compliance with the conditions of contract invariably becomes a pre-requisite and, with no prospect of changing any of the stated requirements, price becomes the major determinant of success. However, the circumstances arising at this stage are also governed by the relational context in which both the buying centre and a particular tender situation have evolved, for example: °:° Where a contractor has achieved a strong network position, it is ideally placed to anticipate the project European ManagementJournal Vol 15 No 5 October 1997
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
Buyer/seller interaction Weak
Strong
Strong
influence strategy
creative offer strategy
Weak
aggressive pricing strategy
'risk' strategy
Network position
Figure 5
Offer Strategies
and modify the rules of the game. Even if no direct contact has been established with the customer, there remain persuasive relationships with one or more of the other network actors holding an authoritative role on the project. Hence, the contractor can indirectly participate in the project definition process and, consequently, influence the tender conditions. Altematively, weak network relationships restrict the contractor to a position of having to react to a tendering situation which it has not anticipated. In such circumstances, it is highly probable that a competitor will have been able to influence key elements of the project and, as a peripheral player, the contractor can only compete in accordance with the rules of the game established by others. As discussed previously, a customer's willingness to interact with a contractor can be influenced by a number of factors, not least the perception of a contractor's expert credibility as a provider of solutions, not simply resources, the degree of technical expertise in the buying centre and constraints embodied within the procurement procedures. Similarly, attitudes, competitors and the relationship-building skills of its personnel are among the key factors affecting the strength of a contractor's network position. By considering these two criteria as a basis for competition on projects, it is possible to distinguish between four possible means of developing offer strategies which either conform with the established rules of the game or, attempt to re-write these rules. These can be located in a 2 x 2 matrix as illustrated in Figure 5. The intention of the first two strategies is the established rules of the game and are contractors with strong network positions participated in shaping these rules and/or play at the pre-tender stage.
gers, architects, management consultants, surveyors, etc.) will usually have been called upon to assist the customer in developing a project solution, specifications, conditions of contract etc. Since there are usually few restrictions on establishing contact with these influential actors, the contractor can try to influence the project conditions in its favour by concentrating marketing efforts at these points in the project network. Conversely, contractors with a weak network position will have been able to exert little influence during earlier stages and will inevitably be required to either compete on price, to break, or attempt to modify the established rules of the game by pursuing a so-called 'risk' strategy. In following a strategy of aggressive pricing, the contractor is placing itself in the worst of all competitive positions by accepting the need to submit the lowest price against a set of specifications and conditions of contract which probably favour one of its strong competitors. If successful, the contractor will probably seek to negotiate technical and commercial amendments during performance of the contract in an effort to improve the risk/reward ratio on the project. It therefore becomes the responsibility of the Project Manager, rather than Marketing personnel, to modify the rules of the game during the implementation stage. Alternatively, the risk strategy (Michel, Salle and Valla, 1996) uses the same principles as those which may have been employed at the pre-tender stage to create uncertainty as to the appropriateness of the established rules relative to the customer's objectives, so as to either:
to maintain available to which have the field of
A creative offer is prepared with the aim of initiating the project and, by implication, controlling each aspect of the development process. A strategy for pre-selection and influence, on the other hand, is often used on public sector tenders where the customer usually has a legal obligation to reject any interaction with the contractor in the name of fair play. Nevertheless, in these instances, a variety of external experts (consultants, project manaEuropeanManagementJournalVo115No 5 October 1997
encourage a customer to re-evaluate the importance attached to each of the perceived risks in order to minimise the overall uncertainty associated with the company's offer and increase that associated with a competing proposal. Or, research and introduce important new risk elements of which the customer may not have been aware and that oblige him to re-define the project. In such circumstances, the contractor must be able to propose a solution which addresses these risks. 5,55
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
Conclusion In the wider sense, it would appear that the three stages of project marketing described in this paper correspond with the realisation of three positioning strategies by the contractor which, together, will lead to greater success in tendering for project business: °~° Independent of any project, a 'network position' is secured. o~o At the pre-tender stage, a 'buying centre position' is secured. o~o At the tender stage, a 'project position' is secured.
References Cova, B., Mazet, F. and Salle, R. (1994) From competitive
BERNARD COVA, EAP Ecole Europ~enne des Affaires, 6 Avenue de la Porte de Champerret, 75838, Paris, Cedex I7, France.
Bernard Cova is a Professor of EAP, Paris and Associate Research Director, IRE, Institut de Recherche de l'Entreprise, Lyon. He received his doctorate from the University of Paris-Dauphine and specializes in the implications of the postmodern on marketing theory and practice. Apart from teaching project marketing and international marketing at EAP and innovation marketing in the Domus Academy in Milan, he manages a European research programme on Project Marketing and Systems Selling supported by major industrial companies.
