June 25, 2013

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Does the RFP Process Hinder Innovation?

“If I asked my customers what they wanted, they would have said a faster horse.” – Henry Ford

Following this adage by Ford, we acknowledge that when it comes to technology, clients don’t always know what they want because they only know what they know. When it comes to the RFP process in particular, this is even more true. The RFP process as it stands today is extremely prescriptive, filled with specific technical requirements mandated by the client. While this fairly rigid process does serve to allow clients to evaluate vendors on an “apples to apples” basis, the concern that arises is whether the RFP process stifles innovation and creativity in the solutions that partners are able to provide. When clients pre-determine what they want and evaluate vendors only on their ability to provide those exact functional requirements, they miss out completely on alternative and possibly far more effective approaches. Surely there must be a better method for clients to find solution providers that actually encourages innovation rather than stifles it.

The Outdated RFP Process

Most decision-makers would agree that the RFP process is cumbersome and consumes a lot of time and money, yet companies continue to hire third party advisors to create an RFP document and help them choose implementation vendors, citing the primary benefit of the process, which is comparing providers on equal ground. However, in many ways, the current process actually stands in the way of the client finding a partner, and more importantly a solution, that will truly help them achieve what they are looking for. The major issues with the RFP process today include:

  • The business outcomes a client is looking for are not always clear.
    • Clients are typically very prescriptive in their technical requirements, but often fail to clearly state the business outcome they need to achieve. Vendors do not always understand these prescriptions clearly enough to match them with the desired business outcomes, and therefore put together a technical solution that meets the specific requirements but fails to achieve the necessary outcomes.
  • Equal comparison of vendors prematurely determines the solution.
    • By forcing vendors to be evaluated on how they will deliver a very specific set of technical requirements, the client is prematurely deciding what their solution should be before ever seeing any other ideas.
  • Creativity and innovation can actually be penalized.
    • The purpose of the RFP process is to choose the vendor that can best deliver on the technical requirements stated. A vendor that tries to be more creative in the solution it offers may not be delivering precisely on those technical requirements, focusing instead on the outcome they can deliver. However, the client is evaluating the delivery of the technical requirements that have been pre-determined.

In order to find creative and effective solutions that actually deliver on a specific business outcome, companies need to commit to innovation before the RFP process; once the process begins, the opportunities for innovation are very limited.

A New Approach To Solution Selling

Consulting firms need to add value to clients in the same way Henry Ford added value to the transportation industry. Instead of waiting to hear what a client wants, partners should seek out new opportunities that clients have not yet considered. If indeed the RFP process is stifling creativity and innovation in delivering solutions for clients, how should that process change? In what ways should partners be attempting to sell solutions to clients rather than delivering upon the requirements of a RFP? We suggest that clients should look for the following attributes in their chosen partner, ideally outside of an RFP, rather than a vendor’s ability to draft a RFP response that matches exact technical requirements:

  • A partner that will be responsible for the business outcome.
    • Functional requirements that don’t actually meet the client’s business need are worthless. Clients should look for partners that are willing to take on the risk of delivering the business outcome, through whatever solution will be most effective. This means the client will be less prescriptive in their requirements for the solution, and more open to a number of solution options.
  • Focus on the cost of the outcome, rather than the cost per hour.
    • A more flexible cost structure that compensates partners based on the outcome they deliver instead of the number of hours they put into the project, i.e. a time and materials cost structure, will allow clients more freedom to take risks with more innovative solutions.
  • A partner on the edge of technology.
    • Clients should be using technology to get ahead of their competition, and in order to do this, they need to partner with vendors who can help them make the best choices about the level and type of technology that presents the best use cases for their business, and can then deliver that technology to them.
  • Proactive in identifying and presenting new opportunities to the client
    • Sales and account management teams should be trying to identify solutions for companies before the client asks for them.

Why Wait?

Why should companies even wait for a RFP in the first place? If partners truly understand their clients’ businesses and are being proactive, they would be approaching the client with new opportunities first, not waiting for the client to issue a RFP.

To consider a few examples of proactive solutions selling, we can look at a human resources executive dealing with an aggressive company growth plan. As a sales person, you would see this as a major opportunity for an innovative approach that would provide the client with a way to successfully manage that growth plan. You would know that the HR exec needs a business outcome that will allow him or her to scale up recruitment, monitor and retain good employees, handle payroll across multiple countries, and manage numerous other HR processes. The question is not whether the executive needs a HCM solution. The opportunity, rather, lies in your ability as the partner to help them efficiently and effectively scale their processes through whatever solution is required to achieve that outcome. And if the HR exec buys into this outcome-based approach, then he or she will not send out a RFP document with numerous technical requirements of a pre-determined HCM solution attached to it; rather, they will trust the partner to develop a more creative solution that will meet the business objective of the company. Ideally, a RFP would never even be considered.

SAP HANA, arguably the hottest, and potentially most impactful, new technology on the market today, brings another example of solutions selling. Companies are scrambling to figure out whether they need HANA, how to use it, and what specific business benefits it will provide to them. HCL is attempting to help clients address the “What do we do with HANA” question before they even ask by offering free workshops that outline use cases that are specific to the client. Rather than waiting for RFPs to come down where we might be able to incorporate a use case for HANA, these workshops are a small investment of our time that allow us to develop a relationship with a client and showcase our capabilities as a partner when that client is ready to implement HANA. In these situations, we are not trying to solve problems that a client has already decided on a solution for; instead, we are proactively providing them with opportunities to grow and more effectively run their businesses through more innovative solutions.

If a company is at the point of sending out an RFP, they are likely too late for innovation. The real value-add is creating the type of relationship with a company where you are considered an advisor they can trust. A partner that makes it easy on them by asking only that they establish what business outcome they are trying to achieve, and then comes up with a thoughtful and innovative solution to achieve that outcome. A partner that is not afraid to say no to faster horses.