5 56
tendering to strategic marketing: an inductive approach to theory-building.Journalof StrategicMarketing, 2, 1-19. Hadjikhani, A. (I996) Project marketing and the management of discontinuity. International Business Review, $(3), pp. 319336. Hoskins, S. (1995) Current Concepts in Project Marketing. MBA Dissertation, Henley Management College. International Business Review, special issue on Project Marketing and Systems Selling, $(6), 1996, edited by G/inter, B. and Bonnacorsi, A. Jansson, H. (1989) Marketing to projects in southeast Asia. In Hallen, L. and Johanson, 1. (eds), Advances in International Marketing, 2, 259-276. Greenwich: JAI Press. MacMillan, I.C. and Gunther McGrath, R. (1996) Discover your products' hidden potential. Harvard Business Review, MayJune, 58-73. Michel, D., Salle, R. and Valla, J.P. (1996) Marketing Industrieh Strategies et Mises en Oeuvre. Economica:Paris. Turner, J.A. (1993) The Handbook of Project-BasedManagement. McGraw Hill: London.
STEVEN HOSKINS, 'Elmwood', Ham Manor Close, Angmering, West Sussex, BNI6 5]D, UK
During nearly 20 years in the international engineering and construction industry, Steven Hoskins, an independent lecturer and consultant on project-based business strategies, has developed project business in Europe, the USA, Middle East and S.E. Asia for companies in the Trafalgar House Group (UK), BICC Group (UK) and the Austin Company (USA).
European ManagementJournalVo115 No 5 October 1997
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© 1997 Elsevier Science Ltd All rights reserved. Printed in Great Britain
Pergamon PII: S0263-23 73(9 7)00034-0
0263-2373/97 $17.00+ 0.00
A Twin-Track Networking Approach to Project Marketing BERNARD COVA, E A P - European School of Management, Paris
STEVEN HOSKINS, Independent Consultant, UK
The purpose of this article is to go far beyond competitive bidding strategies and consequently to highlight the fact that project marketing and system selling mainly consist in the management of a firm's relationships to a local network of business and nonbusiness actors, named the milieu. This networking action forms the basis of a twin-track approach aiming at maximizing the firm's chances of success on on-going projects by: *:. anticipating the competitive arena and the rules of the game (deterministic approach); o~" becoming actively involved in shaping the competitive arena and the rules of the game (constructivist approach). © 1997 Elsevier Science Ltd
Introduction Tendering is an approach largely associated with the award of contracts in areas such as defence, construction, engineering, telecommunications, aerospace and shipbuilding etc. However, manufacturers, management consultants, banks and a wide range of other product and service providers may be equally called upon to engage in this process. Organisations such as ABB, Alcatel, Alsthom, Bouygues, G6n6rale des Eaux, Bechtel, Siemens and GEC are attuned to managing the tendering process in the same way that companies such as Colgate-Palmolive, Danone, Kellogg, Lever, Nestle, Procter & Gamble and l'Or6al must develop and commercialise new products to ensure continued growth through the profitable deployment of organisational resources and expertise. However, project-based organisations, or contractors, must develop specific proposals meeting the requirements of individual customers, while producers of standard goods and services are aiming to satisfy the 5 46
collective demands of homogeneous gi'oups of consumers or, market segments. This distinction has a particular bearing upon the respective approaches to managing the sales and marketing function in such organisations. Whereas mass producers tend to focus upon the marketing mix to attract buyers and dictate the terms of exchange, contractors must manage a complex interaction process leading up to, and including, an invitation to tender in order to influence demand and negotiate the terms of each transaction.
Tendering and Project Marketing Each invitation to tender is a tangible sign of the customer's intention to implement a project and that a real business opportunity exists for the contractor. Hitherto, the term 'project marketing' has tended to be used in a generic sense to describe the activities and processes associated with developing a competitive response to such invitations. A project is a complex transaction involving products and services which must be integrated through work to deliver a facility or an enhanced organisational capability of some description. Its purpose is to enable a customer to obtain certain business benefits within the constraints of time, cost, and quality which are deemed to justify the investment (Turner, I993). Examples might include: a building, an operational production facility, a power station, a defence system, a limited series of aircraft landing gear assemblies, an IT system or, the development and implementation of management procedures to control complex distribution networks etc. Projects are conceived with the intention of disrupting the status quo within the customer organisation with the aim of delivering beneficial, one-off transformational changes, which cannot be achieved through improvements in the efficiency of existing operations. The corresponding 'uniqueness' of each transaction is therefore a principal characteristic associated with project business. EuropeanManagementJournalVol 15 No 5 October 1997
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
As such, external expertise in the form of consultants, contractors etc., which would ordinarily be too costly for any single organisation to maintain in-house, together with additional stakeholders such as government departments, trade unions, shareholders, action groups and regulatory bodies may be involved in the definition and implementation of a project. Bringing together the necessary skills and resources from within both the customer's and the contractor's network of external partners and functional specialists inevitably adds to the 'complexity' and risk associated with each transaction. This may be further complicated on international projects where due consideration must be given to language and cultural differences. The contractor, in particular, must also take account of the high cost and time involved in winning and implementing many projects. While it may require many months of speculative effort to develop and negotiate a contract (often including a complex trade finance package), subsequent implementation may represent a commitment spanning several years and an exposure to certain economic and political risks which may not have been readily apparent at the time an agreement was signed. A third characteristic of project business is the high level of 'discontinuity' in the economic relations between customers and their contractors, since it is rare, in a project context, for buyer/supplier relations to be strengthened over time though frequent transactions in the same way that repeated purchases of standard goods and services can lead to increased inter-dependence. Despite the increasing interest in partnering philosophies as a means of achieving better value for money, income stability and reduced confrontation, power stations, production facilities, laboratories, consulting services, IT systems, office buildings etc. are unlikely to be purchased by individual organisations on a sufficiently frequent basis to enable such long term, co-operative relationships to develop. Contractors are therefore faced with the problem of maintaining purposeful contacts with potential customers during extended periods of economic inactivity with the aim of being called in for discussions if and when a future business opportunity materialises (Hadjikhani, 1996). Given, their unique characteristics, each project might be regarded as an isolated market for goods and services, providing a framework for competition between contractors against a specific hierarchy of customer demands. This makes the task of undertaking market research, in the traditional sense, to predict or, 'anticipate' opportunities and customer requirements virtually impossible. There will inevitably remain a good deal of uncertainty surrounding potential customers (who?), their requirements (what?), the timing (when?) and the manner in which goods and services will be procured (how?). Faced with these dilemmas concerning the competitive arena (who?, what?) and the rules of the game (when?, how?) contractors have developed marketing practices designed to position the company in the demand environment and enable them EuropeanManagementJournalVo115 No 5 October 1997
to react effectively to project opportunities well in advance of any invitation to tender by: o:o anticipating the competitive arena and the rules of the game (deterministic approach) o:o becoming actively involved in shaping the competitive arena and the rules of the game (constructivist approach). By combining these two approaches contractors will aim to avoid, whenever possible, being required to respond to tender invitations which they have neither been able to anticipate or influence to some extent. The deterministic approach is based upon the principle that the project will be defined entirely by the future customer, together with any advisors, and that every effort must be made to anticipate such a requirement in order to better identify and prepare to win the business. The effectiveness of this approach is very much dependent upon the contractor's ability to gather, consolidate and disseminate intelligence since, 'a company stands little chance of securing a contract if it only becomes aware of the opportunity at the time when invitations to tender are issued' (Roland Berth616m& ex Marketing Director of Alsthom). On the other hand, the constructivist approach is based upon the assumption that the customer and various stakeholders in the project should work together to define the optimum solution and that the contractor is one of the key players in this process. This is succinctly put into context by Robert Galvin, President of Motorola, in his statement 'the first step in any defined strategy is writing the rules of the game ... We have incidentally found that in many quarters of the world, our offer to constructively define the rules is reasonably welcomed'. This approach to project marketing is based on using 'creative offers' to initiate a project. Although it can take many forms, a creative offer might be best described in terms of a speculative proposal which is presented to a potential customer who has yet to establish clearly defined requirements or, possibly even a need. The intention is not to sell an inappropriate solution but to reinforce the contractor's credibility and encourage the customer to become engaged in an interactive dialogue at an early stage in the definition process. The catalyst for this approach is a 'pseudo project'. This is a well defined, but not customised, proposal incorporating the corresponding technical, commercial, financial and relational (partners, suppliers etc.) components of a potential project. Although such a project is unlikely to ever be implemented, it can be used to provide a flexible framework for constructing the components of a final solution, based upon the contractor's own technology and working practices, which is perfectly adapted to the business needs and requirements of the customer. It can therefore be seen that project marketing (Figure 1), in terms of responding to invitations to tender, extends well beyond the tactical considerations associated with 54'7
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
Stage of Project
Approach Deterministic Constructivist (anticipation and (definition and
Development
adaptation)
redefinition)
Project
network positioning
network construction
project identification and 'screening'
project creation
project acceptance
re-definition of the project
independent
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preparation
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and risk evaluation
Figure 1 The Twin-track Approach to Project Marketing
'competitive bidding' to an activity which might be illustrated in terms of the strategy options available to a contractor at three key stages of project development (Cova, Mazet and Salle, 1994):
olo Independent of any project: when a specific requirement has yet to be firmly established, requiring the contractor to anticipate and/or create the competitive arena in conjunction with other potential participants. o:o Pre-tender: when the contractor aims to anticipate and/or write the rules of the game in conjunction with the customer and other influential actors. °:o Tender preparation: when the contractor accepts the established rules of the game or seeks to have these re-written in order to compete on more favourable terms. In pursuing a deterministic approach, the contractor is aiming to anticipate a potential project requirement in order to prepare the ground and place the organisation in a position to tender for the work under the most advantageous conditions. A constructivist approach, on the other hand, requires the contractor to lead the development process by initiating, or 'creating' the project. Alternatively, at a later stage, the contractor might introduce new evidence or arguments to encourage a customer to re-evaluate the suitability of a chosen approach and thereby attempt to influence the revision of pertinent technical, commercial or relationship (partners, suppliers etc.) issues within the tender documents. By following this twin-track approach to securing project business, with the option to change from one to the other, a contractor can seek to optimise its competitive position at each stage of the project development cycle. For instance, a contractor might identify a project requirement as a result of an anticipatory effort, but may be concerned that the customer's thinking at the time was erring towards the adoption of a less favourable solution. Rather than accept the situation and attempt to adapt its technology and service provision accordingly, it may be more 548
appropriate to try to influence key elements of the tender documentation, and thereby participate in defining the rules of the game. If successful, a compliant offer can be prepared at the tender stage which more closely reflects the contractor's strengths and adaptation capabilities. Prior to the tender stage of a project, marketing action will reflect a choice between strategies based upon either anticipation or definition whereupon, either adaptation or re-definition become the effective options. In addition to the contractor's own strategic preferences, the choice of which track to follow at any stage will be equally dependent upon a number of external variables including, not least: *:" The approach adopted by the customer and thereby the extent to which he/she is prepared to accept an interactive dialogue with the contractor. While much will depend upon the individuals concerned, company or departmental procurement procedures, the level of expertise available within the customer organisation and the point at which the contractor has identified the opportunity can each be assumed to influence this question. *:* Norms of behaviour within the project context can equally be a determining factor where differing objectives, cultures, ethics, position privileges, loyalties and the such like are concerned. .:. The contractor's position within the project hierarchy and, consequently, the level of influence which can be realistically exerted over the various project stakeholders and the chosen solution.
Project Independent Strategies: Anticipation and/or Definition of the Demand Network Positioning The focus of a contractor's marketing activity, when faced with irregular customer purchasing patterns, is to try to overcome the effects of economic discontinuity by developing strong non-economic, or social, bonds. This can give rise to an impression of collusion, or a lack of transparency in certain tendering situations. However, project marketing relies to a great extent on being able to maintain purposeful relationships, either directly with the customer organisation or, indirectly with the various stakeholders who might influence or have an interest in future projects. These relationships can enable the contractor to: o:° gain the intelligence required to anticipate the competitive arena, establish its credibility within the project context and thus begin to build a platform of support among a number of influential players. o:° become directly involved in determining the rules of the game including the roles and responsibilities of EuropeanManagementJournalVol 15 No 5 October 1997
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
the parties, technical specifications, conditions of contract etc. By identifying and positioning themselves (Jansson, 1989) in key relationship networks, contractors are therefore able to anticipate demand conditions and develop a competitive position on individual projects which most closely reflects their distinctive competencies. The following example can be used to illustrate how a contractor can use its position within a local relationship network to anticipate specific projects. Antolini is a subsidiary of a major French construction group and operates predominantly in the central region of the country. While traditionally undertaking public works contracts, the company has become more interested in establishing a stronger position in the industrial sector and, more particularly, with overseas investors who intend to establish a presence in the region. It is fairly evident that potential customers of this nature can rarely be identified, except at the last moment, when a final decision has been made to locate in an area and development enquiries are underway. If Antolini followed a marketing logic to anticipate such opportunities, it would be required to carry out research on a global basis into all manner of organisations which might eventually be interested in establishing a presence in the region. This would clearly be unrealistic and counter-productive where deployment of the company's limited resources was concerned. However, a number of other bodies including, the Conseil G6n6ral, the responsible Mayor, local government departments, Regional Economic Development Authorities, Chambers of Commerce and Industry, various property agents and Electricit6 de France would normally be implicated in decisions of this type. These individuals and organisations can be said to constitute the central actors in the 'industrial development network for the central region'. As such, once an overseas investor had initiated enquiries as to the possibility of establishing a presence in the locality one, or more, of them would be contacted at an early stage for advice, assistance or information. By investing in the development of relationships with these actors, Antolini could be considered to have already established a strong position among some of the key external stakeholders in any industrial development project and will therefore be much better placed to detect and react effectively to related opportunities. This brief case study illustrates the difficulty of using the concept of the market, as homogeneous groups of customers, to guide project marketing action, and promotes the development of relationships within priority networks as a fundamental condition of all project anticipation. The term 'network', in this context, refers to a relatively stable group of socio-economic actors involved in, or influencing, a particular activity, and its boundaries are usually defined in geographical and functional terms. Further network examples might include food production in the UK, power distribution in Poland, air transport in Europe or, forex dealing in New York. European Management JournalVo115 No 5 October 1997
Given the difficulty of maintaining close contact with potential customers, who may not only have infrequent purchasing patterns but may also be geographically distant, it follows that network management and positioning, among rigorously selected central actors, would appear to be an effective means for contractors to keep informed as to the existence of possible project opportunities, and to influence the field of play at an early stage of project definition. These 'central actors', namely the individuals and institutions around which network interaction is most highly concentrated, can be identified and positioned using analysis and mapping techniques, as illustrated in Figure 2. By providing a focus for the gathering of intelligence and third-party support, these central actors enable relational investments to be kept at manageable levels and may therefore be described as 'poles of continuity' between the contractor and all potential customers in a chosen sphere of business. Poles of continuity can come in a variety of forms and to illustrate this point, one needs only to consider the different administrative and political bodies which may be concerned, to a greater or lesser extent, with the contractor's activities: govemment and local authority departments both at home and overseas, regulatory authorities, consultants, project finance providers (World Bank, Asian Development Bank, commercial banks, venture capitalists, insurance companies, export credit agencies), trade unions, professional institutions and even alumni associations having a strong representation within a given network. Developing and implementing network positioning strategies in areas of strategic interest is a fundamental aspect of the project marketing process which requires the networking capabilities of the organisation as a whole to be harnessed. It is not sufficient to devolve responsibility for developing and maintaining external relations to sales and marketing personnel. Departmental managers, functional specialists and, indeed, all members of staff should be actively encouraged to embrace a 'part-time' marketing role, and establish purposeful relationships which extend well beyond individual project boundaries (Hoskins, 1995).
Network Construction Relationship networks become established over time through a gradual process of learning and experience effects within a given sphere of business activity. Projects are clearly a catalyst for this process by which the frequency of interaction between individual actors is increased to the point where the position of the central figures is consolidated and the relationship structure as a whole begins to resemble a collective network. However, in emerging or innovative sectors where the impact of new technology or a low transaction frequency prevents the establishment of a stable relational environment, the marketing approach must shift from network positioning to network construction. 549
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
To RDI/Delorme (USA) To the Ministry of Transport (Paris)
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To give a current example, it is difficult to determine any stable network associated with 'highway toll systems in Europe' which interested contractors and equipment suppliers can use as a basis for developing positioning strategies. Although numerous private and public entities with an existing or potential involvement in this section can be identified, like pieces of lego, they could be brought together in a variety of ways since the only characteristic that can presently be determined is 5 50
Relationships between actors
Aggregated Actors
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the 'national' colour of the pieces. Moreover, we cannot even be sure at this stage whether all the pieces required to build a viable structure are available, and that some are not still hidden at the bottom of the box. Nevertheless, a brief glance at the various working groups and the committee dealing with this matter can provide some indication as to
composition of the technical standards at a European level the identity of the
EuropeanManagementJournalVot 15 No 5 0 c t o ber 1997
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
actors most likely to have a major influence on the shape of future projects, including: °~" Ministries of transport in each country (particularly northern Europe), °~" Motorway concession owners and operators, •;" Consultants in road planning and construction, IT etc., •~" Manufacturers with the appropriate technology (high frequency, transmission, infra-red, telephone, fibre optics, field induction), °~° Universities and research establishments, •:° Banks (for payment systems), •~" Automotive manufacturers and component suppliers, °:" Traffic management specialists, °:- National transport federations. Despite the number and diversity of the above entities a company could hypothesise as to the likelihood of a strong correlation between the members of the technical standards committee and the evolutionary path of a sector network. In choosing to follow a constructivist marketing approach under such circumstances the contractor might begin by seeking an appointment to one of the working groups, or even the technical standards committee, as a means of becoming better acquainted with the strategies and expectations of the various actors. A stronger competitive position and a more influential role in the wider environment could then be secured by advocating the adoption of standards and specifications which were closely aligned with the contractors' own core competencies and also by building alliances, establishing consortia, promoting new ventures and developing creative offers.
Pre-tender Stage: Anticipation and/or Definition of the Demand Conditions Project Identification Relational investments are the cornerstone of a contractor's intelligence system, which must be capable of being continuously updated in order to distinguish project opportunities and their relational context at an early stage in the definition process. This calls for information concerning the general structure of each network (corporate and individual entities, their profiles and attitudes and, any affinities between them), corresponding power structures (roles and levels of influence, the degree of co-operation or conflict between the actors) and the 'network code' (the implicit standards and norms of behaviour accepted by the parties) to be stored, consolidated and disseminated within the organisation. A contractor's intelligence system must be able to function at two levels: The strategic level: to identify project opportunities in priority networks which may be of interest to the company. EuropeanManagementJournalVol 15 No 5 October 1997
The project level: to secure relevant project information (decision makers, user groups, influencers, gate-keepers, customer business objectives, budgetary and programme constraints, scope for contractor participation in setting specifications etc.) in support of efforts to anticipate or make up the rules of the game with the actors concerned. Network analysis and mapping at the project level is very similar to that carried out at the sector level with the exception that the customer now becomes the dominant central figure and each actor becomes a stakeholder with a particular interest and a potential role in the project. It is only through correctly interpreting the soundness of its relational position, relative to that of competitors, that a contractor can judge what partnerships or alliances may be necessary to ensure it can effectively influence or adapt to the rules of the game.
Pre-tender Project Screening Having identified a possible project requirement, the contractor must evaluate its potential value to the organisation and thereby, to what extent further effort should be expended to develop the opportunity. The pre-tender screening, or selection, process is the intermediate stage between the anticipatory work that has already been carried out and the intense effort required, at all levels, to either participate in defining the rules of the game or, complying with those already established from a position of strength. The main criteria used to assess project opportunities are: °l° Attractiveness to the contractor in terms of: the alignment with company goals and objectives, the anticipated resource and expertise requirements, the importance of the project to the customer, security of funding, customer attitudes towards the company, risk/reward judgements, likelihood of follow on projects, opportunity costs etc. °~o The relational and competitive strengths of the contractor in terms of its credibility and past experience, the level of influence among key project stakeholders, the ability to satisfy customer business objectives and/or generate innovative solutions, the availability of knowledgeable staff and strong partners, readiness to proceed etc.
The principle aims of the screening process are twofold: olo to enable project opportunities to be prioritised and informed decisions made as to the allocation of internal resources; and o:° to determine the optimum mode of entry into the project system and any corresponding external resource requirements (Figure 3). Projects are dynamic processes which evolve over a determinable life-cycle with changing management 55!
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
competitive strengths medium
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requirements and demand conditions. This gives rise to a multitude of options by which to enter the project system ranging from strategic alliances to deliver fully integrated 'turnkey' solutions to straightforward, single discipline sub-contractor roles.
°:° o;" °:" •:" °:°
It will be fairly evident that a contractor's position in the project hierarchy will reflect the degree of responsibility for delivering stage-specific objectives and, consequently, the extent to which it is prepared to accept such risk will relate to both its capability to perform the defined scope of work (competitive position) and the attractiveness of the project.
Screening decisions at the pre-tender stage are usually highly sensitive to a contractor's attitude towards the customer. For example, where a particularly attractive project customer is faced with a high risk venture which is critical to the organisation, personnel changes, disruptions in the business environment, aggressive competitor action or any other factors which increase its vulnerability, a contractor is more likely to expend a great deal of effort and resources to maximise its influence on the project and shape the rules of the game to its advantage.
The screening process has become much more flexible than in the past and has moved beyond a simple decision to bid or not to bid. For many years some contractors had become conditioned to a single mode of entry (or role) whatever their comparative strengths. The culture in one French aerospace group dictated that they would only accept a leadership role on any project. Since 1980, many companies, faced with increasingly intensive global competition (relaxation of tariff and non-tariff barriers and the general growth of international trade), have been forced to consider the implications of this approach and begin to think about varying the mode of entry in order to address the diversity and the competitive environment associated with individual projects. As such screening has become much more closely associated with the process of choosing a mode of entry into the project system. Some of the more usual roles are listed below, illustrated diagramatically in the project attractiveness/competitive position matrix (Figure 3): o:* sole prime contractor, °:° prime contractor in joint venture, 552
work package contractor, trade contractor, sub-contractor, supplier to a contractor, sub-contractor to a supplier etc.
Creating the Project From a constructivist perspective, the aim at the pretender stage is to create the project. In so doing the contractor induces a demand by recognising a project idea corresponding to a problem which remains to be clearly defined by a customer or which might represent an opportunity for an, as yet, unknown customer. Where the contractor undertakes a speculative commitment to develop the scheme, find or create a customer (e.g. by bringing together a group of individual investors), this approach can involve a significant amount of cost and risk. Alternatively, an offer is made to carry out a feasibility study on behalf of a potential customer for such a project solution. In either case, the contractor creates and evaluates the concept, possibly puts together appropriate funding arrangements and assembles a team to implement the project. EuropeanManagementJournalVo115 No 5 October 1997
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
This approach, which is also referred to in terms of a 'creative offer', is relatively common practice in the engineering and construction industry as a means of achieving, not least, greater influence, higher margins and more favourable contractual terms. The corporate creed of the North American construction giant, Bechtel, illustrates the point as well as any: 'if there is no project, we will create one; if there is no client, we will assemble one, if there is no money, we will get them some'.
Customer Risk Analysis Where the option to follow a creative offer strategy is unavailable, an analysis of the individual and corporate risks associated with a project can provide a marketing platform upon which to write the rules of the game. This approach is based upon the notion that all buying decisions involve taking risks, to a greater or lesser extent, by the organisations and individuals involved (Michel, Salle and Valla, 1996). Consequently, buying behaviour tends to be driven by these risk perceptions. The importance attached to individual risks reflects, on the one hand, the influence on project feasibility (costs, timing, technical feasibility, impact on customer business activity etc.) and, on the other, the characteristics of the buying centre (willingness to innovate, culture, the overt and covert aims of individuals, power and influence, vulnerability of decision makers etc.). The attitude towards certain risks can be identified during contact with members of the buying centre (what they say, what they do), whose behaviour should indicate a willingness or otherwise to consider ways of reducing individual or organisational exposure to any potentially adverse technical, financial, commercial and political implications of project decisions. However, perceived risks in the buying centre may differ significantly from a contractor's assessment of the actual (incurred) risk, based upon an evaluation of the customer's objectives and the consequences of following a particular project strategy. Not surprisingly, this can arise where both parties do not have access to the same information, conduct a similar degree of analysis or, recognise certain key factors and their importance from the same standpoint. Given an appropriate level of expert credibility, a contractor is perfectly placed to exploit the gap between perceived and incurred risk by presenting a solid case for the re-evaluation of a chosen approach. If accepted, the customer may then be encouraged to invite the contractor to participate in defining the rules of the game associated with a more effective solution. In this instance, we could describe the marketing action in terms of 'up-dating a latent demand'. That is to say, the contractor has not simply accepted the expressed requirements, but has taken steps to understand the underlying uncertainty on the project and subsequently compel the customer to re-evaluate the demand criteria. European ManagementJournalVo115 No 5 October 1997
Tender Stage: Compliance With or, Redefinition of the Demand Conditions Compliant Offer Strategies Once the rules of the game are set, the contractor can carry out an evaluation of the tendering opportunity. Screening at the tender stage is the intermediate step between the anticipatory effort the company has already made to establish the optimum mode of entry and the process of adapting its core service offering to comply with the terms of an invitation to tender. The principal criteria used in this evaluation are: •I° the estimated costs of preparing an offer (hundreds of thousands of dollars in many instances), •~o the availability of the necessary resources, •I° the attractiveness of the tendering opportunity (scope of work, specifications, conditions of contract, project programme, security of funding, acceptance criteria, availability of personnel etc.), and °,'* the company's relative competitive strengths (extent of competition, relative strength of relational position, experience on similar projects, commitment of key suppliers to company, price etc.). The tender stage culminates in the submission of an offer. Traditionally, this has been divided into technical and commercial components corresponding to the principal sections of the tender document. However, experienced contractors will often attach equal importance to a third component which is usually unstated or 'hidden' namely, the 'political' offer. Although difficult to describe, its importance cannot be under-estimated, as the numerous contractors who have submitted highly competitive, compliant offers on many occasions and not qualified for the first round of negotiations will testify. The political component only rarely corresponds with something explicitly requested by the customer (except in cases where commissions or technology transfer are involved) and it is never expressed in writing. As such, it addresses an implicit requirement which the customer is usually able to identify between the lines of a proposal. It describes the position of the company within the project environment and, more particularly, its relationship with a variety of influential political actors. In this sense it is readily apparent that many contractors are victims of political myopia. In associating politics with politicians many are unable to take societal considerations into account. With the increasing illegitimacy of politicians and their parties and the growth of wide ranging, non-political, interest groups, contractors must often address the requirements of individuals and organisations outside the conventional sphere of politics. In such circumstances we might refer to a socio-political offer. Although appearing in every sense to be an intangible concept, one needs only to ,553
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
Actors Components
Company Strengths push!
Company Weaknesses neutralise!
Technical
Competitors Strengths counter! AHA's!
Commercial Socio-political Figure 4
OHO's! GHOSTS!
The Offer Differentiation Matrix
consider how many road or bridge projects have been halted or disrupted by protest groups. Similarly, when awarding local utility concessions or major construction contracts, how many elected officials are influenced by the vote catching potential of any anti-pollution measures or investments in other areas of the economy promised by the bidders? And the list goes on. In consequence, we might distinguish between three components of an offer: o:o The technical offer, incorporating the products/ services to be provided (including any technical assistance, after sales service, training) and the scope of work to be undertaken. o:o The commercial offer, addressing the financial terms (price, conditions of payment, variation formulae), contract conditions (guarantees, roles and responsibilities, liabilities), details of any project finance proposals (senior and secondary debt, export guarantees, countertrade, bond issues, build/own/ operate and other concession arrangements) and organisation structures (strategic alliances, subcontractors, suppliers). °:° The socio-political offer, which consolidates any formal and informal collaboration with local partners, provides details of any local investments and, more generally, describes the contractor's investments in the customer's network of relationships to improve its political position, together with any actions taken to improve its societal position within the wider stakeholder community (interest groups, shareholders, the community, user groups etc.) In all tendering situations the contractor's aim is to distinguish its offer from those of competitors and thereby achieve recognition by the customer as being the most suitable business partner. Where a compliant offer is being prepared in accordance with the established rules of the game, successful differentiation is dependent upon a careful analysis of the relative competitive position corresponding to each of the offer components. We therefore need to ascertain, for each competitor: o:o strengths (AHA's in North American jargon) to be countered, o:o weaknesses (OHO's) to be exploited, and °:° probable aggressive actions (GHOSTS) to be neutralised. 554
Competitors Weaknesses exploit!
The results of such an analysis can then be illustrated diagramatically, as shown in Figure 4. This type of analysis can be re-inforced by the ACE - Attribute Categorization and Evaluation - - approach, developed by MacMillan and Gunther McGrath (1996). ACE is a simple way to track and evaluate attributes that are salient to the customer. It is based on the premise that not all attributes are created equal - - they can be 'basic', 'discriminatory' or 'energizing'-- and that such attributes can provoke positive, negative or neutral reactions. Thus, we need to ascertain for our company and for each competitor, positive attributes that can be classed as 'non negotiable', 'differentiators' or 'excitors', negative attributes that can be 'tolerable', 'dissatisfiers' or 'enragers', and neutral attributes. However, a differential advantage can sometimes be achieved by focusing upon one attribute which may have been given less attention by competitors. In fact, anything goes in the differentiation stakes and it is not unusually for a contractor to mobilise public opinion against the polluting or, aesthetic consequences of a competing proposal so as to appear on the scene as a 'White Knight' with the perfect solution.
Re-defining the Project Tender strategies will differ fundamentally in accordance with the customer's willingness, or otherwise, to enter into a constructive dialogue with the contractor. Where a customer is receptive to such interaction, the exchange of information enables an offer to be adapted during a negotiated or restricted tendering process, and it is therefore possible to try and change the rules of the game. Alternatively, where a customer refuses to enter into a dialogue of this nature, compliance with the conditions of contract invariably becomes a pre-requisite and, with no prospect of changing any of the stated requirements, price becomes the major determinant of success. However, the circumstances arising at this stage are also governed by the relational context in which both the buying centre and a particular tender situation have evolved, for example: °:° Where a contractor has achieved a strong network position, it is ideally placed to anticipate the project European ManagementJournal Vol 15 No 5 October 1997
A TWIN-TRACK NETWORKING APPROACH TO PROJECT MARKETING
Buyer/seller interaction Weak
Strong
Strong
influence strategy
creative offer strategy
Weak
aggressive pricing strategy
'risk' strategy
Network position
Figure 5
Offer Strategies
and modify the rules of the game. Even if no direct contact has been established with the customer, there remain persuasive relationships with one or more of the other network actors holding an authoritative role on the project. Hence, the contractor can indirectly participate in the project definition process and, consequently, influence the tender conditions. Altematively, weak network relationships restrict the contractor to a position of having to react to a tendering situation which it has not anticipated. In such circumstances, it is highly probable that a competitor will have been able to influence key elements of the project and, as a peripheral player, the contractor can only compete in accordance with the rules of the game established by others. As discussed previously, a customer's willingness to interact with a contractor can be influenced by a number of factors, not least the perception of a contractor's expert credibility as a provider of solutions, not simply resources, the degree of technical expertise in the buying centre and constraints embodied within the procurement procedures. Similarly, attitudes, competitors and the relationship-building skills of its personnel are among the key factors affecting the strength of a contractor's network position. By considering these two criteria as a basis for competition on projects, it is possible to distinguish between four possible means of developing offer strategies which either conform with the established rules of the game or, attempt to re-write these rules. These can be located in a 2 x 2 matrix as illustrated in Figure 5. The intention of the first two strategies is the established rules of the game and are contractors with strong network positions participated in shaping these rules and/or play at the pre-tender stage.
gers, architects, management consultants, surveyors, etc.) will usually have been called upon to assist the customer in developing a project solution, specifications, conditions of contract etc. Since there are usually few restrictions on establishing contact with these influential actors, the contractor can try to influence the project conditions in its favour by concentrating marketing efforts at these points in the project network. Conversely, contractors with a weak network position will have been able to exert little influence during earlier stages and will inevitably be required to either compete on price, to break, or attempt to modify the established rules of the game by pursuing a so-called 'risk' strategy. In following a strategy of aggressive pricing, the contractor is placing itself in the worst of all competitive positions by accepting the need to submit the lowest price against a set of specifications and conditions of contract which probably favour one of its strong competitors. If successful, the contractor will probably seek to negotiate technical and commercial amendments during performance of the contract in an effort to improve the risk/reward ratio on the project. It therefore becomes the responsibility of the Project Manager, rather than Marketing personnel, to modify the rules of the game during the implementation stage. Alternatively, the risk strategy (Michel, Salle and Valla, 1996) uses the same principles as those which may have been employed at the pre-tender stage to create uncertainty as to the appropriateness of the established rules relative to the customer's objectives, so as to either:
to maintain available to which have the field of
A creative offer is prepared with the aim of initiating the project and, by implication, controlling each aspect of the development process. A strategy for pre-selection and influence, on the other hand, is often used on public sector tenders where the customer usually has a legal obligation to reject any interaction with the contractor in the name of fair play. Nevertheless, in these instances, a variety of external experts (consultants, project manaEuropeanManagementJournalVo115No 5 October 1997
encourage a customer to re-evaluate the importance attached to each of the perceived risks in order to minimise the overall uncertainty associated with the company's offer and increase that associated with a competing proposal. Or, research and introduce important new risk elements of which the customer may not have been aware and that oblige him to re-define the project. In such circumstances, the contractor must be able to propose a solution which addresses these risks. 5,55
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Conclusion In the wider sense, it would appear that the three stages of project marketing described in this paper correspond with the realisation of three positioning strategies by the contractor which, together, will lead to greater success in tendering for project business: °~° Independent of any project, a 'network position' is secured. o~o At the pre-tender stage, a 'buying centre position' is secured. o~o At the tender stage, a 'project position' is secured.
References Cova, B., Mazet, F. and Salle, R. (1994) From competitive
BERNARD COVA, EAP Ecole Europ~enne des Affaires, 6 Avenue de la Porte de Champerret, 75838, Paris, Cedex I7, France.
Bernard Cova is a Professor of EAP, Paris and Associate Research Director, IRE, Institut de Recherche de l'Entreprise, Lyon. He received his doctorate from the University of Paris-Dauphine and specializes in the implications of the postmodern on marketing theory and practice. Apart from teaching project marketing and international marketing at EAP and innovation marketing in the Domus Academy in Milan, he manages a European research programme on Project Marketing and Systems Selling supported by major industrial companies.
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tendering to strategic marketing: an inductive approach to theory-building.Journalof StrategicMarketing, 2, 1-19. Hadjikhani, A. (I996) Project marketing and the management of discontinuity. International Business Review, $(3), pp. 319336. Hoskins, S. (1995) Current Concepts in Project Marketing. MBA Dissertation, Henley Management College. International Business Review, special issue on Project Marketing and Systems Selling, $(6), 1996, edited by G/inter, B. and Bonnacorsi, A. Jansson, H. (1989) Marketing to projects in southeast Asia. In Hallen, L. and Johanson, 1. (eds), Advances in International Marketing, 2, 259-276. Greenwich: JAI Press. MacMillan, I.C. and Gunther McGrath, R. (1996) Discover your products' hidden potential. Harvard Business Review, MayJune, 58-73. Michel, D., Salle, R. and Valla, J.P. (1996) Marketing Industrieh Strategies et Mises en Oeuvre. Economica:Paris. Turner, J.A. (1993) The Handbook of Project-BasedManagement. McGraw Hill: London.
STEVEN HOSKINS, 'Elmwood', Ham Manor Close, Angmering, West Sussex, BNI6 5]D, UK
During nearly 20 years in the international engineering and construction industry, Steven Hoskins, an independent lecturer and consultant on project-based business strategies, has developed project business in Europe, the USA, Middle East and S.E. Asia for companies in the Trafalgar House Group (UK), BICC Group (UK) and the Austin Company (USA).
European ManagementJournalVo115 No 5 October 1997